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

Issue No. 43 - Evidence - April 26, 2018


OTTAWA, Thursday, April 26, 2018

The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8:59 a.m. to study the effects of transitioning to a low carbon economy.

Senator Rosa Galvez (Chair) in the chair.

[English]

The Chair: Good morning and welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Rosa Galvez. I’m a senator from Quebec, and I’m the chair of this committee. I will now ask senators around the table to introduce themselves.

Senator Massicotte: Paul Massicotte from Quebec.

Senator MacDonald: Michael MacDonald from Nova Scotia.

Senator Mockler: Percy Mockler from New Brunswick.

Senator Neufeld: Richard Neufeld from British Columbia.

Senator Seidman: Judith Seidman from Montreal, Quebec.

The Chair: I would also like to introduce our staff, our clerk, to my left, Maxime Fortin, and our Library of Parliament analysts, Sam Banks and Jesse Good.

In March 2016, the committee began its study on the transition to a low-carbon economy. The committee is studying five sectors responsible for 80 per cent of Canada’s greenhouse gas emissions. They are electricity, transportation, emissions-intensive and trade-exposed industries, oil and gas, and buildings.

Today we welcome, from Natural Resources Canada, Ms. Joyce Henry, Director General, Office of Energy Efficiency, Energy Sector; Amanda Wilson, Director General, Office of Energy Research and Development, Innovation and Energy Technology Sector; André Bernier, Senior Director, Electricity Resources Branch, Energy Sector; Terence Hubbard, Director General, Petroleum Resources Branch, Energy Sector; and Dean Haslip, Director General, CanmetENERGY-Ottawa.

Thank you very much for joining us. I will invite each of you to give your opening statements, after which we will go to a couple of rounds of questions.

I just want to introduce Senator Patterson from Nunavut.

[Translation]

Joyce Henry, Director General, Office of Energy Efficiency, Energy Sector, Natural Resources Canada: I am pleased to be here to contribute information to the committee as it continues its important work on the effects of Canada’s transition to a low carbon economy.

[English]

I am here with my colleagues, who have already been introduced, to speak to our department’s efforts to support this low-carbon transition. I will share my time with my colleagues André Bernier and Amanda Wilson as well.

I’m going to speak primarily about energy efficiency. Given that we like to say that energy efficiency is the first fuel of economically and environmentally sound development, accordingly, I was elected to speak first. I’ll also talk about the transition to low-carbon transportation as well.

Just to set the stage a little, I’d like to briefly place our efforts in the context of overall government milestones and efforts to reduce emissions.

To begin, as you know, in December 2015, the world’s nations came together in Paris to commit to action on global climate change. As committee members know, Canada committed to a 30 per cent reduction of GHG emissions by 2030, based on 2005 levels.

This committee began its work on how to achieve these targets in early 2016, and, by the end of 2016, to help Canada to meet its targets and transition to a lower-carbon economy, the federal government launched the Pan-Canadian Framework on Clean Growth and Climate Change, a broad and ambitious effort done in collaboration with provinces, territories and Indigenous leaders. You may hear my colleagues and I refer to this framework as the PCF in our remarks, as opposed to its full title.

In parallel, federal Budgets 2016 and 2017 announced significant funding towards the low-carbon transition. Highlights include over $2.2 billion to support clean technology and innovation and over $21 billion in green infrastructure investments over a number of years. This reflects the long-term commitment made to supporting the transition across all sectors of the Canadian economy.

These funds support the PCF and its four main pillars: carbon pricing; measures to complement carbon pricing by further reducing emissions across the economy; measures to adapt to the impacts of climate change and build resilience; and actions to accelerate innovation, support clean technology and create jobs.

All told, the Pan-Canadian Framework has more than 50 concrete policy actions, spanning the economy and all sectors of the country.

Since we first began to meet with your committee in 2016, we have moved from commitment to implementation mode. Funding has been mobilized, regulations to cut emissions have been drafted and consulted on, and new policies and programs to build resilience, support clean technologies and reduce emissions have been developed and are being implemented in all jurisdictions.

In addition, governance, reporting and oversight structures have been established to track overall progress throughout Canada as we work to meet our targets.

Canadians have told us that they expect action and progress on this front. From Natural Resources Canada’s perspective, this was a clear message that we received through the Generation Energy dialogue, which was a national dialogue on Canada’s energy future led by the Minister of Natural Resources, Minister Carr.

Canadians care about the environment. As we know, they want us to do our part to help fight climate change, and they also see the economic opportunity that is before us as the world moves toward the decarbonization of buildings, industry, transportation and fuels. The global demand for cleaner economic growth is opening up trillions of dollars of opportunity around the world, giving Canadian developers of clean solutions access to new markets and creating jobs for Canadians. We want to help them by creating conditions to help them to capitalize on these opportunities.

While Environment and Climate Change Canada is the overall federal lead on the PCF, our department, NRCan, plays a significant role in its implementation, given that the production and use of energy accounts for over 80 per cent of Canada’s greenhouse gas emissions.

[Translation]

Our department supports or leads over 30 of the 50 initiatives outlined in the Pan-Canadian Framework.

[English]

We’re leading on initiatives that span key areas, including clean electricity, electric vehicles, forests, adaptation, clean technology and innovation, and energy efficiency. Energy efficiency is a critical component of the PCF, with more than a third of estimated GHG emissions reductions expected to come from energy efficiency measures.

Canada has six distinct climate zones to build, live and work in, and, in general, Canadians consume a lot of energy relative to our GDP. Further, our energy consumption is expected to increase through 2020. We know that we have work to do, and we believe that the best place to start is by getting smart about our energy demand.

From 1990 to 2014, energy use in Canada increased by 31 per cent, but it would have increased by 55 per cent without energy efficiency measures being put in place. This means that 90.5 megatonnes of greenhouse gas emissions were avoided and $38.5 billion were saved through energy efficiency over this time period.

