THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Thursday, April 27, 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.
[English]
The Chair: My name is Rosa Galvez. I’m a senator from Quebec and the Chair of the Standing Senate Committee on Energy, the Environment and Natural Resources.
I would like to begin with a reminder. Before asking and answering questions, I would like to ask members and witnesses in the room to please refrain from leaning in too close to the microphone, or to remove your earpiece when doing so. This will avoid any sound feedback that could negatively impact the committee staff in the room.
I will now ask my fellow committee members to introduce themselves.
Senator Arnot: My name is David Arnot. I am a senator from Saskatchewan.
Senator Massicotte: Paul Massicotte, senator from Quebec.
[Translation]
Senator Audette: [Innu-Aimun spoken] Michèle Audette, senator from Quebec. [Innu-Aimun spoken]
[English]
Senator Sorensen: Karen Sorensen, senator from Alberta.
[Translation]
Senator Miville-Dechêne: Julie Miville-Dechêne, Inkerman senatorial division, Quebec.
Senator Verner: Josée Verner, Montarville senatorial division, Quebec.
The Chair: I wish to welcome all of you and the viewers across the country who are watching our proceedings.
Today, we are continuing our study of the Canadian oil and gas industry. For our first panel, we welcome in person three representatives of the South Saskatchewan Ready: Cal Martin, Mayor of the Town of Coronach; Craig Eger, Reeve of the Rural Municipality of Hart Butte; and Sean H. Wallace, Managing Director.
We also welcome Jerry V. DeMarco, Commissioner of the Environment and Sustainable Development, from the Office of the Auditor General of Canada. He is accompanied by two principals from his office, Kimberley Leach and James McKenzie.
Finally, Greg Poelzer, professor at the University of Saskatchewan, is joining us by video conference. Welcome and thank you for being with us.
Each group has five minutes to deliver their opening remarks. I understand that the three representatives from the South Saskatchewan Ready will be sharing their five minutes. We will then go to Mr. DeMarco, followed by Mr. Poelzer. Mr. Martin, you have the floor.
[English]
Cal Martin, Mayor, Town of Coronach: Good morning, Madam Chair and members of the committee. I am the Mayor of the Town of Coronach, a rural coal transition community located in southern Saskatchewan. I’m accompanied here today by the Reeve of the Rural Municipality, or RM, of Hart Butte, Mr. Craig Eger, and Sean Wallace, the Managing Director of South Saskatchewan Ready, which represents a partnership of nine rural communities in our area working together as we are directly affected by coal transition in our region.
I am here today to convey concerns about the interim Sustainable Jobs Plan, the sustainable jobs act, and the exclusion of “sustainable communities” from that legislation leading up to the 2030 federal coal transition mandate.
In the case of our community, with coal transition and the closure of that, we will lose up to 71% of our population, 71% of the jobs and about 90% of the household incomes in our community. This means our town then suffers sustainability issues as the drastically reduced tax base will make it almost impossible to maintain our infrastructure and things like that. It means possible closures of local businesses like our grocery stores and pharmacies, our churches, and then, with the declining population, our school and the rural health programs that we have. That means our community members will be forced to commute farther and farther for those services.
Although the federal government has provided infrastructure for coal transition communities, the funding is a current benefit only because, in 2030, the infrastructure that we’ve been granted and we’ve put in — just this year, even right now, we are replacing major water and sewer pipelines and lines that were installed in the 1960s. These are the very first water and sewer projects in our community. Will the community be able to afford to maintain these things, which we desperately need now due to failures and things like that? With the roughly 29% of the population remaining to shoulder 100% of those costs, we see some serious concerns.
I will share my time now with Mr. Eger.
Craig Eger, Reeve, Rural Municipality of Hart Butte: Thank you, Mayor Martin.
Good morning, Madam Chair. My name is Craig Eger, Reeve of the RM of Hart Butte, a rural municipality that borders the town of Coronach where Westmoreland’s Poplar River coal mine and SaskPower generation plant are located.
Our connection to the town of Coronach is important. The town is a regional business and service hub where those of us living in surrounding rural municipalities can access goods and services. The closure of the mine and power plant will result in the loss of our tax base and population as well. A number of the farmers and farm workers in my region rely on the mine and the power plant to supplement incomes during the non-growing season. This employment is so important due to the expanding costs of farm inputs affected by carbon pricing, inflation and higher wages, all of which affect the sustainability of the family farms.
Couple this with the impending lack of access to local goods and services, and farmers will have to spend more for their operations, which affect the viability of the family farm.
I would like to hand it over to Sean Wallace, please.
Sean H. Wallace, Managing Director, South Saskatchewan Ready: Thank you, reeve.
Good morning, Madam Chair. As you’ve heard, we have communities at risk of becoming unsustainable. We have over 100 years of experience in knowing the socio-economic effects of what happens when industries are shuttered. These effects are compounded when it comes to rural jurisdictions. Historically, once a rural community loses its industry and labour force, the majority of communities never recover, and this is a fact.
