Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue No. 5 - Evidence - April 14, 2016
OTTAWA, Thursday, April 14, 2016
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8:06 a.m. to study the effects of transitioning to a low carbon economy.
Senator Richard Neufeld (Chair) in the chair.
[English]
The Chair: Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
My name is Richard Neufeld. I represent the province of British Columbia in the Senate, and I am chair of this committee.
I would like to welcome honourable senators, any members of the public with us in the room and viewers all across the country who are watching on television. As a reminder to those watching, these committee hearings are open to the public and also available via webcast on the sen.parl.gc.ca website. You may also find more information on the schedule of witnesses on the website under "Senate Committees."
I would now ask senators around the table to introduce themselves.
Senator MacDonald: Michael MacDonald, Nova Scotia.
[Translation]
Senator Massicotte: Paul Massicotte, Quebec.
Senator Mockler: Percy Mockler, New Brunswick.
[English]
The Chair: I would like to introduce our staff, beginning with the clerk to my left, Marcy Zlotnick, and our two Library of Parliament analysts, Sam Banks and Marc LeBlanc.
Today marks the third meeting for our study on the effects of transitioning to a low-carbon economy as required to meet the Government of Canada's announced targets for greenhouse gas emission reductions.
We are pleased to welcome officials from Natural Resources Canada to present to us today. In the first segment, officials will provide the committee with information on the roles and work related to energy collaboration, electricity and renewables and innovation to help the transition to a low-carbon economy.
Before us for this first segment are Jeff Labonté, Director General, Energy Safety and Security; Niall O'Dea, Director General, Electricity Resources Branch; Marc Wickham, Director, Science and Technology Programs, Innovation and Energy Technology Sector, Office of Energy Research and Development; and Drew Leyburne, Director General, Energy Policy Branch.
During the second segment, officials will provide the committee with information on the roles and work of the Office of Energy Efficiency to help transition to a new low-carbon economy. During this transition, we will suspend very briefly in order to allow for witnesses to change, and at that point I will introduce those witnesses for the second segment.
You have a presentation to make, Mr. Labonté, so I turn it over to you.
Jeff Labonté, Director General, Energy Safety and Security, Natural Resources Canada: Thank you very much, senator, and everyone in the room and anyone listening in. It is a great pleasure to be here with my colleagues to join you as you start on this particular study that is of great importance to both Canada and, of course, the Government of Canada in its efforts.
I have a set of remarks that I will make. I'll try and stick within the time frame and open up the floor for the conversation, which I think is the more interesting part of the day.
Good morning. Thank you for inviting NRCan for this opportunity to address this important topic. Canada is very fortunate when it comes to energy; not only do we possess one of the world's largest and most diverse endowments of energy — which includes oil, gas, uranium, renewables, hydro and many other leading sources of energy — we also possess world-leading expertise, innovation and a wide variety of energy products, services and technologies.
Despite current economic circumstances, energy continues to be a key driver of Canada's economy, representing about 10 per cent of GDP, some 290,000 direct jobs and about $22 billion worth of government revenues of various forms.
We also have, as we stand today, one the cleanest energy sources and mixes in the world, one of which is electricity, which has approximately 80 per cent of electricity coming from non-emitting sources with the potential to further decarbonize as the energy mix moves forward into the future.
At the same time, the energy sector overall has an important role in addressing climate change, as we know that energy production and use is responsible for about 80 per cent of the country's total greenhouse gas emissions. This is why it's important that energy resources be developed in a sustainable way, in a manner that protects Canadians and vital ecosystems and that we do so in a way that takes into account our future.
The government has already committed to being a leader in the global fight against climate change and the transition towards a low-carbon economy. On December 12, 2015, Canada and 194 other countries adopted the Paris climate agreement to strengthen the international response on climate change, and NRCan has a prominent role to play in such efforts. Our department promotes the economic growth and environmental protection and sees energy and energy innovation as vital components of both of these as we move toward these targets.
From a jurisdictional perspective, Canada's Constitution gives provinces direct ownership and management and responsibility for the majority of Canada's energy resources. Provinces make the bulk of decisions about the pace and format of energy development, but the federal government plays a crucial role, and with our new agreements, that role will continue to be one in which we work closely with the provinces and territories.
For example, we have responsibility for international, transboundary energy issues and nuclear energy. At the same time, we share responsibilities with the provinces in a number of key areas, particularly around energy research and development, innovation and in the environment over all our work centres on partnership and collaboration. In delivering our mandate, we engage and build positive relationships with energy stakeholders, provinces and territories, indigenous communities and representatives from industry and environmental organizations. Our role includes policy, legislation, research and development, international energy engagement, trade and promotion.
These are all important tools that will enable Canada and, more specifically, Natural Resources Canada to support a transition to a low-carbon economy. Our priorities moving forward towards the objective of a low-carbon economy include a number of actions. Today there are four or five that we'll touch on, and my colleagues in the second hour will cover even more: the Canadian Energy Strategy; the North American energy collaboration; the pan-Canadian framework for clean growth and climate change; modernizing and revitalizing the National Energy Board and environmental assessments; and Budget 2016 initiatives that begin programming and transitions that will accelerate the move towards a low-carbon economy.
With respect to the Canadian Energy Strategy, it is a key component of how the provinces and territories have set forth actions and objectives to achieve a low-carbon economy, and the government has recognized that addressing climate change will require further collaboration amongst provinces and territories and the federal government and is committed to working with the provinces to turn the strategy into further action.
On March 3, first ministers met and provided a mandate for the federal government to work in the strategy directly on three specific areas: energy efficiency, clean energy technology and delivering energy to people and global markets.
We've begun the work with provincial and territorial counterparts to identify mutual interest in areas where that collaboration can take a more concrete form to move the strategy forward. Over the short term we'll work with those areas, and over the longer term we'll continue to identify further actions that will help the transition.
Just for a moment I'll speak to North America energy collaboration in which NRCan is working to advance collaboration with our NAFTA counterparts in both Mexico and the United States. We found some early success when Minister Carr signed a trilateral memorandum of understanding on climate change and energy cooperation this past February. It includes specific projects and actions in four key areas: energy mapping and cooperation, clean energy technology, infrastructure and resilience and mission innovation.
More recently, the Prime Minister took it a step further by signing a joint statement on climate, energy and Arctic leadership that commits Canada and the United States to unprecedented cooperation in many of the same energy areas but more specifically to Natural Resources' areas of responsibility: facilitating the integration of renewables onto interconnected grids; aligning energy efficiency standards and shared labelling programs; accelerating clean energy technology innovation; advancing global efforts to advance and accelerate clean energy; and multilateral work and developing a joint strategy for strengthening the grid and the resilience of the North American electricity network.
We are working with Environment and Climate Change Canada to achieve these objectives as they move forward to the June North American Leaders' Summit here in Ottawa.
I think I'll skip the conversation about the pan-Canadian growth framework, having recognized that my colleagues from Environment and Climate Change Canada were here earlier, but I will speak for a moment about the National Energy Board modernization and environmental assessment process.
Incorporating greenhouse gas emissions into the environmental assessment process will support Canada's efforts towards a low-carbon economy. NRCan has been working closely with Environment and Climate Change Canada and other stakeholders and indigenous groups to ensure that direct upstream greenhouse gas emissions are part of the environmental assessment process. The government has announced an interim strategy to transition in this fashion and to provide clarity on how such decisions will be engaged and integrated into project decisions.
We are also taking steps to modernize the representatives in the fashion in which the National Energy Board works.
Budget 2016 lays out a number of key areas that move forward with the government's plan to transition to the low- carbon and help diversify markets and open up opportunities to drive further sustainable development of energy in Canada.
The budget announced over $1 billion in investment in four years to support clean technology, including forestry, mining, energy, fisheries and agriculture. NRCan had specific components included in the budget, including energy efficiency, supporting energy research and development, and a new infrastructure development for electricity.
In concluding and providing some final remarks, senators, overall NRCan recognizes that there are many challenges to decarbonizing in Canada. At the same time, the department sees tremendous opportunities to accelerate that transition to a lower-carbon economy, including the opportunity to grow markets for clean energy technologies and sustainably developed energy.
We will work to continue to enhance Canada's potential and existing strengths to further grow our energy mix towards cleaner sources. We are also taking a long-term perspective that underscores that these changes will take time, and the transition will happen as quickly as possible through working together with indigenous peoples, provinces and territories, stakeholders and expertise that Canada possesses as we move towards this future.
The Chair: Thank you very much for those remarks. We will now start with questions.
Senator Massicotte: Thank you very much for being with us. I know, Mr. Labonté, you're here for the second panel, so maybe my questions should be directed to the second panel, and I hope they don't say I should direct it to the first, but I will lob it at you and you can tell me what we should do with it.
I'm having difficulty coming to grips with how we are going to achieve our objectives. I agree climate change is the issue of our generation, and our grandchildren will probably say, "Where were you, granddaddy, when this happened? What did you do to make this?" The growing pattern is disastrous for our globe, but I want to be practical about it, and we have to have an adult conversation about how we're going to get there.
