Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue No. 21 - Evidence - February 16, 2017
OTTAWA, Thursday, February 16, 2017
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8 a.m. to study the effects of transitioning to a low carbon economy.
Senator Richard Neufeld (Chair) in the chair.
[English]
The Chair: Good morning, colleagues, and welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Richard Neufeld. I am a senator from British Columbia and chair of this committee. I wish to welcome all those with us in the room and viewers across the country who may be watching on television or online. As a reminder to those watching, these committee hearings are open to the public and also available online on the new Senate website at sencanada.ca. All other committee-related business can also be found online, including past reports, bills, studies and lists of witnesses.
I would now ask senators around the table to introduce themselves. I will begin by introducing the deputy chair, Senator Paul Massicotte from Quebec.
Senator Massicotte: Good morning.
Senator Griffin: Senator Griffin, Prince Edward Island.
Senator MacDonald: Michael MacDonald, Nova Scotia.
Senator Wetston: Howard Wetston, Ontario.
Senator Black: Doug Black from Alberta.
Senator Galvez: Rosa Galvez from Quebec.
Senator Seidman: Judith Seidman from Montreal, Quebec.
Senator Lang: Dan Lang, Yukon.
The Chair: I'd also like to introduce our staff beginning with the clerk to my left, Maxime Fortin, and our two Library of Parliament analysts, Sam Banks and Marc LeBlanc.
Colleagues, in March 2016, the Senate mandated our committee to embark on an in-depth study on the effects, challenges and costs of transitioning to a lower carbon economy. The Government of Canada has pledged to reduce our greenhouse gas emissions to 30 per cent below 2005 levels by 2030. This is a huge undertaking.
Our committee has taken a sector-by-sector approach to this study. We will study five sectors of the Canadian economy, which are responsible for over 80 per cent of all greenhouse gas emissions. They are electricity, transportation, oil and gas, emission-intensive trade-exposed industries, and buildings.
Today, for the thirty-second meeting of our current study, I am pleased to welcome from the Canada Mining Innovation Council, Carl Weatherell, Executive Director and Chief Executive Officer. Thank you, sir, for joining us and taking time out of your busy schedule to testify. The floor is yours, sir.
Carl Weatherell, Executive Director and Chief Executive Officer, Canada Mining Innovation Council: Thank you and good morning, Mr. Chair and senators. First, let me thank you and the committee members for opportunity to address you today. Our opening comments will focus on innovation, specifically how innovation, CMIC and Towards Zero Waste Mining can contribute to a low carbon economy.
Some of your witnesses have or are going to be speaking about research and the need for research. We need to be clear that there is a significant difference between research and innovation. Simply stated, research is the creation and dissemination of new knowledge, while innovation is the creation of value. Canada needs to commit to funding both activities; however, we do need to recognize their differences and not promote one under the semblance of the other.
The mining industry in Canada is foundational to Canada's economy, providing the raw materials that enable other sectors of our economy to flourish, including high-tech, transportation, aerospace and defence, manufacturing and clean tech.
As we move toward a clean economy, the need for raw materials produced from mining will only increase. As an example, it is estimated that Tesla alone will consume 5 per cent of copper production, or 900,000 tonnes of copper, for its electric motors by 2030. This is but one example from one company for one technology.
Innovation is not new to the mining industry. Our innovations include highly complex industrial processes, which have required billions of dollars of investment, to technology incorporated into the lunar lander. Much of this technology development and associated investment occurs in metropolitan centres such as southwestern Ontario, Vancouver, Saskatoon, Calgary and Ottawa.
The industry desperately needs innovation but adoption is hindered by its capital-intensive nature; current stress- related, volatile commodity markets; increased costs; and significant competition from other jurisdictions. For example, in 2015, the global mining industry experienced record impairments of $53 billion, far outstripping similar losses in the oil and gas industry for the same period.
CMIC, the Canada Mining Innovation Council, was created with the endorsement of federal-provincial-territorial ministers of energy and mines to create a long-term vision, strategy and approach to encourage the mineral industry to support more focused and coordinated research, development and innovation; to better use the network of Canadian university and government expertise; and to address the large competitive challenges faced by the industry.
Government and industry recognize that CMIC, as an arm's-length non-profit organization, has greater flexibility in coordinating and implementing the type of step change required by the industry that will maintain and increase its global competitiveness.
CMIC is to mining and minerals what COSIA is to oil and gas, and FPInnovations is to forestry. In fact, CMIC has a strategic partnership agreement in place with FPInnovations, and we're discussing similar opportunities with COSIA.
With our partners in the mining industry and the Mining Association of Canada, CMIC created an innovation strategy for the industry, Towards Zero Waste Mining. Towards Zero Waste Mining defines the future of the industry in 10-plus years, focusing on the grand challenges common to the industry related to energy, environment and productivity. Towards Zero Waste Mining includes a business case, transformational targets, technology roadmaps and projects in various stages of execution.
We have a copy of the business case and the integrated Towards Zero Waste Mining technology roadmap with us today, and this can be made available for your consideration through the clerk. I should mention that this simplified version right here has never, to our knowledge, been created for the Canadian industry or any industry globally. It's one of a kind — a first off.
CMIC incorporates an open-innovation business model that comprises members of the entire supply chain, including academia, government and other laboratories, start-ups, small- and medium-sized enterprises, Fortune 500 companies, companies operated by indigenous peoples and mining companies cooperatively focused on solving specific industry-defined challenges. Technologies from the information communication technology, genomics, aerospace and defence have been identified as potential solutions.
This highly collaborative innovation model accelerates technology development, deployment and wide-scale adoption, and reduces the financial risk for all collaborators.
I'd like to provide a couple examples from our technology roadmap that directly address greenhouse gas emissions in mining operations.
Our underground mining technology roadmap is focused on moving the existing underground mining operation from "batch'dom'' and carbon-based platforms to continuous, smart, electric-based technology platforms. The impact on emissions will be significant as we move the industry to a highly efficient, all-electric underground operation.
Two projects that are currently under way include creating the world's first guidelines for underground battery- electric vehicles. These guidelines will be complete by March 2017 and will then move toward the creation of global standards. The CMIC business model enabled this process to be completed in six months versus approximately 24 months, or two years. A second project we're about to launch this spring is aimed at accelerating the development and adoption of battery-electric vehicles for underground mines.
The highly efficient all-electric underground mine will reduce the carbon footprint by removing diesel-based fuels from underground operations. The removal of diesel underground will also decrease, for example, ventilation requirements and associated power consumption, a significant use of energy for underground operations. One mining company estimates at one operation a 47 per cent reduction in power requirements for ventilation alone as a result of moving to battery-electric vehicles — using an electric fleet.
Our energy and processing group is targeting a reduction of energy consumption in the processing cycle of mining operations by 50 per cent. In one example, the process of crushing and grinding rocks consumes approximately 3 per cent of the world's electricity — enough electricity to power Germany — of which 90 to 95 per cent is lost as waste. Our energy processing technology group, composed of senior volunteers from mining and engineering companies, a federal government laboratory, small- and medium-sized enterprise, and original equipment manufacturers, has identified a technology that has the potential to reduce the energy consumption by 50 per cent. The second phase of this project is slated for completion in June 2017, after which we will be moving to a prototype technology development and deployment. Our target is to have a full-scale commercial technology available by 2021.
Our greatest challenge is the immense complexity of the innovation system in Canada. The existing funding mechanisms to support research, development and innovation — over 7,000 — are generally focused on research and academia, restricted to select regions of Canada and are generally incompatible with the requirements of mining- related innovation projects. As a result, innovation investment and technology development in Canada is significantly impeded. The end result is that a number of Canadian mining companies are placing innovation-related investments in foreign jurisdictions.
As a nation, our international rankings in innovation have been dropping steadily for over a decade. These results clearly show that our traditional approach to funding innovation through this myriad of complex and disconnected programs is broken. Thus the Government of Canada needs to make a strategic and focused investment that is common in other countries, such as Australia.
We have a proposal to Parliament right now and we are seeking a direct investment from the Government of Canada of $50 million over five years. This will result in the development of technologies that will significantly reduce energy consumption, greenhouse gas emissions, tailings discharge and water use. These new technologies will be deployed in Canadian mines and globally. This will increase foreign direct investment in Canada by international technology companies, make Canada a global centre of mining innovation and increase Canada's export market share for new and cleaner mining technologies.
