THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Thursday, April 20, 2023
The Standing Senate Committee on Energy, the Environment and Natural Resources met with videoconference this day at 9 a.m. [ET] to study emerging issues related to the committee’s mandate.
Senator Rosa Galvez (Chair) in the chair.
[Translation]
The Chair: Good morning, honourable senators. I am Rosa Galvez. I am a senator from Quebec and the chair of this committee.
The Standing Senate Committee on Energy, the Environment and Natural Resources is holding a meeting today.
I will start off with a quick reminder. Senators and witnesses present in the room must not lean forward too closely to the microphone or take out their earpiece when asking questions or providing answers. This will prevent any feedback that could harm committee staff here in the room.
I will ask my colleagues from the committee to introduce themselves, starting on my right.
Senator Verner: Josée Verner from Quebec.
Senator Audette: [Innu-Aimun spoken] Michèle Audette [Innu-Aimun spoken] from Quebec.
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Senator Greenwood: Margo Greenwood, British Columbia. I am here for Senator Arnot today.
[Translation]
Senator Miville-Dechêne: Julie Miville-Dechêne from Quebec.
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Senator Sorensen: Karen Sorensen, Alberta.
Senator McCallum: Mary Jane McCallum, Manitoba.
Senator Anderson: Margaret Dawn Anderson, Northwest Territories.
[Translation]
Senator Massicotte: Paul Massicotte from Quebec.
The Chair: To my colleagues and the ladies and gentlemen across the country that are watching our deliberations, welcome.
Before getting into the main subject of our meeting, I must tell you that the steering committee has approved the final version of our report on hydrogen. We just have to make some minor corrections and do a few edits for printing, and then soon after, I will be able to table the report in the Senate.
Today, we are continuing our study on the Canadian oil and gas industry. From our first group of witnesses, we have Patricia Elaine Perkins, who is a Professor at York University and who will be testifying in person.
[English]
And by video conference, Tzeporah Berman, International Program Director at STAND.earth.
Welcome, and thank you for being with us. You each have five minutes to deliver your opening remarks. We will begin with Professor Perkins, followed by Ms. Berman.
Patricia Elaine Perkins, Professor, York University, as an individual: Thank you very much, Senator Galvez, and to the committee and staff in general for the opportunity to contribute to your important study.
My name is Patricia Perkins, as you’ve heard, and I’m a feminist ecological economist and a professor at York University. I teach climate change science and policy and climate justice and ecological economics. I’ve also taught economics in Mozambique, and for 25 years, I’ve led participatory research projects on watershed governance and climate change, climate justice, with partners from Latin American and African countries. I was a lead author of the Intergovernmental Panel on Climate Change’s, Sixth Assessment Report, which came out in April 2022. I helped write a chapter entitled “Demand, Services, and Social Aspects of Mitigation.”
I appreciate being able to speak with you here on unceded Anishinaabe Algonquin territory in the beautiful Ottawa River watershed, still caretaken by many Indigenous knowledge keepers. My brief remarks focus on two main points related to my own areas of research and also to Canada’s energy transition.
First, climate policies are strengthened by economic equity, social well-being, participatory democracy and public trust. These things are mutually synergistic. Second, small and larger‑scale steps toward well-being also reinforce each other and accelerate the current energy transition.
On the first point, my work for the Intergovernmental Panel on Climate Change, also referred to as the IPCC, explored the importance of social trust in energy transitions. Social trust helps people see the current transition as not about what’s lost but what is gained when transition plans focus on equitable, low‑carbon well-being.
IPCC authors reviewed more than 100,000 peer-reviewed sources — not me personally but us as a group. A huge amount of multidisciplinary empirical evidence demonstrates that when people at all income levels believe the government is protecting their interests, even in times of climate chaos and large economic shifts related to the energy transition, then social trust makes possible innovative climate policies and keeps democracies stable. Policies that address inequity, not just climate per se, are key to building that social trust. This means that equity‑enhancing policies are essential climate policies.
My handout is a graphic from the IPCC Working Group III report and summarizes the key linkages, which are all thoroughly documented in the peer-reviewed literature. The bottom line is equity and well-being for all facilitate a faster and easier energy transition.
On point 2, the post-fossil-fuel energy transition is inherently away from centralization — pipelines, refineries, sacrifice zones, huge power plants, heavy dependency on long-distance grids — and toward decentralized, locally appropriate, less polluting renewable energy systems. Renewables are less energy-dense than fossil fuels, and thus, they need more land area to produce the same number of kilowatts. So the Prairies, rich in wind and sun over huge expanses, have an excellent comparative advantage in renewable energy. So does Newfoundland.
Moving renewable energy long distances doesn’t make sense and it isn’t needed. Green energy systems are local, since solar and wind energy are widely available everywhere and are best used locally to meet energy needs and avoid transmission wastage. This is a plus. Local energy systems have many benefits. They do require storage facilities to cover variations in different types of energy supply but not much long-distance infrastructure, which is needed only for emergency backup.
Politically, this means the energy transition relies on local communities and governments for innovating synergistic ways to meet local needs for food, water, low-energy-demand shelter and energy itself simultaneously and efficiently. A few examples: Livestock can shelter under solar panels. Local topography creates water and energy storage areas if water is pumped uphill when the wind is blowing and released through turbines when it is not. Solar greenhouses are already increasing food production in many parts of Canada.
Local ingenuity, combined with traditional ecological knowledge and participatory decision making with small-scale finance, leads to appropriate energy systems in each different context. This kind of multitasking needs recognition and support by planning frameworks that have to shift now to integrate agriculture and food, housing, conservation, forestry, water, energy and finance.
Subsidiarity, as you probably know, is the name for decisions made at the most decentralized level possible. With training and skills development, there is huge job creation potential here, and many unions support this type of local green transition. These transitions, as we know, are opposed or blocked by public or private sector energy incumbents, including the fossil fuel and nuclear energy industries and state utilities, such as Hydro‑Québec and Ontario Hydro, who are deeply invested in huge centralized energy systems.
For Canada, there are many policy implications. I’ll just spin off a few if I have another minute. One is follow Indigenous leadership and self-determination. Follow those who know the land. Shift fossil energy subsidies, including for carbon capture and storage, which is a huge boondoggle, to worker retraining via unions, education, income redistribution and the care economy. Clear the way for entrepreneurs and communities to build renewable energy systems, which are now the cheapest way to generate kilowatts. Focus federal attention on the natural monopolies, such as emergency infrastructure and public transportation. Accelerate income redistribution and social equity via progressive tax reform, supports for the service sectors and the care economy. Update energy transition governance to merge energy, water, food, agriculture, housing, conservation, forestry and emergency management because they are fundamentally interrelated now. And the last is consider only policies that address both equity and climate change, accelerating the post-fossil-fuel energy transition.
I am optimistic that humans will meet and collectively survive the climate challenge if we place well-being for all at the forefront. Thank you very much for your committee’s important work.
The Chair: Thank you so much. Ms. Berman, the floor is yours.
Tzeporah Berman, International Program Director, STAND.earth: Senators and distinguished advisors and guests, I want to thank you for this opportunity to present to you on the critical question of the role of oil and gas and the industry’s relevance to our country and economy.
My name is Tzeporah Berman. I’ve been working on environmental policy in Canada and beyond for 30 years, with a focus on climate policy for the last decade. During this time, I’ve been appointed by several provincial governments to design policy recommendations, including two years as the Co-Chair of the Oil Sands Advisory Group in Alberta and four years meeting with senior executives of the oil industry to discuss climate policy. I would like to make five key points this morning.
While the oil and gas sector has been historically very important to our economy, its impact and importance is waning, and it is increasingly privatizing billions in profits to shareholders who are predominantly not Canadian. It’s socializing the toxic legacy while employing fewer and fewer people.