Here is what I have been told so far, and if you look at reasonable economic growth in the next 15 to 25 years, we're going to have still a growing GHG production of 0.7 per year. It keeps going up given the passage, and that's assuming we double the amount of green energy in 15 years. Irrespective of that, it keeps going up, yet our moral obligation to other countries and to the world is to decrease that by 6 per cent in 15 years.
Obviously an assumption is being made about how we get there, but I wouldn't mind hearing some scenarios from somebody who is as intelligent as you are to explain if we do this and not double green energy but make it four times or six times or have a carbon tax of $100 per tonne, yes, we'll get there, but how do we get there?
[Translation]
Mr. Labonté: Thank you for the question. This issue presents a number of challenges, and there is no question that plenty of challenges lay ahead of us before we can achieve this goal for Canada and the rest of the world. Let's begin with the fact that we will need to take significant action in a number of very important areas. We will have to plan for political and technological activities, as well as innovation, and be ready for changing activities that will affect individuals and businesses, as well as the provinces and territories. Obviously, a considerable number of measures will have to be taken.
[English]
At this point it is difficult to say that there is a specific path that will achieve that, although I think you've sketched the reality in front of the country, and more globally; many other countries have similar challenges.
The answer lies in a lot of different actions and a range of different opportunities. Some of them have been laid out before us as directions that we need to work together on through the provinces and territories, indigenous groups and stakeholders, but the reality is that it will take a mix of policies, new technologies and innovations applied, regulatory frameworks, prices on carbon and collaboration with others. The degree to which each of those things contributes to the total is the plan, as well as the pan-Canadian framework that the government has announced it plans to move forward with. That dialogue is under way now, and it will continue for quite some time.
The actions have to occur over time. Of course, I would also comment that the actions have to happen sooner rather than later for the effect of those reductions to achieve the maximum potential they have. We have lots of specific examples of things that we could share with you, and my colleagues in the second hour will have much more concrete activities that we're doing today.
There's a mix of looking at technology, looking at changing our behaviour and patterns about attacking certain components of the problem, and some of the budget components that were announced recently help us start that conversation. I'll conclude that it's going to be a very difficult task, one that's going to take effort on many fronts.
[Translation]
Senator Massicotte: I would like to follow up with another question. Thank you for your answer, but unfortunately, it doesn't help me much. Many people have good intentions. I have learned from experience, however, that that isn't enough. Some people might say the right thing, but they are often motivated by their own personal interests. Then the government also imposes limits on them.
I am not banking on any new technologies that might emerge. It's a bit like playing the lottery; it's pretty unreliable. I want more concrete examples. If we double or even triple our green energy output, will that really achieve anything? Do you think a solution exists? We know that 85 per cent of Canadians are very environmentally conscious, except when it costs them an extra $20 a month. According to surveys, only 15 per cent to 20 per cent of Canadians agree that monthly energy costs should be raised to $100. The public says it wants to see green energy developed, but only if someone else pays for it. The taxpayer is always the one who pays for these things in the end. What solutions should we be considering? If we could sell this idea to Canadians, we would get results. For the time being, this is just empty rhetoric. What measures should we be taking in order to reach a solution?
Mr. Labonté: This is another great question. It's important to have a plan that respects federal jurisdictions and provincial and territorial jurisdictions. We also need a plan that proposes close collaboration and ways to be able to reduce costs. According to senior executives, it's important to examine all of the components of greenhouse gas emissions. In the energy sector, 20 per cent of our activities are still the cause of greenhouse gas emissions. We would like to see projects that allow us to increase our renewable energy output and that encourage the provinces to share these efforts, for instance, between Ontario and Quebec or British Columbia and Alberta, in order to reduce costs in those areas of our economy.
My colleague, Mr. O'Dea, can tell you more about our initiative to strengthen collaboration between the provinces and the federal government in an effort to come up with various ways to produce electricity.
Senator Massicotte: That all has a significant impact.
Mr. Labonté: Yes. It accounts for 12 per cent of our greenhouse gas emissions.
Senator Massicotte: In other words, transporting electricity from British Columbia or Quebec to another province in order to reduce the number of coal plants, that accounts for 12 per cent?
Mr. Labonté: That's right.
Senator Massicotte: That leaves 48 per cent. How will we achieve that?
Mr. Labonté: The federal government will be developing a plan in partnership with the provinces to look closely at all emissions sectors. It is also important to make financial investments in the technology and innovation sector in order to move forward.
Senator Massicotte: Do those technologies exist today?
Mr. Labonté: Yes, and we are also investing in technologies of the future.
Senator Massicotte: You have an image in your head that indicates that if we adopt those kinds of measures, we will reduce emissions by 60 per cent in the next 15 years, despite slow economic growth.
Mr. Labonté: That is the challenge we are facing.
Senator Massicotte: Do you see a full colour image? That is the problem, isn't it?
Mr. Labonté: There are several different answers. As a country, we are going to take a number of actions, and the federal government will work in partnership with the provinces and territories. There's no miracle solution. I would like to add that it's not just the Department of Natural Resources alone that will take action; we will be creating partnerships in order to get real results.
Senator Massicotte: Canadian taxpayers should also be part of the process. They need to be aware that this will have serious consequences on their level of consumption or their quality of life, don't you think?
Mr. Labonté: That is one aspect, in other words, the commitment of taxpayers, the citizens, through concrete actions taken by each individual. You're quite right. That is one concrete aspect of it. The government must take measures to encourage Canadians to act. In the second part of today's meeting, we can address the question of energy efficiency with concrete examples, specifically energy consumption related to shipping things like televisions and refrigerators. Various activities are being considered. Then again, we are also talking about the global reality. We need to come up with a system that works worldwide in order to achieve all these things.
[English]
There are the elements of accounting and exchange among different economies because of the reality that emissions occur both domestically, and globally and some of the actors work both domestically and globally, and there's how we manage those in a broader context. Supporting developing nations is also part of the equation and has specific requirements that are different than those from developed nations, and we have a range of things.
I'd say the challenge continues to be large, but there's a focus on that challenge that we're now spending a great deal of time working our way through as a government federally, as a department in NRCan and as a sector working and focused on energy.
Senator Massicotte: I'm anxious to feel your optimism.
Senator MacDonald: Where to start with this stuff. There's so much to talk about. We're a carbon-based economy. We're a northern climate. We have jurisdictions where the federal government wants to take the lead, but so much of the jurisdictions' responsibilities are in the hands of the provinces. I have just a couple of questions.
What is it the federal government can do unilaterally? What areas are we strong in where we can implement changes unilaterally that do not require the cooperation of the provinces or the full integration of the approach with the provinces?
Mr. Labonté: I'll take the question to mean that we would want to act unilaterally in the sense —
Senator MacDonald: I'm not saying we want to act unilaterally, but trying to get federal-provincial consensus on anything in this country is such a challenge.
Mr. Labonté: Right.
Senator MacDonald: In what areas can the federal government act unilaterally that are appropriate?
Mr. Labonté: There is a number of ways. Constitutionally, we have the ability to tax, spend and take action in direct, federal areas. A number of those areas kind of knock up against provincial jurisdiction or have direct impacts through their actions on provincial jurisdiction.
Senator MacDonald: Those are broad; give me some specifics, if you can.
Mr. Labonté: My colleagues from Environment and Climate Change would be better able to speak to this, but I think the government stated that putting a price on carbon is something we will have to move forward with. That was a component of the Vancouver declaration. That recognizes that there are already different methods that occur in different provinces for achieving that objective.
So the federal government can move in that direction in recognition of the fact that others have already moved and absorbed that.
There are specific actions that can come from regulating products that come into the country from other countries — and we can speak to some of those examples in the second part of our talk today on energy efficiency — whether consumer products, equipment used by businesses, transportation vehicles and things like that — that provide minimum standards and regulations in place, sometimes voluntary, sometimes regulated by fact.
We have specific domains of energy that we regulate — for example, in areas such as the North and areas of nuclear energy that all have opportunities to address how we might deal with releasing emissions.
Senator MacDonald: As somebody who does not believe in a carbon tax — who is vehemently opposed to a carbon tax — do we have a comprehensive assessment of carbon taxes applying in the rest of the world and how much they cost the consumers and the economies, and how effective they really are?
Mr. Labonté: To clarify, I didn't say "carbon tax." I said "price on carbon."
Senator MacDonald: Yes, but I say "carbon tax."
Mr. Labonté: I just want to be sure.
But an example of that would be that the federal government has put regulations on coal for electricity generation, which creates a specific timeline in which there is the phase-out of coal-fired electricity generation. That has a particular impact on emissions.
In terms of your question, we as NRCan do not specifically study and analyze to a degree to which I think I could answer your question around the impact of a price on carbon, or a tax, as you've stated. There are a number of jurisdictions both in Canada and around the world that have examples of that.
It's an area where work is under way under the pan-Canadian framework among Finance and Environment and Climate Change officials with their provincial counterparts. It's reasonable to say there are strong views in both directions on that particular issue, and that will be part of the discussion.
