Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources

Issue No. 22 - Evidence - March 2, 2017


OTTAWA, Thursday, March 2, 2017

The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8:03 a.m. to study the effects of transitioning to a low carbon economy.

Senator Richard Neufeld (Chair) in the chair.

[English]

The Chair: Good morning, colleagues, and welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.

My name is Richard Neufeld. I'm honoured to serve as chair of this committee. I'm a senator from British Columbia.

I wish to welcome to all of those who are with us in the room and viewers across the country who may be watching on television or online. As a reminder to those watching, these committee hearings are open to the public and also available online on the new Senate website at sencanada.ca.

All other committee related business can also be found online, including past reports, bills studied and lists of witnesses.

I would now ask senators around the table to introduce themselves.

Senator Galvez: Rosa Galvez from Quebec.

Senator Fraser: Joan Fraser from Quebec.

Senator MacDonald: Michael MacDonald from Nova Scotia.

Senator Wetston: Howard Wetston, Ontario.

Senator Patterson: Good morning. Dennis Patterson from Nunavut.

Senator Seidman: Judith Seidman from Montreal, Quebec.

[Translation]

Senator Mockler: Percy Mockler, senator from New Brunswick.

[English]

The Chair: I'd also like to introduce our staff. To my left, Maxime Fortin, our clerk; and, on my right, our Library of Parliament analyst, Sam Banks.

Colleagues, in March 2016, the Senate mandated our committee to embark on an in-depth study on the effects, challenges and costs of transitioning to a lower carbon economy. The Government of Canada has pledged to reduce our greenhouse gas emissions by 30 per cent below 2005 levels by 2030. This is a big undertaking.

Our committee has taken a sector-by-sector approach to this study. We will study five sectors of the Canadian economy, which are responsible for over 80 per cent of all GHG emissions. They are: electricity; transportation; oil and gas; emission-intensive, trade-exposed industries; and buildings.

Today, for the thirty-fifth meeting of our current study, I am pleased to welcome, from the Forest Products Association of Canada, Robert Larocque, Vice President, Climate Change, Environment and Labour; and Kate Lindsay, Director, Environmental Regulations and Conservation Biology.

Thank you for joining us this morning. We look forward to your presentation, and, after that, we'll go to some questions and answers.

Robert Larocque, Vice President, Climate Change, Environment and Labour, Forest Products Association of Canada: Good morning, everyone. Thank you, Mr. Chair, and members of the committee. Copies of my remarks are available, if you're interested. I provided them earlier.

Yes, my name is Robert Larocque. I am very pleased to be here to represent the Forest Products Association of Canada as part your study on the effects of transitioning to a low carbon economy.

[Translation]

The Forest Products Association of Canada speaks in Canada and abroad for the Canadian producers of wood and pulp and paper products on issues involving government, trade, the environment, and today's topic, the transition to a low carbon economy.

[English]

Let me give you a quick snapshot of how important the forest products sector is to Canada's economy. It is a $65 billion-a-year industry that represents 2 per cent of Canada's GDP. The industry is one of Canada's largest employers, operating in 200 forest-dependent communities from coast to coast. We directly employ about 230,000 Canadians across the country.

The sector is also important when it comes to the Canadian environment. As custodians of almost 10 per cent of the world's forests, we take our responsibilities as environment stewards very seriously. Canada has the most independently certified forests in the world, 166 million hectares, or about 43 per cent of all the certified forests. In fact, repeated surveys of international customers have shown that the Canadian forest products industry has the best environmental reputation in the world.

Climate change is emerging as the signature issue of our time. The forest product companies have been ahead of the curve by aggressively reducing their carbon footprint and running more efficient facilities. In fact, pulp and paper mills have cut greenhouse gas emissions by an impressive 66 per cent since 1990. That's an equivalent of nine megatonnes per year. To give you an idea, today we emit about 6.5 megatonnes.

The sector does not use coal and barely any oil, less than 1 per cent. We now have about 30 facilities in Canada that generate green electricity from biomass residues at the mill sites.

Following Canada's commitment under the Paris Agreement, the forest products industry pledged last May to remove 30 megatonnes a year of greenhouse gas emissions by 2030. That's about 13 per cent of the government's emissions reduction target. We call this initiative the "30 by 30'' Climate Change Challenge. We did provide copies, both in French and English, if you want to look at them.

We are proud to be part of the solution, and there is no question that the Canadian forest products industry is an environmental leader.

[Translation]

As a sector, we believe that Canada has the means to accelerate the transition to a low carbon emissions economy. Today I would like to focus my remarks on the management of our forests, potential innovation related to the use of new products, and on the negative and positive impacts for our plants.

[English]

Canada's forests are a truly an astonishing resource. They represent 348 million hectares of forest land. The forest absorbs a tremendous amount of carbon dioxide and, by doing so, helps to regulate the world's climate systems. Therefore, as Canada faces the challenge of transitioning to a low carbon economy we were very pleased that the Pan- Canadian Framework on Clean Growth and Climate Change mentioned the need to increase the carbon sinks from forests, wetlands and agricultural lands.

There is a great opportunity for the federal, provincial and territorial governments to work with industry to accelerate reforestation, like the recently announced British Columbia program under the B.C. climate change plan. To continue to improve and innovate on sustainable management practices, we can increase utilization of wood and residue in the forest, for example, or plant trees that may grow quicker and absorb more carbon.

[Translation]

The use of new forest bioproducts such as wood fibre composite to replace plastics, for instance to produce a Ford Lincoln console, contributes in two ways to a low carbon economy. First, we replace the plastics made from fossil fuel, and second, we lower the weight of the vehicle, which reduces its fuel consumption.

The forestry sector can also make pyrolysis oil. For instance, Canfor and Licella in British Columbia have announced that they are going to replace oil produced from non-renewable sources.

Moreover, we should not forget that wood stores carbon over the long term in houses and buildings. Canada has the opportunity to make changes to the building codes to allow for the construction of multi-floor buildings, such as the 18-storey residence at the University of British Columbia. For each cubic metre of wood that is used, close to a ton of carbon is removed from the atmosphere.

[English]

As I mentioned earlier, the forest products industry already reduced their GHG emissions at the mill site by 66 per cent since 1990. It will be challenging for to us reduce the carbon footprint at the facilities, but we do believe we can do more and we can reduce our emissions further. We can continue to improve our energy efficiency — improve mill operations — fuel switch using mill waste to displace fossil fuel, for example, using biogas from our waste water treatment systems to replace natural gas, and reduce our transportation emissions from bringing the trees to the mills or shipping our products to customers. We are looking at increasing the use of rail instead of trucks.

These opportunities require capital investment at the facility site. While the sector does support a price on carbon, it is very important that carbon pricing revenue generated by governments should be revenue-neutral and returned to industry in some form; for example, a technology fund.

I would also like to highlight that our sector is a significant exporter of goods. Seventy per cent of what we produce is exported, at a value of $37 billion. Our main competition for wood products is Russia and the United States, and for pulp and paper, it is the United States, Asia and South America.

This globally competitive landscape makes it imperative that a carbon pricing scheme, either a carbon tax or fuel standards that include some sort of price, considers competitiveness. As a trade-exposed industry, our suppliers — chemicals, fuels, electricity and transportation — can pass on the cost to our sector, but our sector has to absorb that cost as our products are based on international commodity prices.

[Translation]

In conclusion, the entire world is grappling with the urgent need to deal with climate change and reduce carbon emissions. We are going to have to work together, develop new ideas and put in place effective policies and programs.

The Canadian forest products industry is determined and willing to contribute to the transition toward a low carbon economy, and to work with governments to reach the Paris Accord objectives.

Thank you for your attention. I am ready to answer your questions.

[English]

The Chair: Thank you very much.

Senator Fraser: Thank you very much for being here. It seems to me every time I've heard from your association I've been impressed by the commitment to the environment, and today is no exception.

I'd really like to wrap my mind a little more closely around your commitments to reduce emissions. You are now emitting at the mill sites 6.5 megatonnes a year?

Mr. Larocque: Yes.

Senator Fraser: You're going to remove another 30 megatonnes a year by 2030, which is fabulous, but I'm still a little confused. There are only 6.5 megatonnes at the mills, and then you go on and you give a lovely, evocative list of things that could happen, but they are not all happening in your industry. If a car company decides to make a console, are you counting in your 30 megatonnes actions by other companies that would be using your products? Could you explain that to me?