For perspective, there are approximately 500 direct jobs and about 600 indirect jobs that support the mining industry and energy sectors to provide for the sustainability of nine communities and 3,000 people in my region.
Under the previous moniker of “just transition,” 50% of the mantra was communities, as in no worker or community left behind. Under the new rebrand of the Sustainable Jobs Plan, communities have been de-prioritized as evidenced by the lack of support going forward for coal transition communities. To note, funds devoted to economic diversification ended one month ago — a full seven years before the 2030 mandate — while funding and support for unionized workers increased for the foreseeable future.
In March of this year, the committee heard from Professors Benjamin Sovacool and Angela Carter. Throughout their remarks, they mentioned the risks of non-equity and exclusion of communities and at-risk populations. Their assessments were spot-on in that other jurisdictions outside of Canada have been very thoughtful about sustainable communities. Our federal government needs to listen and act with expediency to ensure they’re creating top-up level policy to ensure our rural communities remain whole and prosperous through this transition.
Also, the federal government has allocated approximately $1.3 billion for coal-transition-related activities in other countries but only $185 million for Canadian coal-transition activities.
There’s also the issue of the rural Canadian coal transition communities being excluded from the green economy. We’ve seen many billions being spent by the federal government in the name of climate change and green jobs in non-coal-transition jurisdictions. This must also change in order to ensure sustainable communities through thoughtful economic policy.
In closing, we recommend that the impending sustainable jobs act be aptly named the sustainable jobs and communities act to ensure communities can partake in the green economy through legislation like workers. On behalf of the mayor and reeve, thank you for listening, and we invite any questions you may have.
The Chair: Thank you.
[Translation]
Jerry V. DeMarco, Commissioner of the Environment and Sustainable Development, Office of the Auditor General of Canada: Thank you, Madam Chair. We are happy to appear before your committee as part of its study of climate change and the Canadian oil and gas industry.
I would like first to acknowledge that this hearing is taking place on the traditional unceded territory of the Algonquin Anishinaabe people.
With me today are Kimberley Leach and James McKenzie, who were responsible for a number of our audit reports on this subject. The Office of the Auditor General of Canada has published a number of reports about climate change in recent years. To allow more time for questions, I will give an overview of our four of most recent audit reports and our 2021 retrospective on lessons learned from Canada’s record on climate change since 1990.
Our retrospective sets out eight lessons learned from Canada’s action and inaction on the enduring climate crisis, including Canada’s economic dependence on emission-intensive sectors, such as the oil and gas sector.
Oil and gas production accounts for the largest share of Canada’s greenhouse gas emissions per economic sector. Growing oil and gas production remains a barrier to meeting domestic and international climate targets.
One of Canada’s commitments is to move away from fossil fuel dependence to a low-carbon economy that reaches net-zero emissions by 2050. In section 2 of our report, we identified several opportunities to address the challenges of such a transition.
In our 2022 audit of a just transition to a low-carbon economy, we found that as the government shifted its focus to low-carbon alternatives, it was not prepared to provide the support needed by the more than 50 communities and 170,000 workers who are directly employed in the fossil fuel sector.
We also found that, as the lead department, Natural Resources Canada has done very little to deliver just-transition legislation. Since our audit, the department has announced an interim sustainable jobs plan, but actual legislation has yet to be introduced.
[English]
I will now turn to our 2022 audit of carbon pricing. Putting a price on carbon pollution drives changes in consumer and producer behaviour, which in turn reduce overall greenhouse gas emissions. Effective carbon pricing is therefore essential if Canada is to succeed in significantly reducing its greenhouse gas emissions.
We found that the federal requirements for large emitters continued to undermine the “polluter pays” principle by allowing weaker provincial pricing systems in some parts of the country. In addition, Indigenous communities and other groups in society remained disproportionately affected by carbon pricing systems.
Our 2021 audit of the Emissions Reduction Fund for the oil and gas sector examined measures created in response to the COVID-19 pandemic to reduce emissions while maintaining employment and encouraging investments in oil and gas companies.
We found that the program was poorly designed because it did not link funding to net emissions reductions from conventional onshore oil and gas operations. For example, for 27 of the 40 projects that we examined, companies stated in their applications that the funding would allow them to increase their production levels. When production increases, so do the related emissions, yet these increases were not reflected in Natural Resources Canada’s — NRCan — projections.
Lastly, as you may be aware, our audit of greenhouse gas regulations was tabled in Parliament last week. We found that Environment and Climate Change Canada did not know the extent to which the greenhouse gas regulations we examined contributed to meeting Canada’s overall emissions reduction target. This was because the department’s approach to measuring emissions did not attribute results to specific regulations. Regulations are an important element of achieving Canada’s emissions reduction target; however, 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.