Senator MacDonald: One thing I hope we can measure that comes under the federal government's jurisdiction was the eco-energy retrofit that was in place for about five years, from 2007 to 2012. Have we done a comprehensive evaluation of how effective that program was? Was it cost-effective? Is there any way to measure? Did we measure the overall effectiveness of this program, and do we have stats on it?
Mr. Labonté: I think we can say yes to all those questions, except that my colleagues who are experts in that domain will be here in the second hour.
Would it be possible to come back to that question? We would be happy to answer it.
Senator MacDonald: Sure.
Senator Patterson: Thank you for the presentation, and welcome back to the committee.
I noted your declaration that Canada is one of the cleanest electrical power generators in the world — 80 per cent of our electricity comes from clean sources — which is great. But I come from a region that is in the 20 per cent range. In fact, sadly, Nunavut has no alternate sources of electrical energy other than diesel.
I believe your department is the key federal player in the area of research, development and demonstration. You talked about new initiatives in the recent federal budget. Even before it, a $2 billion Low Carbon Economy Fund was established, announced to support provincial and territorial actions that materially reduce greenhouse gas emissions.
Our committee studied energy in the territories, and we found a large number of federal departments, including yours, but also Indigenous and Northern Affairs Canada, Environment and Climate Change Canada, CMHC — there is a list of seven or eight departments in our committee report — that could perhaps better work together.
How does a jurisdiction like Nunavut capitalize on a shift that is increasing toward alternative energy and low- carbon economy? There is great concern about carbon pricing in the territories. It is felt it would increase the cost of everything, and it wouldn't incentivize people to go to alternative energy sources, because there is no clear alternative energy source.
I'm sorry, Mr. Chair. I guess my question is, what's in these new initiatives for the territories? Can you tell me what a jurisdiction like Nunavut can look forward to in order to reduce its reliance on costly and polluting diesel, not only in generating electricity but also in heating homes?
Mr. Labonté: That's an important question and one that we recognize. My colleague and I can provide insights into how we are looking at that.
Niall O'Dea, Director General, Electricity Resources Branch, Natural Resources Canada: In our view, renewable energy technologies can provide an ability to enhance the resiliency and security of the electricity supply for remote communities, while also limiting their dependency on diesel, which comes with its own concerns with respect to reliability and supply, particularly as climate-change impacts affect the accessibility of northern communities at specific times of the year.
In our view, renewable energy also provides opportunities for local employment, which can have positive community benefits and enhance local economies.
Just to start big and move to the more specific part of your question, as part of the Vancouver declaration on clean growth and climate change, First Ministers committed to developing the pan-Canadian framework. As part of that, they recognized that investments in clean-energy solutions are needed to help reduce reliance on diesel fuel in indigenous, remote and northern communities. More specifically, Budget 2016 announced a commitment of $10.7 million to Indigenous and Northern Affairs Canada to implement renewable energy projects in indigenous, remote and northern communities that rely on diesel and other fossil fuels for heat and power.
Importantly, Budget 2016 also provides an additional $225 million over two years, starting in 2016-17, to the First Nations Infrastructure Fund to support investments in a range of community infrastructure projects, including energy systems.
The government also collaborates with the Province of Ontario and concerned communities. It is doing so currently to advance a project that would see 21 remote First Nations communities in northern Ontario connected to the provincial grid.
To pick up, senator, on your question with respect to coordination, I would say that we at NRCan work closely with our colleagues both within the department and in INAC to provide both policy and program support in the development of these initiatives. We recognize that there are a large number of areas within the federal government where activities to support remote communities occur and that there are major benefits in coordinating those activities to maximize the benefit of the investments we do make.
Senator Patterson: Thank you for that response. Maybe I can ask some specific questions.
In our study Powering Canada's Territories, our committee did look at Indigenous and Northern Affairs Canada's ecoENERGY program and noted that only a small portion — 18 per cent — of that fund had been invested in communities north of 60 where energy challenges are great.
My first specific question, then, is will the $10.7 million you mentioned in the budget for Indigenous and Northern Affairs Canada be a represented increase to the ecoENERGY program? It wasn't clear to me, in the budget, whether that was the case.
Second, you mentioned $225 million over two years for the First Nations Infrastructure Fund. We in Nunavut, where 85 per cent of the population is Inuit, are always curious about whether Inuit are included in programs like the First Nations Infrastructure Fund because First Nations, generally, do not include Inuit. Could you tell me, now or later, whether Inuit regions like Nunavut, Nunatsiavut and Nunavik, and the Inuvialuit region of the Northwest Territories, would be eligible for applications to this First Nations Infrastructure Fund?
Mr. O'Dea: With respect to the question on the $10.7 million in programming, that, to my understanding, is a new program, so it takes up the results of the ecoENERGY program that INAC has managed previously and takes that forward into a different phase.
INAC itself would be better placed to advise you on the question of the eligibility of the Nunavut and Nunatsiavut communities for that program, but we can commit to engage with them and come back to you with a response to support your deliberations here.
With respect to northern communities throughout Canada, I would say there are two aspects that are important to consider. One is that there are existing technologies that, in specific circumstances, can be applied to help reduce dependency on diesel in those communities. My colleague Marc Wickham can provide a couple of concrete examples to the committee, if you wish, with respect to the type of work we're doing on research, development and demonstration of novel technologies that may also help encourage a step change in reducing diesel dependency and addressing greenhouse gas emissions.
Senator Patterson: I believe there is a bit of a further supplementary being offered, Mr. Chair.
Marc Wickham, Director, Science and Technology Programs, Innovation and Energy Technology Sector, Office of Energy Research and Development, Natural Resources Canada: I'd like to give one example of a recent project we did in northern Quebec. It's a remote mine, the Raglan Mine, where we installed the largest wind turbine in the Arctic — it was three megawatts — along with a three-stage storage system. There are a lot of challenges there, not the least of which was to support a large structure in the permafrost, so there was innovation in terms of developing the platform that could support a large turbine of that size in a very harsh environment.
What they found is that the wind regime in that location is extremely good. The results are better than expected, and the company is interested in going to the next stage. To give you an idea of what the potential could be for that, in a mine, right now, when they use vehicles underground there is a need to ventilate the mines, and that utilizes a lot of electricity. By converting the vehicles to electric power one might be able to reduce emissions underground and reduce the need for ventilation. Both on the efficiency and on the renewable energy side there would be ability to develop things and to move those mines to reduce diesel in a significant way.
Senator Massicotte: I'm glad to hear that. In the last 12 months we spent some time, went up north and actually looked at a mine that used the wind, but the conclusion I was left with — and maybe I misunderstood — is that that solution is rarely applicable given the complexity of ice and wind and so on. It's a good example, and we have to use it, but even if you apply it to all the North it's not a big number or a big solution. Am I getting the wrong information?
Mr. Wickham: You might be correct in that I think a number of different technology solutions need to be brought to different cases.
Senator Massicotte: It has to be a heavy user at one location.
Mr. Wickham: And the ability to support technically the complex system. This is a complex system, so there is the advantage of having a mining staff there that has the ability to support that.
We continued demonstrations, and we can look at solutions that work in different circumstances.
[Translation]
Senator Mockler: You said earlier, Mr. Labonté, that all the stakeholders need to participate, and that a number of actions must be taken.
[English]
You said that we would have many challenges in decarbonizing in Canada.
[Translation]
My colleagues asked questions to try to understand what kind of impact this will have on our communities and our society.
[English]
I read a report from 2015, Pathways to Deep Decarbonization in Canada. They've apprised all governments, I've been told, that pathway one is decarbonizing electrification; pathway two is improving energy productivity, and that would be doubling down on current energy savings, trends in buildings, vehicles and industry to capture the full stock of energy efficiency potential; and pathway number three is to reduce, cap, and utilize non-energy emissions, two areas of focus being capping and burning of methane from landfills and reductions from the oil and gas sector. I know that where I come from, in the province of New Brunswick, there are such initiatives.
The federal government has committed to reducing emissions by 30 per cent below 2005 levels by 2030, according to Environment and Climate Change Canada. The emissions gap needed to reach this goal was 291 metric tonnes of carbon dioxide equivalent. Do you believe that it is likely that energy costs in Canada will have to rise considerably in order to meet this target? And the sub-question would be, what options are available to the federal government to help energy users with the potential rise in energy costs? Somebody has to pay.
[Translation]
Mr. Labonté: You raise a very important point in our discussion and in the context of our efforts to develop Canada's plan for achieving our target of reducing our emissions by 30 per cent by 2030. As I mentioned, we need to get to work in several areas of our economy, but I want to focus on one aspect in particular of your question.
[English]
With respect to electrification as one of the pathways or sources, certainly my colleague Niall can speak to that particular issue. There are opportunities for investments to be made and changes to occur, some of which already exist, for example, the regulations on coal-fired initiatives and some of the trends towards more renewable energy.