Mr. Larocque: Yes, we were looking at being part of the solution. That's the reason we use the word "remove'' and not "reduce.'' You are correct; we only produce about 6.5 as far as our facilities are concerned, but we can be part of the Canadian solution.

Part of the 30 megatonnes of removal includes forests, and the forest is about half of that 30 megatonnes. So by removing piles of wood that we would otherwise burn for forest fire prevention, for example, by maximizing the use of wood when we harvest and keeping it all sustainable and protecting biodiversity, we can get about half that, and trees that grow a bit quicker and faster to absorb carbon. Those are all examples of forest management practices and reforestation that we can do, and that's about half of the 30.

The other half comes, I would say, about a third of that from our facilities, so maybe another 2 megatonnes comes from our facilities' transportation logistics. The other ones are for our products that are renewable sources to displace fossil fuel type products, so it is the plastic console from Ford. It is using biocrude oil. It's making renewable natural gas that would be fed into the electricity system, using more wood to displace steel and concrete in buildings. So that's the other 12 megatonnes out of the 30.

Senator Fraser: You have some sales work to do, then, if you're going to meet that 30 megatonne target. I take it this work has already begun?

Mr. Larocque: Yes. We actually work in partnership with Natural Resources Canada, who did some modelling and evaluation for us, so it is based on some science.

We are working with our provinces and the federal government on some of the policies. That is happening as we speak. There was a low carbon fuel standard announced by the Government of Canada about renewable content. That could fall into the biocrude or biofuel/biodiesel world that we're talking about.

Senator Fraser: Is Ford in fact making consoles?

Mr. Larocque: Yes, they are, with Weyerhaeuser.

Senator Fraser: Thank you.

Senator Wetston: I've always felt that the forest products industry is a very critical component of our economy, and you've obviously indicated that. Before I ask you some questions related to the climate change agenda, what's the future of forest products for Canada?

Mr. Larocque: I think the future is looking pretty good; I'll be honest with you. We are transitioning and transforming. In recent years, we started making a lot of different bioproducts like nanocellulose crystalline, cellulose filament, there's a lignin plant, and it's all integrated with our existing infrastructure. We're maximizing a pulp mill, for example, that used to make pulp and paper, and now we're using some of those fibres to make innovative new products.

I think on the wood side, we have a bright future ahead of us. The pulp side is a surrogate, if you want, to making tissue and paper towels that we're going to continue to use in the future.

I think on the paper writing and the newsprint, we're all aware there has been a decline since 2005 or the Internet age. Those are the types of facilities that are transforming to make those products. I'd say in the last five years we've had 10 to 12 different facilities across Canada making these new products. We appreciated the government's help at the time. There were some programs, first in kind in Canada. I think we need to do more, but I think we're on the way up.

Senator Wetston: There are many aspects to your industry, obviously. You've kind of indicated that in your comments. Just focusing a little bit on energy efficiency, I recall a few years ago that the forest products industry was doing a great deal. I'm an Ontario senator, so I'm focusing on what was done in Ontario. The focus was twofold. Obviously, it was to enhance energy efficiency from a competitive perspective and also had a very strong climate change agenda. As you know, in Ontario, the former premier decided to close the coal plants and move very strongly with respect to a green energy agenda.

Can you talk a little bit about the energy efficiency program that the forest industry seems to be adopting? I know biogas is green, and that's a great deal of what you utilize for production, but can you provide a bit more information about that?

Mr. Larocque: One of our game-changers over the last five years has been the installation across the country of co- generation facilities.

I don't have the exact number, but from 2010 to 2015 we've produced about 10,000 per cent more electricity across Canada than we did in 2010, which has allowed us to bring green electricity to the grid.

While you're doing those capital investments, you're upgrading your boilers, putting turbines in the mill, and therefore you are looking at efficiencies within the mill to save as much as you can on the energy side to produce the green power.

You're right. We've innovated in biogas to replace natural gas in a lot of our kilns. We've done 90 per cent of the energy efficiencies with the installation of co-generation that we can do. There's another 10 per cent left. In my remarks, I wanted to be clear that at the mill site, the 6.5 megatonnes, it's going to be difficult for us to reduce that to 3. We're going to have some game changers as far as making pulp on the drying side, and it will have to be significant.

We're focusing on our scope 2, but the transportation aspect of it, our harvesting, sending our products to market, this is where we can focus, and we have some room to improve on energy efficiency.

Senator Wetston: In your latter comment you are focusing on obstacles to achieve some of the goals that you're setting for yourself. Can you elaborate on how you view the industry being able to overcome them? Is it simply research, technology or financial investment? Is the industry investing enough in technology to achieve these goals?

Mr. Larocque: From 2010 to 2015, I think we invested $2.8 billion in energy-related, environmental-regulated investments. I think we could do that again. The policies have to be in place. For example, carbon pricing will have a positive and negative impact. We're going to have to pay for it at the mill site, but if we can make a biofuel, there's an opportunity for us on the market.

I think the investment is there. The technology, I would say, is about 75 per cent there to get us to the "30 by 30.'' There is some first in kind we're going to have to replicate across Canada, but I think the technology is there.

At this point in time, over the next five years, it's looking at investment options and making sure we make them in the right spot. The mills are going to have to make a decision. Am I making green electricity? Am I going to be making biofuel? Am I going to be making green and energy efficiency at the mill? And carbon pricing is going to have an impact on all those investment decisions.

We're not sure yet. We're seeing it in Ontario and Quebec, with the cap and trade with B.C. and Alberta, the government announcement of $50 a tonne. We're still waiting for the other policies being discussed as we speak right now.

Senator Galvez: You are an industry that has come up with a plan and strategy; I wish other sectors would do the same. In this committee we are listening to many other sectors, and it's not same.

My daughter is a forest engineer. She does exactly this certification. I will be very happy to tell her that her work is contributing to making Canada the most certified in the world scale.

Of course, there is always room to ask questions and to put you on the spot. I am sorry about that.

Mr. Larocque: It's okay.

Senator Galvez: I'm worried about the health of the forest. Climate change is bringing a lot of new illnesses. It's true that you are proposing to reforest with fast-growing trees, but I know these things have to be planned and thought through and researched before you do them. So R & D technology and studying is a fundamental aspect for the success of your activities. Could you please elaborate?

Mr. Larocque: That's a good point. Today I was focusing on low carbon economy, but our biggest concern is that we're impacted by climate change. We've all heard about the pine beetle in B.C. If we don't get those resources and our forests healthy, we won't be able to harvest and it's going to hurt us economically.

You're right. There is a lot of research. We are working with the Canadian Forest Service, the Fibre Centre and FPInnovations. We are partnering up with Genome Canada to look at what is possible.

There are some pockets. There's a company in Vancouver that is doing what we call "assisted migration.'' They are not planting new trees, but trees from Washington State, because as the climate is moving, those may be the trees we should be planting today for our future in the next 20, 30, 40 years.

As we're looking at that research and that impact, it takes time. We need to start now. That's why we launched the "30 by 30'' Climate Change Challenge. If we wait till 2030, it is 15 more years, and the trees we planted today may not be growing as much as we thought and be impacted by forest fires or pests.

It is very important. I believe that the pan-Canadian framework is a very good step in the right direction, but it is very energy-focused. We are forgetting, in my mind, about the forest and agricultural sides. We call at it "the sinks.''

Senator Galvez: You're absolutely right that when we put in the materials in the construction that cannot source CO2, and we heard that from the chemical industry, alternative plasticizers, instead of coming from petroleum they can come from other sources. Yes, it's true that they are lightweight, flexible and cheaper. What is needed in the construction code to encourage this?

Mr. Larocque: Yes. There are two or three things in my mind relating to construction that would make a difference. First, we recently moved up the building code height in Canada from four to six storeys. The tall wood building would be a very good initiative. We are aware that the Government of Canada in the building code is working on it for 2020 or 2025.

With the Brock Commons, Canada has the tallest wood building in the world at 18 storeys, but that was probably just in the fall; we may have been overtaken now. As far as the amounts of them, we're behind what Europe is doing. We're really looking at the building code to incent taller wood buildings across Canada.

Number two, I think the net zero energy concept is very important. At this point in time, the idea in the building code is that a new building would be net zero energy, but we're only looking at operational, how you are getting the heat in your building, and make sure it's from renewable sources.

There's a great opportunity to include building materials in that building code and call it net zero energy with embodied carbon. Therefore, as you're building a building, you need to count the carbon in your material and the operational efficiencies.