The Mining Association of Canada has identified up to $145 billion in potential new mine investment in Canada over the next 10 years. Through the work of CMIC, we can help to ensure that this investment represents the most energy efficient, low waste mines the country has ever seen. Zero emissions, fully electric mines are possible within the next five years, but it will require a concerted effort to make this happen.
The Canada Mining Innovation Council has been identified as the umbrella organization to coordinate innovation in the mining industry, has a proven track record and is the ideal arm's length organization to manage such a direct investment and implement this visionary strategy. Thank you for your time, and I look forward to your questions.
The Chair: Thank you, sir.
Senator Massicotte: Thank you, Mr. Weatherell, for your presentation and for being with us this morning. In your presentation you talked about looking for funding. I'll let you deal with the authority of those arguments and so on. That's not our role. But let's talk innovation.
I'm interested in 90 per cent of the power that could go to Germany. Give me a sense, what are you going to do in the next 10 years? What are you going to do to save that 3 per cent of the world's energy?
Mr. Weatherell: One project I spoke of as an example was a new comminution technology to reduce that by 50 per cent. Again, we're looking at having the next phase done by June, prototype in a year, commercialized within five years.
Senator Massicotte: You would save 1.5 per cent of the world's energy —
Mr. Weatherell: The world's electricity.
Senator Massicotte: Tell me about that product. It's obviously quite interesting. What is it, per se? Why does it work?
Mr. Weatherell: I'd like to back up. There's a second piece that's more complicated. I'll go back to first principles.
The crushing and grinding of rocks is a highly energy intensive and energy inefficient process that's basically using a mechanical approach to smash rocks together. The typical way it works — this was described by a non-engineer — is that you get a margarine tub, stick it outside, spin it around, throw rocks in, there are balls in there and they crash together, and you put up to 20 of these in a series, and then you end up with fine particles out the end. Because of that highly inefficient process, it consumes a significant amount of energy.
The technology we're looking at is a totally new way of grinding. It's not looking at these collisions. The simplest way to describe it is that it's a like a spoke in the chain, that sort of technology. It's called a conical anvil hammer mill. Again, it has been simulated and demonstrated. We just need to prototype it. Estimates based on existing technology are a 50 to 60 per cent reduction in energy consumption.
Senator Massicotte: This exists and is currently being applied in other parts of the world?
Mr. Weatherell: No, it's being developed. This is what we're doing, developing it from the lab in bench scale to prototype.
Senator Massicotte: Has it been proven to work?
Mr. Weatherell: We're at that stage now. The study we're dealing with now is what we call the fatal flaws. Here are the technologies we have at the bench scale. How do we solve them? That's where we're at right now.
Senator Massicotte: That would save 30 per cent of the world's energy if that worked.
Mr. Weatherell: About 50 per cent of the 3 per cent, which is about 1.5 per cent.
Senator Massicotte: There are some large mining companies in Australia and Canada. They must be super keen on this stuff and must be throwing millions of dollars to get this going, are they not?
Mr. Weatherell: At this point they're not because it's in the initial stages. Technology development in the mining industry has typically taken 20, 30, 40 years to happen. We do have mining companies there right now. They typically do not invest in technology development. That's more the engineering firms —
Senator Massicotte: Everybody is logical at the end of the day. If they save millions of dollars, which they would, they would throw millions of dollars at you in turn.
Mr. Weatherell: Yes, absolutely. The second piece of this, which is very important, is that you mentioned mines in Australia and other companies. There's an existing capital base, so this would not replace an existing capital base. A mining project lasts 10, 20 or 30 years. The companies are not going to go in and replace these mills. A second project is for low-grade energy waste that comes out of the existing processes, and we're looking at technology development to recapture that low-grade energy waste to apply to existing mines. The technology you asked about, Senator Massicotte, is for new mines.
Senator Massicotte: I'm not an expert, but I wish you luck. I've done a lot of venture capital in my life, and a lot of good ideas don't work but I hope that's not your case. Thank you very much.
Mr. Weatherell: Thank you.
Senator Lang: I welcome our guest. Like Senator Massicotte, I was intrigued by two examples that you brought forward with respect to going from research into innovation, and hopefully into the practicalities of running a mine.
Having personally worked around mines in a different life a long time ago, I have some understanding of how it works and how on the ground it's so difficult trying to meet all the objectives that you'd like to meet.
We've had a series of witnesses here from a number of organizations that are looking at research and innovation, to the point it gets kind of confusing. Who's doing what, who's reporting to whom, who's getting the money? At the end of the day, will we have a product that will be of substantial use for the general economy and for the environment?
That being said, in your comments you say "the Government of Canada needs to make a strategic focused investment that's common to other countries, such as Australia.'' What does Australia do different than we do?
Mr. Weatherell: That's a good question. I'm glad you brought it up, Senator Lang. Australia has identified four sectors that are strategic to their economy and made significant direct investments into those sectors.
I'll give you one specific example that happened recently. The Governments of Australia and Queensland, the state government and the federal government, collectively put up $20 million in 2015 to create an organization such as ourselves to do the same thing we're doing. That's one example. They've also invested over $100 million in centres to do technology development in areas similar to what we're doing. We're working with these organizations in Australia, but again they're doing strategic, focused large-scale investments outside of universities and using third parties such as ourselves to do that.
Senator Lang: I want to follow up on this in the practicality of the research and innovation. It would seem to me that a centre, and probably a university centre, would be established by the mining association to consolidate all the various research that's taking place in order to see how they can implement it. I'm just going to go on that. In Yukon, we have a small college, Yukon College, and we have a research and innovation centre primarily directed towards the mining community to try and see what we can do to meet our environmental responsibilities.
Colleagues, there's some substantial research under way that seems to be quite promising that will do two things. It's going to be a better process for the purposes of the environment, and on the other side of the coin, it is going to be less costly for the producer. So if that happens, just like these two examples you've given, obviously that's going to be of great benefit.
What I don't quite understand, and perhaps you can tell us on the financing side, from Senator Massicotte again, is why the major mining companies that are the producers, which will be the beneficiaries directly at the end of this if we're successful, aren't stepping up to the plate with millions of dollars to help and assist and put this together. Quite frankly, any money they put forward they'll be able to use as a tax benefit as well. Perhaps you could comment why we're not at that stage where they're putting in significant amounts of money to encourage the government.
Mr. Weatherell: That's a great question. Actually, they are. They are stepping up and they are putting in millions. As I alluded to in my comments, some of these investments are being made in Australia versus Canada simply because there's an existing matching mechanism that's already there. They get a 50 to 500 to 1 match right away. It already exists.
What happens in Canada is you end up with a myriad of colleges, universities or other organizations knocking on the industry's door saying, "We want a million for this, we want $500,000 for that and we want a quarter million for this.'' They're constantly bombarded for requests for money. That's number one.
To the point you made in your opening comments, related to focus, one of the reasons we were put in place — why CMIC was built — was to actually get this collaboration among the research organizations and innovation, both at the same time. We're working on that and we've been working on it for a number of years. We've made significant progress in getting industry, SMEs, suppliers and the research organizations aligned. In fact, we're involved in four, and encouraging a fifth, centres of excellence in Canada related to research and universities and making sure the focus is on mining challenges.
To get back to your question, they are investing. They're investing in us and projects right now. In the battery electric vehicle project I mentioned, two companies alone are putting up between $2.5 and $5 million each because it's directly relevant to their business. They are stepping up to the plate if it's relevant to their business. What we're doing is bringing that focus and relevance to the business of mining.
Senator Black: It's very important work that you and your organization are doing. That was a very helpful presentation this morning.
To help us in the work we're doing, would you please tell us, in your view, the three things we could recommend to be helpful to the work you're doing?
Mr. Weatherell: Actually, that's one question I wasn't prepared for, Senator Black. Again, I would focus on one recommendation, and that is to focus investment in organizations such as ours, that are recommending that that happen, simply because it's happening in other jurisdictions. It's happening in Canada with other sectors. It's not happening with mining.
Senator Black: Fine, let's just talk about that. The one recommendation would be, "Give us additional funds to advance our innovation agenda.'' That's what you're saying to us?
Mr. Weatherell: Yes.
Senator Black: You say you partner and work with COSIA. You will have to refresh my memory as to whether COSIA has any government funds.
Mr. Weatherell: No, COSIA does not have government funds at this point, but again, I think we have to be very careful about comparing apples and oranges. If you look at the oil and gas industry, the margins in the past five years or so were significantly higher than hard rock mining. A greater capability to fund those projects at significant levels is what COSIA is undertaking. That's changing now. There's a bit of a difference in terms of margins and capabilities.