On energy efficiency, we'll be speaking to that issue in about 10 minutes, and we'll have a full hour to walk through some of the direct reductions we've achieved, what we see as future reductions we've already planned in terms of how programs can unfold, and then the reality that there is potential for more to be realized.
On methane, I think the government has made a commitment to reduce methane emissions from all sources, both oil and gas and other places, as one of the early action areas that could immediately make some reductions in terms of the way industry works, as an example.
On the final point around costs, I would say Canada's energy policy framework is a market-based framework. So even if we look at the existing energy economy we have, which produces emissions and doesn't produce emissions, if we speak to oil and gas and fossil fuels, those prices are set on global markets, and we as Canadians consume those products to produce electricity to move goods and services around and to move ourselves around. We essentially pay the price the globe has established for those commodities and the transformation of those commodities into usable energy products.
Similarly, electricity is generally a regulated entity in different provincial jurisdictions, and the prices of electricity are based on the market in which the production occurs. I think my colleague could speak to some of the growing trends of renewables coming onto the grid. A number of those are actually very competitive and in some cases less costly than existing sources of electricity generation.
In terms of the cost structures, there is no specific, easy answer to that question, but to say that over a longer period of time there are different facets of what type of energy is being consumed and produced and the context in which it occurs, maybe Niall can speak to the electricity one as an example of the first pathway identified.
Mr. O'Dea: Thank you. To add further to my colleague's remarks, it's important as a basis for this conversation to understand that as a principle, any new generating assets, no matter the energy source or technology being used, whether natural gas, nuclear, hydro or other renewable energy sources, will generate electricity at higher costs tomorrow than the existing generating assets generating electricity today, because most of the existing generating assets in Canada were built decades ago and are at this point fully depreciated. The Canadian Electricity Association indicates that we anticipate something on the order of $350 billion in required investments in electricity infrastructure over the coming 20 years.
The question becomes how do we best optimize those investments to build a stable, reliable grid that manages costs to electricity consumers but also helps us to attain our goals with respect to greenhouse gas reductions.
Renewable energy has the advantage of zero-cost fuel, and as such, it can act as a hedge against future fuel price increases by offering stable prices for two or three decades in the case of wind and solar and hydro respectively.
The required investments in aging infrastructure, including new transmission lines and distribution lines and replacement of transformers, all add to increases in costs and can add to electricity prices. But the key model, we think, to manage those costs is cooperation.
Budget 2016 announced $2.5 million over two years to support regional dialogues among provinces and territories on the potential for cooperation on electricity trade and transmission. That allows us to optimize both existing and newly established assets and investments and to identify what those new investments should be in order to both minimize costs while maximizing this deep decarbonization.
As you know, we already have an 80 per cent decarbonized grid. There are specific jurisdictions in Canada where reliance on fossil energy is higher, and we think the cooperation among jurisdictions can be a key driver to help those jurisdictions that have existing commitments to reduce their dependency on coal achieve that end.
Senator Mockler: Looking at the grid of increasing wind power, energy and solar, it's much more costly than hydro. Somebody has to subsidize. As the Constitution of Canada says, there are provincial responsibilities. The fact that there are provincial responsibilities, I'd like to know, has the federal government released details concerning the approach that it would take with the parameters it has set in putting a price on carbon? And if so, did you share that at the last federal-provincial-territorial first ministers meeting?
[Translation]
Mr. Labonté: I'm going to let my colleagues answer certain aspects of your question, and then I will add to that.
Mr. O'Dea: Regarding a price on carbon, it would more useful to ask officials from Environment Canada and our colleagues from the Department of Finance. However, I do know that some discussions on that have taken place among the premiers and territorial leaders and our colleagues.
Regarding the price of renewable energy, I would say that I'm optimistic. The price of renewable energy has been decreasing rapidly over the past few years, especially wind and solar energy. For the first time, the price linked to the demand for wind energy in Ontario dropped below the retail price for this kind of energy. This shows that this market it becoming rather competitive in Canada and around the world.
Senator Mockler: I agree that we have reason to be optimistic, but we also need to be realistic.
[English]
I will conclude by saying there is a project in New Brunswick, the Laforge project, where they produce methane and feed it into the grid. Then they use biomass and farm residues, such as potato peel residues and chicken waste residues. When I was with the Agriculture Committee, we visited that section of the operation. I would advise you to come to New Brunswick and see it.
[Translation]
Mr. Labonté: Thank you, senator, for the information. We are definitely interested in anything that helps us improve our power system using biomass. We are familiar with examples of experimental projects in that area of the industry, so thank you for bringing that example from New Brunswick to our attention.
[English]
The Chair: Thank you. That basically ends our questions, but I have a few.
I'm always interested to hear — and you hear it a lot — that if we just generate more wind electricity and solar power, we've met all of our obligations. I think that's something that the Canadian public believes, but to me it's not true. We already have it 80 per cent clean, but it depends on who you talk to. Some people say 85 per cent. Let's use your number today at 80 per cent clean. That means to clean up the other 20 per cent of the electricity system, what would we have to do? Tell me.
Obviously you must have looked at this. I know of a couple of plants in Saskatchewan, Alberta and Eastern Canada that burn coal. If you could magically take a wand and replace them all with alternative energy sources — and I don't want to hear about just solar and wind energy because those are not firm energy, and we all know that — what would happen? How much would it help to meet the government's targets?
Mr. Labonté: Thank you for the question. I think it is a good one.
I think someone mentioned the target was about 290 megatonnes, more or less. Electricity generation is about 150 megatonnes a year today, so if you completely changed our electricity generation system, it would be 15 per cent, 16 per cent or 17 per cent of the total reduction required for the country.
My colleague can speak to the different types of electricity generation, products and methods, but I think I'd make one point, senator, to your comment. It's expected that if you wanted to achieve outcomes like reducing the emissions in the transportation sector, we might see more electrification of vehicles, and that would increase the demand for electricity.
The Chair: That was my next question.
Mr. Labonté: Right. So there are two sides to this particular question. I will allow Niall to address the first part, and then we'll wait for your next question.
Mr. O'Dea: I fully agree with your point, senator. In Canada, 65 per cent of our electricity is generated from hydropower, and that is non-emitting electricity. We consider this a very important part of our portfolio. Sixteen per cent is generated from nuclear, likewise an important part of our non-emitting portfolio. Wind and solar currently make smaller contributions. In terms of a balanced portfolio approach to full decarbonization, we would see all forms of energy potentially contributing to that future energy mix in Canada.
In terms of what the role of electricity is beyond the emissions that it produces itself, I think you can treat electricity as the backbone of deeper decarbonization. Relating to the points that my colleague has made, once you have a fully decarbonized grid, it provides the potential to then apply both energy efficiency measures and electrification of other sectors of the economy in order to drive further reductions that allow Canada to help meet our ambitious greenhouse gas emissions reduction targets.
The Chair: Well, it's interesting that you say the backbone of decarbonization. When I look at the carbon that's produced in Canada — first I'm going to stay with my line of questioning.
If you start putting in electric cars, as I understand there are over 3,000 electric cars now. I've heard that number. I don't know. Maybe you folks know how many electric cars are out there in operation today. We know they don't get you very far, and I guess that will change over time with technology.
But when you start looking further down the road, as you said, it takes more generation and firm generation. You can build lots of wind power — and I don't have any problem with wind or solar power, but they only generate when the sun shines or when the wind blows. That's when their peak is. I don't care what people tell me; that's when their peak is. I've visited wind farms, and when that turbine isn't turning, it's not generating anything, zero.
We can build all of those we want, but we still need firm electricity. Alberta could build lots of generation in wind because they have great wind, but they need firm electricity, and the firm electricity today comes from coal and natural gas. So they're still going to have to, I would think, because their ability for hydro is a bit limited as compared to British Columbia, Manitoba or Quebec as a result of the abundance of rivers and those kinds of things those provinces have. They are okay.
When you start looking at electrifying everything, it will take an awful lot of electricity. It takes a lot of money. At the end of the day, who pays that bill? Fred and Martha, the people who consume that electricity, the $350 billion to modernize the system alone that we have today? I'm not talking about new stuff. Then to replace what we have is going to cost a huge amount of money as well. So to continue down the path of actually telling people that all we have to do is build more clean electricity and we're going to meet our goals, would I be wrong in saying that?
Mr. O'Dea: That's a very good question, senator. I'll try and address it in chunks.
With respect to the variability of wind and solar, that is a recognized challenge with the integration of those technologies. In Canada, we're not yet at a point where the proportion of the energy mix that is supplied by wind and solar makes it an issue, but I recognize that as we move to potentially more ambitious percentages of wind and solar within the grid, that could pose a potential challenge.
Canada does have unique advantages in respect of increasing the integration of those sources, and that is our substantial proportion of hydro within the energy mix. Hydroelectric reservoirs can act as natural batteries to balance the variability of wind power. That's actually something we currently do with the U.S. Between Manitoba Hydro and Minnesota, Manitoba provides firm storage to allow Minnesota to achieve the levels of wind power integration that it currently has.