Energy efficiency also supports competitiveness and innovation because companies with lower energy needs have a leg up on their competition as a result of reduced operating costs. We have a number of programs and tools, such as ISO 50001, the Superior Energy Performance program, and ENERGY STAR for Industry, that help businesses track, analyze and improve their energy efficiency.

Energy efficiency standards can drive development of innovation as well. That can be marketed in the international energy efficiency marketplace.

For Canadians, energy efficiency generates savings through better-insulated homes that cost less to heat and cool, more efficient equipment like fridges and dryers that lower electricity costs, and fuel-efficient vehicles that save Canadians money at the pump.

In Canada, through our Build Smart strategy, we have potential GHG emissions reductions from energy efficiency programs for buildings that are both significant and ambitious, at 21.6 megatonnes. We have 5.6 megatonnes from new building codes; 5.6 megatonnes from codes and labels for existing buildings; and a reduction of 10.4 megatonnes from equipment standards.

The federal government works with provincial and territorial governments on Build Smart initiatives, and, to help to achieve these reductions, the Government of Canada allocated $182 million in Budget 2017 to support energy-efficient buildings, including through the development of net zero energy ready codes for new buildings, which are increasingly stringent model codes for adoption and implementation by provinces and territories, as well as a code to retrofit existing buildings by expanding energy benchmarking, optimization and standards for buildings and also to support provincial and territorial regulation of energy labelling and sharing energy-use data. There are also research, development and deployment projects to lower the incremental cost of building to new standards.

We are making progress on all fronts, and this progress was documented in a publicly released synthesis report on the implementation of the PCF about four months ago. When it comes to energy efficiency, highlights of federal progress include the launch of the ENERGY STAR for Industry certification program and challenge and updated regulations on equipment standards.

In addition, the code development process toward the more stringent code for buildings that I mentioned is beginning. That’s led by the National Research Council, but it’s supported by our work at NRCan, as well as the provinces and territories and a broad group of experts and stakeholders. This process is open and transparent, and encourages Canadians to share their views through formal, public consultations. The intent is to have new codes in place by 2022, with provinces and territories adopting the codes by 2030.

Great technological strides have been made in efficient building design, but we know there’s still a lot of work to be done to make routine achievement of net-zero energy performance accessible to the entire industry. As in many areas of energy efficiency, this is not a solo federal effort. First of all, it is complex and ambitious, and, like most energy issues, energy efficiency is an area of shared jurisdiction.

With respect to building codes in particular, the government is leading on the development of a national code, with input from provinces, territories and a lot of the stakeholders I mentioned. In terms of regulating energy efficiency standards, we do that in the federal government for equipment and compliance. For codes, the provinces, territories and municipalities need to ensure the adoption and enforcement of those codes.

[Translation]

I would like to turn now to a brief update on transportation. This is another area where all levels of government and industry are working collaboratively to improve energy efficiency and realize greenhouse gas reductions.

[English]

Energy efficiency in the transportation sector has improved by 36 per cent since 1990, saving $17.9 billion in 2015. Increasing energy efficiency in freight operations reduces operating costs and increases profitability. Over 40,000 Canadian trucks are currently enrolled in our SmartWay program, saving over $100 million in fuel costs annually.

To accelerate the uptake of low-carbon transportation technologies, NRCan is delivering over $180 million to demonstrate and deploy electric vehicle and alternative fuel infrastructure. My colleague Amanda Wilson will speak to the research, development and demonstration elements, and I’m going to speak a little bit on the deployment of the infrastructure.

Basically, through this funding, we are supporting the development of a coast-to-coast network of electric vehicle fast-chargers, natural gas stations along strategic freight routes and hydrogen stations in key urban areas.

We have already committed to the construction of 102 electric vehicle fast-charging stations, of which over 40 are already available to the public. We have also committed to building seven natural gas stations and three hydrogen stations, as well as the demonstration of 200 next-generation electric vehicle charging stations.

By 2022, Canadians will be able to drive and charge their electric vehicles from coast to coast. Trucking companies will be able to use lower-emitting natural gas trucks. Vehicle manufacturers can have confidence in selling hydrogen-fuel-cell cars in more Canadian cities.

We are also investing in the development of enabling codes and standards to align vehicle and infrastructure requirements across Canada and the United States to ensure Canadians can charge and refuel their low-carbon vehicles with ease on both sides of the border.

These investments support our commitment to reduce emissions from both the passenger and freight sectors while growing the economy. They also align with the government’s efforts to develop, with provinces and territories, a zero-emission vehicle strategy.

As I mentioned, we know we can’t do this alone, and the private sector also has a significant role to play. We’re making these commitments to help de-risk investments from the private sector as the markets for these lower-emitting vehicles grows. As they lead to profit, the program is designed so that our partners repay the government’s investment.

Transportation programming, especially with respect to electrification, clearly links to the need for grid readiness, which is one of a range of activities under way related to the electricity sector.

I will turn the presentation over to my colleague, André Bernier.

André Bernier, Senior Director, Electricity Resources Branch, Energy Sector, Natural Resources Canada: The Pan-Canadian Framework, PCF, puts electricity very much at the centre of government efforts. That’s both because it plays a significant role in terms of its direct greenhouse gas emissions — 11 per cent nationally — but also because of its role in helping other sectors, such as buildings and transport to which Joyce has referred, use electricity as their source of energy in the future. It’s really aiming to use it in two distinct senses. Canada is starting out in a strong position with a grid that is already 80 per cent non-emitting — largely hydro and, to a lesser extent, nuclear, but with a growing share of wind and solar.