Global demand for oil and gas is soft and will decrease rapidly in the next decade. Canada’s oil and gas will not be competitive. Rising oil and gas production is a massive climate problem, and CCUS at scale is not working; it’s too expensive. Climate science clearly shows that no new expansion of oil and gas fits within our climate goals, and it threatens climate stability and our economy.
The oil and gas sector is responsible for the fastest-growing and largest component, 27%, of Canada’s climate emissions but represents less than 7.5% of the GDP and directly employs just half of 1% of the workers in the economy. Despite record profits in 2022, the oil and gas sector employs fewer Canadians today than it did in 2013 due to the industry’s focus on reducing labour costs through greater automation.
The industry’s plan to cut emissions through the Pathways Alliance remains mostly undisclosed, and despite their claims regarding future emissions reductions, there have been no significant allocations of funding or investment decisions from industry to support the urgent progress required to substantially reduce emissions from the sector in this decade. The polluter pays principle, which is meant to be enforced by the Canadian energy regulator, is meant to protect the public from the cost of these types of measures. In order to uphold this principle, the government needs to require significant investment from industry and rapid decarbonization in line with the net-zero pathway and to stop subsidizing the industry in its attempts to achieve carbon capture and storage at scale.
Recent analysis of the lobby record further undermines claims that the industry is committed to a net-zero pathway. The international think tank InfluenceMap found in a report released in February that many key players in the Canadian oil and gas sector, including the Pathways Alliance members — CNRL, Cenovus, Suncor and Imperial Oil — have lobbied against the very policies that would help their industry reach its climate targets.
Further undercutting the industry’s claims to have joined the fight against climate change are their plans to increase production by 500,000 and 1.2 million barrels per day within the next decade. Eighty per cent of the greenhouse gas emissions associated with a barrel of oil sands crude come from actually burning it in a vehicle’s engine. Those climate impacts certainly are not covered under the Pathways Alliance net-zero plans. Oil sands producers are only aiming to cut emissions from the operations that pull oil out of the ground, and even here, they have not been significantly successful. The industry also claims to be part of the transition, but over 90% of capital expenditures, or CapEx, is invested in expanding oil and gas development and not in renewable technologies.
The Pathways Alliance plan relies heavily on carbon capture and storage, or CCS, technology. Carbon capture and storage projects implemented to date have systemically overpromised and under-delivered on emissions reductions. For example, an investigation by Global Witness found that Shell’s Quest Carbon Capture and Storage facility near Edmonton, which has been in operation since 2015, has released 7.5 million tonnes of greenhouse gases over that time while sequestering just 5 million tonnes, meaning the project is a net emitter and not a climate solution.
Even if the technological flaws that have plagued CCS could be fixed, the technology still doesn’t address 80% of the emissions that come from Scope 3 emissions. At best, carbon capture, utilization and storage, or CCUS, is an expensive delay from an inevitable shift away from dependency on fossil fuels, and at worst, it locks us into a world where we exceed the limits of climate mitigation and safety.
The most recent Sixth Assessment Report, or AR6, by the Intergovernmental Panel on Climate Change, makes very clear that CCUS has the weakest efficiency per dollar spent and potential to reduce emissions of all the mitigation pathways. In a climate-constrained world, it is critical that Canada focuses on emissions reductions that will build our economy. It has been over a decade since Canada first committed to ending fossil fuel subsidies, yet in 2022, the Government of Canada announced over $18 billion in subsidies and public financing for the oil and gas sector.
Finally, I want to put Canada’s oil and gas industry into a global context. Canada’s oil has seen the highest carbon and the highest-cost oil on the planet. Numerous studies have noted that as oil demand declines, high costs and high-carbon oil production is the most vulnerable. We have already seen a flight of major investors and insurers leaving the oil sands. International Energy Agency, also known as the IEA, scenarios project a decline in oil demand globally as climate policies intensify. Trends suggest global demand for oil will decline by 2030 and will drop significantly thereafter. Even BP has noted in its recent global energy outlook that demand is expected to peak between the late 2020s and the early 2030s.
The IEA stresses that to stable out at 1.5 C, there must be no new oil and gas fields or coalmines, and global clean energy investment must be tripled by 2030, plus immediate and rapid transition away from fossil fuel production. The UN’s Production Gap Report finds that governments are still on track to produce more than double the fossil fuels that would be in line with the Paris Agreement’s goal of 1.5 C.
The science has made it impossible to ignore the threat fossil fuels pose not just to our health but to the future of the planet. This was made even clearer by the latest release of the UN Intergovernmental Panel on Climate Change. In no uncertain terms, this body of the world’s leading climate scientists explains that there is a rapidly closing window of opportunities to secure a livable and sustainable future for all. If we want the make it through that window, the science is certain: We can’t allow new fossil fuel development, and we need to phase out what is already under production.
As former Minister of Environment and Climate Change, Catherine McKenna, said last year while releasing the UN High‑Level Expert Group report on net-zero, new oil and gas projects are inconsistent with net-zero goals. Proposing new projects and claiming to be on a path to net zero is just greenwashing. Canada needs to plan to dramatically reduce production and emissions in line with climate safety and plan for a world in which oil and gas demand declines steeply between now and 2050.
The fact is, renewable energy is now cheaper than fossil fuel development and doesn’t leave us with a toxic legacy or expensive liability in cleanup bills. Currently, the evidence shows that Canada’s oil and gas industry stand in the way of us meeting the goal of mitigating climate change and building a stronger, cleaner and safer economy for Canada. Thank you.
[Translation]
The Chair: We will now have a round of questions. I would ask my colleagues to name the person for whom the question is intended.
Senator Miville-Dechêne: Ms. Berman, in your opening statement, you did not say a single word on an important issue that we are hearing more and more about, which is a “just transition.” This is a concept that has been brought forward by the unions to ensure a smoother transition for employees. I would like to know if this concept was part of your analysis, and if so, how it factors in and what your thoughts are on this.
[English]
Ms. Berman: Thank you very much for that question. It’s an important one.
The fact is it’s not a transition if we’re still growing the problem. Unfortunately, we’ve seen the oil industry and certain elected officials in the country argue that we need to expand oil and gas production as part of the transition. The fact is we just continue to make the problem larger. If we want to ensure a fair transition, that means that we have a plan and a plan means that we recognize the need for both emission and production declines so we can plan for how many people can be employed in the future, and we can develop just transition plans that reflect that reality. Right now, by continuing to grow production, we are ensuring that we don’t have a fair transition. That in fact production levels will be guided by the market and that’s. As we know, there is no fairness or justice embedded in the market. We need governments to regulate production decline so we can have a fair transition.
As we are discussing the concepts of fair, we also need to think about Canada’s role in this global issue and in the global economy. Many academic papers have looked at the managed decline of production globally that would be in line with the Paris Agreement and issues of equity and fairness embedded in that. Canada has an important role to play globally and we are also one of the countries that is in a position to manage a decline in a way that meets the goals of the IPCC reports and that means that our managed decline needs to be faster than other countries that have such a significant portion of their GDP dependent on production and historically are not responsible for those emissions. If we want this transition to be fair, we need to plan for a managed decline in production and stop growing our dependency that will lead to a boom and bust and leave many workers and their families behind.
[Translation]
Senator Miville-Dechêne: Ms. Perkins, you do not mention the concept of a just transition in your chart. Does that mean that you don’t believe in this concept that was put forth by the unions?
[English]
Ms. Perkins: Thank you. I think just transition is a very important concept and it also has its critics, but basically, what I’m talking about through the presentation is just transition. It’s education and training so that the workers who are employed now in the current structure will be key to the development of the renewable energy systems locally and the kinds of economic processes central to the care economy.
People in industries who have particular skills can learn to use those skills in the renewable sector. There is plenty of room in this broader conception of the low-carbon well-being for all economy, which is, basically, a care economy with many jobs for women in education, housing and retrofits, and in building different kinds of governance structures at the local level to integrate all the sectors. A just transition is central.
Senator Miville-Dechêne: Thank you.