In respect of jurisdictions like Alberta that are now strongly dependent on fossil-fuel-based electricity production, clearly there will be a need, if they are to fully decarbonize, to access sources of power elsewhere that provide them that firm capacity. That is either investing in hydro or nuclear or other non-emitting generation within their jurisdiction or connecting to jurisdictions like B.C. or the Northwest Territories that have considerable untapped hydro assets that could be used to leverage that backup capacity.
In terms of cost to consumers related to electrification, I think there's certainly more work to be done. The real question to my mind is that when you're looking at that $350 billion investment, how do we best optimize it in a way that minimizes incremental costs to Canadians while allowing us to achieve our goals? I think our view is that cooperation is among the best ways to achieve that.
Further work in respect of innovation will also be important to realizing the kinds of technological breakthroughs that would be required to allow greater integration of those non-emitting sources.
The Chair: We're running out of time, so I think I have to limit my questions here. To minimize the cost of $350 billion, whether you talk about minimizing it or that's what the cost is, that's what the cost is. The rubber hits the road. It's easy to say those kinds of things, but it's a little tougher to get it done. Let me tell you, I've experienced it. I know it's a little tougher to get it done. It's fine to sit someplace and say, "Well, this can be done there, and that can be done here, and it will minimize or reduce our costs." No, it's won't, because $350 billion, if that's what they say it is, is real, and the only place that comes back is through the ratepayer. Fred and Martha, and industry: that's who pays the bill. At the end of the day, you can try to make it sound like it is not much, but it is a lot of money, and that's just to modernize what we have, not to replace the fossil fuel generation we have today.
I know they are tough targets. In fact, personally, I don't think they can be met. I'll be frank and honest with you. I'm not convinced that we can meet those targets when we talk about that we need some more wind and solar and we're on our way.
That's more of a statement, I guess, than a question, but I leave that with you to think about a little bit more, and maybe we'll have you back to answer some more questions about how we're going to do this.
I have many questions about wind power north of 60. We did that study. It's nice to say we're going to spend some $200 million or more figuring out what we're going to do. Reality has to set in some place in terms of how you actually construct a wind farm north of 60 and how much electricity it takes out of that wind farm just to keep the ice off the blades.
I think we have to think about all of those kinds of things, and those people that live north of 60 deserve firm power, too, not intermittent.
We are continuing our study on the effects of transitioning to a low-carbon economy. I am pleased to welcome officials from Natural Resources Canada to provide the committee with information on the roles and work of the Office of Energy Efficiency to help the transition to a low-carbon economy. Again, we have Jeff Labonté, Director General, Energy Safety and Security; Patricia Fuller, Director General, Office of Energy Efficiency; Paula Vieira, Director, Transportation and Alternative Fuels Division; and Laura Oleson, Director, Demand Policy and Analysis, Office of Energy Efficiency, Energy Sector.
Please start with your opening remarks, and then we'll go to questions and answers. Thank you.
Patricia Fuller, Director General, Office of Energy Efficiency, Natural Resources Canada: Thank you, senator. I would like to thank the committee for this opportunity to discuss the work of the Office of Energy Efficiency at Natural Resources Canada. I will touch on parts of my opening remarks in the interests of time and submit the full version to the clerk of the committee.
Energy efficiency policies and programs are key features of climate change policies in Canada and around the world. More energy-efficient appliances, homes or industrial systems are investments that often pay for themselves in relatively short time horizons. Businesses and households benefit from reduced energy costs over time, demonstrating how economic and environmental goals can be mutually supportive.
[Translation]
From the perspective of long-term decarbonisation of our energy systems, both consumption and production need to be addressed. For these reasons, energy efficiency is a key pillar in both the Canadian Energy Strategy and in the commitment to advance a Pan-Canadian Framework on Clean Growth and Climate Change. It is also a key element in North American clean energy cooperation.
Canada has made considerable progress to date in energy efficiency, improving by 24 per cent from 1990 to 2013.
International and domestic demand for energy efficient technologies represents strong opportunities for Canadian clean technology companies. The required investment in energy efficient technologies to meet commitments made in the fight against climate change on a global level is estimated to be over $8 trillion. Canadian companies are leaders in a number of areas, including building materials and high efficiency LED lighting, for example.
[English]
The Energy Efficiency Act provides the Minister of Natural Resources with a mandate to promote energy efficiency across all sectors of the economy and the use of alternative fuels. Energy efficiency is an area of shared jurisdiction with provinces and territories, and the role of the Office of Energy Efficiency is to support nationally, as well as internationally, harmonized standards and benchmarking systems that facilitate sub-national programs and increase cost-effectiveness of policy instruments.
The Office of Energy Efficiency implements regulated minimum energy efficiency standards on products that cross provincial borders or are imported, and voluntary premium standards and benchmarking systems. Voluntary programs include EnerGuide for vehicles and homes and the ENERGY STAR program, on which we partner with the United States, and provincial and territorial regulations and incentives — some 50 programs in the case of housing — are based on Office of Energy Efficiency standards and benchmarking systems.
We work closely with provinces and territories in keeping with our minister's commitments to support the Canadian Energy Strategy, and we also work closely with the United States in the context of the Regulatory Cooperation Council as well as the recent commitment of the Prime Minister and President Obama to improve and better align energy efficiency standards by 2020, as well as the government's commitment to a North American clean energy and environmental agreement.
In terms of the results of the work of the Office of Energy Efficiency to date, our programs cover residential, commercial and industrial sectors, as well as the transportation sector. In the residential, commercial and industrial sector, our first objective is to increase the energy efficiency of products used, specifically appliances and equipment. We do this through the regulation of minimum energy performance standards, as well as through the voluntary ENERGY STAR program, which certifies products that are in the top 15 per cent to 30 per cent of their class in terms of energy performance.
In these sectors, we estimate that, as of 2015, the combination of regulation and voluntary standards has reduced energy use by more than 5 per cent since 1990. A good example is refrigerators. A new fridge today consumes only 40 per cent of the energy of a 1990 model.
Our forward regulatory plan includes four amendments to the Energy Efficiency Regulations, which would align more than 90 per cent of product standards with the U.S. by 2020.
[Translation]
Our second objective is to increase the energy efficiency of buildings, including residential, commercial and institutional buildings, and again, we support both regulated and voluntary standards. We work with the National Research Council and stakeholders to develop model national energy codes, which provinces and territories can then implement in their regulations. The 2011 Model National Energy Code for Buildings is now over 25 per cent more stringent than its 1997 predecessor.
We also support the ENERGY STAR certification program for homes as well as the R-2000 standard, which represents reduced energy use of 20 per cent and 50 per cent respectively relative to code, and we make the widely-used ENERGY STAR Portfolio Manager Web application available to building owners.
Our third objective is to support improved energy management in industry. We promote this through the Canadian Industry Program for Energy Conservation, which represents over 21 industrial sectors. Canada was the first country to adopt the ISO 50001Energy Management Systems standard, which has been shown to reduce energy use in facilities that adopt it by an average of 20 per cent.
In the transportation sector, our objective is to encourage fuel efficiency and promote the expanded use of alternative, lower carbon fuels. Our key programs include the EnerGuide label for personal vehicles, and the SmartWay Transport Partnership program for freight vehicles, which is delivered jointly with the United States.
We also have the Biofuels program, which encourages the production and use of biofuels in transportation. This program, which sunsets in March 2017 with an approximate total investment of $1 billion, has played a key role in supporting Canada's renewable fuel regulations.
We also facilitate the expanded use of natural gas in transportation with the development of codes and standards that are harmonized with the United States.
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Budget 2016 included a new initiative to support infrastructure for electric and alternative-fuel vehicles. This program will be implemented jointly by the Office of Energy Efficiency and the Innovation and Energy Technology Sector of Natural Resources Canada. Of the $62.5 million over two years allocated in Budget 2016 for that initiative, $16.4 million will support expanded infrastructure using commercially available technologies, including electric, natural gas and hydrogen-charging stations along key transportation corridors. The balance, $46.1 million, will support the demonstration of next-generation charging stations for electric vehicles.
To conclude, as NRCan has emphasized over the coming months, the government will work with provincial and territorial governments, as well as key stakeholders, to develop a pan-Canadian framework on clean growth and climate change. The role that energy efficiency can play in reducing emissions will form a key part of these ongoing discussions, as well as the work with provinces and territories on the Canadian Energy Strategy.
Thank you very much for the opportunity to speak with you today. I'm happy to answer your questions.
The Chair: Thank you for that presentation. We will begin with the deputy chair.
Senator Mitchell: That was very interesting. I don't want to say "tension," but the line that is drawn in this study for us is the apparently inexpensive cost of fossil fuels compared to the comparably expensive cost of other fuels and efficiency techniques. I think technology will get much cheaper very quickly, and we don't always count all the costs of fossil fuels in climate change.
But it all comes down to how quickly we can reduce greenhouse gases. Some of your programs will have a lot to do with that.