The science has demonstrated that on a building life cycle the embodied energy is about half the total amount of the carbon. The operational is the other half.

I don't think we're there yet. We're working on it. We have to do our part. Life cycle analysis is complicated; not everyone gets it. I've been working in this field for five years, and even I am sometimes, wow. But I think we can get there. We're working on it.

Three, I think the governments have a place as leaders for procurement policies. If you're going to build a new federal building, why don't you look at it from a carbon perspective? A lot of other jurisdictions are doing it, and our perspective also is a carbon-first policy. It should be based on carbon, not on material per se, wood versus something else.

Senator Seidman: Thank you very much for your presentation.

You talked about barriers. You talked about the necessity of the industry to be competitive, and a bit about innovation and technologies. That's what I'd like to pursue. How well coordinated is the industry? Do companies work together to share information and develop technologies? This is an ongoing issue in many disciplines across the country and in many industries.

Mr. Larocque: In our industry, we are very lucky to have an organization called FPInnovations. They're all about innovation for the forest products sector. All of the technologies or energy efficiency programs that they have apply to all of the sectors. So we do share a lot of information.

I think that, on mill operation, climate change, the information is well shared across the sectors. But I'll be honest with you that, once we get into the new products or novel products, I think the market penetration might not be as well shared, but how to make it is, I think, well shared across the sector

Senator Seidman: So what would you say, then, are the main barriers to deploying those innovative technologies?

Mr. Larocque: I think funding is going to be one that's very interesting for us. The softwood lumber issue with the United States and the trade there is a concern as far as investment. Number two, I think it's the unknown. If it were just carbon pricing, the signals would be there for investment. We would know where to go, and then we'd make investment decisions. But, because we don't know yet the low-carbon-fuel policy, the procurement policies, it's very difficult to decide. Am I investing in making a wood product or a biofuel? I think that, two years from now, we'll be better placed.

Senator Seidman: Is there something that the government can do to help?

Mr. Larocque: I want to make sure that they achieve their timelines on how we're going to implement it. Two, they need to recognize the full value chain. There were 51 recommendations, I think, in the Pan-Canadian Framework. I just want to make sure that there are people looking at it from a global perspective and not just, "I'm just working on fuels. I'm just working on buildings.'' It is an issue right now.

Senator Seidman: Integration.

Mr. Larocque: Integration, because a lot of those programs are relying on the same biomass. "You're going to give us the renewable electricity. You're going to give us the renewable fuels. You're going to give us the renewable efficiency in the mills,'' and it's the same biomass. So we need to integrate it to make sure we get it right. The opportunity is there, but we need to integrate it to make sure we get it right.

Senator MacDonald: Thank you, Mr. Larocque, for your presentation.

The forest industry in Nova Scotia has always been misunderstood. I always used to ask people what the biggest industry in Nova Scotia is in terms of overall value and direct and indirect employment, and they say the fishery and the lobster industry and a lot of things. For many decades, it's been the forest industry. It's very important in Nova Scotia.

You mentioned "revenue neutral'' in your comments. You're referring to revenue neutral between government and industry, right? Because it's never revenue neutral for consumers or people who are paying.

Mr. Larocque: No, I include consumers there. I just want the government, as the carbon pricing or revenues are generated, to look at who is paying it. As a consumer, I'm paying it, too, as far as my gas or home heating. I do believe that, when the provinces are looking at revenue sharing, they do include the part that the industry is paying into some kind of technology fund and not just going all into one spot, if you want.

Senator MacDonald: Forestation, I find this interesting because it's always a topic of conversation in Nova Scotia. I'm wondering if you have some statistics on the level of deforestation in this country, let's say 100 years ago compared to 50 years ago compared to today.

Mr. Larocque: As far as deforestation land lost, I think it's 0.1 per cent.

Kate Lindsay, Director, Environmental Regulations and Conservation Biology, Forest Products Association of Canada: Canada has 91 per cent of its original forest currently. I don't know what year the commitment was made to regenerate. It's been in place for a number of decades. But, now, the deforestation rate, according to NRCan's State of Canada's Forests report, is 0.2 per cent, and that's not the result of forest harvesting but where land is converted to another purpose. So, in the forest industry, any harvested tree is regenerated, and that's mandated by law as well as certification.

Senator MacDonald: If we were to restore our level of forestation from 91 per cent to 100 per cent, what would the impact be on carbon?

Ms. Lindsay: I think that would be challenging, though, because a lot of the area we've lost is where there is urban development, agricultural land, areas that perhaps would not be possible to restore to a working managed forest now.

Mr. Larocque: But we're talking megatonnes. We're not talking hundreds of thousands of tonnes. We're talking megatonnes. It would be significant.

Senator MacDonald: Most of our forest products would be exported in this country. Correct?

Mr. Larocque: Yes.

Senator MacDonald: If somebody has been on Canada-U.S. for the last eight years, softwood lumber is a big issue, a constant issue, with WTO challenges. It's going to be another big issue but particularly now with the imposition of carbon taxes in this country and probably a whole new regime in the U.S. with regard to managing carbon and these industries. How do you see the impact? We put carbon taxes on our forest industry, and the same is not done with our largest trading partner and with other big exporters of lumber, such as Russia. Realistically, what will the effect be on our industry?

Mr. Larocque: I think there will be an impact. We'll see what happens with the negotiation on the softwood lumber. I think climate change is an important aspect of it, and it's not just carbon pricing. It's the overall impact of all of the policies.

We did an analysis for the $50-a-tonne announcement. The incremental cost for our sector is $250 million by 2022, and I'm talking the incremental of 2015 because there was already B.C., for example, at 30.

I think, on that one, we understand the price of carbon. It was across Canada, across sectors. I think we were able to agree with it. Our concern is that what is happening now is that all of those other policies are adding up. As soon as you start including industrial, you're adding more cost, and that's where our concern is. We're going to have to evaluate those costs.

Senator Meredith: Thank you for your presentation. I am delighted to hear that your industry has been sort of ahead of the curve with respect to GHG reductions. The government has set some aggressive targets. I'm delighted to hear of your "30 by 30'' challenge as well. Climate Change Canada, however, has indicated that, to reach those targets, the difference is 219 metric tonnes. Is that achievable, and what needs to be done from a policy perspective to ensure that there's broader buy-in to actually achieving that target?

Mr. Larocque: Is that achievable? I think we can try. I think we want to be part of that solution.

I do like that the Pan-Canadian Framework was looking at a broad perspective of it. So that was a good move.

My concern is that we need to work together to really understand the big picture. I'm afraid that a lot of those reductions might be the same reduction. It's just that they're counted differently because someone is looking at buildings. Someone is looking at electricity. The electricity is feeding the building. Are we talking about the same megatonnes?

I do think it is achievable, but I think we're going to have to have innovation. I'm pleased about the innovation agenda. I think it's going to play an important role in this. I think that we need to look at the forest and agricultural lands as more of an opportunity than what has been discussed so far.

Senator Meredith: Can you expand on the innovation piece? I know Senator Seidman talked about other industries and technologies and collaboration that needs to take place.

Mr. Larocque: Correct.

Senator Meredith: Expand upon that a little.

Mr. Larocque: I think we're pretty excited about the innovation piece. There has been some cluster conversation. We are working with Unilever, Boeing and Ford, for example. I think we need to do more of that. The natural resource sector has to work more with what we call the user type companies.

Senator Meredith: You said Ford. Are we talking wood cars here?

Mr. Larocque: Not wood cars; we're talking carbon fibre. We're talking about fibres that are lighter but as strong. We're looking at panels. We're not talking wood cars, but biofuel. You can have a car that has wood products in. You're using 20 per cent biodiesel, for example, in your car. Those are all examples of where we can work together and make those products for the future. I think it is important in innovation that both the suppliers of those products and the users talk, and I'm pretty excited about what is happening on the innovation side.

Senator Meredith: Again, I was concerned about what the government can do in terms of the top three things that we need to be doing right now. Have you presented those to the Minister of Environment in terms of just changes that need to happen now? How receptive have they been to those discussions?

Mr. Larocque: Very receptive. During the pan-Canadian conversation, we had 66 recommendations for the government; 17 of those were in the Pan-Canadian Framework. The top three on the wood building side were buildings, energy and transportation. Those are the top three I would focus on in the next five years. I think they're on track; it's just let's get it right.

Senator Meredith: How do we do that?