Senator Sorensen: My question is directed to Dr. Perkins. I’m impressed with your credentials but more so how you encompassed them all into all the work you do and I’m looking at climate justice, feminism, economics and community. I think that’s just fantastic that you’ve amalgamated all of that together. I also appreciate your optimism and your suggested path to get us there through social trust. Great term. I will be using it.
I’m from Alberta and we’re in an election. As we look toward a net-zero future, I am personally convinced most Albertans understand the need to transition, but I will ask you to elaborate more on our workers. I think you just responded to a large degree on how we can protect workers, but I will go back to your suggestion as to how we build trust with that workforce, that they’re going to be okay.
I’m also going to add that I am the past mayor of Banff, Alberta and I mention that to comment on my devotion to conservation. But you also spoke to the role of municipalities in this. As children of the provinces and territories, municipalities sometimes struggle to take a lead in these things, financially, based on other rules et cetera. So those are the things that interest me.
Ms. Perkins: It seems to me that building trust with workers requires going through their unions, getting unions on board and making unions central to the job retraining and education and the shift. If, at the local level, there are initiatives for building renewable infrastructure such as the energy, the batteries or the ways of storing energy at the local level, those are different from extraction. But the skills of building an energy storage facility, or understanding the electricity of batteries, many of the things that workers are already doing, their skills can be upgraded and adapted and unions are crucial to making that happen in a way that’s sensitive to workers’ needs and has workers at the forefront because they know what needs to happen. At the local level, those skills exist.
The second part of your question was about municipalities. It seems to me that in Canada, the different provinces have very different ways of managing intergovernmental affairs, and also integrating these silos of sectoral kind of regulation and policy. As I was saying, we have to reform our governance ideas to bring things together. I was talking with a woman who is speaking at another hearing across the hall about soils and she was talking about the same thing.
When I worked for the Ministry of the Environment in Ontario in the 1990s under the NDP government when we were fighting the North American Free Trade Agreement, also known as NAFTA. I was charged with developing an interministerial working group to talk about how NAFTA would affect each ministry’s sector. For most of those people, it was the first time they had a chance to talk to people from other ministries. It was a larger goal. Now the large goal is climate change. How will we address this? You have to bring people together and have them around the table to talk about it. There are ways to do it.
Senator McCallum: Thank you for your presentations. Welcome to the Senate. My question is for both the presenters.
I wanted to look at the word “equitable” and how are equitable societies built, especially when a government, corporate and other bodies, including provincial governments, work on the capitalist new liberalism model which fosters consumerism and is not sustainable? And you know, on top of that, we have not addressed the individuals and what their responsibility is in reducing their consumption and what about the sponsors? Because I don’t think we’ve ever talked about sponsors and how they drive the process of oil and gas or hydro or whatever energy that can make money for them? I do not know what their responsibility is. How do we build an equitable society when capitalism doesn’t encourage equity? It’s an individual model, and we’re looking at a collective.
Ms. Berman: I see this committee is just looking at the easy questions.
This is one of the most challenging questions of our time, that you have flagged. If we are going to build a more equitable society given the capitalist structure we’re functioning within, that speaks to the role of government in ensuring equity and protecting the public good. Because what we know is that the system and the markets inherently are not going to do that. That’s why we need government rules and regulations, and it’s why, especially at this critical moment in history, we need governments to step in at all levels to design systems, policies and laws that give everyone the opportunity to do the right thing.
It shouldn’t only be easy to reduce your emissions or consumption of fossil fuels only if you’re wealthy enough to buy a Tesla. If the government puts in place significant demand-reduction policies — which we’re starting to across the country with zero-emission vehicle laws and zero-emission building laws — that provide certainty to industry to invest in low-carbon solutions, it gives us the ability to change the system, so we’re not as dependent on fossil fuels, so people have access to heat pumps because there is a subsidy on heat pumps to get their houses off gas and so people have access to public transport instead of always driving their car. It’s putting those systems in place that create greater equity.
As we talk here, though, about the oil and gas industry, we need to understand that for a long time, we have allowed this industry to privatize the profits and what they get back from industry while royalties and taxes back to governments have gone down. The public is left with the legacy of those tailings ponds that are leaking and of those abandoned wells. The public has to pay for those. Taxpayers have to pay for them while the industry has walked away with the profits. That’s not equitable, and that’s why we need greater regulations on this industry. We have to stop subsidizing them with taxpayers’ dollars. We have to insist they use their own profits to invest in the technologies to clean up existing oil and gas development, and we also have to make sure we have policies in place so they can’t just leave abandoned wells and an environment that has been compromised.
The job of government and the basis of equity and fairness has to start with the ability of all citizens to have clean air to breathe, clean water to drink and healthy food, and right now we’re certainly not doing that for downstream communities.
Ms. Perkins: You have put your finger on the crucial challenge we face in addressing the climate crisis, which is a challenge of governance. I see the way in which public awareness — actually, the public has always been further ahead of government in wanting climate change to be addressed, and that goes back 20 years. For someone like me — and I think for Ms. Berman too — who has been working in this area for a long time — decades — what I see now is that there is public awareness. People are asking what they can do at the individual level to reduce their emissions.
When I get called by journalists to talk, they want to ask me, “What can individuals do?” I answer their question. I mean, individuals can certainly do a lot of things like stop flying or reduce the flights, become vegetarian and reduce food waste, and try to change your vehicle or get rid of it and use active transportation. There are all those things you can do, but when people are aware that they need to change their behaviour, they also become different voters. They become aware of what governments are doing or not doing. They start pushing politically for different kinds of processes.
I believe those kinds of pressures are also showing up the shortcomings of our colonial governance system. At the same time all of this is happening, there has been this resurgence of Indigenous leadership and of Indigenous models of how you do some of the coordination we were talking about. It’s not about hierarchies and sectors. It’s about thinking together about what the past meant, what the future is going to bring and how we as humans act in a positive way and not in a negative way vis-à-vis the environment, and then build the governance that allows that to happen.
I think changes are afoot that aren’t necessarily facilitated by — well, I mean, intellectuals can say capitalism is the problem and that we need to decolonize these things. Those are happening. I see them happening. The governance system in Canada especially needs Indigenous leadership in Canada because the tar sands and the oil sector in Canada has driven our global shame. Canadians’ per capita carbon footprint is among the highest in the world. It’s only behind Dubai, Abu Dhabi and the United Arab Emirates. It’s a global shame.
As a result, we have a responsibility to really change the way we sit in the world, and we can lead with the kind of just transition policies we’ve been talking about today.
[Translation]
Senator Verner: I would like to thank the witnesses for being here with us this morning. As you know, one of the goals of our study is to evaluate transition plans towards a more sustainable future for workers in the oil and gas industry. Many witnesses have spoken about the concept of a fair and just transition, and the issue has given rise to conflicting points of view. On February 9, Mr. O’Regan declared that we needed more workers in the oil and gas industry. He provided an estimate of 14,000 new jobs, which would be a 13% increase by 2031.
Ms. Perkins, you spoke about workers’ confidence. Don’t you see a contradictory message that is being sent to industry workers, who are being told that billions of dollars will be invested to help them make the transition? What’s more, on April 11, the minister also mentioned in an article that he thought that we would need more workers in the oil and gas industry. There must be people who are wondering what all this means and where we are going with this.
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Ms. Perkins: Yes. I mean, the jobs that are needed in this new economy we’re envisioning — an economy of low carbon and well-being for all — include energy sector workers. But we are also envisioning an economy that provides home-care services for seniors and that devotes much more attention to education, from children to adult education — ongoing lifetime education. This energy transition is a transition. It’s a cultural shift — a mental shift — for all of us.
This question about jobs is not just about people working in the energy industry now and what they are going to do. They can be trained. They can move on to other things. But also, many other kinds of work are needed for this visionary post-fossil-fuel economy that we face.
I don’t know if I’m answering your question sufficiently. Maybe we could let Ms. Berman answer, and we can come back.
[Translation]
Senator Verner: Perhaps, but I’ll come back to it.