What is your estimate of the percentage or the amount of GHG reduction over the periods the government is targeting that can be achieved by energy efficiency initiatives with the kinds of programs and the kind of work that you do?
Mr. Labonté: It's a good question, and it's one for which there are many factors to take into account. I will address a couple, and my colleague can deal with some, as well.
Let's start with the trend. The trend, economically, is that Canada for about the last 20 years has been producing the same level of GDP with about a quarter less energy use. That's a trend we need to continue to drive toward. If we look out to 2030, a similar result would hope that we could continue to produce GDP with a quarter less energy use overall in the economy.
Of the important tools or, if you will, weapons with which to fight climate change, energy efficiency is the first you would pull out of the arsenal, because the energy that you don't need to use is the energy you don't need to use. That's economically wise and, from an environmental perspective, extremely wise.
Sometimes those self-evident realizations aren't always reasonably implemented, and there are reasons for that. But in terms of our projections, we have concrete projections, then we have projections of what is possible, and then there is a dialogue under way that will develop a plan that actually includes further actions that governments need to take. Patricia could probably address the plan and what seems to be a possibility.
Ms. Fuller: Perhaps, senator, I might also offer some international context on the potential for energy efficiency. The International Energy Agency has done estimates at the global level, which indicate that, in terms of the 2030 time frame, as much as 50 per cent of the required reductions in greenhouse gas emissions could come from energy efficiency policies.
In terms of our programs, we have projections for the potential of individual programs, and as we work to put together the pan-Canadian climate change framework, we will be working with Environment and Climate Change Canada to produce projections of what the impact of our policies together with provincial measures will be toward meeting the overall greenhouse gas emission target.
It's the view of stakeholders, particularly in the building sector, that there is an enormous degree of low-hanging fruit in potential for reductions in energy use. We know from the program we implement, for example, in the housing sector, EnerGuide for homes that, on average, the reduction in energy use associated with renovations of the home is in the order of 20 per cent, and that is with existing technologies. That would be one example of potential we have identified through the mechanism of our programs.
Senator Mitchell: You're not assuming it would be 20 per cent of the entire sector if every house and building did it, but the potential is there?
Ms. Fuller: In the homes that have been renovated and measured, the results of those renovations measured through the EnerGuide system, which assesses the home before and after, the energy use of the home on average drops by 20 per cent.
Senator Mitchell: Has conservation been assigned a specific chunk of the achievement of greenhouse gas reduction targets yet?
Ms. Fuller: That will be part of the discussions around the pan-Canadian climate change framework. No assignment of portions of the target have been made at this point in time.
Certainly, as I mentioned, energy efficiency policies work very much in an integrated way among the federal government, provinces and territories. So the working together of these policies in terms of additional potential to achieve energy efficiency will be an important part of this discussion.
Senator Massicotte: Thank you for joining us. I'm trying to get a handle on how we get there. I do not doubt the importance of getting there. With the numbers we've seen so far, if you look at projections 15 years from now, we need to cut GHGs by 60 per cent in the best-case scenario.
You just said, Mr. Labonté, that we had a 20 per cent increase of efficiency of energy. Over how many years? Was it 15 years?
Mr. Labonté: It's about 27 per cent over 22 years.
Senator Massicotte: That's nearly a per cent per year, basically. That would explain a little bit why, if you look at the best-case scenario, we're seeing a 0.7 per cent increase of GHGs in spite of the fact that we have an economic growth base case of maybe 1.5 per cent or 2 per cent.
Mr. Labonté: Correct.
Senator Massicotte: With that scenario, you will notice that we still get an increase of GHGs. I presume they must have done the same thing for the next 25 years. A 1 per cent increase in efficiency per year still gets GHGs going up every year, so that's not the solution. You say we have to contain that trend. No, it looks like we may have to get 75 per cent or 100 per cent increase of efficiency over 15 years and not 25 per cent over the last 22 years.
Mr. Labonté: Right. To try to be consistent with my previous answer, there are a range of actions that need to be taken. If we just do our analysis — and the analysis is federal and provincial jurisdictions working together to develop the plan — there are going to be a number of choices. Energy efficiency is a good example of a policy instrument that the federal, provincial and territorial governments have that can reduce the demand for energy, which will reduce emissions.
The programming we have now — my colleagues can probably provide statistics on how well they've done over the last 10 to 15 years in terms of megatonne reductions. They give us a glimpse of how they might look going forward to 2030. We can roughly account for a certain portion of that target that needs to be achieved through existing programming that we have now which will roll along to that point.
Then the question becomes what additional programming, policies and regulatory frameworks can be considered in the domain of energy efficiency to increase the amount of expected reduction that we would achieve? That's recognizing that those also have effects that change behaviours and ripple through different parts of the economy, whether it's industrial use, consumer behaviour or transportation, for example. It's not always one to one. There are effects that go into the modelling frameworks. In fact, we use the models that are produced by Environment and Climate Change Canada. NRCan and Climate Change Canada work together to develop those models that project what happens and what the effects are.
Even though we might predict a certain reduction, the reality is that other things occur in the economy, and not all of that reduction can be realized. The challenge becomes trying to recognize them.
Maybe Patricia can speak to how well we've done up to now.
Senator Massicotte: Let me just fool around with those numbers. Nearly 1 per cent per year increase of efficiency. All efforts combined — if you look at economic growth versus GHGs, all those efforts, such as efficiency and change of use, 1 per cent per year in the last 23 years.
If you look at the numbers, there is a 0.7 per cent increase with the continuation of the past, including all those efforts, but we need to get to a 6 per cent reduction. So the 1 per cent, if I do the numbers roughly, has to become, starting today, 5 per cent; in other words, a 500 per cent increase of efficiency over our current pattern. So it's not 5 per cent or 10 per cent; it has to be five times more efficient starting today, and we're not going to do it today. We're going to be late. We're always late. Governments are always late. Therefore, it has to be maybe 1,000 per cent by the time we get to year five. It's hard to believe you're going to get there, sorry to say, but tell me why I'm wrong.
Mr. Labonté: Well, I wouldn't want to tell you you're wrong. What I would say is there are probably different perspectives of how one looks at it. So I would think that some of the models you're referring to assume technologies at a certain constant state, and we know that change comes in technology and has a profound impact on what one believed it would have been and what it might be into the future. That is one element of how the models work, that it isn't easy to trend your way out all the way.
I think the other aspect is there is a need for action, and I would agree with your point that rather than late, there is a lag, in effect, in terms of action taken and decisions to take action and the effect on the economy and all the behaviours that happen, and then the impact of actually reducing emissions and changing how much energy is consumed in what way.
With that said, we don't believe it's a recipe for not acting. So the recipe has to be what are all the combination of actions that can be taken and how can those actions on a look-forward basis be taken in concert to continue to live the life we live and achieve the economy we've achieved, yet at the same time address the need to reduce our emissions and the types of energy we consume, getting the most for all the energy we consume?
Our energy efficiency work at NRCan is to get the best bang for your energy buck, if you will, both economically and from use of that energy in the economy to produce the things we all desire and need.
The program is set around segments, and Patricia has spoken to, for example, the building sector, the transport sector and the industrial sector and how different strategies attack different parts of the problem and use different tools to achieve those ends.
Generally speaking, Canada is quite creative and novel in a way that we produce energy efficiency, and we need to be. We have certain characteristics that create the type of economy we have with a northern climate and the vast distances, which create an environment where consumption of energy is generally higher than other parts of the world. We have to have specific strategies that recognize how we work.
I want to make sure we give you examples of how much we've achieved so far and what we could do.
Senator Massicotte: Well, you've achieved 1 per cent increased efficiency. But I wonder, when I hear all this talk — you have to admit it's talk and talk is cheap. It's all loose words. We can set examples, but we're talking about a huge change. Is it just a continuation — I'm challenging you a little bit — of what we've heard for the last 30 years? A lot of talk. Yes, sincere efforts and intentions, but we know we're not going to get there, because we probably cannot get there. The world is maybe doing the same, which means a 2 degree Celsius limitation. They're all nice documents, but we're probably not going to get there, with serious consequences to the planet and our future kids and grandkids. Is it more of the same?
Mr. Labonté: I certainly wouldn't say it's more of the same. I think the climate agreement in December is something that 175 countries around the world have signed onto.
Senator Massicotte: That's easy to do.
Mr. Labonté: I'm sure my climate change negotiating colleagues would probably say it was pretty hard, but I recognize it doesn't mean that it is all the actions that follow. I acknowledge the point that we need to build a plan that lays out all the actions that have to follow, and those are going to be difficult actions, and a massive number of them are going to be required for Canada, amongst other nations around the world, to achieve that end.
For example, we believe that energy efficiency, just based on the way we're working now, can achieve 10 per cent of our target, more or less, if you look at our projected activities based on today's actions that we have already in place and that we're working towards.