Mr. Larocque: Consultation and understanding the impacts on the industry, not only the users but the suppliers of those technologies, and collaboration between federal and provincial governments. This is key, and we need to continue it.

Senator Mockler: Mr. Larocque, did you speak on behalf of Crown land this morning, private woodlot owners and industrial land or a combination thereof?

Mr. Larocque: Ninety per cent of our operations are on Crown land.

Senator Mockler: On Crown land.

Mr. Larocque: Correct.

Senator Mockler: When you look at building codes, I agree that that has to change now, not later but now. When you talk about pine beetles in B.C., you forgot to mention — I believe I didn't hear it, and please help me if I didn't hear it.

[Translation]

I would like to know.

Mr. Larocque: There is no problem.

Senator Mockler: It is the spruce budworm.

Mr. Larocque: Yes.

[English]

Senator Mockler: With respect to spruce bud worm, right now the devastation we have in Quebec is larger than in New Brunswick. We have to manage that. If we don't manage it, it will manage us. So that's one.

Next is, we also have lessons that we could learn from Quebec.

[Translation]

On the Quebec side, it would be important to invite your members to visit the 6-storey Fondaction de Québec building.

[English]

We need to have a strategy that will represent private woodlot owners, industrial land and Crown land.

Mr. Larocque: I agree.

Senator Mockler: And bring those people to the table. I had the opportunity in Atlantic Canada to mobilize Canadian private woodlot owners. I did a round table on that not long ago in order to prepare myself for the meeting, and I want to talk about civic culture, tree planting and carbon. A forest is considered a carbon sink if it absorbs more carbon than it releases. Harvested and processed wood products are an additional source of long-term carbon storage when used in house construction.

Can you elaborate on the type of leadership you're doing to help sustain and better manage our forests?

Mr. Larocque: I completely agree that it sinks if it's sustainable. When you harvest them, you replant, and the forest would always be a sink. You're storing that carbon for a hundred years. So overall, as you keep doing that, your carbon stock increases. However, pests and fire are the wild cards on this one. So we'll plant it, but we might lose that forest after 20 or 30 years.

So there are two things we need to work on. First, we call it adaptation or mitigation. We need to mitigate or adapt for the changing climate on pests and fire. We're working with FireSmart Canada. Our mills are also working with the Quebec association and the Quebec government, but then we need to do the right things when we harvest that forest and replant trees that will be healthy. Those are called climate-resilient forests. We need to do both. We need to deal with the issues now, which is adaptation, but we need to mitigate for the future. We are working with CAFO, the —

Ms. Lindsay: — Canadian Association of Forest Owners, the ten per cent of forestry in Canada that is managed on private land by woodlot owners. And I think we can collaborate with them and learn from them, because they have made investment in planting adapted seed stock where we could do more of that on public land.

Mr. Larocque: We do have to work with provincial governments on Crown land because there are some regulatory barriers to learning from the private woodlands that we can take on the Crown land.

Senator Mockler: When you talk about products derived from wood fibre, don't forget Ford; anyone who sits on a Ford seat right now is sitting on a byproduct of the cellulose coming from wood.

Mr. Larocque: Yes.

Senator Mockler: All those seat cushions come from wood fibre.

Mr. Larocque: Good example.

Senator Mockler: Ford is leading and Toyota is second. I want to quote and then ask for your comment. Every cubic metre of wood used as a substitute for other building materials reduces CO2 emissions to the atmosphere by an average of 1.1 tonnes of CO2. And that's according to scientists. If this is added to the 0.9 tonnes of CO2 stored in wood, each cubic metre of wood used saves a total of 2 tonnes of CO2.

Do you agree with that statement? How better can we inform the public when it comes to better management practices of our forests, which is silviculture, and managing the forest smarter, and using smaller equipment for less of a footprint?

Mr. Larocque: I completely agree with the 1.1. We use 1 and it's an average. No problem there. The other 0.9, I completely agree. I just add one caveat that we support 100 per cent that it needs to be based on sustainable forests. If you just harvest trees and you're not sustainable, you're losing that 0.9.

Senator Mockler: Which area of Canada has the best management practices?

Mr. Larocque: How much time do I have? I just want to say that Canada has the best forest management practices in the world.

The Chair: That's a very good answer. I could give you the answer, Percy.

Ms. Lindsay: As a condition of membership to the Forest Products Association of Canada, our members must be third-party certified by an independent forest certification standard. So that's an added requirement if you're a FPAC member.

Senator Patterson: This was an excellent presentation. Thank you very much. I'm going to ask maybe a really simplistic question.

I understand from high school biology that living forests absorb carbon dioxide and produce oxygen. The dead, old- growth forests, beloved and considered sacred by environmentalists, do the opposite or don't have the same kind of effect. I'm not going to ask you to agree with that.

Is Canada getting credit internationally for the role of our forests, wetlands and agricultural lands in absorbing carbon dioxide and producing oxygen?

Mr. Larocque: I think that the world knows. Canada has to report to the international — the acronym is pretty long. We do talk about the role of forests in Canada and their sinks as far as absorbing carbon.

Senator Patterson: When we set targets that we're going to meet and are measured by the critical international community, do we get credit?

Mr. Larocque: Yes, it's included in our targets, and that's why the "30 by 30'' is very important, because we count the sinks. It's not just about reducing emissions; it's about absorbing.

Senator Patterson: I'm very pleased to hear that. You say, and I agree, that it's imperative that the carbon pricing scheme, which I think we're still developing in Canada as we move to implementation next year, considers competitiveness for trade-exposed industry.

How do we consider competitiveness in our carbon pricing scheme? Is it as simple as exempting trade-exposed industries from carbon pricing? What is the way we deliver on that recommendation of yours?

Mr. Larocque: I wish there were a simple answer. I really do. I wish we can just say "let's exempt.'' I think we all have a role to play as we're using fossil fuels. The concern we have is that when the same fossil fuel is taxed four times and is passed on to the last consumer, either myself or trade-exposed industries on the international market, that's the analysis that needs to be done, instead of individual policies looking at it in a simple mindset.

A perfect example I'm working on is the low carbon fuel standard that the government is working on, and they added industrial fuel to it. We are the users of industrial fuel so we are not only going to be paying a carbon tax, we may be paying that extra cost for the fuel supplier to put renewable content and give it to us. That's two costs we're paying, and we can't pass it on. That's the cumulative impact of all those carbon policies that you need to recognize the trade-exposed industries. In those cases, I would exempt the industrial users of that fuel.

The Chair: So I understand, you say on the mill site the industry emits 6.5 metric tonnes. That's just the mill site. That's not moving the product to the mill site or moving the finished product from the mill site out or anything else; is that correct?

Mr. Larocque: That is correct.

The Chair: You say it's going to be difficult to reduce that 6.5 metric tonnes?

Mr. Larocque: There is a 5 to 10 per cent opportunity for us to do better, but I think to go down to 1, for example, in 25 years is going to be next to impossible with the technology we have now.

The Chair: You also say the sector does not use coal and barely any oil, and I don't disagree with that, but in a few provinces where you operate, obviously your electricity is provided by coal; right?

Mr. Larocque: Yes. I'll give you an example. In Alberta it is coal-based, but half our facilities in Alberta generate green electricity and are self-sufficient.

The Chair: You say you have 30 facilities across Canada that generate electricity from biomass. Thirty out of how many and where are they?

Mr. Larocque: Thirty out of eighty-nine, and they're across Canada.

The Chair: Do all of the sites in Alberta, Saskatchewan — what happens in New Brunswick? You don't use any coal-fired electricity is what you're saying?

Mr. Larocque: I'm not saying none. I'm just saying the electricity we buy is about 20 per cent in Canada. I'm including Quebec and B.C. My guess would be maybe 5 per cent of our energy needs in Alberta. I'm roughing numbers here.

The Chair: When I read your "30 by 30,'' and I looked at the first page, I thought, wow, that's almost half of the GHGs that Canada is looking for from now until 2030.

Mr. Larocque: Yes, 13 per cent. Thirty out of 225; right?

The Chair: It's a bit misleading, to be perfectly honest. Don't get me wrong; you are doing a great job, but the industry is pledging to remove 30 metric tonnes a year by 2030.

Mr. Larocque: Yes.

The Chair: If you add that up, it's a lot more than 13 per cent. Why would you put CO2 and not GHGs?

Mr. Larocque: We would include GHGs in there. I think we went with CO2 just because —

The Chair: You have to get the right description.