[English]
Ms. Berman: Thank you for your question. It’s absolutely a complete contradiction for our government to set the climate targets that we have and to acknowledge and sign off on the Intergovernmental Panel on Climate Change report, committing to net zero by 2050. What that means is we have to reduce our emissions and production of fossil fuels to zero and then start drawing down the pollution from the atmosphere to get to net zero by 2050. That means by 2030, seven years from now, if we’re on that pathway, according to the reports that our own government has signed off on, we have to reduce fossil fuel emissions by 50% in the next seven years. It’s absurd to say that we can do that while we grow this industry.
Adding more jobs to the oil and gas workforce right now makes the problem even more difficult. It makes more people dependent on an industry that needs to be and is being phased‑out. We know that the demand is softer. Even BP has said that. Demand for oil and gas is going down significantly as more and more countries commit to banning the fossil-fuel car. We now have close to a hundred countries in the world that are putting policies in place, including our own, to no longer sell fossil fuel cars. We’ve seen what happened in Europe just this year with an 18% reduction in gas dependency just by introducing heat pumps. In some countries, 50% more heat pumps were introduced, putting houses onto electricity and eventually renewable energy instead of gas. As this transition happens around the world, the oil and gas industry is going to shrink. We need to plan for that in Canada in order to protect our workers.
[Translation]
Senator Massicotte: Ms. Berman, I have a question for you. In our market-based capitalist system, the best way to control CO2 emissions is through the consumer. We would be dreaming in technicolor if we tried to force oil companies to voluntarily make reductions within their systems. Moreover, the International Energy Agency has clearly stated that we will need oil for at least the next 30 to 40 years, because we can’t scale up the other energy sources fast enough to replace oil. Obviously, however, we do have to get everyone on board.
I believe that we have to work with consumers on the demand side, and not necessarily focus on supply. As for supply, Saudi Arabia and other providers will always be ready to compete aggressively in order to sell their oil. So why would they not compete with our supply?
That said, is there anything else that we can do to limit demand and encourage consumers to use less oil? I think that any other program is bound to fail, because our system is based on supply and demand.
I would like to know what you think.
[English]
Ms. Berman: Thank you for that question. There is no question that we need to reduce demand, but we also need to constrain and cut supply. Economists talk about cutting with only one half of the scissors. With every other major intransigent issue in our history, countries have had to cut and reduce and address a critical issue. Look at chlorofluorocarbons, or CFCs. Look at many of the pesticides that we now know are toxic, or asbestos. We had to regulate both the production and the demand and supply.
For 30 years, climate policy was designed just to reduce demand, and the result of that is we’re now on the track to produce 110% more oil and gas and coal that we can never use if we want to stay below 1.5 degrees. In fact, we already have enough oil, gas and coal on the surface of the planet or under construction, where if we used it all it would take us past 2 degrees.
So right now, we’re spending billions of dollars and the world’s political and intellectual capital in our own countries to produce products that we know we can’t use. We’re flooding the market with it. By not constraining that supply, we are impacting consumers.
There is a lot that we can do to help consumers reduce demand, but we’re not going to do it just by trying to convince consumers to use less because it’s the legislation that we put in place and it’s the certainty in the markets for renewable energy and renewable energy infrastructure that come from recognition, acknowledgment and policy that we’re going to use less oil and gas and we’re going to produce less oil and gas that starts to create that systemic change.
We know what is successful. We put in incentives for electric cars and for heat pumps. If we put in place policies, like just happened yesterday in several places in the world — in Germany yesterday, they set a date to ban all gas hookups to houses. So that will certainly change how consumers react, but we can’t just put the onus on the consumers. We also have to shift how much of these products we’re flooding into the marketplace.
In fact, the marketplace would have constrained oil and gas production already if it wasn’t distorted by billions of dollars in fossil fuel subsidies that are keeping projects alive, even though demand is soft. Renewable energy at scale is cheaper. The first thing we have to do is cut the fossil fuel subsidies, and that will lead to more of a constraint and demand in supply in line with demand levels.
Senator Massicotte: If I can come back to the question, though. What would you do for the consumer? I firmly believe we should do more to reduce consumption and reduce the interest to consumers, but you’re saying no, let’s cut off supply. So we cut supply off from our own producers, but how does that help us? You can close the ports to oil and gas. What are you going to do to cut it off? Are you going to have a military camp that makes sure they don’t unload oil and gas at our ports?
Coming back to my question, how do you resolve this issue when the world says and the IEA says, which is an independent body, we need oil and gas for another 40 or 50 years because we can’t scale up in time? It’s all good to dream about it, but how do you get there?
Ms. Berman: First of all, I’m not saying that we need to constrain supply without doing everything we can to reduce demand. It’s not one or the other. We need both. At this moment in history, we need every tool in our toolbox to reduce our dependency on fossil fuels and to reduce the emissions that are getting trapped in our atmosphere.
No one is saying shut off the taps overnight. What we’re saying, what the science is clearly saying, and even now the IEA is clearly saying no new projects, no new expansion of oil, gas and coal. That means the Bay du Nord Project off the East Coast of Canada, which was just approved, should not be going forward. It means Cedar LNG off the West Coast of Canada should not be going forward, but that’s true of every other country. How do we do it and ensure that some other country will not decide to do it? That’s a core question of fairness and competitiveness. But if we look at other issues that Canada has led on issues such as landmines, CFCs and the Montreal protocol. Leadership is critical when creating a new social norm. This new social norm follows the science, which is that we cannot continue to expand, and even the IEA says that now. No new projects.
That’s why initiatives like the Beyond Oil & Gas Alliance, which many countries around the world have now joined, a commitment to no new expansion of fossil fuel production, are absolutely critical in starting to create this new leadership and social norm. It’s why we’re seeing a bloc of countries now call for a fossil fuel non-proliferation treaty. We need international cooperation and agreement to stop expansion and manage the wind-down in an equitable way.
Over 3,000 scientists, 101 Nobel Laureates, even the World Health Organization along with several countries, are now calling for a fossil fuel non-proliferation treaty. That kind of agreement would help ensure fairness in the managed decline of production, but we need to do both. We also need to recognize that stopping expansion doesn’t mean that we’re going to shut off the taps. Yes, we’re going to use oil and gas in the future.
We’re going to use less and less of it. We need to stop expanding it, and we need to plan for a managed decline of our existing production, because the decline will happen. The global trends are very clear in the markets.
The question for us, as Canadians, is will it be a managed decline, or will it be an unmanaged decline? If it’s an unmanaged decline, more people will suffer.
[Translation]
Senator Audette: Thank you very much, Madam Chair. I would like to congratulate you on your most prestigious prize.
The Chair: Thank you.
Senator Audette: I would like to thank the witnesses for their presentations. I will speak in French, because it is a direct link to the land, and the land is my house, my university, my medicine. It is also a place that we continue to inhabit, and it is there that extraction and mining activities are going on.
Are you building things or collaborating with Indigenous peoples within your organizations and spaces and in your fields of expertise? I see that you are also involved in various international movements.
I’m no expert, but every year I go to Mushuau-nipi and I think it must be the same everywhere. For example, critical minerals and green transition projects are underway just a few kilometres away from our camps. How can we make sure that the Indigenous population of the communities, whether they be for, against or undecided when it comes to the question of local jurisdiction, have a seat at the table so that they can become leaders in protection and economic development, and not only janitors and cafeteria workers? Do you have any recommendations or thoughts on the subject?
[English]
Ms. Perkins: It’s sad that you have to ask such a question. I appreciate your question.
I think that there are several realities going on here, and when the large extraction companies talk about impact benefit agreements, they’re talking about those jobs in the cafeteria and cleaning the dormitories and things like that.
Senator Audette: Which is noble work —
Ms. Perkins: Not that it’s not noble work, but you’re right, those are not the leadership roles.
There are some First Nations who are willing to — there’s not unanimity of voice or of ideas among First Nations. That’s what I see.