Before I speak to the initiatives the government has under way in this area, it’s worth noting that it’s a challenge that’s regional in nature. A little more than three quarters of all the sectors’ emissions come from coal-fired generation, which is used by four provinces: Alberta, Saskatchewan, Nova Scotia and New Brunswick. The challenge in that sense is not one that is the same as you move from east to west across the country, or from north to south; it’s one where there’s a story that’s told province by province and territory by territory.

There are four areas of focus. One is helping to increase the amount of electricity generated by non-emitting sources. The backbone of that effort is led by Environment and Climate Change Canada, and it’s focused on a trio of measures: the carbon tax, as well as regulations on coal-fired generation and gas generation. Taken together, those will have a significant effect on the emissions profile of the grid.

We’re also implementing a national program called the Emerging Renewable Power Program, designed to bring a new generation of technologies into the Canadian grid, including things like offshore wind, tidal and geothermal.

Another area of focus is connecting clean power with places that need it. In particular, if you have provinces that are relatively dependent on fossil fuels, there may be greater opportunities for development in those provinces or for trade between provinces to help clean the grid. That’s an area where we’ve been facilitating regional dialogues — one with the four Western provinces and one with the four Eastern provinces — to look at potential regional solutions in this area. It’s also an area where the government has committed significant funds to transfers to the provinces and territories that can help them make the investments they would need to follow up.

There is also modernizing electricity systems — our grid — as Joyce mentioned — the importance of grid readiness. We have a program called the Smart Grid Program that is now under way. We’ve closed our request for proposals process for that. That will help advance a range of different technologies that can help modernize the electricity grid.

The fourth and final area of focus is helping remote communities reduce their reliance on diesel. In particular, this is in partnership with the North and with Indigenous peoples.

There are a range of initiatives, one of which NRCan is responsible for. It’s the Clean Energy for Rural and Remote Communities program, which is now under way. It will help bring to remote communities renewable energy, including sources like wind, solar and bio-heat using local forest resources.

It’s worth noting that, constitutionally, the provinces and territories are responsible for their electricity systems; that’s where the leadership and the decision-making rests. Many of the initiatives I’ve described that NRCan is responsible for are there to help facilitate that transition and minimize the impacts on individual Canadians. It’s a mixture of both dollars coming through national programs to help do that and also taking advantage of the fact that electricity infrastructure turns over slowly — when something needs to be replaced, doing it then rather than trying to replace things all at once. It’s both a long-term and short-term endeavour.

Amanda Wilson, my colleague, will talk more about the long term from an innovation perspective, but before I turn it over to her, I wanted to mention briefly some of the efforts under way in the oil and gas sector. Primarily, reductions in the oil and gas sector will be achieved through a combination of carbon pricing, regulatory measures led by Environment and Climate Change Canada and through support for clean technology, which I’ll elaborate on shortly.

Also, the clean fuel standard, which will set a life cycle carbon intensity requirement for fuels in the transportation industry and building sectors, is under development. This regulation will encourage the use of low-carbon fuels, energy sources and technologies, and will drive innovation in this area.

In addition, proposed methane regulations are expected to reduce emissions from the oil and gas sector by 40 to 45 per cent from 2012 levels by 2025, which is about 21 megatonnes.

The oil and gas sector is known for its innovation and adoption of new technologies. I’ll use that as a transition point to turn it over to Amanda, who can speak more about the work NRCan is doing to promote clean technology across the energy spectrum.

Amanda Wilson, Director General, Office of Energy Research and Development, Innovation and Energy Technology Sector, Natural Resources Canada: As many of you probably know, clean technology and innovation do make up a pillar of the Pan-Canadian Framework on Clean Growth and Climate Change, or PCF, as Joyce noted earlier. Investing in technology innovation amplifies carbon pricing signals, enables smarter regulations and drives improved performance from technologies supported by deployment programs, such as those that my colleagues just mentioned. In short, innovation redefines what’s possible, and it lowers the cost of adoption for Canadian businesses and households.

[Translation]

To drive emerging technologies from the lab to the market, Natural Resources Canada is investing across the energy and natural resource sectors. Budget 2017 funded seven program streams focused in whole or in part on clean technology innovation. This includes the Energy Innovation Program which funds research, development and small-scale demonstrations conducted by both federal labs and research centres, and external organizations. The program currently supports a wide range of projects including renewables, smart grids, energy efficient buildings, vehicles and carbon capture, use and storage.

[English]

In addition, four of the five NRCan Green Infrastructure programs, which my colleagues spoke about earlier, include a demonstration component to fund innovative energy technologies that enable mitigation under the Pan-Canadian Framework. These programs include the Smart Grid demonstration Program; the Clean Energy for Rural and Remote Communities Program, the demo component; Electric Vehicle Infrastructure Demonstration program; and the Energy Efficient Buildings Research, Development and Demonstration program.

Budget 2017 also established the Clean Growth Program, which will provide $155 million over four years to fund industry-led projects across the natural resources sectors, together with provinces and territories. To better support small and medium-sized enterprises, proponents are, for the first time, able to collaborate with federal laboratories and research centres. By coordinating investment, we’re able to maximize the impact of our investment and we stand a better chance of collaborating and advancing technological innovation.

Finally, we’re also working with the Privy Council Office to deliver Clean Tech Impact, the clean technology stream of a broader horizontal initiative called Impact Canada. Impact Canada provides a vehicle to pilot new, outcomes-focused approaches to Canada’s biggest problems and, as such, Clean Tech Impact will be launching a series of five prize-based challenges this year in order to accelerate breakthroughs in clean technology innovation.

These investments at the domestic level are paralleled by international initiatives, such as Mission Innovation, which is a coalition of 22 countries plus the European Union, dedicated to accelerating breakthroughs in clean energy technology. By leveraging a range of bilateral and multilateral initiatives with our global partners, we can collaborate to amplify the return on our collective investments.