Mr. Larocque: We're scientists, and I am an engineer, and we are talking about CO2 equivalent, and it does not resonate with people. They get CO2, but CO2 equivalent, they would say, "What does that mean?''

The Chair: If I take this and extrapolate it out as GHGs, we have met all our targets, and I don't believe that's going to happen. This is the wish list of what could happen if everyone cooperates in your industry.

Mr. Larocque: I want to be clear. It's 30 megatonnes in 2030. It will not be 20 megatonnes every year until then. There is a nice graph that shows the curve. It's compared to 2015, by 2030. The trees we plant today are absorbing carbon in 2030, 13 years from now. That carbon will be counted.

The Chair: You say you are going to remove 30 metric tonnes a year.

Mr. Larocque: After 2030.

The Chair: It's a play on words. I understand what you're saying.

I believe we have to do everything we can, but when I look at the targets that the government has set — and it's not just this government, these are the targets from the previous government, so I'm not trying to play politics here. When I look at what has to be removed, 219 metric tonnes by 2030, that's a herculean task, in fact, almost impossible, and almost everyone who comes here with some knowledge says that would ruin the economy, unless there's a big silver bullet that happens in the next five years, which I don't think anyone believes is going to happen.

What three things can the forest industry do? They have done a lot, and I think you can still do a lot more without squeezing too hard on your industry. What three things could the forest industry do to help us begin to meet those targets? I hope you will talk about adaptation. I believe it's going to come whether we like it or not. It's going to come when you look at what's happening in the world, but governments aren't looking at how we're going to adapt so much as trying to say that if we put these targets out there, everything is going to be fine. Even if we met our targets in Canada, it's still coming.

Mr. Larocque: I agree with you as far as adaptation. The three places I would reiterate where I am talking about: the forest, which is both adaptation to make sure we have a sustainable renewable forest in 2030 — that's the pests, droughts and fires — but there also is a mitigation option for us. We could be absorbing a lot more carbon in 2030 than we are today, and there is a huge opportunity there.

Two is the use of wood products, building codes and whatever. It is not insignificant. There is a lot there. It's good for the economy, too.

Three is going to be on the energy side. We can do a little on this, but we can make biofuels and bioelectricity. We can make pellets that can replace coal plants at a coking mill. There are a lot of opportunities there. We can help in the North by using biomass; we're close to there. It would be energy, wood buildings and forests, adaptation and mitigation.

The Chair: Thank you. I don't want pages, but could you drop a note to the clerk that expands on each of them?

Senator Mockler: I'm coming to your "30 by 30.'' The world's most certified forests, and you itemize the countries. I'm coming back to Canada. Which regions of Canada have the most certified land?

Ms. Lindsay: B.C. and Quebec have the most hectares of forest land, so they have the most certified, but New Brunswick has a high percentage of forests certified.

Senator Mockler: I'm a senator from New Brunswick, but I represent Canada. I think the forest has an important role to play in biofuels, textiles, rayon and car products. We need to be at the table. That includes private woodlot owners. They own one third of Canadian land, Crown lands. In some places it is one third, one third, one third. Other places it's 50 per cent.

When I was looking at the recommendation of the report, the future of the forestry is through innovation, when we look at GHGs and CO2s —

[Translation]

The most important instrument is innovation to respect the requirements and to reach the carbon dioxide and carbon emissions objectives. However, may I say that given the role of your association, you should be more aggressive.

[English]

What is the role of those other stakeholders that you don't represent here this morning?

Mr. Larocque: I think it's working together. I know we're talking 2030, but, from 1990 to 2005, which is 15 years, we reduced our emissions by about 50 per cent. A lot can happen in 15 years. We did not produce any electricity in 1995. In 2005, 10 years later, we were producing electricity. Ten years after that, we're 1,000 per cent more. What can we do with innovation? Will we have renewable forests in the next 10 to 15 years? I'm hopeful.

That "30 by 30,'' I completely agree, but we didn't do that on our own. This has been based on models by Natural Resources Canada, by scientists who really believe that the opportunity is there. We need to work together and start now.

Senator Wetston: Your comments are very informative and quite illustrative of the challenges in the sector. Is there a national forestry strategy in Canada?

Mr. Larocque: There is the CCFM working on it from a forest perspective, but I do believe we need to have a — I will call it — forest products strategy where the forest, the mill and the products are all integrated.

Senator Wetston: When I talk about a national forestry strategy or what you've just described as an important focus on products, is that a result of the fact that the authority over forests is split between the federal government and the provincial governments, and is the issue one that requires a considerable alignment between the federal government and provincial governments to achieve this strategy on behalf of Canada?

Mr. Larocque: I think I agree. We need to have alignment, or working together, between the provinces. I know we talk about private wood landowners, but we operate 90 per cent on Crown lands, so we need to work together.

The Chair: Thank you very much. Very interesting. Thanks for the presentation, both of you, and answering the questions. That was great.

For our second segment, I am pleased to welcome, from the Mining Association of Canada, Brendan Marshall, Vice President of Economic and Northern Affairs.

Thank you very much for joining us this morning. We look forward to your presentation. Then we will go to some questions and answers.

The floor is yours, sir.

Brendan Marshall, Vice President, Economic and Northern Affairs, Mining Association of Canada: Thanks for having me, Mr. Chair, senators and others present.

I'm not a stranger to the Senate. I used to work as a staffer. I began working in Senator Kinsella's office when he was the Speaker. So I have a great deal of respect for the institution and the work that you do, and thank you for the opportunity to speak to you today.

For the record, my name is Brendan Marshall, and I'm the Vice President, Economic and Northern Affairs, at the Mining Association of Canada. MAC is the national voice of the mining industry, representing 39 companies operating in Canada in exploration, mining, smelting and semi-fabrication capacities, across a diversified range of commodities, including iron ore, gold, diamonds, oil sands, metallurgical coal, base metals and uranium.

The mining industry employs 563,000 people and is, proportionally, the largest employer of indigenous Canadians. With operations from coast-to-coast-to-coast, the industry contributes approximately 3.5 per cent of GDP, which is $57 billion in 2015, accounts for 19 per cent of the value of Canada's exports — that exceeded $91 billion in 2015 — and is a major economic driver of rural, urban and Northern economies across Canada.

Focusing on the transition to a lower carbon future, I'm going to speak first about what the mining industry has done in recent decades and then turn to where I think we need to go from here.

MAC has held a position on climate change since March 2000. Most recently, in this space, MAC released Principles for Climate Change Policy Design in April 2016. In that document, in addition to supporting a revenue-neutral price on carbon, MAC underscored the need for any climate change policy to ensure the competitiveness of emissions- intensive and trade-exposed sectors and to prevent carbon leakage, to be sensitive to the geographical realities of remote Northern regions, and to support the industry's innovation priorities to improve energy, fuel and process efficiencies to reduce greenhouse gas emissions.

Industry-wide actions have been complemented by a host of individual member-company actions to improve energy and fuel efficiency, reduce greenhouse gas emissions and improve environmental performance. Together, these efforts underscore the mining industry's long-held recognition that we need to be part of the solution.

MAC's Towards Sustainable Mining initiative demonstrates this recognition. Launched in 2004, TSM is an award- winning international performance system that helps mining companies to evaluate and manage their social and environmental responsibilities. TSM is the only mining program in the world that requires public reporting at site-level performance against program indicators, the results of which are independently verified by a third party. Every MAC member company commits to implementing TSM at their Canadian facilities as a condition of membership, and many have voluntarily applied it to their international operations.

TSM's energy use and greenhouse gas emissions management protocol demonstrates industry's commitment to energy management and greenhouse gas emissions mitigation. To achieve TSM's good practice standard, which is aligned with ISO 50001 certification, each facility must show that its management system includes assigned accountability from senior management and that it has a process in place to ensure that energy data are reviewed regularly and are well-integrated into operator actions.

In 2015, Natural Resources Canada expanded the Canadian industry program for energy conservation to support TSM's energy and greenhouse gas emissions management protocol. The expansion was made out of recognition that TSM and NRCan's goals to increase the adoption of energy management systems by Canadian industry — leading to reduced energy costs, improved competitiveness and greenhouse gas emissions reduction — are common objectives.

Beyond energy management, the industry is developing and deploying new and cleaner technologies and improving processes. Annual research and development and innovation investments totalling $677 million in 2013 — that's the most recent year for which data are available — underscore the mining industry's continued commitment to efficiency improvement and reduced environmental impact.