Senator Black: Very well, thank you.
Senator Seidman: Thank you very much for your presentation. On your council's website, it says that CMIC is seeking a five-year, $50 million investment by the federal government, which will be matched by industry to accelerate implementation of the TZWM innovation strategy.
Would you be able to tell us a bit about the kinds of projects? I know you talked a bit about what you're currently doing.
Mr. Weatherell: Absolutely.
Senator Seidman: But futuristically, in wanting this kind of investment, what is it you're thinking about?
Mr. Weatherell: I gave you a couple of examples. We have basically four portfolios: exploration, underground mining, processing energy and environment. I talked about a couple in underground mining and I talked about one in processing so I'll hit the other ends and come back to innovation and processing as well.
In exploration, our exploration group created a technology road map for 10 years. The next part, which we're fleshing out right now, will be ready to have a project defined in 2018, and that is: How do we find deposits in Northern Canada undercover? Typically, they're 300 metres or so down, but how do you find those deposits with superficial methods, versus going up and drilling all over the place? This is looking at technology such as geochemistry and genomics, even. There's potential for genomics technology. That's the key focus in exploration.
In underground mining, a third project there is mechanical cutting. I talked about drill and blast, where you drill holes, stick in explosives and blow it up. The industry would like to go to mechanical cutting, where you're mechanically cutting rock. The challenge in Canada is the rock is too hard and there's no technology that exists, so we're doing a pre-feasibility study that we're about to launch to look at how we can accelerate the development of technology to cut that rock faster in Canada. We're working with companies in Sweden and Canada.
In the processing area — and this is a really exciting one — one of the pieces of processing is flotation, where you get this finely ground material, you add chemicals to it and it floats and concentrates it. Right now, there are chemicals used that are hazardous to the environment, health and everything else, so we're working with a consortium based out of Quebec that is looking at creating bio-flotation reagent, again, using molecular biology and genomics. It would create a whole new bio-industry for the mining industry. That's, again, another potential project.
In the environment space, we have two projects right now. One is what we call the knowledge hub. Essentially, whenever a mining project goes forward, there has to be baseline water quality monitoring that's done, with water quality data submitted to the relevant jurisdictions — federal-provincial-territorial — and that data is available, but it's not easily available. It's really hard to find. It's really hard to get. Working with the Province of B.C. and Geoscience B.C., we now have water quality data available, geospatially located in the province of B.C., that is available to whomever. It's openly available, and I think there is about 10 million data points available now; just open and transparent access to water quality data.
The last project in environment we're about to launch — and there are others — is part of the mining operation. A lot of them are in remote areas. Mining companies are obligated to go and monitor water quality. Typically, they will fly somebody up if it's in a remote area, they do grab samples in a batch, send it back to the lab and do the analysis. They are snapshots in time. We've defined a project and identified six potential companies and technologies globally, two of which are in Canada, actually, that will change that water quality monitoring to real-time remote. Your water quality sensor, for everything in schedules 4 and 5, will eventually, in five to 10 years, look like this and you will be able to access it on your iPad.
The first company we're working with is a start-up out of Calgary using genomics-based technology.
The Chair: Senator Seidman, I'm going to put you on the second round. I've got a lot of questioners. I'm going to start changing the process.
Senator Griffin: Thank you for being here. In your brief, you specifically mentioned what the Government of Canada can do for you, and Senator Black was also talking about this. What other economic instruments would be useful to the mining industry, in addition to the $50 million you asked for over five years?
I'll give you a heads-up that the next part of my question is in terms of regulatory instruments, because you did mention there were problems doing business here compared to Australia, for instance. What regulatory instruments do we have in Canada that could be changed or assist?
So further on the economic instruments and then what regulatory instruments would be useful to you?
Mr. Weatherell: Great, thank you. I'll hit the regulatory ones first. The Canada Mining Innovation Council is focused on innovation, and the regulatory piece is handled by the Mining Association of Canada, so I would refer to MAC on that. They're the experts and they deal with anything regulatory and policy-related.
Regarding financial instruments, I'll give you a specific example: technology prototyping and testing. Battery electric vehicles, for example, are very expensive. Mining companies would love to see some sort of program where they could offset the costs of purchase, testing and prototyping battery electric vehicles underground so they're not spending $15 million or $20 million of their own to make sure it works before they buy an entire fleet.
National Resources Canada in their new energy innovation demonstration program has something like that. That's number one. Number two is technology prototyping and demonstration, like this crushing and grinding technology, for example. If we're not hitting up VCs, engineering companies or others, it would be nice if there was a Canadian fund where we could actually go and do this that's relevant to how we operate.
There are some existing mechanisms but unfortunately they're not amenable to how we're operating right now, which is part of the challenge. Those are two examples.
Senator Fraser: Thank you. This is all fascinating. I have one quick clarification for the new crushing thing: What did you say that was called?
Mr. Weatherell: An anvil-hammer mill.
Senator Fraser: Shoving things into a funnel?
Mr. Weatherell: It's more like a chain-and-spoke.
Senator Fraser: "Fully electric mines are possible within the next five years.'' I grew up in a mining town, and if you can do that, that's going to be enormous. But I'm assuming that a fair number of these new mines would be in the North?
Mr. Weatherell: Yes.
Senator Fraser: Or in fairly remote territories. Where will you get the electricity?
Mr. Weatherell: In remote areas, there are a couple of options. Right now, the existing diesel-based generators is first one. Second is to run a river, if it's feasible. I know one mining company is looking at run-a-river project in Nunavut. Third, although it's a lot further away, is SMR, which is "small and medium reactors'' — nuclear reactors. That's eight to 10 years away. Right now, it would be diesel generators.
Senator Fraser: Are you counting the diesel-based emissions from the production of the electricity when you say that we would have zero-emission fully electric mines?
Mr. Weatherell: That's just the underground piece.
Senator Fraser: I'm assuming that's net zero emissions after you recapture all that waste energy.
Mr. Weatherell: Yes.
Senator Fraser: I'm mystified by the concept of applying genomic technology to mining. You talked about bioflotation. What on earth is that?
Mr. Weatherell: It's very interesting. Studies have shown that metal particles in flotation circuits, frothing with all sorts of chemicals, are actually surrounded by bacteria. The idea is: Can you engineer or modify these bacteria so they selectively float the minerals on their own, without the chemicals? That's one example. This is a project that the University of Laval, the NRC and COREM in Quebec City are focused on.
I talked about the water-quality sensor. For example, a protein in a bacterium will emit electrical signal in response to an external influence, such as a copper or cyanide ion in water. By genetically modifying these bacteria, you can have them react to different anilides in water, for example. That's what this company in Calgary is working on.
Senator Wetston: My confession, Mr. Weatherell, is that I studied hard rock mining at Mount Allison University over 45 years ago. The mine you are talking about sure sounds a lot different than the first one I went down. That's probably why I left the profession.
Productivity is a big challenge in our country, in many areas, not just mining. I think you are alluding to that when you talk about innovation, and I think we've fallen behind for a number of reasons and continue to do so.
Other than what you are talking about today — and I have a two-part question that won't take long — talk to me a bit about the productivity challenges in your industry.
Mr. Weatherell: The simplest one is underground mining. Productivity in underground mining is estimated to be about 24 per cent. Once you get deeper mines, you have to send equipment and people, and they have to go to locations and find equipment. If you're doing blasting, you have to evacuate the mines. It's highly unproductive.
By doing things like getting rid of blasting, you don't have to evacuate mines. In the case of mechanical cutting, you're not using explosives, so there are fewer hazards. Also, if you are using smart information communication technologies enabled, you can increase productivity as well. There are examples where it has been increased by 400 per cent.
Also, you can benefit just in the mining process. When you are moving material from underground to the surface, you sometimes have what is called oversize; when you are moving material, it gets stuck, and that can take 6 to 20 hours to remove. We are looking at technology that will reduce that to five minutes.
In underground mining, there are a lot of really good examples for that.
Senator Wetston: Australia. In my opinion, they have done a lot of good things in relation to developing national programs along with the States. My best example is a national securities commission, which we don't have in Canada. I will not go there, so please don't fire anything at me, but I want to talk about that for a moment because it's an important capital-raising component of investment in countries — the predictability, consistency and efficiency.