Why do we do all this? We do it because investments in innovation drive both environmental performance and economic competitiveness. In the short term, emissions reductions are driven by demonstration projects. Additional reductions occur as projects are replicated and commercialized in Canada and globally.

These investments also generate significant economic benefits. The Conference Board of Canada found that $1.6 billion invested by NRCan in energy technology leveraged $4.3 billion in investment from partners, increased household and business income by $5.6 billion and created 58,700 job years of employment.

[Translation]

Further, technology innovation underpins the competitiveness of Canada’s natural resource sectors, and programs like the ones I’ve described help to ensure that Canada’s natural resource sectors remain a source of jobs and economic prosperity while contributing to Canada’s climate targets.

Before I close, I’d like to spend a moment on how we’re working to enhance Canada’s clean innovation ecosystem by leading and supporting a number of cross-cutting measures. This includes the Clean Growth Hub, an interdepartmental effort to streamline client services, improve program coordination, and track outcomes.

On the latter point specifically, I’ll note that we’re working with colleagues at Environment and Climate Change Canada and Innovation, Science and Economic Development Canada to standardize GHG reporting frameworks.

[English]

Looking ahead, innovation supports breakthroughs that will help Canada become a clean technology leader and achieve its emissions reductions targets for 2030 and beyond. Investments made today are critical to help advance technologies that will drive mitigation tomorrow.

Canadians have told us that the low carbon transition must drive prosperity as we reduce emissions. They told us that in a number of ways, but also through the Generation Energy Forum that Joyce mentioned earlier. The government shares this view and recognizes that the environment and the economy go hand in hand.

Before I conclude, I’d like to summarize how exactly the transition will generate prosperity for Canadian homes, businesses and industry.

First, as Joyce mentioned, energy efficiency will continue to save Canadians money on their home heating and power bills, as well as at the pumps. Second, expanded electricity infrastructure in smart grids will reduce energy bills by supporting greater levels of low-cost, zero-carbon renewables across Canada, including in rural and remote communities that currently depend on diesel. Third, investments in innovation will increase the performance and reduce the costs of adopting low-carbon technologies across the economy. Technology innovation not only drives the competitiveness of the industries that Canadians count on, but it also positions Canada to compete in the global clean technology environment, which, of course, includes clean energy.

In fact, Canada’s clean tech industry already includes over 850 firms and supports over 55,000 jobs. These firms are competing to capture Canada’s fair share of the global clean tech market, which is expected to be worth $3 trillion by 2020.

In conclusion, Canadian homes, businesses and industries are well positioned to leverage the low carbon transition as a source of long-term prosperity.

Thank you for your time today.

[Translation]

We would be happy to answer any questions or comments you may have. Thank you.

[English]

The Chair: Thank you for the interesting statement. Now we will proceed to a series of questions. I will ask senators to keep their preambles short so we can have two rounds of questions.

[Translation]

Senator Massicotte: Thank you all for being with us this morning. You did an excellent presentation. It provided a good overview of all the efforts that have been made and all the progress realized in several sectors. Congratulations!

Nevertheless, I’d like to know what you think about the fact that Canadian auditors — Recently, Canada’s Commissioner of the Environment and the U.S. commissioner said that, despite all these good efforts, we are still far from meeting our targets. You could argue that the global impact would be minimal because we are a small country, but even so, we’re still not achieving our targets. This does nothing for our credibility with our global partners.

Nevertheless, the minister continually reassures us that we don’t have to be concerned and that we will meet our objectives. What is your opinion on this? Can we catch up? There are serious consequences for our future society.

[English]

Ms. Henry: I can at least give an initial response. From a Natural Resources Canada perspective, we’re very much focused at this point on implementing the commitments that governments have made around the Pan-Canadian Framework in particular. We have a number of ways to push forward and to work with provinces and territories, in my case also with the building industry and other stakeholders who play a big role in reducing greenhouse gas emissions.

I would note two areas in particular. Buildings are obviously a fairly major source of emissions, and we have a number of activities that we are in the process of implementing now that will result in pretty significant emissions. I mentioned some of them in my opening statement. To draw attention, for example, to our equipment and appliances regulations, we recently published in the Canada Gazette our next updated standards for regulations, for example, for microwaves and commercial fridges. These have a significant impact not just now but over time, as new stock comes on to the market and businesses or Canadians replace the equipment or appliances in their house. By 2030, for example, these regulations alone for just 17 products will result in a 1.5 megatonne reduction, and they’re expected to save up to $4 billion in operating costs for Canadians and Canadian businesses.

[Translation]

Senator Massicotte: I’m sorry to interrupt you, but you are not answering my question. Are you saying that thanks to these measures, we will be able to meet our targets?

[English]

Ms. Henry: Well, currently the government’s position is that we will achieve the measures by 2030.

[Translation]

Senator Massicotte: I understand, but several people are saying the opposite. You’re not answering my question. I’m not surprised, however, that you’re not answering it.

[English]

Ms. Henry: I can only speak to my particular part.

[Translation]

Senator Massicotte: I understand. But I would like to show you how big of a challenge this is. Go to page 7 of your presentation. You say that you committed to build 102 fast-charging stations for electric vehicles, and seven natural gas stations. So let’s say 120 stations.

How many gas stations are there in Canada as such? Do you know these figures?

[English]

Ms. Henry: I don’t know off the top of my head but I have asked that question in the past so I may be able to get it. Currently, we are in the middle of building 102 stations with our partners, as I mentioned.

[Translation]

Senator Massicotte: But 102 compared with how many stations? 20,000 or 30,000?

Ms. Henry: I do not know.