Examples include Glencore's first of its kind in the world wind turbine system integrated with an energy storage network at its Raglan Mine in northern Quebec and Diavik Diamond Mine hosting the world's largest wind-diesel hybrid power facility. GoldCorp is currently developing its underground Borden mine and seeking to power the operation 100 per cent by electricity, and that includes the mine-haul fleet as well as all other power consumption on site.

On an industrial scale, the Canada Mining Innovation Council, with the active support of MAC and its members, has developed the Towards Zero Waste Mining strategy to fundamentally transform the industry through innovation.

CMIC's Towards Zero Waste Mining strategy is designed to stimulate mining technology innovation in Canada to achieve zero waste in mining and mineral processing within the next few decades. This will lead to significant reductions in greenhouse gas emissions, water use and tailings discharge and significant improvements in energy efficiency, environmental protection and operational productivity.

These efforts have and continue to make positive improvement in the industry's energy and emissions profile. For example, according to the Canadian Industrial Energy End-Use Data and Analysis Centre, since 1990 the aggregate metal and non-metal mining sector's share of overall Canadian energy use in percentage terms dropped from 1.5 per cent to 1.3 per cent. Total mining greenhouse gas emissions have decreased by 0.6 megatonnes since 1990.

Canada's mining sector accounted for 1.1 per cent of the country's direct and indirect greenhouse gas emissions in 2014, of which 0.8 per cent were direct emissions, a drop from 1.5 per cent in 1990.

Looking forward, the mining industry is committed to doing its part but recognizes the government has a crucial role to play in making sound policies and strategic investments to help facilitate our society's transition to a lower carbon future.

In the North, the government is committed to working with the territories to address their circumstances in respect of climate change. The challenge the region faces stems predominantly from heightened costs resulting from the region's infrastructure deficit and subsequent company reliance on diesel generation to power their operations. With limited or no ability to fuel switch off diesel, these operations will absorb the carbon price as a cost of business.

Ensuring that infrastructure funding vehicles, including the Canada infrastructure bank, have pathways for northern projects with funding criteria that reflect northern realties is critical. At current technology levels, developing strategic energy and trade-enabling infrastructure in the North is the only means through which operations will displace diesel in sufficient volumes to reduce emissions in the way a carbon price intends.

On the innovation front, and building off existing strengths, the government should fund CMIC's application for multi-year funding. The Canadian mining industry, through CMIC, is deeply committed to Towards Zero Waste Mining, but ensuring its success will take significant investment from both industry and government. Government support will catalyze private sector innovation investments, leading to real progress in energy efficiency, environmental production and business productivity.

Finally, balancing meaningful emissions reduction with industrial competitiveness is critical to ensuring the proposed carbon price functions the way it's intended. And the stakes are high. For example, if Canada becomes an uncompetitive jurisdiction to produce nickel, then our current market share will bleed to lower cost jurisdictions, with a likely net increase in global emissions. With some jurisdictions producing greater than 40 times more emissions per unit of nickel production in Canada, that's significant. Such an outcome would see a sizeable engine in the Canadian economy become diminished with adverse contributions to global emissions growth, a lose-lose situation.

In conclusion, there is a natural synergy between mining and clean technology. Extracted raw materials are transformed into technology that, having gone full circle, assists mining operations in reducing environmental footprints and enhancing efficiency and reliability. These same products and technologies are driving performance improvements, efficiency gains and a lower carbon footprint across society.

As primary materials, mining products will remain fundamental to the Canadian economy as it transitions toward a lower carbon future. As the mining industry continues to improve its environmental performance, so will its products continue to shape the world in which we live.

Senator Griffin: Thank you for your presentation. In it, you touched on something that I normally ask about, and that is what would be the two most important things, either of an economic instrument policy or regulatory action, that the Government of Canada could do to help the industry move to a lower carbon emissions situation? You did mention that in your brief, but I'd like more detail and specifics.

Mr. Marshall: Sure. Thank you for the question. One predominant concern that MAC has, given the frequently remote and northern location of many of our members' operations, is how climate change policy will affect operations that are not grid-connected, that are either 100 per cent or virtually completely reliant on diesel, with very little avenue for diesel displacement.

In our principles document that we released last May, we did support a price on carbon, but that support was underscored on protection for emissions-intensive trade-exposed sectors as well as policy sensitivity to geographical considerations.

So how can policy address remote and northern regions? I think the government's commitment in its October announcement to work with the territories to address their special circumstances is a positive step. Fleshing out what role the federal government sees for itself in terms of addressing those special circumstances is really a question that you're asking about with respect to the North.

MAC sees infrastructure investment in remote northern regions as fundamental to maintaining industrial competitiveness and meaningful emissions reductions in the North. The reason for that is quite simple. The overwhelming reliance on diesel is a result of a lack of energy infrastructure to transition to another set of fuels. Even operations where companies have innovatively and progressively deployed first-in-the-world renewable generations, such as at Diavik or at Glencore in northern Quebec, those projects, while highly valuable, have to date displaced approximately 10 per cent of those operations' diesel consumption.

So even with those significant investments and forward thinking, that leaves 90 per cent of the operations' fuel exposed to a carbon tax with, at current levels of technology, very little opportunity to further displace that diesel. That would mean that the price on carbon is absorbed almost exclusively as a cost of business.

From MAC's point of view, that's not the intention of a carbon price. A carbon price is designed to, as efficiently as possible, not punish business, but price and reduce emissions. So if we're in a circumstance where a carbon price cannot function as it was intended to, then we need to look and the government needs to look at these auxiliary policy avenues to insulate an unintended reduction in competitiveness that could harm local economies and operations, and ultimately that may stand in contrast with other government policy objectives, such as economic indigenous reconciliation and broader social and economic development in remote and northern regions. That's one piece, infrastructure in the North.

The other component would be innovation. Mining has a long-standing history of being a very high-tech industry. Ensuring that there is sufficient research and attention being focused on developing those site-specific technologies of tomorrow to reduce emissions is going to be key to breaking that technology barrier that we currently have, which prevents greater levels of diesel displacement. For example, wind energy in the North is an intermittent fuel source, but if you package that with battery storage technologies, flywheels and other apparatus, then you can start to conquer that intermittency and expand the value of those technologies. So ensuring that research is being directed towards those types of solutions is very much an important part of the solution.

Finally, I would underscore again that both of those things can be understood as measures to address emissions- intensive trade-exposed sectors, but I would say that with respect to remote and northern regions, we need to be creative and have an all-options-on-the-table approach to ensuring the protection of emissions-intensive trade-exposed sectors.

At the end of the day, it's in no one's interest to reduce Canadian competitiveness and bleed market share to another jurisdiction where carbon leakage and less efficient operations result in greater levels of emissions than are currently being made in the Canadian context.

Senator Fraser: Welcome back to the Senate. I don't know much about the Mining Association of Canada. You say you represent 39 companies. What proportion is that of the total mining sector?

Mr. Marshall: From a production standpoint, it would be the majority of mineral production in Canada; it tends to be the largest companies that operate in Canada. We also have provincial mining associations, so smaller companies or developing companies may not be members of MAC. Our members tend to also be members of the provincial associations.

Senator Fraser: Right. But basically, most of the big stuff is with you.

Mr. Marshall: That's correct.

Senator Fraser: Your members include oil sands producers. All of the oil sands producers or just maybe one?

Mr. Marshall: No. I can provide some clarity on that. We represent the oil sands mining component of Shell, Syncrude and Suncor, and Teck is also a member. Teck has interests in the oil sands as well.

Senator Fraser: TSM — an old wordsmith as I am — Towards Sustainable Mining caught my eye. The inherent fact about mining is that you run out of stuff to mine in a given mine, so what exactly do you mean by sustainable mining?

Mr. Marshall: It's interesting you raise that because that's a topic that we've discussed internally about the naming of the organization as well. That's why it's towards sustainable mining, recognizing the spirit of the program and its continual improvement. Yes, you are correct in stating that once a non-renewable resource is extracted, then there's finality to that.

I guess what we mean by the sustainability component is that there are many aspects of mining that can be done in better and worse ways; for example, energy and greenhouse gas emissions management, tailings management, engagement with local and indigenous communities and biodiversity. All these components of doing mining are recognized in the context of the program, and companies set goals and evaluate themselves against the goals that they've set. They are audited based on their performance, and those results are made public.

Ultimately, the goal of TSM is to improve transparency for broader mining stakeholders for local communities, for environmental organizations and for government.