When I look at your example of what they've done in Australia and think about Canada, why is it that you think — for example, the $50 million that you are asking for from the federal government — why are you not asking for that from the federal and provincial governments? I think that was alluded to a moment ago. Why is that not the case? If that is not the case, do we have a problem with respect to the competition that exists between provinces and the federal government, due to the fact that we have to spread all of the benefits across the country, which is a positive thing in some ways but might not allow us to have a national mining policy of some short that would allow for the kind of investment from industry and government to promote the sector, which has gone through a very difficult time with commodity pricing in the last five years — we are well aware of that — and can you respond for me?
Mr. Weatherell: Absolutely. That's a great question and good point. We are starting at the federal level because we are a national organization. A lot of organizations we work with are provincially based, so we are seeing provincial investments. Again, we are providing the focus and they are being invested in by provincial entities to break down some of the barriers and silos.
One good example is in Ontario. The Ontario Mining Association's strategy now consists of zero waste, zero productivity, zero harm. They are following our lead. Ontario is following the national lead on innovation for the sector.
We are getting there; we're not 100 per cent, but we are seeing that move. We're starting with the federal government as a signal to say "this is important,'' and other provinces and territories are starting to line up.
Senator Galvez: It was very interesting and I applaud your initiative. If you attain your goals, it will certainly be for the benefit of all Canadians.
Coming from a research background and being a researcher myself, I was a little confused on what you said about needing more research and needing ways for being effective and applied.
I'm aware, and I know because I have participated in this contest of Genome Canada, Genome Quebec and Genome British Columbia, so I am aware that millions of dollars have been allocated over the last five years in genomic research for exploration and exploitation. From NSERC, there are the strategic grants and CRDC, which are collaborative and match funds — and no need to match funding — and there are millions of dollars that have also been given through NSERC.
Moreover SSHRC, which is the social part of NSERC, right now they just funded a network of excellence for mining and to help them with the interaction with communities. Although mining is not a sustainable activity, the money that is produced by mining can help in a sustainable activity in the community.
Last, you have grasps and grabs, so can you please tell me what is not working? What is the obstacle?
Mr. Weatherell: That's a very good question. It comes back to what Senator Wetston had talked about before, which is the slice and dice; things are not totally collaborative.
I would like to back up and let you know that I'm chairing a group across Canada of volunteers who are trying to push genomics and genomics-based technology into the mining industry. This includes Genome B.C. There are people from Genome Canada and the NRC. We are trying to focus some of these activities and investments.
There are a couple of pieces here. First, you mentioned a couple of programs. I have dealt with all of them. Those are five, and each of them have several programs, NSERC, et cetera. Then SSHRC, CFI and then CFREF, et cetera. That's the challenge: There are too many of them. They are disconnected, they don't necessarily work together and they focus more on academic issues than business issues.
Senator Galvez: I challenge that. That's not true. From our side, we are given directives; we are given criteria. We have to match what the companies want, otherwise we don't get the money.
Mr. Weatherell: I will give you an example related to genomics. It is a perfect example that just happened a few months ago. One of the projects I mentioned — bioflotation reagents— with this group out of Quebec. They applied to LSRP program grant from Genome Canada. We were put a lot of effort into it and had a lot of industry behind it, and it was turned down. It was turned down because it was not academically sound, although it was earth shattering for the business of mining. There are a number of challenges.
I wrote a six- to eight-page white paper for Natural Resources Canada on some of the challenges with funding programs in Canada. There are a number of challenges. I have personally been involved, and so has CMIC, in a number of existing granting organizations, proposals and processes, and there are challenges. There are many challenges.
Senator Mockler: You have a very good reputation so I'll start with that.
We all know that Canada enjoys a role as a global leader in mineral exploration, mining and knowledge-based services and technologies and I know you play an important role in that. When you answered Senator Galvez, I would like to have more detailed information on your statement, if you can. But with that said, I know that you have been very instrumental in Eastern Canada in the mining industry. Particularly, I know a few cases in the New Brunswick area. My question is: With the changes that we've had with the government in the U.S., do you believe that Canadian governments must adjust to their emission reduction goals, because it will have an impact on what you do, in light of the new U.S. administration? And should we slow the pace of emission reductions, from your experience?
Mr. Weatherell: I'm going to have to plead ignorance on that. Again, our organization is focused on innovation. We're not targeting policy related issues whatsoever. Unfortunately, I would have to defer to the Mining Association of Canada for that one.
Senator Mockler: You have no comment on it?
Mr. Weatherell: Not really.
Senator MacDonald: I have a clarification and then maybe a question. You said in 2015 that the global mining industry experienced record impairment of $53 billion dollars. That's a pretty frightening number for investors, I would think.
Mr. Weatherell: Yes.
Senator MacDonald: Could you clarify that? What do you mean by "record impairment''? Is it capital losses, writeoffs?
Mr. Weatherell: There are a number involved, and I can provide a full report to the clerk if necessary from PricewaterhouseCoopers. I should clarify that's $53 billion just with the top 40 mining companies; it's not the entire industry. Over the span of five years, the total is $200 billion in impairments. Some of these include writedowns, capital loss, et cetera. It covers a broad range of things and it's scary for investors.
Senator MacDonald: I would assume this applies in a uniform way in Canada? We are not exempt from this.
Mr. Weatherell: No, absolutely not.
Senator MacDonald: So when it comes to getting investment from the private sector in the mining industry to pursue some of these things, in light of the investment environment, and in light of what Senator Mockler referred to in terms of what is going on in the U.S., are we pushing a rope uphill here?
Mr. Weatherell: Can you clarify that? Pushing a rope uphill in what sense?
Senator MacDonald: In the sense of are we being realistic to be able to get the investment we need to pursue those goals? Is private industry really going to step up when they are losing this type of money in these sectors?
Mr. Weatherell: The answer is absolutely yes, and they are stepping up for a couple of reasons. Number one, I gave examples where they are actually making investments. If you look at multiple challenges the industry have from being able to find deposits or complexity of declining rates and all the way down to social licence, those are collective issues that interest driving some of the challenges and impairments. The industry has realized and recognized that, and they are coming to the table and everything we have in this plan comes from industry. They are defining this.
I don't think we are pushing a rope uphill. They are looking at how to change our business. I will quote a chief operating officer from a large mining company in Canada who said that if we don't change the business of mining, we won't have a mining business. And this is the blueprint for trying to do that.
The Chair: We'll go to second round, and I will give each of you one question and we'll see how that works out on the time.
Senator Massicotte: You also talked about other technological solutions that would help a lot in your report. What else should we consider that's earth shattering? We are in the mining business here. But what else would be important in your mind?
Mr. Weatherell: In terms of technologies? I alluded to a couple. We are looking heavily into genomics, aerospace and defence. We've identified a defence weapon that could be used to fragment rock. We identified technologies in aerospace that are electric-based for removing coatings that could be used to fragment rock. I have had discussions with people from the Institute for Quantum Computing who have identified quantum encryption techniques that could be used to expand the capability of monitoring and boreholes. We have had initial discussions with NINT out of Alberta about the applications of nanotechnology. We have an existing project with SNOLAB in Sudbury looking at their massive data manipulation and handling.
To us, it's open. I think back to Senator Galvez's question, and there's existing technology out there and we don't have to start at research. We can find what already exists in an industry and bring it back and disrupt that linear chain of technology development. We don't have to start at research. We can start somewhere down the line, disrupt it and iterate very quickly. We have actually done that in our exploration efforts.
Senator Lang: I have a general question that Senator Massicotte referred to. As we know, the federal government has committed itself to reducing emissions by 30 per cent below 2005 levels. By 2030, according to Environment and Climate Change Canada, the emission gap to reach this goal is 219 metrics tonnes of carbon dioxide or equivalent. The question to you as an organization is: From your knowledge, your organization and the members of your organization, do you believe this target is achievable and exactly what are you going to be able to provide as an estimated goal to contribute to the 219 metric tonnes of carbon dioxide equivalent?
Mr. Weatherell: I will answer that in two pieces. First, anything related to carbon reduction and policy issues, that's the Mining Association of Canada. Our targets are on the business whereas GHG and CO2 were secondary targets. How the industry will address that, MAC has already written position papers on that. I would refer to that.
We are doing some initial calculations on our comminution technology that by itself will potentially reduce emission of GHGs by about 20 per cent. The mining industry itself, in 2014 I believe, accounted for only 1.1 per cent of total emissions in Canada. Does that help?
Senator Black: You referred to a memorandum that you have prepared in respect of problems with funding programs. Could you provide that?