[English]

For the Budget 2017 funds that have been put forward, the government will build another 800 fast-charging stations. Those are mostly focused on a coast-to-coast network of fast chargers because the private sector, provinces and territories are focused on putting chargers in cities. When Canadians buy EVs — those numbers are still small, I admit, but they’re rising — they get a charger with them that they can then put in their home. These are small but important steps forward in this respect.

The Chair: Can you send us details of both the location and the cities that have chargers?

Ms. Henry: Yes. We have a map for Canada.

The Chair: We would appreciate that.

Ms. Henry: We will send that.

Senator Seidman: Thank you very much for your presentations.

I’ll address you, Ms. Henry, because you were the one who spoke to this in your presentation. It has to do with energy-efficient buildings and the process you’re engaged in. You talked about a very ambitious project here with the development of net-zero energy ready codes for new buildings and a code to support retrofits to existing buildings. You also said you’ll have the new codes published by 2022.

I would like to hear a bit about the process because we did have the municipalities, for example, in here, as well as the professional associations for the trades and builders, and they knew nothing about this, literally. They couldn’t tell us anything about what the impact was going to be. Municipalities had seemingly not been consulted. They didn’t know, but they’re the ones who will have to ensure the adoption and enforcement of the new codes.

I would really appreciate, as I’m sure all of us would, to hear about the process, with special reference to the impact on Canadians, because it’s evident that there will be a financial impact on Canadians in terms of retrofits and even on the prices of new homes.

Ms. Henry: I’m happy to speak to that. I know that has been a concern as the committee does its work. We’re certainly aware of that. I’ll say a couple of things. I’ll try to go quickly. I know there’s a limited time, but I want to deal with the components you raised.

There are two codes. First, there’s the net-zero energy for new buildings code. That’s one piece. However, there’s also the retrofit code that’s being developed because 75 per cent of our building stock today will exist in 2030 and beyond. We know that’s a significant source of emissions that we need to deal with.

The National Research Council is the secretariat for the building code process. They have an extremely elaborate and consultative process that reaches out to experts and stakeholders. I’m not sure which industry people you’ve spoken to off the top of my head, but there’s a very open call for people to be part of these committees. They’re extremely broad-based and technical committees because of the nature of the codes, which deal with everything from plumbing, to heating systems, to fire safety, and energy is part of that.

The code process itself for the net-zero energy piece will be done in increasingly stringent codes from now, when it’s just beginning — it’s still quite nascent — to 2022, when we expect the national model code to be published. Provinces and territories are part of that process. They have their own committee that feeds in. They also sit on expert groups. With the support of the federal government, they will then be putting in place the codes by 2030. That’s the commitment under the Pan-Canadian Framework. That’s how the process works.

Decisions haven’t been made with respect to the retrofit code in terms of triggers or things like that. The work is quite nascent at this point. We have that five-year period where intensive work will be done to ensure that some of the concerns you’re raising are heard and dealt with.

The National Research Council undertakes a number of studies, for example, with a focus on affordability, to inform their work. There is also enforceability, which will be of concern to the municipalities who are in charge of enforcing those codes.

There are some examples in other jurisdictions on the retrofit piece. For example, Texas has a retrofit code. We will look to those jurisdictions for lessons learned. That will occur over the next few years.

The Chair: I want to jump in with Senator Seidman and share her concerns. I’ve been speaking to a lot people involved in the industry and also with the consumers’ association. In Canada, we have a heterogeneous way of respecting and violating the building codes. For example, yesterday I was talking with a group that showed me statistics of homes — single, duplex and condominium homes — in Vancouver, Toronto and Montreal where the minimum building codes are not being respected. What is the reason for that?

You’re right when you say that we have the safety, security and energy here, but there are a lot of sectors where nothing is being done. We want to put them there so everybody respects the minimum. It’s also important, as she mentioned, that people know how much that will cost them. By doing a life-cycle analysis, we will be able to answer if this was a good investment or when it’s a good investment.

Ms. Henry: With respect to enforcement of existing codes, I can’t really speak to that. My focus is at the federal level and energy efficiency more specifically.

However, with respect to costs in particular, there is an innovation cycle that we help to encourage and drive, some of which Amanda spoke to. Perhaps she wants to add something later. We’ve seen good results in having costs come down over time. For example, the cost of the new builds to come to net-zero energy is already dropping significantly. I’m looking for my stat here so I get it right. The cost of building a net-zero energy-ready home has dropped at least 40 per cent.

Part of that is because of innovation. Furnaces are a good example. Obviously, that’s a particular concern in Canada because of our climate. Through an innovation and regulation cycle, the market has changed over time to have furnace costs drop significantly. You can get a high-efficiency furnace for a lower price today. It is the same with fridges. Fridges are twice the size, but the cost of your fridge is less than it was 20 years ago, even though it is twice the size. We see that innovation cycle.

That’s part of the reason we have such a long lead time between now and the code being published. We’re already signalling to the industry that this is coming, and then provinces and territories, in adopting those, can tweak the code to fit their own jurisdictions. The idea is that the people know this is coming and industry will start to adapt. We then drive, through innovation and demonstration projects, the search for identification and development of new technologies. We regulate minimum standards. Our ENERGY STAR programs are about our premium standard that we want the market to reach for. We’re seeing new commercial and institutional buildings as well as some houses being built not just to this net-zero energy-ready standard but also with net-zero energy, where they produce enough heat or power themselves so they have no environmental impact. It is a cycle. It does take time, but that’s what we’re aiming for, and we think we can achieve it.

Senator Neufeld: Thank you for being here. This is a fulsome report, there’s no doubt about that.

I’m going to carry on with Senator Seidman’s questioning. Last September, we had your department here and were given a deck and were told that by 2022, there would be a code for older homes. Not for new builds, but the ones that are presently there.

We were told at the same time that there would be some strict rules around application of those codes, meaning that if you didn’t build your home to those standards, you could not sell it, and if you had one you were renting, you could not change renters. That actually surprised me a lot, and I thought, “My goodness, what are we doing to people?”