Senator Fraser: Does it include a commitment that when the mine is finally exhausted, closed down, that the environment be left clean and restored? There are two elements there, one clean and one restored.

Mr. Marshall: Sure. Reclamation and reclamation bonding are conditions of any permit for a mine to be built. Prior to a mine moving through the environmental assessment process, that company needs to have financial assurance in place to accommodate for the cost of reclaiming the site in the event of an unintended disruption or termination of the company's practice prior to the intended closing of the mine. That's a highly regulated component of the industry.

Senator Fraser: How many of your members have reached TSM's good practice standard?

Mr. Marshall: I don't know the numbers off the top of my head. What I can do, if it's okay, I can provide our most recent report. Every year we do a report for TSM, and I can assure that report is circulated to the committee.

Senator Fraser: Thank you very much.

Senator Lang: I want to thank the witness for being here this morning. I want to clarify for the record, in respect of the presentation that was given, you refer to the North as an area of Canada that I'm assuming includes the Yukon, Northwest Territories, Nunavut and maybe northern Quebec and Labrador.

I want to emphasize that I think to some degree that's a fallacy, because Yukon is much different from Northwest Territories, and Northwest Territories has a number of differences between themselves and Nunavik. The reason I say that is, for example, in Yukon, just under 95 per cent of the electricity generated in Yukon is hydro, unlike the other two jurisdictions. Yukon has a very well maintained all-weather highway connecting all our communities except for one, and it gives some access to those potential mines that could go into development. We also have in most cases throughout the territory 24 hours, 7 days a week telecommunications, all the essentials that are required for the purpose of having a viable mining community and a viable community as we know it. I want to clarify that for the record.

Also, the other aspect that should be noted is that Yukon is looking at natural gas, LNG, for the purpose of an alternative to diesel in a number of instances. In fact, the backup for our major hydro is natural gas, because we have at least access through our highway system, as the chair knows, to natural gas being shipped to Yukon. So that puts us in a different situation.

When I talk about, for example, the Western provinces, Manitoba is much different from Alberta. I just want to clarify that for the record.

I do have one question that I would like to ask, and that's the question of the carbon tax. That goes back to the North again, because there seems to be a common understanding that there will be an agreement that a carbon tax will be put in place by, I believe, 2018. I don't agree with it. I'm going to be very clear. I'll go on the record with that. I think it's a disincentive for business, no matter how you cut it, whether you call it neutral or otherwise. It's another expense that has to be met by us in the North as residents but also in the mining community.

Has your organization done an analysis in each of the three territories of what the effect and the costs are going to be with the announced carbon tax that has been put forward by the federal government in conjunction with the territorial governments, and what that will do to your ability to compete or the ability for a mine to go into operation?

Mr. Marshall: Before I answer your question, to your preceding remarks, generally, I would agree. With respect to development, from an infrastructure standpoint, the further east you move across the territories, the less developed the North is. So I would concur.

With respect to a carbon pricing analysis, we have not done a pan-territorial economic modelling exercise of wholesale implications for the carbon price. However, we have worked with our members operating or seeking to operate in those jurisdictions, and they have informed us of what their anticipated cost impacts are.

At present, the cost burden relative to market realities for several companies for which we have this information suggests a challenging, if not exacerbated, situation for business to operate in the North under the impending carbon price.

Now, the uncertainty, which is a question mark over the extent of what that impact is, is also highly contingent on the policy choices — to Senator Griffin's earlier question — exercised by governments. That's an uncertainty at present that we are unaware of. Does MAC view a carbon price in the North as completely inconsistent with the possibility for mining development? No. But there are caveats associated with that.

In our view, we feel that the remote regions of provinces are similar in this respect. Policy sensitivity to the disposition of business operating in those regions needs to be addressed in policy. Otherwise, that exacerbated outcome will materialize.

Senator Lang: I think this is really important because what you've just said is that, for those companies that are looking at going into production or may be in production, the information that's been provided to them thus far is going to be a very significant financial disincentive for the ability to operate.

My suggestion to you would be to follow up as the spokesperson for the major producers in this country. Do you not feel you have a responsibility to do an economic model that can clearly inform a committee such as this, Parliament and the Government of Canada, to let them know exactly what the effect is going to be and, if it is going to be negative, to what degree it will be negative and how many mines will not go into production because of this type of policy?

Mr. Marshall: Again, I'll take that as a recommended takeaway to go back to assess whether that's feasible, but what I can also suggest is that there are many projects in the North that are currently economically unviable. A carbon price just pushes them further away without the appropriate EITE and other policy considerations.

Isolating the carbon tax relative to general and status quo challenges that are already in place as barriers to viable economic development in the North might take some doing. One thing I can point the committee to in that respect, which would factor into any response that we would make on those grounds, would be that I direct you to our Levelling the Playing Field report. So MAC partnered with the territorial chambers, the PDAC, as well as the consulting engineers of Canada. We developed a report that quantitatively assessed the cost differential between locating, developing and operating a mine in remote and Northern regions when compared to a centrally located jurisdiction.

Even before a carbon price is put in place, it's 2 to 2.5 times more expensive to build a base or precious metal mine in the North. That's a significant barrier in itself prior to adding a carbon tax on top of that.

We would like to see the carbon pricing reality as an opportunity. The government has given itself substantial infrastructure dollars. It's our view that this infrastructure investment is, at least substantially in part, intended to facilitate the transition to a lower carbon future. In our view, ensuring that the North and remote and Northern regions are eligible for that funding, that there is a consideration of Northern realities in the mandate and funding criteria for those investments is critical to ensuring that you can have a harmonious implementation of any carbon pricing in the North, as well as maintaining business competitiveness.

Again, there are challenges in the North. The carbon price may exacerbate those challenges. We would suggest that, if undertaken properly, that doesn't have to be the case, and we would like to remain optimistic that a smooth transition on both fronts is possible.

Senator Galvez: Thank you very much for your presentation. We have heard, among other witnesses, that there are so many developments in innovation and technology that are to be applied to the mining industry in order to get to a low carbon industry. You have also said that innovation is the key for the success of this enterprise.

What are the obstacles to transfer this technology that is being developed in universities and research centres to be applicable and put into practice in the industry?

Mr. Marshall: Before I get into that, I would first state that a colleague of mine, Carl Weatherell, from the Canada Mining Innovation Council, appeared before this committee not too long ago on that very subject. So my answer would be to direct the committee to his remarks because he's the subject-matter expert in that space. But not to completely dismiss the question, historically, in the Canadian context, there has been a massive ecosystem of funding formulae and funding envelopes for research and development and innovation. I believe the statistic is exceeding 7,000 different funding dispensaries.

Part of the challenge, in broad strokes, would be that the mining industry historically has felt that its priorities have not necessarily been reflected in the way that it sees as most valuable and useful in the context of that ecosystem. The other component is ensuring that research and development, as well as innovation, is geared towards tangible results that address existing and current challenges.

Senator Galvez: One of the reasons I was asking this is because I know some of the things happening in your sector. You will please elaborate on this and tell me your opinion, but I heard that Canadian owners of mines are very open and historically host and see with good eyes innovation coming to the mining industry. However, in the recent past, new investors from outside, and particularly from Asian countries, have come and owned parts of our mines, and they don't have this culture of welcoming technology. They have been stopping these innovations.

I am from the province of Quebec, and I won't mention names, but I know this is happening. Can you elaborate, please?

Mr. Marshall: I can't provide comment for scenarios that I'm unaware of, but I can cite a few examples that would suggest the alternative or the opposite is also true, if what you're saying is indeed happening.

Let's talk about the Raglan project. Glencore is a multinational company. It's not headquartered in Canada. That company proceeded with the construction of a first-in-the-world wind turbine energy storage system in partnership with a Canadian energy company, the Government of Quebec, as well as the Government of Canada. That's one example of a foreign multinational company making a significant innovation investment in the Canadian context.

Another would be Rio Tinto in the North, another non-Canadian-headquartered company that made the largest wind-diesel hybrid system in the world investment in the Northwest Territories.

These are examples that suggest that while what you may be saying is true, that it is equally true that other non- Canadian firms are making significant and positive investments along the same lines in Canada.

In general, I would caveat my answer by saying — and to build off my earlier statement — that the Canadian R & D and innovation ecosystem has been felt to be nonresponsive to the mining industry in the way we would like. Other mining jurisdictions have sought to improve the competitiveness of their mining innovation spaces. Australia is one of these jurisdictions.