To come back to this question of the governance system overall and the colonial structures that we’re working within, those are not inevitable. They are mutable; they can change, and the change that I see happening is in some places — for example, in the Ring of Fire in western Ontario and the idea that we need more extraction in order to produce the lithium and the cobalt and other metals that are needed for the energy transition; therefore, let’s build the roads, let’s open the mines and those traditional impact benefit agreements will be how we will buy off the First Nations to allow this to happen.
This comes back to Senator Massicotte’s question. The modelling of the extraction requirements and the energy requirements that will be needed in the future depends, inevitably, on projecting business as usual and current needs into the future, and the Intergovernmental Panel on Climate Change, or IPCC, has been vulnerable to criticisms like, “Your models are just so pessimistic.”
They are pessimistic when you project the current business‑as‑usual practices into the future, but consistently there are efficiency innovations. Things are happening beside business as usual in the informal sector, in local-level innovations. Those projections aren’t necessarily what you need to rely on. In fact, it’s the more optimistic ones, where energy demand does drop because of technological innovations for efficiency that reduce the need, and also recycling of metals and efficiency in recycling. Then that requires design for sustainability, which is where government comes in.
If governments say, “We’re only going to sell cellphones in our country if they are designed to be taken apart metal by metal,” then you can recycle things more feasibly.
But coming back to your issue about the role for Indigenous people, it seems to me that the role for Indigenous leadership, especially by women, is at the forefront. When I teach ecological economics now, I use a textbook by an Indigenous ecological economist, who also has a PhD from Harvard University in economics, and he has looked — during his sabbaticals, he always goes and talks to elders about, “How is it that your people have been able to live for thousands of years, since time immemorial, in this ecosystem without overstraining its boundaries, without crashing it? How is that?” And the answers are to do with the governance, to do with how humans are positive facilitators of ecological flourishing, rather than predators on the environment. That shift is key to what we’re talking about with this new vision.
I think, have confidence. Put it forward. Say, “In this land, we’re going to do it our way, and we’re going to have our governance system.”
Good luck.
The Chair: Thank you so much.
Senator Batters: Thank you to our witnesses.
My question is to Professor Perkins. This morning you have told us that Indigenous involvement and consultation must be paramount in any transition policy, and our committee, actually, recently had Dale Swampy testify. He is the President of the National Coalition of Chiefs. Mr. Swampy stated these important remarks while he was testifying before us:
Our mandate is to defeat on-reserve poverty. We work to establish mutually beneficial agreements between First Nations and the natural resource industry partners in an effort to enhance the economic prosperity of our on-reserve communities across Canada.
He also said:
We believe that Canada’s oil and gas industry is the most technologically advanced industry in the world and should be applauded and not demonized, as the federal government is doing now with its crippling legislation.
He also went on to say:
Canada’s oil and gas industry is unique. It has the best record today for Indigenous engagement and consultation. It works hard to ensure that First Nations communities are included in opportunities in employment, business contracting, community investments and equity ownership.
There is no country in the world that comes close to what our oil and gas industry has accomplished, and through the ESG guidelines that all companies are adhering to, Indigenous inclusion in major oil and gas developments has become a priority in achieving social acceptance.
In his opening remarks, he closed with:
Let’s move towards a more sustainable energy transition. Let’s not put the cart before the horse by destroying an industry without first having an adequate and sustainable green and clean energy to replace it. Let’s support our fellow Canadian oil and gas workers and the 14,000 self-identified First Nations workers in the industry. Let’s make well-informed decisions on energy policy that make sense for the economy and the well-being of all Canadians, including First Nations.
That was the end of his quote. How would you react to Mr. Swampy’s comments?
Ms. Perkins: As I said, just as with everyone, there is a diversity of opinions and a diversity of strategies and a diversity of ideas among First Nations in Canada and worldwide about what needs to happen.
My final policy point was to look at climate and equity together and prioritize any kind of policies that take both of those things into account when you are deciding how to deploy government resources and regulatory ability at the local level or at the federal level. I think those things need to be tied together.
How do we know what equity is, as Senator McCallum was saying? How do we recognize what is an equitable policy? It requires participatory governance. It requires bringing people around the table to talk about what the harms and benefits would be for all members of that local community and for the country at large.
I think Mr. Swampy expressed the view that he has, based on his experience and leadership in his nation, and other nations may see it very differently.
Senator Batters: We have had many witnesses from Indigenous communities who have become leaders in this industry in Canada. They have expressed that the jobs that the energy industry has provided to their people in Canada have actually been vastly preferable to the other types of jobs they may be able to get, as far as the benefits that this is bringing to their community. We’re not talking about low-paying jobs but very high-paying jobs that they can use. They want more is what we have heard from many different witnesses. As you say, I appreciate that you acknowledge that it’s not one, singular voice on this issue.
We already heard from many witnesses who have been very supportive of Canada, which has a very good track record on environmental on all of these types of things. Wouldn’t it be better that this energy is coming from this and supporting these types of jobs, rather than from countries which don’t have these types of human rights records?
Ms. Perkins: The recent biological conference in Montreal where Canada committed to preserving 30% of the country as conservation areas, this will create many jobs in Canada for foresters, conservation monitors and people who can build on Indigenous traditions of ecological — the western word would be stewardship. There are other kinds of jobs other than in resource extraction that are also very good jobs and are part of this vision for carbon capture via trees. There are other ways to see it, if you don’t take a business-as-usual framework. That’s what I would say.
The Chair: Thank you very much. We have exhausted the time for this session.
[Translation]
For our second group of witnesses, we will hear via video conference Alan Andrews, who is the Climate Program Director with Ecojustice Canada, and Kyla Tienhaara, who is an Assistant Professor at Queen’s University. Welcome. Thank you for accepting our invitation. You each have five minutes to make an opening statement. We will start with Mr. Andrews, and then hear Ms. Tienhaara.
[English]
Alan Andrews, Climate Program Director, Ecojustice Canada: Thank you for the invitation to appear before the committee.
I am the climate program director at Ecojustice Canada, Canada’s largest environmental law non-profit. We use law to protect the environment and address climate change. I lead a team of lawyers working across Canada on climate litigation and legal reform.
Today I am going to focus my remarks on the crucial role that regulation, and particularly financial regulation, must play in the energy transition.
The latest IPCC report was a stark reminder that the window of opportunity is closing and we need to rapidly reduce emissions now and over the next decade to keep alive the goal of 1.5 degrees, the goal that Canada has committed to under both international and domestic law.
All credible pathways to 1.5 degrees see oil and gas production rapidly reducing in the coming decades. The International Energy Agency has concluded that there was no room for oil and gas expansion in its 1.5 C pathway, and that there would be a significant reduction in global demand by 2030.
The oil and gas sector is the largest emitting sector in Canada, responsible for 28% of Canadian greenhouse gas emissions. While we are seeing other sectors start to show signs of progress in cutting emissions, the oil and gas sector’s emissions are heading in the wrong direction. Crucially, as other witnesses have mentioned, this figure only includes industry emissions within Canada’s borders. It ignores Canada’s huge and growing exported emissions.
According to data that Ecojustice obtained through an environmental petition, Canada’s 2021 exported fossil fuels produced 39% more carbon than Canada’s entire domestic emissions. To put that in context, in 2021, Canada’s natural gas exports alone produced more than all of the province of Ontario’s emissions in the previous year.
Canada’s laws have a vital role to play in cutting emissions from the sector and promoting a managed and just transition away from oil and gas, toward the clean energy economy. Good laws provide policy certainty that is needed to drive investment and innovation. They allow us to hold governments and companies to account for delivering on climate action. They protect consumers and investors from false climate advertising.
Canada’s current laws turn a blind eye to the pollution that it exports and finances, aids and abets rampant greenwashing.