There are others that we can build with the provinces and territories through more collaboration. There are new technologies that we'll be able to integrate into the mix that we have not yet added to our plans. We see that as a positive opportunity, but it certainly doesn't address all the problems. It is a contribution and some element that moves towards the component, and certainly, I believe and hope others believe that we aren't just talking and that we are taking action. Energy efficiency is a domain where we do have action; we have regulatory frameworks, specific programs and actions that have achieved concrete reductions. That's a good place for us to continue driving forward.
Senator MacDonald: When it comes to energy improvement, what's the low-hanging fruit here? What are the areas that we've overlooked or haven't really exploited to the point we should have? Are there areas that have bypassed us and that we haven't concentrated on? What is the low-hanging fruit in terms of unilateral action by the federal government, or joint action of the federal government with the provinces, territories and municipalities?
Ms. Fuller: The area that is most commonly pointed to for low-hanging fruit — with low-hanging fruit meaning the return on the investment that is potentially available for investments with existing technology — is the area of buildings — houses and commercial and institutional buildings — and the appliances and equipment used within them.
I referred earlier to the figure that we have been able to establish through our EnerGuide program in terms of energy-use reduction as a result of renovations of homes. This is certainly an area of concentration for provincial and territorial programs. There are a wide range of programs in place, in many cases operated by utilities, that provide incentives for retrofits of buildings and homes. As I noted, the instruments that are offered by the Office of Energy Efficiency support those regulations and incentives in many cases.
Regarding standards for products, the effectiveness of those standards is enhanced to the degree that we align them with the United States in the interests of an integrated market for products, and in the interests of reducing the costs of compliance for businesses. That is the reason for the commitment to aligning standards for energy efficiency with the United States for virtually all products by 2020.
Senator MacDonald: I know that you can't really discount the fact that energy efficiency is a principle that is not necessarily tied into the geographical location of the country. Air conditioning is just as important in the southern U.S. as heating is in the Canada, and they need just as much energy.
How does a modern economy like Canada's compare to other countries that are comparable to us as an economy? Where do we fit in? Are we in the middle? Are we particularly efficient, or are we not so efficient? Where are we on the scale compared to other countries with a similar background?
Ms. Fuller: It won't surprise you to know that we are in a very good standing internationally in terms of our heating equipment standards. In fact, perhaps I could invite the director of our Equipment Division, if I may, Mr. Chair, to join us at the table. Debbie Scharf could say a few words about our — I think it's fair to say — leadership with respect to heating equipment and also where we stand internationally in product efficiency, more broadly.
Debbie Scharf, Director, Equipment Division, Natural Resources Canada: Thank you very much.
Space and water heating is, of course, of concern to Canadians because of our colder climate; 70 per cent to 80 per cent of energy use in a typical home or building is because of our space and water heating needs. Residential space heating is one area of great success for Canada. A number of years ago, we introduced minimum performance standards for residential gas furnaces that were amongst the highest in the world, at 90 per cent efficiency, and this is a huge success story in the North American market, surpassing even where the U.S. standards are and seen by both industry, consumers and government as a big advancement for consumers in energy use.
It is an energy-use challenge for us to be heating our homes and the water that we have in our homes, but that does present an opportunity to find cost-effective of ways to reduce energy use because they're such an imperative in terms of the amount of energy that goes into those pieces of equipment.
Senator MacDonald: Where are we particularly poor compared to relevant economies? In what areas are our deficiencies particularly egregious?
Ms. Fuller: As Jeff alluded to earlier, simply because of the structure of our economy and our climate we do have one of the highest per capita energy-use levels in the world.
Senator MacDonald: That's not something we can avoid, really, using energy in this climate.
Ms. Fuller: Indeed, and in our role as an energy producer, as well, that leads to greater energy intensity in our economy. Nevertheless, as one of the highest per capita users, that suggests that there are areas for gain.
The industrial area is seen as an area where technology change would play a greater role than, say, in the buildings area, where a lot of those efficiency gains are available even with existing technologies. New technologies will give greater gains as industry begins to talk in concrete terms about net-zero homes and buildings, for example.
My colleague Marc Wickham from the Innovation and Energy Technology Sector could elaborate if that's of interest, but there are opportunities with technological transformations to improve the energy efficiency of industrial processes, and that is a key objective in the investments in Budget 2016 to support that type of innovation.
Senator Mockler: I was trying to find out earlier the department's budget from previous years and with the new programs you have, so that's why I was working with machines.
We saw the oval building in B.C. during the Olympics. We had encouraged industrial and commercial builders to use more wood in their structures. We have seen a leading project that is an icon in Quebec City called the CSN Fondaction building. It is a building of six to eight stories high, and 85 per cent of it is built with wood. Canada is a wood producer.
So when I look at your efficiency and encouraging, and the amount of money that you have earmarked, what is the program specifically that you have — I know that the provinces have that jurisdiction — to encourage provinces to go towards using more wood in residential — they're using it to the extent of 95 per cent — but to switch also to use it more in industrial and commercial buildings?
[Translation]
Mr. Labonté: That is a very interesting question. Canada's forestry sector, another area that falls under Natural Resources Canada, has expertise in the area of forestry resources. Our initiatives encourage the use of more wood in the construction of buildings and houses. Some of our projects and programs include investments in innovation in order to create new opportunities. Generally speaking, those programs emphasize international markets, like China and India or other countries that provide opportunities for the construction industry. I don't have a lot of expertise in this area. We don't have a specific program that promotes the use of wood in order to reduce greenhouse gas emissions or energy consumption.
[English]
We could certainly provide additional information, or perhaps we could even consider suggesting officials from NRCan who could come to speak to that issue at a future meeting, if that's of interest to the committee. I understand your question, senator, and I understand its importance. It's just not something I can speak to with a great degree of expertise.
The Chair: If you could send the information to the clerk, she will ensure we all get it.
Mr. Labonté: Certainly. I'll weave in my colleagues from the Canadian Forest Service.
Senator Mockler: To quote my chair, Fred and Martha will be paying." Is the department concerned with the potential rise in production costs of the Canadian oil and gas sector and the impact it would have on environmental measures that you are proposing?
[Translation]
Mr. Labonté: Yes. It is in our interest to create our own role in the area of research and to gather information on the activities of this and other sectors.
[English]
The oil and gas sector and the energy production sector produce a high degree of the emissions profile in Canada; I think somewhere in the order of a quarter of Canada's emissions come from the oil and gas sector. Not all types of oil and gas production produce the same levels of emissions. They vary by region and type of reservoir, et cetera.
Action has been taken recently to move in this direction. There has been a commitment to reduce the methane emissions that come from oil and gas production, which was announced by the Prime Minister in Washington during the state visit. I think it's 40 to 45 per cent reduction in the methane emissions. Methane is among the highest types of greenhouse gases that produce emissions.
Work is under way in provincial jurisdictions. I think Alberta, for example, has announced a cap on the amount of emissions in the oil sands sector; they expect to have a limit, if you will. Then there are existing methods that manage the emissions. Alberta has a large-emitters' carbon price. British Columbia has a carbon tax. Ontario and Quebec have announced cap and trade. There are various forms that are coming or that exist that will manage some of the emissions and how those emissions look going forward.
I don't have my oil and gas experts with us at the table today, but we could provide further information if you like, or we could dive in more, if you wish, senator.
Senator Mockler: Which province or region of Canada is leading when it comes to electric cars?
Mr. Labonté: Generally speaking, there are three provinces that have a fair degree of leadership, or have expressed a great deal of interest, in moving forward with encouraging electric vehicles.
Paula Vieira, Director, Transportation and Alternative Fuels Division, Natural Resources Canada: The three provinces that have taken early action are Ontario, Quebec and British Columbia. Those jurisdictions have provided a suite of measures to support the deployment of electric vehicles in their jurisdictions.
Senator Patterson: First, about electric cars and hybrid vehicles, gas prices are dropping. Are you concerned that this will encourage people to buy larger vehicles or that it will deter the purchase of hybrid or electric vehicles?
It was minus 19 this morning in my community where I live in the southern part of Nunavut — just over the border. I don't believe we have a single hybrid or electric vehicle in town. There are quite a few vehicles. Do electric and hybrid vehicles work as well in the cold as they do in warmer climates?
Mr. Labonté: Energy prices vary and change, and the price of gasoline and diesel as motor vehicle fuels influences behaviour of consumers a fair bit. There is some potential that lower prices encourage greater consumption, but I like to think that most people don't like to pay very much at all for the vehicle fuels they use. Most social circles I work in, and in most communities I visit, people generally want to pay the least amount possible.
There is a natural component of that. But from our perspective at NRCan, we have labelling programs that encourage better understanding that people take into account and realize when they're purchasing vehicles how much energy is needed to fuel those vehicles. Those labels tell people the costs of running the car and what the consumption is.
Vehicle regulations that drive the producers of vehicles to produce more efficient vehicles are in place, and there has been a great deal of success in reducing the consumption of fuel for vehicle transport. It continues to move in that direction. Then there are programs that encourage the alternate and switching components.
On the second part of your question on whether cold weather impacts such alternate vehicles, perhaps my colleague Paula can add to that.