Please tell me that was a mistake or tell me what the plan is. I get we have to do something with the older homes to a degree, but I know lots of older homes that may not meet net-zero. Net-zero means you don’t need any energy from any place to run your home. That’s a tough thing to do on a 30-year-old house, so please tell me the information we got at that time is not true.

Ms. Henry: I do think this is a good time to correct a few of what I think are misperceptions or misstatements.

First, on the retrofit building code, the commitment on the Pan-Canadian Framework is not to make it net zero. That net zero is really for new buildings. That’s an important distinction. For existing homes, there will be a retrofit —

Senator Neufeld: That’s not what we heard.

Ms. Henry: Okay. That is the commitment under the Pan-Canadian Framework: a net-zero, energy-ready code by 2022 for adoption by 2030. That’s only for new builds.

For retrofitting existing buildings, there will be a code. There’s no intention to have it as net-zero energy-ready. That’s not the intent.

This is the first time Canada is looking at a retrofit code, and there are two reasons for that. One is we know that so many buildings will still exist in 2030 and beyond, so to meet our greenhouse gas reduction targets under the Paris Agreement and the Pan-Canadian Framework, we need to deal with existing buildings. How we do that has really just begun, so no decisions have been made on who has to do what by what time or what the triggers will be.

What we would say is that as Canadians renovate their houses — I live in a house that’s over 100 years old, so I understand the issue — they want to take advantage of higher-efficiency appliances, technologies, better insulation and windows and better space heating equipment. Space and water heating equipment are the things that drive most energy costs in homes.

The idea is that this code would work in such a way that it would support, through information on energy use and management, the decisions Canadians are already going to make to retrofit their homes and the benefits out of that. They do pay for themselves over time. There will be cost analysis done on that. I don’t have a lot of detail on that right now because those affordability questions are just starting to be dug into. In the future, we would be happy to come back to the committee with more detail on that.

Senator Neufeld: Thank you. Thanks for that clarification. I appreciate that. I’ll take that to the bank and, if it doesn’t happen that way, I’ll be coming to visit you.

Ms. Henry: You can. You should. I want you to.

Senator Neufeld: You also say there are some key areas, including clean electricity, electric vehicles, forests and adaptation. I’m glad to finally see the word adaptation being used a lot more because I’ve been thinking for a long time we should be looking seriously at adaptation. Climate change is coming whether we like it or not and we need to be able to adapt, so I’m happy about that.

Can you tell me what you mean by forests? You have it in there. Is that a carbon sink? It’s on page 4, the first bullet.

Ms. Wilson: I can take a stab at that from an innovation angle. We also have our colleague John Kozij here, who is a DG in the Canadian Forest Service, so I might invite him to the table if that’s okay.

I will speak to the piece I’m responsible for, which is our Clean Growth in Natural Resource Sectors Innovation Program, which I referred to in my remarks. That seeks to amplify clean technology innovations across the three natural resource sectors: energy, as well as forestry and mining. I know we’re right now looking through the first results for our call for proposals, which was very well received. We’re oversubscribed to great amounts in all three areas.

There we would see things like using forestry bio-stock as innovative types of fuel, for example, and doing things in order to make forestry industrial processes less energy intensive. These are some of the main thrusts we’re seeing on my side, but I think it would be a good idea to pass it to John, who can speak more broadly to the forestry side.

John Kozij, Director General, Canadian Forest Service, Natural Resources Canada: I’m John Kozij, pronounced “cozy,” like cozy by a comfortable biomass fire. I’m the Director General of our Trade, Economic and Industry Branch with the Canadian Forest Service at NRCan.

We’ve looked at forests’ contribution to climate change in a number of different ways, the first, as the senator mentioned, in terms of the capacity for forests to act as a carbon sink. There are two main sinks that we count on in the world to absorb carbon, and those are the oceans and our forests. They really are lungs in terms of the global ecosystem. We have done a lot of work around carbon budget modelling to examine the extent to which forests and improved sustainable forest management practices can increase the carbon sink in Canada and around the world.

Second, we looked at the way that we use wood as a long-lived carbon storage product to be able to sequester carbon when we use it as a building material. Hence, we’ve undertaken a lot of work with the provinces and industry for code changes, not unlike the ones being talked about here for energy efficiency, but looking at building higher with wood.

In 2015, the National Building Code changed to allow six-storey wood construction. Building code changes aren’t really sexy, but they are effective, and as a result of those building code changes in 2015 we’ve seen over 500 mid-storey buildings being constructed with wood either already built or in development.

We’re going to go higher, and we’re looking at the 2020 building code changes to go up to 10 storeys because we think there’s a good market there for taller wood building construction. Taller wood building construction means we have to change our building techniques. These are not stick-frame construction that you’ll see in 90 per cent of the housing that’s built in Canada, but instead engineered wood construction with cross-laminated timber and those kinds of things.

There are different places where forests and wood products can play a role in our Pan-Canadian Framework.

Senator Neufeld: I hope you’re reviewing what goes on in B.C. because we’ve been doing that for a long time, so there’s no sense recreating the wheel. To my knowledge, our forest industry in British Columbia is almost a net exporter of energy. They produce enough energy to run themselves through the burning of waste and those kinds of things. Anyway, thank you. I’m glad you’re talking about the forest sinks. Just please remember that it’s the provinces that own the forest sinks.

My last question is about transparency. For all these things you have here, is there somewhere I can go on the web and see all the areas where you’re doing things and some transparency about what’s happening so I don’t have to look through pages and pages? As the chair asked, I’d like to find where the charging stations and natural gas stations are. All of those things should be on a website so it’s transparent to Canadians what you’re actually accomplishing and how much greenhouse gas that’s reducing.