The federal government took an important step in 2021 by enshrining Canada’s Paris Agreement commitment and net-zero goals into law. For Canada to deliver on its targets, the federal government must adopt a robust oil and gas emissions cap and set strict, new regulations on methane emissions. It must regulate to stem the flow of finance to fossil fuels and drive a massive redirection of capital toward the new energy economy.
Canada’s financial system continues to fund oil and gas expansion and is heavily exposed to climate risk. Canadian banks, pension plans and insurance companies are among the largest fossil fuel financiers in the world, with a recent report finding that the Royal Bank of Canada was actually the world’s number one fossil fuel financier in 2022.
The federal government also continues to finance fossil fuel expansion through Crown corporations, such as Export Development Canada.
Canadian governments, oil and gas companies and financial institutions are all engaged in climate greenwash, setting net‑zero targets with no credible plans to achieve them, ignoring that finances and exported emissions that account for the vast majority of pollution are from oil and gas, and continuing to promote finance expansion of oil and gas, contrary to any credible 1.5-aligned pathway.
We see a similar pattern when it comes to the sector’s commitment to the United Nations Declaration on the Rights of Indigenous Peoples. Contrary to efforts to brand Canadian oil and gas as ethical, you see oil and gas infrastructure violating Indigenous rights.
Again, Canada’s lax approach to regulation is at the root of many of these problems. The reliance of voluntary initiatives such as the Glasgow Financial Alliance for Net Zero are failing, and leadership from the federal government has been entirely lagging and is desperately needed. We need to see a suite of federal regulations that force financial institutions, Crown corporations and large companies to prepare credible climate plans that actively align with Canada’s climate goals, and we need to equip regulators, investors and the public with the tools they need to hold them to account. That would have been consistent with the aims of Senator Galvez’s climate finance bill, which was tabled a year ago and ought to be given full consideration by this committee.
The energy transition is already under way. Canada’s legal and financial systems need to be rewired to reflect that reality and put us in a position to reap the rewards, rather than propping up the oil and gas industry. Thank you for your time, and I look forward to your questions.
The Chair: Professor Tienhaara, please go ahead with your presentation.
Kyla Tienhaara, Assistant Professor, Queen’s University, as an individual: Good morning, senators. I am a Canada Research Chair in Economy and Environment, in addition to being an Assistant Professor in the School of Environmental Studies and the Department of Global Development Studies at Queen’s University.
I am speaking to you today from the traditional territory of the Anishinaabe and Haudenosaunee.
In my opening statement, I want to try to add something to your study that you might not have heard from previous witnesses. Rather than delving into the debate about whether we need a transition away from fossil fuels in Canada and how quick that transition should be, I want to address the question of who should pay for the transition.
We need substantial public investment in areas such as renewable energy, public transportation and building retrofit. We also urgently need public funding for job retraining and other social supports to ensure that communities currently dependent on the fossil fuel sector are not left behind and that the transition is a just one.
My concern, based on my research, is that trade and investment agreements could divert public resources from these critically important areas into compensation payments to foreign investors in the fossil fuel sector.
As we have heard many times this morning, to meet the targets of the Paris Agreement, we need to cease all new oil and gas developments. We also need to limit new fossil fuel infrastructure because such infrastructure would lock in continued extraction long into the future.
However, when fossil fuel extraction and infrastructure projects are rejected by a provincial government or the federal government, foreign investors can sue Canada in a system known as investor-state dispute settlement, or ISDS. As you heard from Professor Carter a few weeks ago, Quebec has taken a leadership role in terms of phasing out oil and gas extraction and is a member of the Beyond Oil and Gas Alliance. Quebec has also rejected a proposal for a new LNG terminal on the basis that it would increase greenhouse gas emissions and negatively impact First Nations and marine mammals.
Last month, the American firm Ruby River Capital LLC, filed a request for arbitration against Canada, claiming US$20 billion in compensation for the rejection of this project. Importantly, the company did not invest anything close to that amount in developing its project proposal, but under ISDS, it is able to seek speculative “lost future profits.”
This is not the first time that Canada has been sued by a fossil fuel firm. The American firm, Westmoreland Coal Company, launched its own ISDS case over Alberta’s coal power phase‑out. The federal government was able to win that case on jurisdiction, but only because the company had gone through a restructuring following bankruptcy and could no longer claim protection under the North American Free Trade Agreement, also known as NAFTA.
Similar cases have arisen in the U.S. and Europe. The Canadian company TC Energy is suing the U.S. for US$15 billion over the cancellation of the Keystone XL Pipeline. Recently, a British oil exploration firm was awarded more than C$300 million in compensation for Italy’s ban on oil and gas development within 12 nautical miles of the coast. The Netherlands has also been sued by two companies over its phase‑out of coal-fired power.
Concerns about the potential for such cases to chill climate policy has become so acute that the European Union is currently working on a strategy to withdraw from the Energy Charter Treaty, which is the largest investment treaty in the world. Other countries, such as Australia and New Zealand, have worked to exclude ISDS from their trade agreements.
Canada is not a part of the Energy Charter Treaty, and as of July this year, we will no longer be exposed to ISDS cases under the old NAFTA system. However, we remain locked into ISDS through other trade agreements, such as the Comprehensive and Progressive Agreement for a Trans-Pacific Partnership, CPTPP. When the U.K. officially joins the CPTPP, the risk of ISDS claims from fossil fuel firms will increase dramatically.
Fossil fuel investors are aware of the contribution that the industry makes to the climate crisis and of the urgent need for government action. Firms that continue to invest in the sector, despite a clear risk that their projects will be rejected or retired early, should not be rewarded. The notion that these firms should be compensated and that the financial risk they have taken on should be shifted onto the public is offensive, particularly in light of the increasing body of evidence that documents how the industry has actively obstructed climate action and helped to spread disinformation about climate science.
In closing, a just transition in Canada requires us to rethink our trade and investment agreements and, in particular, our acceptance of the ISDS system, as many countries around the world are currently doing.
I am very happy to take questions on this topic, as well as any other aspects of your study that I have expertise on. Many thanks for the invitation to speak to you and for your attention.
The Chair: Thank you very much. We will start our question period.
Senator McCallum: Thank you to the presenters for the work they do.
When we look at transitioning from oil and gas, hydro is set as the next major source of energy. Those firms also display environmental racism, as does the oil and gas industry.
How have the different costs of environmental racism contributed to this dilemma that we are in? An example is allowing Indigenous lands and peoples to be sacrificed zones, and the existence of the identified sacrifice zones contributes to the toxicity, costs, et cetera. Can you comment on that?
Ms. Tienhaara: I would agree with what Professor Perkins noted this morning about the need for small-scale localized energy systems rather than any sort of large-scale systems, whether hydro or oil and gas. When you have those large corporate-dominated systems, you often end up with more environmental racism and more negative impacts on the environment.
My research is very focused on corporate power and how corporations use law to increase their power as well as the other lobbying and initiatives they go through. I would argue that we need to decrease that kind of large corporate power and work toward energy systems that are localized, particularly in areas with Indigenous populations. Those should be Indigenous-owned energy systems that are entirely owned, not just led, by the local community, and all of the benefits of those systems should go to the local and Indigenous communities.
Mr. Andrews: I would agree with those comments, I think environmental racism is highly evident in Canadian oil and gas policy. I would also suggest that as part of the just transition legislation, one of the guiding principles of that just transition should be incorporation of First Nations’ sovereignty and promoting the idea of nation-to-nation dialogue when it comes to the future of the oil and gas industry.
[Translation]
Senator Miville-Dechêne: My question is for Mr. Andrews and it’s about the finance sector. It is obvious that banks are slowing down the fight against climate change by financing the oil industry. I would like you to explain to me in concrete terms what we can do. The finance system is at the heart of our capitalist system, and the search for profits for shareholders is one of the main principles enshrined by laws that state that the primary fiduciary responsibility of businesses is the shareholder.
How can we recalibrate the system and not put Canadian banks at a disadvantage compared to others? This question comes up all the time.