Ms. Vieira: That is one of the anxieties that many consumers have, namely, not only the range of the battery, but that durability in cold-weather climates. That's one thing our department has spent a lot of time on. I and my colleague Marc Wickham from the innovation part of the energy sector have spent a lot of funds during research and development. Batteries have progressed significantly in terms of their durability and sustainability. So although it may still be a concern, most of the vehicle types available in the marketplace today can be used in cold-weather climates.
Sen Patterson: This is about cost pressures on the oil and gas sector resulting from environmental measures. I think you talked about carbon pricing.
The Canadian Association of Petroleum Producers has expressed concern that many other oil exporting nations — Iraq, Iran, Angola, Venezuela, Kuwait and Kazakhstan — would not face similar environmental cost pressures to those that are being imposed on Canadian producers. Is the department concerned with the potential rise in production costs in the Canadian oil and gas sector caused by environmental measures, as outlined by the Canadian Association of Petroleum Producers?
Mr. Labonté: I am familiar with CAPP's brief on some of these issues. I guess, broadly, Natural Resources Canada and, I think, generally, Canadians are concerned about the health of the oil and gas sector as part of our economy, overall, whether that is with global commodity trades, for infrastructure or the cost of producing and all of the characteristics.
It's a complicated issue. The cost of producing oil and gas is very dependent on the reservoir, the jurisdiction, the cost to transport to market, the production methodology and the environmental circumstances, which change. One reservoir, or project, has certain components around its environmental impact, while another project in a different part of a province, offshore or in a different part of Canada has different components that feed into the import cost.
CAPP has expressed concern about its competitiveness globally, for a number of reasons — labour costs, market costs, environmental costs and a range of issues — and it's something that is a part of the dialogue.
Certainly, the pan-Canadian framework, working with the provinces, has a healthy degree of representation from provinces that produce energy and that will have interests and concerns that they will want to have taken into account.
I think it's fair to say, if we use Alberta as an example of the largest producer of oil and gas in Canada, there are existing prices related to emissions in Alberta for large emitters, and most of the large projects have costs associated with those activities and, if I argued five or ten years ago, were doing quite well. Here we are in 2016, and there's a pan- Canadian framework being addressed, and there is already an existing cost that those producers have been, if you will, expending on their balance sheet. Going forward, we'll have to look at how those elements are taken into account.
Certainly, as Natural Resources Canada, we are concerned about the oil and gas sector. It's one of the sectors we work with along with our provinces and territories in looking at how healthy that economy — that sector — is.
Internationally, one of the challenges around the Paris agreement is how does each country implement its plan to achieve its reductions, and are all of those things reasoned and balanced in terms of how they affect different sectors of different economies? I think that's a much broader question, and certainly one that has to be part of the puzzle, but I'm not sure that it's as straightforward as a number of the different perspectives that have been put forward. It's something that we have to take into account, by all means, and we do.
The Chair: I noted that you spoke about the federal building code and building standards, which you have made more stringent. I appreciate that.
That is just voluntary for provinces, right? I'm not sure about the territories, but provinces have their own buildings codes that builders have to adhere to, rather than the federal one. Am I wrong, there?
Ms. Fuller: You're right in that what we put forward is a model energy code, which the provinces and territories can then implement in regulation. The most recent model national energy code for buildings is already in force in five provinces and one territory; we can confirm those figures. The approach has been to work through the National Research Council and with a wide range of stakeholders to develop these model energy codes. The experience thus far has been quite positive in terms of their adoption in code in the provinces and territories, both for buildings and for homes.
The Chair: I appreciate that. I've been one that has encouraged that the federal code should be the code that everybody has to meet, because I think what happens, at least in my experience, is that when builders are building a number of homes for sale, they want to use the cheapest, quickest way that they can get that home built. The country is going to live with that stock of housing that's happening now with, maybe, not as good a code as we could have, and I think there are ways we can move that forward.
Mr. Labonté, you talked about what governments can do, and you said, "tax and spend." It was interesting to me that that was the first thing you said.
I think there are things that, maybe, we can do by working with provinces to say, "Look, we're going to put in a really stringent code," because for the future, it takes a long time, as you said, Mr. Labonté, for some of these things to catch up, and this stringent code is this, and it is what you have to live up to.
That's one thing I think the government could actually do, and actually, beef up what you already have. It could be beefed up an awful lot more, because I do believe in conservation. That's just one thing about the building code. I'm cognizant of the time.
You talked about energy-efficient fridges, and I appreciate that. I have one in my home. Can you buy a non-efficient fridge? I'm not aware that you can anymore. I think, for a long time, the only thing that has been on the shelf, if you go to a store, is an energy-efficient fridge. Am I wrong?
Ms. Fuller: Certainly our standards set those minimum energy performance levels, so we absolutely removed the least-efficient products from the marketplace through setting that floor of regulation. However, we find very effective the setting of those voluntary premium standards, the ENERGY STAR standard, which manufacturers do — it's proven — strive to meet to be able to put the ENERGY STAR label on their product. We find that the combination of those voluntary premium standards — which essentially move the market forward in terms of energy efficiency levels — and regulation evolving over time raises that floor to be effective in driving higher efficiency levels and driving innovation in how these products are produced.
The Chair: That's another way. We can say, "The only thing you can buy is this."
Ms. Fuller: That's what we're doing.
The Chair: When we talk about moving along with technology — now, this information is a little bit old, so you'll correct me if I am wrong — a high-definition TV consumes four times the electricity that an old one does. So, although we have all these standards, as technology moves along and it gets more available, how many iPads do you have in your house? Some houses have more, probably, than two or three. All of those kinds of things actually consume electricity, so although technology makes it better, technology also makes it more widely available and uses a lot more electricity. Would you agree with me?
Ms. Fuller: You're absolutely right that there has been an expansion of energy-using products, and again there's a need to address energy use in terms of, for example, stand-by power from networked devices. While there have been increases in plug load from products, and electronics in particular, there are also ways to increase the energy efficiency of those products. We're working, including internationally, to develop ways to set standards that can address those energy-using products, as well.
The Chair: I might add that there's more than one TV in most houses, too, and they're probably all high-definition units, I would think. As we move forward with technology, it also makes us things that cost us more at the end of the day in energy production.
I have a few questions about how the $16.4 million will support expanded infrastructure using commercially available technologies such as electric natural gas and hydrogen charging stations. How much does it cost to put in a hydrogen station? How much does it cost to put in an electric charging station, a fast-charge station?
Ms. Vieira: It costs from $2 million to $2.5 million. A fast-charging electric is about $100,000. A natural gas station is about $2 million.
The Chair: So the $16 million won't go very far. Would we think we are going to invest a little bit more money in this?
Ms. Vieira: The Government of Canada's Green Infrastructure program is a 10-year initiative. This is simply phase one, so it is what could be done in two years. What we have proposed is not only what can be completed by March 2018 but what responds to the deployment rates that we see today. So when we look at how many EVs are on the road, the hydrogen vehicles to be released by most OEMs who have declared they will be making commercial hydrogen vehicles, as well as natural gas trucks on the road today and pending sales, those were the numbers that we mapped to the first two years.
So what we're targeting is about 70 fast-charging electric stations, six natural gas stations and two hydrogen stations, but noting as well that the actual number of installations will be dependent on the strength of the business cases that the government receives. The market will decide.
Mr. Labonté: If I could add one thing here so that I don't stand here as a tax and spend person, the answer to the question also is that the program will be delivered in collaboration with provinces and with the private sector, so that we can test the business models. Because the other question is how do you monetize electric and hydrogen vehicles in a marketplace in which vehicles are moving around, and you can't charge for electricity in most jurisdictions after being the secondary consumer of electricity. So there are some interesting models that the program is going to test as to how the private sector will be able to step in and create the opportunity and the business cases.
The Chair: Thank you very much. Two of the members had a couple of quick questions, and this room is needed in 15 minutes and we're over time. I'm going to ask both of those senators to just give a short question and then if you could give the answer to us.
Senator Massicotte: I read through an access to information, there's a government document, I forget who prepared it, saying what is the social cost of our CO2, the GHGs in the environment, and the study says I think it's $37 or $38 per tonne. Does that suggest that if we had a pricing of carbon of $37 or $38 per tonne, that the amount of GHGs would be zero? In other words, people would find savings to reduce GHGs if we paid them $38 per tonne equal to the cost of reducing it? What is the relevancy of that document and that number?
Senator Mitchell: My question concerns Senator Massicotte's sort of half-empty view of going from 1 per cent to 5 per cent efficiency. I think 5 per cent efficiency is great. And is it not true that we achieved 1 per cent efficiency for 27 years, part of which was in the 1990s when no one was even thinking of it, and the rest in the 2000s when we had a government that wasn't doing anything about it? The base is low. If we applied ourselves in any way with any intensity at all, we would get to 5 per cent before we knew it.
The Chair: Thank you very much for your presentations. They were great, and the questions were good. I appreciate your time, and we may be calling you back for some more information as we move along on this study. So thank you very much.
(The committee adjourned.)