Ms. Henry: On the map for charging stations, for example, I’ll get you the link but there is an easy link to that for Canada right now, and we’re working closely with the United States and Mexico to expand that throughout North America.

Senator Neufeld: I’m asking about your department and all the things you’re doing to reduce greenhouse gases.

The Chair: Thank you. I will follow up with you on that.

[Translation]

Senator Dupuis: Thank you for being here. I understand that the French version of your presentation will follow later today. Is that correct?

Ms. Henry: Yes.

Senator Dupuis: You referenced several documents in the presentation. I was wondering if we can have copies of them, such as the synthesis report on page 5, which was published four months ago. On page 11 of your presentation, you talked about innovation. At the top of page 11, you say that:

In short, innovation redefines what’s possible and lowers the cost of adoption for Canadian businesses and households.

I think that is an interesting statement. Can you tell me more specifically how you can draw a link between innovation and cost-cutting for Canadian households?

We saw people last week who studied the question of innovation. They concluded that if there were no government investment, innovation would not exist. In other words, we support companies, which brings about innovation, and so on. Therefore we are directly subsidizing industry to bring about innovation.

I would like to know if you agree with that statement. Moreover, can you substantiate the statement that innovation cuts costs for Canadian households?

[English]

Ms. Wilson: Thank you very much. I’m happy to provide some remarks. I will start by saying yes, we will absolutely provide the report you mentioned on page 5.

In terms of your remarks on how innovation lowers costs, it’s a good question. To explain it broadly, I’ll work in parts of your second question as well, because that’s also a point we hear a lot. As a starting point, I would say, yes, you’re right, government does invest heavily in innovation, but there’s a reason for that. As you rightly noted, businesses don’t always invest as much as perhaps a longer-term view would indicate, but that’s why the role of government investment in innovation is particularly important.

By and large, and you’ll understand that I’m generalizing, in terms of businesses’ bottom lines, sometimes investing in research, development and demonstration seems like a big risk, especially when you’re in the area of energy and clean technology innovation. It can be capital-intensive, it can take a long time and it’s not always clear there’s going to be a payoff at the end of the day or when that end of the day will be.

To the extent the government can step in and provide funding at the right points — I will underline that — in the process and in the right areas, we can help leverage investments from businesses and other sectors of society. All of our funding programs in the innovation sphere require leverage from private sector, provinces and territories, or other institutions such as universities, for example. We work very collaboratively, and it behooves us to continue to think about the right spaces and time for government investment.

In short, I would say that while it might appear that there’s a disproportionate investment compared with the private sector, I would suggest that’s not necessarily the case, and it’s not necessarily the wrong move.

I would also note that government invests a couple of ways in innovation. One is through the funding programs provided externally to the types of organizations I’ve mentioned, but we also do a lot of work through our own network of federal research centres and labs.

Dean is here. Here’s our DG of our CanmetENERGY lab. Dean, I don’t know if you want to speak more directly to the types of research you do, but before I offer Dean the opportunity to speak, I would say that by investing in the right technologies and areas, we can get to the first question you had, which was about lowering costs. When we see there’s a sweet spot, where there’s an opportunity to invest in a particular area, through collaboration, the work of our federal labs as well as externally, we can work to try to get the prices of particular things down.

Dean Haslip, Director General, CanmetENERGY-Ottawa: Thank you, Amanda.

Let’s take, for example, one of the discussions earlier about the building of net-zero-energy buildings. We know that it is possible to build a net-zero-energy building in Canada today. It has been possible for a very, very long time. The reason we don’t see net-zero-energy buildings on every residential street in Canada is because it is cost-prohibitive to do so, and consumers are not willing to pay that cost in order to achieve the environmental benefit.

In fact, I think it is true in large part to say that a lot of the research and development that takes place in federal government labs, the private sector and universities is around taking technologies we already know about or that have been developed through smart people and saying, “It’s great we have this technology, but how do we actually turn it into a commercial product?” That involves refining the technology, working out some of the bugs and reducing costs, because it’s only by reducing costs that that invention becomes a commercialized innovation.

There are a lot number of research and development projects that are taking place in my research centre here in Ottawa, at other research centres across the country and in the private sector where driving down costs is one of the main drivers of that research.

Ms. Henry: I can add to what Dean and Amanda have said in the area of efficient equipment and appliances. I spoke to this a little bit earlier, but I want to underline that although the innovation cycle can be fostered and promoted through government spending, one of the other tools government has is regulation. That’s something we have used effectively to set minimum standards. Even in our most recent regulations for 17 household products that are being updated — for example, your microwave will have a slightly higher standard — the end result is a five-to-one ratio in terms of cost benefit. That study is publicly available. We do that for the regulation process. That’s one example.

The other thing I would note is that the Acadia Centre did a study recently for us. They found that for every $1 of government spending, there’s a cost benefit of savings of $3 to $5 over time. Even though this might not seem like an immediate upfront piece, it drives the market over time.

With respect to net-zero-energy homes and other innovations like electric cars, part of what we look at is the life cycle. Often you invest up front, but there’s a significant reduction in operating costs over time. For example, for net-zero-energy-ready homes, there are lower operating costs in the order of 30 to 50 per cent over a typical house. There are also other co-benefits. For instance, you’re not living in a draughty house. In terms of comfort and air quality, there are other benefits that come with these homes. Part of what we don’t often explain to Canadians is that there are all these other benefits from taking these measures in addition to environmental benefits.

[Translation]

Senator Dupuis: The highly intelligent person conducting innovative research in a laboratory is also a citizen. You stated that the government is subsidizing innovation in “the right area.” What criteria are you using to define the right area? In other words, the person inventing “net zero,” or indeed, who may already have invented it, lives in a society that also has conservation requirements. But that person also wants to know precisely what his or her taxes are funding. In that respect, citizens are increasingly demanding when it comes to criteria used by governments to subsidize businesses. Ultimately, they want to know if they will receive a bigger credit for renovating their house, as opposed to subsidizing a company building something new — and I have nothing against new inventions.