[English]
Mr. Andrews: I see it a little differently. Part of the risk here is that because Canada is such a laggard when it comes to climate regulation in the finance sector, that is potentially harming the profitability of the Canadian banks and really putting at risk the whole Canadian economy. We’ve seen financial crises in the past. We saw the subprime-mortgage crisis in 2008.
That’s a crisis that Canada weathered fairly well. Canada has a good reputation globally when it comes to regulating the financial industry. The concern is that by delaying, by falling behind the rest of the world when it comes to climate, it’s exposing Canadian investors and shareholders and bank customers to the risks of a further climate crisis. There is also this opportunity cost. The more that Canada continues to invest in fossil fuels, the more it is crowding out investment in renewables and the technologies that are needed to drive the transition.
I would say that the profitability of the sector and climate regulation can and must go hand in hand.
[Translation]
Senator Miville-Dechêne: What kind of regulations or framework would you like to see? Is there an example somewhere? Can we look to other jurisdictions for examples? I know that my colleague Rosa Galvez has sponsored a bill. What studies have been done on the subject?
[English]
Mr. Andrews: Certainly. To your point about being inspired by other jurisdictions, I think Canada certainly needs to look around the world at some of the leading jurisdictions. The ones I’m most familiar with are the U.K. and the EU who are several years ahead of Canada in this respect. I think the key regulatory tool we need to see is mandatory credible climate plans. The problem we see at the moment is that banks, through various voluntary schemes, are committing to net zero by 2050, but they don’t have the policies in place to actually achieve those targets.
So we can consider this kind of action really just greenwashing. Instead what we need to see is a move away from voluntary measures to regulations that actually require banks and other financial institutions to publish a credible plan that doesn’t just include a long-term target to some distant future of 2050 but really sets these more meaningful interim targets that are looking ahead to 2025, to 2030, so these much more meaningful short‑term time horizons and are explaining the policies that will actually deliver compliance with those targets. Then crucially, regulations must require this regular reporting system, so that banks are annually reporting to their investors and their shareholders and the regulators on how they are achieving those plans.
[Translation]
Senator Audette: In my community, we had a group of 50 young people who were on the verge of starting high school. Five, six or seven years later, only 15 of them graduated from high school. They were aiming to go to college or CEGEP during the COVID pandemic, and all of them failed. No one was able to finish their diploma. The reason that this group tried to go to college was that the Mi’kmaq people, a beautiful people, as well as the Innu, my people, own wind turbines and certain wind generation projects. Can you imagine what it means when our people have problems getting diplomas to acquire knowledge in high-tech areas which require particular expertise? Most of the workers will come from outside and hold the key jobs. I can’t speak to what happens in my colleagues’ regions, but that is the case in our region.
Ms. Tienhaara, during your tenure as research chair, have you studied ways of enabling Indigenous populations who seek to participate in whatever industry? I’m talking about training. Do you have any recommendations or suggestions to make to the committee?
I will conclude by making a reference to what Senator McCallum said about environmental racism. We live in the North. How can we bring change in order to protect the land and get back to some sort of balance, and not be at the mercy of the billions of dollars that have been coming out of the territories, and be able to play a role in the economy and in protecting the regions and land without being the poorest of them all at the end of the day? Thank you.
[English]
Ms. Tienhaara: Yes, thank you for the question.
It’s definitely not something that I have focused on within my particular area of research but I have looked at the success or failure of various government investment programs, particularly following the global financial crisis and again in the immediate post COVID period. I do see that there has been at least a shift, to some extent, in recognizing that more funds should flow to Indigenous communities, both in terms of helping remote communities to move off of dirty forms of energy such as diesel but also in terms of spearheading renewable energy projects for the reasons you mentioned in terms of creating jobs and so forth. But I think much more can be done in that respect, in terms of funding. I would also say that it would be very useful and I don’t know to what extent this is already happening, for communities to learn from each other because there have been some success stories in Indigenous communities that have taken a real leadership role.
Again, I think the ownership model is really central. I think it should be a bottom-up approach and it should really be the community at the centre. I think that’s much more likely to be successful and for young people to see the benefits and to want to get into that industry. If they could see other communities where young people are being successful in those areas, I think all of that can help.
But it’s a very complex issue and I think that there are so many pieces that need to come together and I wouldn’t say it’s my main area of expertise, but it’s critically important, so I’m glad you’re focusing on it.
[Translation]
Senator Massicotte: I don’t know who will be able to answer my question, but I would like to carry on with the discussion I had a bit earlier with Ms. Berman. I would like to know more about the non-proliferation treaty. There are many endorsements. It is easy to endorse if you are not part of the oil industry. Have the big oil producers endorsed the treaty? In order to be relevant and get the desired results, you have to make sure that everyone is involved. If two or three producers are not on board, the treaty becomes irrelevant. I would like to know who has endorsed the treaty. Have all the big oil producers endorsed the treaty?
[English]
The Chair: I think the question should have been directed to Ms. Berman, but can you try to answer the question? Go ahead, Professor Tienhaara.
Ms. Tienhaara: I wouldn’t have as much expertise on these agreements as Ms. Berman, but I can say that with any kind of initiative, obviously, there are first movers and those first movers aren’t necessarily the largest producers, but Denmark is one of the leaders, and Denmark did have significant oil and gas production. I think they also have an interesting example of how a transition can occur in a company that was producing oil and gas and is now a major wind company, so it’s not the case that they have lost out in the transition. They’ve actually benefited from it.
The other co-leader is Costa Rica, which I think is an excellent example of how a country that isn’t as wealthy as Canada could try to exploit resources in order to develop further. Costa Rica has opted instead to focus on being a green economy and having green development and has shown leadership in that respect.
There are large oil and gas producers, if you’re talking about the major oil and gas producers in the world, but it’s a very early initiative, and I think the important point is that they are changing the norms around what is possible. Obviously, Canada has an opportunity to play a leadership role in joining that type of initiative, and it’s great to see that Quebec has stepped up, even though it’s not producing anywhere near what Alberta is. I think it’s still an important demonstration of leadership.
Senator Massicotte: If I could follow up the question, the only thing I caution you on is Quebec is a good example. It’s easy for them to sign because they don’t have a project they want to pursue. As for the treaty per se, are you aware whether Saudi Arabia is onside? Is Iran onside? Is Russia onside? Has anyone signed that agreement? Even Norway — you can argue about that — but they have significant interest not to be onside. How about the major players? Have they signed up?
Ms. Tienhaara: No, the Saudi Arabias and so forth have not signed up. I would say that saying that Quebec has not given up anything is not accurate. There were projects being developed. The province is being sued by companies who wanted to develop projects. They have foregone developments, and they did so because they prioritized protection of the environment, whether it be banning extraction under the St. Lawrence to protect that environment or whether it be more climate focused.
It is not the case that major oil and gas producers are currently onside, but one would expect that it would take more efforts, and this is a very new initiative.
I don’t think the fact that they’re not onside yet means it’s not relevant. Not all the major coal producers, I’m sure, have joined the Beyond Coal campaign or the Powering Past Coal Alliance, but Canada has taken a leadership role there. I don’t think we could say that leadership is irrelevant just because Canada doesn’t have much coal to offer the world. It’s still demonstrating to the world an understanding that fossil fuels do need to be radically phased down, and that requires cuts in production and not just an emphasis on the demand side.
Senator Massicotte: Thank you.
The Chair: Mr. Andrews, do you want to share an opinion with us?
Mr. Andrews: I don’t have anything to add to that excellent answer.
The Chair: Thank you.
Senator Batters: Thanks to our witnesses for being here today. My question is to Ms. Tienhaara. During this meeting, only about 10 minutes ago or so, there was a new news article that came out in response to a brand-new report from the environment and climate change commissioner, Jerry DeMarco. This news article states in part:
The federal government isn’t measuring how effective its policies are in reducing greenhouse gas (GHG) emissions, says a report released Thursday by the commissioner of the environment and sustainable development.