In recent years, Canadian companies have chosen to invest their innovation dollars in Australia because they felt it was more valuable. There was a greater return for the dollars invested in innovation programs in that country, as opposed to investing their dollars here. The implications of that are lost opportunities, lost patents, lost job creation opportunities in the Canadian context.

To muddy the waters further, it's a complex space. I think that Carl would also agree. There is a significant opportunity for Canada to up its game for R & D mining innovation in the Canadian context.

Senator MacDonald: Mr. Marshall, a couple of weeks ago we had people in here who were talking about the number of losses in the mining industry, and the money that was written off around the world was staggering. Of course, mining exports make up about 20 per cent of the exports in this country.

I'm curious as to what energy source is the most commonly used in the mining industry in Canada. I'm assuming that the farther north you go, the more it's confined to diesel.

Realistically, there must be challenges when it comes to comparing energy sources, particularly non-renewable energy sources. Is the ability of the industry to respond to these challenges limited in order to stay competitive?

Mr. Marshall: Yes. No matter where you are, the state of technology is always going to provide a limitation. Even if you're grid-connected in B.C., where it's a 98 per cent hydro-powered grid, you're still at present going to require diesel to drive a haul fleet. There are pilot projects looking at displacing diesel with natural gas to drive those trucks. There's research into creating electric battery-powered underground mine haul trucks. I'm sure that we'll get there. As remoteness increases, the extent of the challenge does as well.

Let me put it this way: I'm not aware of a single mine that has access to the grid that's not connected to it. I'm not aware of a single mine that has an economically viable connection to natural gas that isn't connected to it. Beyond that, I'm not aware of a single mine that has access to truck and trailer gas that doesn't utilize that.

To Senator Lang's point with respect to Yukon, we have two projects they are developing there that have announced their choice to supply power to the site by truck and trailer gas.

It's not a question of the willingness of companies to maximize economic and environmental efficiencies. Geography is a significant barrier. Some barriers are not economically viable to overcome at private expense. That's just the reality.

Senator MacDonald: One more reality is that we have a free trade zone with the U.S. that is being reassessed. What is the response of the mining industry to trading in a trade environment where we have carbon taxes put on the industry in this country, and we're trying to compete and export our product to the U.S.? Is it going to be something that's a job killer and a game changer? It seems to me it's almost inevitable.

Mr. Marshall: There are a lot of uncertainties about how U.S. policy will materialize. There are also concerns over tax and regulatory competitiveness changes or proposed changes or changes that have been discussed that are yet to be proposed and how those will affect Canada's competitiveness.

With respect to NAFTA, many of the materials that Canada produces in the mining industry, the United States does not have the domestic resources to produce those locally or domestically. So the notion of a barrier to trade for products that they can't procure themselves doesn't make sense if the goal is to enhance domestic job creation in the U.S. They don't have any nickel, so what's the point of putting a protective barrier up on that?

I take your point. We'll have to very closely watch these developments as they unfold. At the end of the day, the principles we've advanced are not insensitive to those considerations.

Senator Patterson: Agnico Eagle is a great Canadian gold company, and you know the great story in Nunavut. Their mine near Baker Lake, Meadowbank mine, employs 1,200 people in a region of extremely high unemployment, 400 Inuit. It transferred the community of Baker Lake from a welfare-dependent, sad community to a prosperous, forward-looking community. It's a great story.

The board just announced a couple of weeks ago that it's taken the courageous step to invest in two more properties, Amaruq and Meliadine, in that same region, which will give long-term employment to Nunavut residents, but they are far from any hydro or other energy sources. They have a 40-megawatt diesel plant at Baker Lake.

You've said that wind and solar have limits, and the sun doesn't always shine in the North. You've talked about the higher costs of building infrastructure in the North.

The three territories courageously signed on to the Pan-Canadian Framework on Clean Growth and Climate Change and agreed to carbon pricing in Vancouver. They said it would be revenue neutral and somehow would protect consumers. I don't think anyone really knows how this will be implemented in the territories. Agnico Eagle is already paying for carbon cap and trade or carbon pricing when it buys diesel from Southern Canada.

Will your association be involved in helping design a creative approach to carbon pricing for the territories? Agnico Eagle just released a letter to our premier saying they calculate the carbon pricing by 2023 will cost the company $20 million a year on what is already a marginal operation. Will MAC help design an approach for carbon pricing in the territories that will somehow still allow the development of our rich natural resources?

Mr. Marshall: The answer is yes on this point. From the very outset of our engagement, the most recent iteration of our engagement on climate change, our policy principles released in April of last year, an important component of that was ensuring the policy was sensitive to geography, namely remote and northern regions.

In the October announcement for pricing, which I'm sure you're well aware, the federal government made a public commitment to work with the territories to address their circumstances. We viewed that positively as well as reflective of the principles statement that we released. We have subsequently engaged each of the territorial premiers, senior members of cabinet as well as a number of federal ministers on this issue. We have had several touch points with staff in Minister McKenna's office and we have been assured that our ability to remain engaged on this issue as an important stakeholder from the North will remain.

Yes, we will remain engaged on this. This is a critical issue for our northern membership, and it's something we intend to follow through on.

Senator Patterson: Infrastructure funding. Projects are proposed in the North to access the North American transmission grid and increase what hydro is available through extension of lines.

We're concerned that the infrastructure funding seems to be a lot about reducing traffic holdups in major cities. You're engaging with Infrastructure Canada to ensure infrastructure funding vehicles have pathways for northern projects. How is that going?

Mr. Marshall: To date, we are cautiously optimistic based on the signals that we've seen. If you look at the infrastructure announcement in the fall economic statement, language in that included reference to the territories both within the trade-enabling infrastructure envelope with the transition to a lower-carbon economy envelope, and then of course the rural and remote fund. The three envelopes combined amount to $31 billion over the next three years. That's a significant amount of money.

Our view is that, and as I stated to the committee earlier today, the North is unlike other regions in Canada. You cannot take a south-of-60 policy and map it on to the North and expect to have the same outcomes as you would in downtown Toronto. The capital base is less. The tax base is virtually nonexistent. The infrastructure deficit per capita is massive, and there is already a heightened level of cost that companies need to overcome in order to move projects forward.

Looking forward, we think there will be a greater level of information disclosed on how some of these programs are going to move forward in Budget 2017. Preliminary signals, like I said, suggest cautious optimism in that respect, and we will continue working on that.

Senator Patterson: Music to my ears.

Senator Lang: I'm going to cut to the chase here with respect to this carbon tax. Prior to the last election, there were some negotiations between the northern jurisdictions to see about an exemption from a carbon tax being applied to at least the three territories. That would then do away with the smoke and mirrors we are talking about in respect to what is neutral and what is isn't.

Would you support this committee in recommending to the Government of Canada that they seriously consider an exemption from the carbon tax to the northern territories in order to be able to facilitate the future potential of the North as opposed to the disincentive that a carbon tax would impose?

Mr. Marshall: I can't do that because that stands in contrast to the principles that MAC as an entity endorsed, including our northern members.

The other component is that even despite those negotiations, the outcome was not to exclude the North from the pan-Canadian framework on pricing. That having been said, MAC would and does encourage that all options remain on the table with respect to the North in terms of how this moves forward. I can't underscore enough how important it is to protect emissions-intensive, trade-exposed sectors and ensure, in respect of these policy levers that the government has given itself to transition to a lower-carbon economy, that northern realities are reflected in those programs moving forward.

The Chair: I just have a couple of things. I don't expect an answer. I would ask you to get an answer back to the clerk.

When you say, "Goldcorp is currently developing in its underground Borden mine,'' I'm not sure where the Borden mine is.

Don't answer now; please provide that to the clerk. And they are "seeking to power the operation 100 per cent by electricity, mine haul-fleet and all.'' I'd like to know who is building the mine-haul fleet and how large it is. Any information you can give us about that would be appreciated.

The second question is related to where you talked about nickel. You say that if, in fact, you can't produce it in Canada, some jurisdictions are producing nickel but generating 40 times more emissions per unit of nickel. I'd like to know where those are, and if you could identify those places in the world where they are. I'd also like you to expand it to copper and iron ore, two of the things that we mine, and copper especially, which we mine a lot more of. Is the same thing applicable?

If you could get those answers to the clerk, I'd appreciate it.

The reason we have to move is because there's another committee that comes in here right away. They will soon be chasing us out of our seats.

Thank you very much, Mr. Marshall, for your presentation and your answers.

(The committee adjourned.)