[English]

Mr. Haslip: There are two parts to my answer. One is that when the government puts dollars into research that is done outside of government, such as through the programs that Amanda leads, there are very public and transparent sets of criteria upon which those research proposals are going to be evaluated. On the internal side, we are also very transparent about what we do and how we get there.

What is important to note is that there are a number of criteria that we have to build when we’re assembling an overall research and development program. It’s important that the Government of Canada, in some cases, maintain a minimum critical mass of expertise in a given area so we are able to speak intelligently with industry counterparts, senators and other parliamentarians about developments in technology and what those mean.

In addition, when we are choosing research projects, we are but one player in a very large ecosystem. For us, it’s about what is the impact we can have through our research? To take a simple example, we know that battery technology will be extremely important. There are many devices around this table that use batteries. Electric vehicles, in order to solve questions of range anxiety, need larger-capacity batteries. However, this is also an area of research that sees billions of dollars of investment by significant players around the globe. If I’m making a decision at my research and development centre about whether we’re going to do research into battery technology, the answer is probably no because we can’t make a dent in that overall picture.

However, there are niches where we can definitely make contributions. For example, we are working with a private sector partner on steam generation technology that can be used in oil sands extraction where we are the world experts in certain combustion technologies. We know if we bring our technology into that sector, we can reduce fresh water utilization, greenhouse gas emissions and operating costs for the producer.

We have to be choosy about the areas of research we do. For me, in one word, it’s all about the impact that we can have.

Senator MacDonald: We share the continent and the environment with the United States of America, a country with 10 times our population, 10 times the industrial output — 10 times everything, really. I would assume that when we take a regulatory approach to trying to solve some of the problems or concerns you’ve outlined, we could easily find ourselves working at cross-purposes with the Americans in some of these areas. How closely do you work with the Americans and their organizations and government agencies that work in the same fields that you do?

Ms. Henry: In energy efficiency, we work extremely closely with the Americans and our American counterparts. I’ll give a couple of examples.

One is on our freight program called SmartWay, and that is because obviously you have a lot of cross-border traffic. We work in the areas of benchmarking, for example, so we can see how we’re doing against the Americans. With codes and standards, part of what we’re doing on electric vehicles right now is to ensure codes and standards are aligned so if you are driving your electric car across the border and you want to plug in, your plug works on both sides of the border.

The other place I would highlight is equipment standards, for example, the microwave in your house. We are harmonizing with the United States in all of the regulations we do, and we should be fully harmonized, or 90 per cent — I can’t remember the number off the top of my head — by 2020. That’s part of what we’re doing, and we’re in contact on ENERGY STAR, which is a program that was originally set up by the Americans and which we have used to great effect here in Canada on energy efficiency. So a very close collaboration in areas that make sense for both countries.

Ms. Wilson: On the research and innovation side, we work closely with our colleagues in the Department of Energy and in their network of national labs on a variety of issues, but among them we have biojet fuel innovation, advanced clean energy materials, and we could go on. There are a number of areas.

Senator Mockler: We have to look at the impact globally, and Canada is not a big player, but there are two attributes that we have, and I feel we’re dropping the ball. Canadians, as my colleague Senator Neufeld says so well, the Fred and Marthas, are not aware and they could participate. There’s a big concern now about what is being asked by the government in looking at greenhouse gas emissions. There are two sectors that are doing many good, positive initiatives that we’re not made aware of. One is the leadership that Canada has in modernizing refinery capacities across Canada. The second one is we talked about forestry. Again, the role of forestry is not well understood in terms of the impact it has for greenhouse gas emissions. I’m aware that forestry is having its challenges with the spruce budworm in Eastern Canada, and it impacts on the role that our forests could play. What are you doing about it?

Terry Hubbard, Director General, Petroleum Resources Branch, Energy Sector, Natural Resources Canada: With respect to your first question on the refining industry, I’d maybe even broaden that out. Canada has provided leadership globally more broadly with the oil and gas and petrochemical industries, and we have an opportunity and vision that’s shared with the federal government as well as industry that we can be the lowest carbon producer of oil and gas globally. We can take these technologies and solutions that we’re developing here in Canada to the rest of the world, whether it’s the refining industry you mentioned, petrochemical and the use of low-carbon feedstocks or LNG. If we get an LNG industry up and running, the projects that are proposed are amongst the lowest carbon producers globally. We have an opportunity to take these technologies and solutions, driven by the regulatory frameworks that are being put in place, and utilizing that as a competitive factor going forward.

While the world has shifted and is changing, and the world is not chasing every molecule of oil and gas now, we can use some of the work we’ve been doing on the technology and regulatory side of things to position Canada as a leader in this space and take this to the rest of the world. Part of the efforts that NRCan is doing is promoting this industry with our counterparts in other countries that are key consumers of oil and gas — China, India, among other Asia-Pacific countries — and how we can capitalize on these opportunities for Canada in the refining in petrochemical, LNG broadly.

The Chair: If you can please send us the link to what you call “cycle of innovation,” we would appreciate it. Thank you very much for your testimony.

Colleagues, before adjourning, I would like to tell you that next week we will proceed with the pre-study of Bill C-74, the budget implementation act. As you know, the Senate asked our committee to study the subject matter of those elements contained in Part 5, entitled “Greenhouse Gas Pollution Pricing Act.” You received a copy of the bill from the clerk last Tuesday. If you have any witnesses that you want to suggest for the study of these sections of the bill, please send it to me or to the clerk. Thank you so much.

(The committee adjourned.)