Mr. Weatherell: Absolutely.
Senator Black: That could be helpful because in view of the excellent questioning of my colleague Senator Galvez, I have taken the conclusion that money is not the problem. There seems to be enough dedicated money, but getting that money out in a focused meaningful way seems to be the problem.
Mr. Weatherell: Exactly, precisely.
Senator Black: Does your paper address that?
Mr. Weatherell: It talks about some existing challenges from disconnects at the policy and government level all the way down to process.
Senator Seidman: It's interesting because we have heard, in questioning witnesses on several committees now, about silos in R&D. The health field, which I know very well, is a prime example of this ongoing complaint.
However, we have also heard from basic researchers in universities that far too much of the research monies are going to applied research. You know, there are these contradictions, so it would be helpful to try to understand your perspective and what your key complaints are. I think Senator Black just asked you to submit this memorandum to us, which might be very helpful.
You did answer my question in revealing, I think, five key areas you are working on, and key projects in those areas. So my question would be: How do you prioritize, as an innovation council, all of the vast numbers of ideas that must come forward?
Mr. Weatherell: That's great. Basically, part of that goes to how we operate, so I'll take 30 seconds or less to explain that.
We have our technology groups in these four areas. It is chaired, typically, by a vice-president from a mining company and we surround them with experts and senior people in the industry. What they do is define the technology road map, the future state, where the technology gaps are and the potential projects, and then we go and find who can deliver projects.
We don't typically take unsolicited proposals. It's a very focused thing: This is what we need to do, so how do we solve it? What we will do to identify potential delivery agents, for example, we'll have open workshops where we invite people to present ideas, et cetera. A couple of weeks ago we hosted an event with Western Economic Diversification Canada, Foresight B.C. and a VC, presenting some of these challenges to the SME community. "Here is the challenge the industry has: Do you have solutions? Come and talk to us.'' And we've identified two companies. It's a little bit of a different approach.
Senator Seidman: Thank you.
Senator Galvez: My colleagues asked you my question, but I have another one.
You have mentioned that these technologies will be applied to new mines. However, I'm very worried about all the residues and waste that are still being produced by all of the operating mines, and some of this technology applies, like bio-leaching. I will explain to you what bioleaching is over tea.
It can be applied to these, and moreover, I was in South America. You know that many Canadian mines are operating in South America and actually, they are going to leave Mexico because of all the trouble that Mexico is having, and they are going to move to Chile, Bolivia, Ecuador and Peru.
You have a lot of new businesses, markets and development to do over there and they are very worried about the waste. You said something like 90 per cent of what you extract becomes waste, but it still contains some metals, like copper and zinc. Would it not be smart to also direct some of your technologies to further extract the metals from the residues?
Mr. Weatherell: Absolutely.
Senator Galvez: Or recycle, or reduce?
Mr. Weatherell: Absolutely. I just gave a snapshot of a couple of projects — not everything — but tailings processing and repurposing has actually been identified by our technology group as a key area. There are challenges related to that, especially with environmental permits, et cetera, and there are technology challenges; bioleaching is absolutely a prime candidate for dealing with that.
Senator Galvez: Just a correction, because he said it was going to be applied to new mines, so you're saying it's not only new mines?
Mr. Weatherell: Both.
Senator Wetston: You talked about diesel in the North. We've heard testimony about storage, and the opportunities for storage. We realize it's an underdeveloped area in the sense of providing better sources of generation; that is, cleaner sources of generation. Can you talk to me a bit about what you have been thinking about in storage for the North, if anything?
I know there are a lot of developments, like Tesla's Powerwall, for example, is very expensive and will run a house for a whole day, but obviously that won't work.
Nuclear, obviously, is an option, but you say it's 10 years away. We were looking at nuclear 10 years ago, so that means it was 20 years away.
What's your thought about storage and providing a reasonable opportunity for alternative sources of energy in the North?
Mr. Weatherell: At this point, we are not looking at storage specifically. We are just looking at changing the fundamental operations first. Storage would be one of the next steps. Unfortunately, we are not doing anything right now.
Senator Meredith: Thank you for being here this morning. I apologize that I missed your presentation, but I just picked up on page 3: "With our partners in the mining industry and the Mining Association of Canada, CMIC created an innovation strategy for the industry toward zero waste mining.''
Speaking to one of my colleagues yesterday who has been in this industry for a while, we were having a conversation with respect to innovation in Canada and the fact that sometimes we neglect to utilize the technologies that are here, and we look outside. How is your council encouraging working with the Ministry of Innovation and, obviously our Minister of Science, to ensure Canadians get a crack at these cutting-edge technologies, to work within the mining industry and ensure that jobs are kept here and are protected?
As we all work toward this, we met with the minister last night and we were talking about the fact that all industries have to work together, in terms of corporate Canada as a whole in terms of whether we are going to reach our emissions targets and so forth.
So regarding the innovation that's created in Canada, how do we maintain that in Canada and make sure the mining industry here is utilizing that technology?
Mr. Weatherell: I mentioned one example of what we're doing: We are reaching out to existing funding organizations that fund SMEs in Canada. We're targeting a lot of SMEs in Canada, and we have small- and medium- sized enterprises in Canada that are members of our council, and we are focused on them, and they are competing directly against OEMs in other countries. We are encouraging them. Again, it's about reaching out and networking; we're trying to keep things as Canadian as possible.
The Chair: Thank you very much, Mr. Weatherell, for your excellent presentation. I want to thank the committee for some excellent questions and also you for some great answers.
If you could, for any information that you send, please send it to the clerk and he will make sure that all members get a copy of it.
Thank you, again, for taking time out of your busy schedule.
I want to remark on one thing regarding nuclear. We've heard testimony that it takes 20 years to get a site, so 10 years is a little optimistic. I mean, heaven only knows that could change but this is just to note that the average time we have been told, as I recall, is 20 years.
Thank you very much.
We will suspend for a few minutes because our next presenter is via video conference and it will take a few minutes to set up, so please don't run away on me.
Welcome to the second portion of this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. We are continuing our study on the effects of transitioning to a low-carbon economy.
For the second segment, I'm pleased to welcome, by video conference, Jennifer Winter, Assistant Professor, School of Public Policy, University of Calgary.
Thank you very much for joining us today. We look forward to your presentation. Once your presentation is complete, there will be questions from the senators. The floor is yours.
Jennifer Winter, Assistant Professor, School of Public Policy, University of Calgary, as an individual: Thank you very much, and thank you for inviting me to speak on this very important issue. It is a privilege to speak to you today.
Canada faces a challenge in reducing emissions and simultaneously protecting the quality of life and economic growth that we enjoy. Adaptation to, and mitigation of, climate change is a complex problem and the various policy solutions should be weighed very carefully.
From the perspective of the atmosphere, the source of the emissions does not matter. A tonne is a tonne is a tonne, regardless of whether the emissions come from Alberta or Ontario, the oil sands or an auto plant.
Given this, the best policies to reduce emissions are those that ensure the lowest-cost emission reduction options are chosen first, regardless of where in Canada these emissions come from.
The policy options we have available are pricing, regulation or a combination of both. Any policy action has costs and benefits, winners and losers and political consequences. From an economic perspective, we should, where possible, strive for policies that achieve the maximum benefit at the minimum cost. This is why economists are almost universally in favour of emissions pricing via taxes or a cap-and-trade system.
By contrast, political feasibility often depends on the visibility of costs and benefits, which is why regulatory solutions are often preferred due to their less explicit costs.
Pricing mechanisms create an incentive for individuals and firms to change their behaviour and choose the lowest- cost emissions reduction pricing option. This may be choosing not to emit at all or to invest in technology to reduce emissions. The lowest cost way to reduce emissions is for everyone to face the same price.
I want to emphasize, however, that emission pricing is not a silver bullet. In particular, pricing of emissions requires that emissions be easily measurable. For those emissions that are not easily measurable, a regulatory solution may be a better policy option. An example of where a regulatory solution may be better is in fugitive emissions from oil and gas production.
I have so far spoken in generalities, but I was asked to specifically comment on how the economic benefits of Canada's oil and gas sector can be balanced with the need for credible policies to reduce emissions.
I'm afraid my answer may seem simplistic to some, but I believe we are already there. Environment and Climate Change Canada has an estimate of the social cost of carbon for 2016 of $43 per tonne. What the social cost of carbon measures is the cost associated with each tonne of carbon dioxide equivalent emitted in 2016. It can also be thought of as the benefit associated with not emitting a tonne of carbon dioxide equivalent.