Then it is says that Commissioner DeMarco said in his audit that Environment and Climate Change Canada’s failure to assess policies could lead to problems in Canada’s efforts to fight climate change:
Without comprehensive impact information, the federal government does not know whether it is using the right tools to sufficiently reduce emissions to meet its target, DeMarco said in a news release.
It goes on to say that the commissioner’s review found Environment and Climate Change Canada relies on a modelling approach to look at whether its broad efforts are working and, as a result, couldn’t say whether individual regulations were effective.
Then it says:
The report said it’s particularly troubling that the government doesn’t know how much efforts to reduce methane emissions are contributing to emissions reductions.
Another quote from Mr. DeMarco’s report states:
This is worrying because methane has 25 times the warming potential of carbon dioxide over a 100-year period.
I’m just wondering if you could react to that, please. I know it’s just brand new, but I’m sure that this is something that won’t be foreign to you.
Ms. Tienhaara: Thank you for the question. I will look forward to reading this report. I haven’t had an opportunity to do so.
On the point about methane, it is definitely the case that methane is a critical aspect of what we need to do on climate policy because it has a much larger immediate effect. It doesn’t stay in the atmosphere as long as carbon dioxide, but it does have a greater warming potential. That should be a part of increasing regulations on the fossil fuel industry, and this industry needs to make sure that their pledges to reduce methane are followed through. That needs to be stringent, and as you say, it’s very important that the government monitor that and ensure that that is being carried out and is being effective.
The only other thing I would say is, generally speaking, the research suggests that reliance on market-based mechanisms, which is much of what Canadian policy is focused on in terms of putting the price on carbon, is very central. It’s very difficult to show that carbon taxes and carbon pricing around the world have had any demonstrable effect, and much more emphasis needs to be placed on stricter regulations. This morning I mentioned that banning fossil fuel cars will be very important. I would argue that cuts to production are going to be very important. We know that there are policies to incentivize renewable energies and things like heat pumps, electric cars and so forth that are also effective.
We do have research showing that certain types of policies are effective globally. If the government is looking at that research and using it, they can be more confident.
I look forward to reading this report, and I think it’s important that we make sure that everything that we are putting into place is having the impact that we want it to have.
Senator Batters: Right. How concerned does it make you, though, that the commissioner has said the federal government isn’t measuring those types of policies? If we are not measuring them, how do you expect to convince Canadians this is the right way to go if a government that has placed such emphasis on this isn’t doing this level of measurement?
Ms. Tienhaara: I think it’s concerning, but I think my greater concern is that we don’t have high enough ambition in the first place to reduce emissions at a level that would be fair in terms of our historical contribution. I’m not in favour of not measuring what we’re doing, but I think even more important is that we are not doing enough and that we need to ramp up our ambition.
I think that there’s often the assumption that any regulation that we put in place has to have negative impacts on the economy because it’s beneficial for the environment and therefore we have to measure it to make sure that it’s doing what we intended. As was really expressed this morning, all of our policies should have more than just emissions reduction impacts. They should be focused on increasing equity and well-being and making a better life for Canadians, particularly Canadians that are lower income or that have suffered from environmental racism and other forms of discrimination.
If we are building policies that really are not just about emissions reductions, then measuring is important, but we should be looking not just at the impacts on GHG reductions. We should look at how this benefits communities and workers in a bigger package. That, obviously, is more difficult to measure, but that’s the approach that we should be taking.
The Chair: I have a question. Professor Tienhaara, you talk about some legal suits that are ongoing in the world, but you also mentioned some legal suits against Canada. What are the impacts of these climate-related suits that are appearing? What are the kinds of impacts that are not yet there but will come with time, and how big is that risk to Canada?
Mr. Andrews can also share if he has things to say on this subject. Thank you.
Ms. Tienhaara: Thank you very much for the question. With colleagues at Boston University last year, I did modelling that was published in the Journal of Science, and what we did was basically look at all of the oil and gas reserves around the world that already have some permits for exploration but don’t yet have a final investment decision, and these are assets that, basically, under the International Energy Agency’s Net Zero by 2050 pathway, should not be given permits for extraction. So these are oil and gas deposits that should not be exploited. Then we looked at how many of them are protected by these treaties, and we found that there was possibly $340 billion worth of risk to governments if they reject these projects and the investors take it to arbitration.
For Canada, the risks are not just in the oil and gas sector. There’s a wide variety, but it’s very difficult to predict because it’s not just about these reserves that we looked at in the science paper but also about infrastructure, like the marine terminal in Quebec, the coal power phase-out in Alberta. But any country that has a large fossil fuel industry is at quite high risk.
Now, we did radically reduce our risk by getting out of the NAFTA agreement, and the new Canada-U.S.-Mexico Agreement does not have an investor-state dispute settlement between Canadian and American investors, and our government basically said that was to protect public policy. However, we have joined other agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and that agreement doesn’t have the U.S. involved in it at the moment, but the U.K. joining means that companies based in the U.K., like Shell and BP, now will have access to that dispute settlement mechanism. It’s very easy to imagine cases where, for example, an LNG plant in British Columbia that’s very controversial is going to want to have a second phase, which would completely blow the province’s carbon budget. If that project is rejected, that second phase, that could end up in an ISDS dispute. The risks are quite significant.
Thinking globally, we have to be concerned with what’s happening in other countries and with the potential for Canadian companies to be suing governments, particularly in the global south. These countries don’t have the capacity to deal with these disputes, and they may decide not to go ahead with climate policies in order to avoid those disputes.
The Chair: Thank you.
Mr. Andrews: Nothing to add to that. Investor-state dispute mechanism is somewhat outside my expertise.
Senator McCallum: I wanted to go back to Mr. Andrews and the need for financial regulation to play a role in energy transition, especially looking at the exports. As 95% of Canada’s oil and gas are directed to the United States, what are the potential economic impacts on the industry and broader Canadian economy should the U.S. and other countries — because I know France has had electrification since 2019. They have their buses running. They have a lot of infrastructure in place to shift their economy that way. If other countries are going to shift more rapidly toward renewable energy sources, what are the current trends right now in global oil demand, and how are they expected to evolve in the future given the increasing focus on reducing carbon emissions? And what are the potential implications for the Canadian economy and employment if certain sources of oil production become less competitive and more regulated?
Mr. Andrews: I’ll start with your final question. The outlook is bleak for the Canadian oil and gas sector due to the long-term forecasting decline in demand for its products. There has been a lot of uncertainty generated by the war in Ukraine and a lot of turbulence in the markets, but what we’ve actually seen following the war in Ukraine is that many countries, particularly in Europe, are doubling down on their energy transition. Rather than creating demand and a market for Canadian oil and gas, what we’ve actually seen is the door slamming shut faster than it would have otherwise because of the war in Ukraine.
You make a good point about the U.S. Obviously, we’ve seen with the Inflation Reduction Act, the U.S. has really come to the party when it comes to climate change, and so we will see rapid reduction in demand, particularly as the U.S. electrifies its vehicles, its transport system, so demand for petroleum will obviously decline.
You gave other examples. You mentioned France. I could also say that Germany just recently announced that it’s going to be phasing out gas for domestic heating.
All across the board, global demand for oil and gas will decline. We can debate exactly how quickly it will, and the forecasts are always changing, but the long-term trend is certainly downwards, and Canada needs to prepare for that reality, and the financial system needs to accept that reality.
As of next year, Canadian financial institutions will have to disclose the risks that they face under a 1.5 degree scenario. This will reveal the Canadian financial system is uniquely at risk under this kind of transition scenario, and it had better get a plan in place to adjust, to adapt and to ensure that transition is just and managed and that we’re able to take advantage of the huge upside of the energy transition.
The Chair: Thank you so much. If there are no other questions? We have exhausted our questions. Thank you very much.
With that, just some information for you, dear colleagues. Next Thursday we are receiving the Commissioner of the Environment and Sustainable Development. So we’ll be glad to ask him more questions directly.
With that, thank you so much.
(The committee adjourned.)