Alberta and B.C. have carbon taxes, which are levied on the combustion of fossil fuels. Quebec and Ontario have a cap-and-trade system, and the new federal carbon tax will mean there is emission pricing across Canada. The prices associated with these systems are lower than the current estimated cost of emissions, the social cost of carbon that I mentioned. But by 2022, provinces with carbon taxes will be pricing emissions in line with the social cost of carbon. However, unless Ontario and Quebec significantly tighten their emissions caps, prices are not likely to rise to the same level. The federal government has an important role in ensuring the price of emissions is harmonized across provinces.
From my perspective, Canada already has credible environmental policies in place, or has committed to put them in place. Given that we have committed to pricing emissions, any economic development — no matter in what sector of the economy — is entirely appropriate. If a company finds it profitable to invest in Canada, even in the presence of a $50- or a $100-per-tonne carbon tax, there is no other policy action needed.
In fact, there may even be scope to eliminate pre-existing, unnecessarily costly approaches to lowering greenhouse gas emissions. These are policies that have a higher cost per tonne than pricing does.
For example, the Ecofiscal Commission report on biofuels found that the cost per tonne of emissions reductions from biofuels ranges from $128 to $596 per tonne.
Other policies may even increase the cost of our environmental policies, further sacrificing economic benefits. A key principle of economic efficiency is treating all individuals and all firms the same so that they face the same incentives. Policies such as phasing out coal or the cap on oil sands emissions effectively create a two-tier system, where specific types of economic activity are favoured over others.
In the case of the oil sands cap, the economic activity and emissions associated with that economic activity are valued up until the 100 megatonne cap, at which point the economic activity has zero value and avoiding an additional tonne of carbon dioxide has infinite value.
This type of policy eliminates any consideration of the relative costs and benefits of the economic activity versus the reduction in emissions.
An issue often raised in the context of meeting Canada's emissions targets is that Canada is a small economy and a small contributor to global emissions. That doesn't mean we should do nothing, but there are concerns about how acting alone to reduce emissions will affect the economy.
One major concern is carbon leakage, where economic activity leaves for a country with less stringent environmental policy, reducing economic activity here without reducing global emissions.
A second concern is that policies increase the costs of Canadian firms, making them less competitive in a global market. In this situation, there may be scope for additional complementary policies to mitigate these effects. For example, B.C. has lowered corporate income taxes, whereas Alberta is pursuing output subsidies for energy-intensive and trade-exposed sectors. The output subsidies lower firms' production costs, preventing leakage, but keep the incentive of carbon pricing.
That said, however, even a $50 per tonne carbon tax is not exceptionally burdensome on the oil and gas sector. To illustrate, for the oil sands overall, average emissions are 65 kilograms per barrel. At $50 a tonne, that's $3.25 per barrel in additional costs. For perspective, the National Energy Board estimates the cost of no additional pipelines at $10 per barrel.
The costs of a carbon tax are swamped by the benefit of additional transportation infrastructure.
I would also like to point out the sensitivity of Canadian oil and gas production to global prices. These prices are beyond our control but are a significant determinant of the amount of oil and gas production in Canada, economic growth and our corresponding emissions. This means that the Canadian government should be flexible in its emissions targets, as Canadian emissions are dependent on some factors beyond our control.
To conclude, I offer my three main points. First, there is nothing special about oil and gas emissions; a tonne is a tonne is a tonne. Prices should apply uniformly to all sectors. Second, some sectors, like oil and gas, may face adverse competitive implications from pricing emissions. Other complementary policies, like Alberta's output subsidies, can address this without exempting the sector from pricing. Third, Canada is a small, open economy. Therefore, we should approach our emissions targets flexibly.
Thank you for your time, and I look forward to your questions.
The Chair: Thank you for that presentation. We'll now go to questions.
Senator Massicotte: I quite enjoyed your presentation. You summarize quite well how the economy works, how it should work and how we should be viewing this challenge we face as citizens of this world.
In pure economic theory, you say "develop a price that reflects our policy objectives,'' which means we want to get to 1.5 Celsius; therefore, don't treat anybody differently. The market works very well. Capitalism works well. Don't penalize the oil and gas industry. They should pay like everybody else. I think Environment and Climate Change Canada came up with a social cost of $46 per tonne. But you have people like Shell that came out a few weeks ago to say that to get where we want to go, given the policy objectives, it will cost more like $200 per tonne. Then we had a professor saying we should go probably as high as 150, but given the resistance by the Canadian population, we should couple that with regulation, even if regulation is less efficient than pricing carbon.
Having said that, what if it's proven in a year or two from now that $46 or $50 per tonne is not adequate? Under your proposal, you're saying let it be whatever price is necessary to reach policy objectives, and let the chips fall where they may, with everybody paying the same price for carbon. Am I correct in saying that? You make reference to $46, but maybe it's $100 per tonne or $150. Maybe Shell is right and it's $200 per tonne. You're saying adjust to that reality to meet our policy objectives. Am I correct in saying that?
Ms. Winter: Yes, that's correct. Environment and Climate Change Canada has the estimate of $46 per tonne, and that's their central estimate. There is some uncertainty as to the potential costs and benefits of climate change, so they also have a ninety-fifth percentile estimate, which takes into account some risk. That estimate is a lot higher.
I am recommending that we should be pricing at whatever the social cost of carbon is for Canada. If the estimate changes, then the price should go higher.
Another consideration, of course, is essentially the economic cost to Canada of a high carbon price — $150 or $200 a tonne — and whether the targets we have should be met domestically or whether we should also be searching for global options for, say, purchasing offsets, which would help us to meet our targets of reducing a certain quantity of emissions but that do not necessarily have the same economic cost in Canada.
Senator Massicotte: And you're saying at $50 a tonne, there's a $3.50 cost per barrel, which means how much filling up the gas tank? What is that per litre?
Ms. Winter: I don't have that off the top of my head, but I can get that information to you. My sense is that it is not very significant relative to other gas taxes that are in place, such as the GST.
Senator Black: Dr. Winter, thanks very much for being available. I can tell you, your presentation was excellent, and you have further underlined the reputation of the School of Public Policy, certainly in my view, at least, so thanks for that.
I want to talk with you about flexibility. You made the point, as I understood it, that Canada needs to be flexible in respect of its emission targets. Do you believe that the current position that Canada has set forward is flexible? If not, what should be done?
Ms. Winter: In some senses, Canada's current position is flexible in that the federal government has committed to working with provinces to develop carbon pricing equivalency agreements. On the other hand, we have these firm targets, and a lot of focus is on carbon pricing.
We're also not necessarily exploring the relative costs and benefits of different policy options. This is where there's a lot of scope for work in the academic community to help inform the deliberations of the Government of Canada and your committee to evaluate whether we are approaching the problem in the correct way: whether carbon pricing is sufficient or if we need to explore additional regulatory policies to reduce emissions, such as the fugitive emissions for the oil and gas sector, if we need to explore carbon capture and sequestration in agriculture or if we want to explore offsets globally.
Senator Black: Those are processes and steps, many of which we're hearing about, that will assist us to meet the goals that Canada has set arising from Paris. In your conversation — and we've heard much of this testimony now — you alluded to the potential cost to the Canadian economy being such that flexibility may require something greater than just finding other methods to try to meet these goals. Can you comment on that, the damage to the economy?
Ms. Winter: The issue right now is the social cost of carbon, which is the cost to Canada of not reducing our emissions, is much less than the estimated required price to meet our commitments. In that, there's a fundamental disassociation between the policy goal, which is at least reducing global emissions and meeting the 2 Celsius goal, and what the actual estimated cost to Canada of emissions is.
That gap is why there is scope for flexibility. It means we have to consider complementary policies to mitigate or reduce the impacts on the Canadian economy. For example, Alberta has the output subsidies. That keeps the incentive of carbon pricing without imposing the entire full cost of carbon pricing on these energy-intensive sectors.
Senator Black: But isn't that just a shuffle of money? I take money from you for carbon tax and because you're hurt I'm going to send some money back to you to compensate. Don't you find that a funny way to do business?
Ms. Winter: It's a choice to be made whether you want to mitigate these effects on a certain sector of the economy. B.C. went the route of corporate income tax reduction, so that is beneficial for the entire B.C. economy but doesn't address the competitiveness impacts on a single sector. It's a choice in terms of what to do with revenue and what to do with complementary policies.
Senator Black: Thanks, Dr. Winter.
Senator Mockler: Dr. Winter, in your 2013 paper entitled The Importance of Policy Neutrality for Lowering Greenhouse Gas Emissions, you discussed various policy solutions for lowering GHGs. The paper also suggested that a flat tax on energy is the best option. I have multiple questions, but can you expand on that? How will Canadian households and businesses be affected?
Ms. Winter: Absolutely. In that paper, we treated energy as equivalent to emissions, so that was a theoretical abstraction, but for the majority of Canada's greenhouse gas emissions, it comes from energy use. We were comfortable with that assumption.
Now, we're saying that the flat tax on energy is the best because it means that everyone faces the same price relative to other policy options, such as an emissions intensity standard, for example. That creates differences in the prices across sectors of the economy and across firms.
Now, in terms of the impact on households associated with a carbon tax, for Alberta in particular — and I can get the calculations interest for the rest of Canada — it's going to cost about $500 in additional expenditure. That generally seems like a large amount, but in terms of a share of total expenditure by households in Alberta, it's actually quite small, less than 1 per cent.
Senator Mockler: I have a comment and then another question. I believe, doctor, you just mentioned you could provide us with additional information on the impact. I certainly would appreciate that, especially in an area that we're faced with right now, which is the aging population. Rather than growing our population in Eastern Canada, we have the opposite. So if you have time, I would like you to provide us with that.
My next question is in relation to our neighbours to the south. As a professor, there's no doubt that you would have an opinion. Do you believe that Canadian governments must adjust their emission reduction goals in light of the new administration in the U.S.? Should Canadian energy and climate change policies align with those of the United States as we talk going forward?
Ms. Winter: That is really one of the questions of the day regarding how Canada should react to the new administration in the south. To answer your question, part of it is that Canada faces different costs and benefits associated with climate change. The reason I say costs and benefits is that there is potential for some benefits to Canada as a northern country and global warming would increase the growing season, for example.
Now, there are also significant costs associated with climate change. As I stated earlier, we should be aligning our pricing policies, and other policies, to match what the cost is to Canada. The scope for adjusting to what the rest of the world does is, I believe, through complementary policies, if we're concerned about competitiveness, if we're concerned about impacts on households.
Senator Galvez: Thank you very much. I definitely agree with your statement that one tonne is one tonne, for sure.
I want to understand your statement that a $50 per tonne carbon tax is not exceptionally burdensome on the oil and gas sector. Then you illustrated with an example, ending with the perspective that the National Energy Board estimates the cost of no additional pipelines at $10 per barrel. The costs of carbon tax are swamped by the benefit of additional transportation infrastructure. Can you please elaborate on this statement for me?
Ms. Winter: Absolutely. So the $3.25 is based on the average for the oil sands. Of course, the cost to any given producer in the oil sands will depend on their emissions intensity. So for very good facilities in the oil sands, where they do not have much greenhouse gas emissions per barrel, the costs will be much lower. For high emissions intensity facilities in the oil sands, the cost will be much higher, so there is definitely variation.
Regarding the benefits of additional transportation infrastructure, that is an estimate from the National Energy Board's Canada's Energy Future report, where they have a no additional infrastructure case and an additional infrastructure case. You can compare the benefit of oil production in those two cases and the amount of production to get an estimate of what the cost per barrel is of having no additional infrastructure.
The additional infrastructure enables the oil sands and other producers to access more markets, which increases the price that they have available to them, so that's the benefit of the additional infrastructure. It also potentially results in lower cost of transportation because the pipeline is then the route of transportation rather than rail, which would be more expensive than pipelines.
Senator Meredith: Thank you, professor, for your comprehensive presentation and a shout-out to the University of Calgary. A colleague of mine is in Qatar and the flag is flying high there. I appreciate the work the university is doing in terms of your work as well.
One of the critical things that I've always been concerned about is whether the government is doing what they need to do. In the absence of full regulatory framework across provinces, we know that the oil and gas sector is very important to the Canadian economy. You talk about leakage, but what should we be doing from a regulatory standpoint at this stage with respect to the emissions targets that we've set? Are we doing everything we need to do? What can we do? What are the top three things the Canadian government should be focusing on from a regulatory framework to ensure uniformity across Canada?
Ms. Winter: You've raised an excellent point in that there are costs of policies not being harmonized across Canada and across provinces. We've seen this in trade costs, and the Ecofiscal Commission has also estimated the costs of not having the same policies in different provinces with regard to carbon pricing, because that increases the compliance costs for firms that operate in multiple jurisdictions across Canada.
For the Government of Canada, one of the top things I would recommend is, through the Canadian Energy Strategy or the Canadian climate change strategy, to work to harmonize policies where possible. This can be in environmental standards and it could also be in other areas. It doesn't necessarily have to be environmental standards. It could be on fuel standards across provinces, things like that. Where possible, creating rules that are similar, and that reduces the economic burden on firms and can also help them meet the environmental goals that we have.
Senator Meredith: Chair, I have a quick one with respect to industry.
Professor, the other aspect of this is the responsibility of the emitters. Can you elaborate for me in terms of just what their part should be from the social licence perspective, and their acceptance of what they are doing in terms of how they are contributing to this reduction of GHGs? What should their responsibility be, and have we done everything we can to ensure that those emitters are really being brought to the table in a fulsome way?
Ms. Winter: The responsibility of the emitters is to respond to the policies we have in place, and if it's carbon pricing it's to reduce emissions in response to that or to invest in technology. One of the challenges right now is that the prices in Canada are different depending on what jurisdiction they are in. So there is the potential role for the federal government — like in the U.K. — where we have a lower price in Ontario and Quebec, with the cap-and-trade system, to have an additional federal carbon tax on that, to add to the cost to ensure that firms in Ontario and Quebec operating under the cap-and-trade system are facing the same incentive as firms in Alberta and B.C. that have the carbon tax.
Senator Meredith: Thank you.
Senator Wetston: Thank you very much, Professor Winter. Congratulations to the School of Public Policy. I suspect you have worked closely with Jack Mintz over the years, and I suspect he still has some relationship with the university. I really want to compliment the work you are doing there.
I have a general question that I think is a good question for a professor in relation to your paragraph on the policy options we have available, which are pricing, regulations and a combination of both.
You use language which I have a lot of trouble with, but I have had to deal with it my entire professional career, and that's tradeoffs, costs and benefits, winners and losers and political consequences. I'm sure, as an academic, you have problems with that, as well.
I happen to be a bit of a fan of Arthur Okun, the macro-economist who unfortunately passed away many years ago, and his approach to equality and efficiency in the markets.
My question is: Is there any way, in your view and in your work, that you are able to find a way to align? Not find winners and losers in the scenario that you are presenting, but to align the interests of winners and losers that would benefit Canada and Canadian society as a whole, whether you think about it from a social utility or an economic efficiency perspective.
My question is about alignment: Where is the alignment that may be available to you to create something nationally beneficial to the country as a whole?
Ms. Winter: That is a very good question, and it is a tricky situation. The equality considerations versus the efficiency considerations are, I think, one of the top issues for politicians to address in that we know, with efficiency, they're arguing for everyone being treated the same. The equity considerations mean that some groups, say energy intensive industries or lower-income households, are more detrimentally affected.
I'm arguing that's the role for complementary policies in that if we scale back on the level of the carbon price, whatever it is and whether it's a tax or a cap-and-trade system, that means we're essentially lessening the stick, or the incentive to change behaviour. By trying to address our equity considerations as well as our environmental goals with the same policy instrument, we risk undermining both in that we're still detrimentally affecting some parts of the economy more than others, and the incentive to reduce emissions isn't as strong. That's why I'm arguing for setting the price at whatever we think the cost is for Canada, and then have complementary policies each aimed at a specific issue to address that specific issue.
In terms of the alignment of interests, one of the tidbits that the oil sands discusses is that they create steam by burning natural gas, so for them it makes sense to reduce emissions because that means they are lowering their costs and improving their ability to produce oil.
Another alignment of interests is that Alberta is accommodating co-generation, where industrial facilities like the oil sands are burning natural gas to create steam to produce oil, and a side benefit is they are also generating electricity. That's a way where we have relatively less emissions-intensive electricity generation and we're also able to produce oil. Finding those synergies is one way to get alignment on winners and losers.
Senator Wetston: Thank you very much.
Senator Griffin: Thank you.
My questions are related to energy literacy. Do you believe the public has a sense of the scope of the challenge that's going to be involved in meeting the carbon reduction targets?
Ms. Winter: No, I do not. I also think that, in many ways, the public is — and I include myself in the public — woefully uninformed about the scope of the challenge, and it is very difficult to become an expert or knowledgeable in any given issue.
One of the potential solutions that has been offered for transitioning Canada to a low-carbon future is electrification of transportation. Yes, that is possible and we could do it very quickly, or we could do it slowly, but there will be a cost associated with that transition in that all transportation infrastructure is essentially built around fossil fuel vehicles. Transitioning to having a sufficient number of charging stations, building up the electric grid and building up the number of generators to meet that expected demand will have a cost, as well as decommissioning of the infrastructure that we have.
I think, right now, there has not necessarily been enough research into what the potential costs of the different options are and what the potential benefits are. I think one of the reasons there has not been enough research right now is that even academics like myself haven't — until, say, the last 10 years — quite grasped the scope of the challenge and what needs to be done.
Senator Griffin: My follow-up to that is still related to energy literacy. I'm thinking that the public should know more about the issue, they should be more literate about energy and carbon reduction targets, some of the options to get there and, as you say, some of the costs. How do you think we could do this?
Ms. Winter: That's a great question as well in that I find it very interesting and I find environmental policy very interesting, but it is, for a lot of people, very boring.
Just as an anecdote, I spent Christmas dinner explaining to my parents how Alberta's carbon tax would work. That was a good, I don't know, two hours explaining how Alberta's carbon tax works and how the rebate to households works. My parents are very smart people but it still was not easy to understand and so I think, where possible, academics like myself should be out speaking to reporters explaining what's going on and providing accessible lay- language explanations of the policies and consequences. I think that's a role for the Government of Canada as well, as a public information campaign to not only explain that we're trying to meet these targets and it's going to be good for Canada, but what we are doing and why we are doing it.
Senator Massicotte: You make reference to all these policy options being good for a country, and every country is sovereign. But with economic policies, many of our companies and participants in the marketplace are international. Therefore, you acknowledge the issue where we could be causing exporters, particularly those that are intensive in emissions, to be uncompetitive. You give two examples to remedy that. We can treat them differently by returning some of the money back or protect them like they do in B.C., excluding them from the application of that policy.
That would be good economic theory, but would you agree that to be fair to those companies, we would also have to tax those importers who have a different GES treatment — an import tax, effectively, for those companies — to ensure you maintain a level playing field? Is that agreeable to you?
Ms. Winter: Yes, that is a potential solution and I'm not a trade expert or a trade lawyer so I can't comment on the legality of something like that, which would be a consideration. But yes, to level the playing field, in terms of taxing imports based on their emissions intensity, it could potentially work. But with a tax on imports, it will affect Canadian consumers. It will not necessarily affect the companies that are exporting into Canada, and so it is an option to protect Canadian producers by making their costs internal in Canada, the same as firms that are external to Canada but that will be borne by Canadian consumers.
Senator Massicotte: I agree, and I appreciate that's a negative to the consumer but do you have any choice? You seem to be saying that given the negative we shouldn't be doing it, which means in time, the importer of goods to Canada would dominate the Canadian marketplace. Their cost base would be significantly less than our Canadian companies and isn't that a serious negative to the Canadian economy if you allowed that to occur?
Ms. Winter: It could be a bad thing for the Canadian economy, but it could also be a good thing for the Canadian economy. I'm sorry for giving the typical economist answer.
At the end of the day, the majority of the carbon tax costs or carbon pricing costs are going to be borne by Canadian consumers because they are the end demanders of the goods. A fairness consideration could be to have an import tax, yes.
I think, though, that in terms of what Canada could potentially do in addition to that is encourage other countries to adopt carbon pricing so that there are not necessarily these competitiveness concerns in Canada, that all firms around the world are facing the same price. And then we can transition away from complementary policies to address competitiveness concerns.
I realize that's a very idealistic answer, but given that many countries have committed to emissions reduction targets and if thinking about benefits for the global community is reducing emissions at the lowest cost possible, that will mean carbon pricing.
The Chair: Ms. Winter that brings us to the end of questions, but I have a couple of questions to ask because there is a bit of time left.
Earlier, Senator Massicotte asked you what it would cost at the pumps for about $150 a tonne. If I extrapolate from British Columbia, it's about 7 cents a litre for $30 a tonne, so it's probably about 35 cents a litre.
When we look at the targets that Canada has set for 2030 — you are well aware of them and so are we — and we use the numbers from Environment Canada, we have to reduce to meet the target. We should reduce by 219 million tonnes.
If you shut down the oil and gas industry, you could accomplish 233. That's just 14 million tonnes over what we're supposed to reach. When you look at that Herculean task and say, "is that possible,'' you have to think to yourself — at least I do — that I don't think it is possible. I'm not saying that we shouldn't; I don't want you to put me in the wrong pigeonhole. I don't mean we shouldn't look at everything we can do, but when we set targets like this and we don't tell the public about what it will cost them and how they have to change their lifestyle, I think it's pretty unfair.
Do you think at $50 a tonne by 2030 that we can actually reach the target of a 219 million tonne reduction in the whole world?
Just so you know, we've been told from other experts that that will take $200 to $300 a tonne. Would you tell me if you think we can meet that target? Targets are great, but if you are not going to meet it there is no sense of putting one in.
Ms. Winter: Absolutely. You have raised a very good point in that the strength of the stick, the carbon tax, will definitely affect how people behave. So based on even $50 a tonne, it's unlikely that it will be sufficient to change behaviour enough to meet Canada's emissions targets.
Now in terms of shutting down the oil and gas sector, the question is if we did that, yes, it would reduce emissions from the oil and gas sector. But would it make a difference? Essentially, it's probably not that big of a difference because it will mean that Canadian consumers are just importing fuel, gasoline and diesel from elsewhere. So that's a consideration and it's why I was stressing the idea of flexibility in that we can put policies in place to address what the cost to Canada is. And then if we have the goal of meeting a target and we know it's going to be extremely costly domestically in Canada, we should consider where else in the world we should work to reduce emissions that are potentially extremely low cost.
I don't know what all of the options are, but there are ongoing forest fires or piles of tires that have been on fire and potentially just putting out those fires would be extremely beneficial in terms of global emissions and not cost that much. These are flexible options that Canada should be considering.
The Chair: Thank you very much for that. It's a little hard for us to control what happens around the rest of the world when we can hardly get it in place in Canada. I appreciate that.
I have talked about this before and this is the second time I've heard any presenter talk about adaptation, and you mentioned it right at the start. When I look at the task ahead and I get information from around the world through our Library of Parliament analysts, we know that emissions are going to increase for at least the next 50 years because we are going to continue to use fossil fuels. At least that's what is told to us right now by all the experts.
At least in my mind, when you think about all of those things, for instance, that 2,000 coal plants in the next 10 or 15 years, some of them are being built now. So all the things we do, and it's all the same air we breathe — it's the same atmosphere — we're really losing ground, but we haven't looked at adaptation to what will actually happen. Whether or not we like it, at least with all the projections we have and all of those things, I'm not saying we shouldn't look at reducing our carbon footprint, but we are still going to face that.
I'd like to know a little more about what you think about adaptation. I think we should be looking Canada-wide more. How do we adapt to a changing world for Fred and Martha — the average people. Who will pay the bill? If we just charge them for carbon tax, they will not be happy. That's the end user; that's the one who gets it. It's not so much the oil company but the end user.
Should we be looking more to adaptation, how we adapt to what is going to happen to us, regardless of whether or not we hit the 219 tonnes? Because after that, the government has said the next stretch is something that I think is almost impossible. It's tighter yet. Could you give me your viewpoints on adaptation.
Ms. Winter: Smart policy would be not just a focus on reducing emissions but to look forward 10, 15, 20 and 30 years to adaptation in terms of how climate change will affect Canada and whether we need to, say, invest in new infrastructure in order to adapt to whatever the changes are.
Yes, the policy focus should not just be on avoiding emissions. It should be on adaptation. That is a role for the government to help universities and firms invest in research and development to try and adapt to whatever happens. Of course, the challenge is that we don't know with any certainty what is going to happen, so it's incumbent upon us to plan for a variety of future scenarios.
The Chair: Okay. Thank you for that presentation. It was very interesting. We had some good questions and great answers. Thank you for taking time out of your busy schedule to come and talk with us this morning.
(The committee adjourned.)