Despite repeated government commitments to decrease emissions, Canada’s emissions increased by approximately 14% from 1990 to 2021. Since the United Nations Framework Convention on Climate Change was signed in 1992, Canada has been the worst performer of all G7 nations. Canada has not met a single emissions reduction target in the past three decades, while it has continued to increase oil and gas production. The climate change clock is ticking, and our window of opportunity to prevent catastrophic climate change is quickly closing.
Madam Chair, we would be pleased to answer any questions the committee may have. Thank you.
The Chair: Thank you.
Greg Poelzer, Professor, University of Saskatchewan, as an individual: I wanted to thank the Senate and this committee for the opportunity to share some of my thoughts and experience with regard to energy transition, particularly as it relates to Indigenous, northern and remote communities. I would suggest Canada has a once-in-a-generation opportunity to achieve great steps towards economic reconciliation through strategic investments in this area.
If we want to achieve a “just transition” and not “just a transition,” I think it’s really important that we consider all the opportunities that lay before us in this country to achieve economic reconciliation through the energy sector.
When we look at this globally and in my experience working in Alaska, Norway and Sweden to help provide some insight into what Canada could possibly do, there are four areas, the first of which is utility scale and electricity development as we move towards a net-zero future. We’ve seen some important examples in Canada itself — the Wataynikaneyap transmission line in northern Ontario, the biomass plant in Meadow Lake Tribal Council in northern Saskatchewan — but on the cutting edge, such as hydrogen, we see leaps and bounds where the European Union, and Norway in particular, has made progress in remote communities in the High Arctic, and they’ll be building, for example, in the community of Berlevåg, a 100-megawatt green energy hydrogen facility.
The second area is community scale, and we’re already seeing some important steps in Canada, including the territories, such as Old Crow and Colville Lake with battery and solar, and these are going to be very important to achieve energy security and more affordable pricing in Indigenous and northern communities.
The third area is that we have to be mindful that we are in a transition. The green transition is a transition, and we’re going to require transition infrastructure, including an expansion of oil and gas pipelines. Not only is this more user-friendly on the environment in terms of carbon emissions, but also, given the geopolitical realities and changes such as the war in Ukraine, it’s going to be very important that OECD countries, where possible, supply instead of other countries that are, in fact, adversaries of Canada. And there we have consistently seen huge interest by First Nations, Métis and Inuit communities in participation in this transition infrastructure.
The fourth area is in vital and critical minerals, which our mining is going to increase as we move towards a net-zero future. There, again, there are opportunities for equity ownership by Indigenous communities in this future economy towards a greener future.
Why does this all matter? First, it’s an important pathway to achieve economic reconciliation that, frankly, is once in a generation. Second, such investments could help enhance energy security in northern, Indigenous, rural and remote communities. Third, it can strengthen business development, particularly in building the energy ecosystem in new areas — particularly things like biomass, in which Canada is weak compared to countries like Finland and Sweden. Fourth, we have an opportunity to build a new creative class in the energy sector that is Indigenous-led.
This leads to a final point. We have an enormous opportunity ahead of us where we could have Indigenous, northern and rural communities leading a global export sector in green energy and its deployment. We know globally there’s roughly 1 billion people who do not currently have electricity services and/or are weakly tied to weak grids.
The opportunity for us to take like-minded situations and export that in other places around the world — as we’re seeing, for example, in the state of Alaska quite successfully — is an opportunity for Canada and, through that, achieving greater economic reconciliation through these kinds of energy exports.
Finally, what we need to consider, I suggest, are mechanisms including, among many others, access to fiscal capital for Indigenous communities to participate in the energy sector more broadly, whether it’s pipelines, whether it’s green energy, utility scale, community scale or in the mineral sector.
When we look at examples around the world, and I’ll come to Alaska in particular, this has been ongoing for over 50 years. This happened with the creation of the Alaska Village Electric Cooperative, which has over 50 native Alaskan communities running and operating their own utilities since 1967 — 50 years ago.
We don’t have a single Indigenous-owned generation and service delivery utility in Canada as of yet. This was done through the Rural Electrification Administration, a long‑standing, successful example.
The state of Alaska under Governor Sarah Palin in 2008 established The Renewable Energy Fund, capitalizing over 100 projects in Alaska. Thank you.
The Chair: Thank you.
Senator Arnot: Thank you to all the witnesses.
I have one question for South Saskatchewan Ready and one for Dr. Poelzer.
I know South Saskatchewan Ready participated in a project by the Government of Canada which created the Final Report by the Task Force on Just Transition for Canadian Coal Power Workers and Communities. This is online.
I believe one of the key recommendations in this report, which was chaired by Senator Yussuff, was that communities need to be given agency in order to participate in this transition. I wonder if you agree with the recommendations that Senator Yussuff and his group did with your participation. I need that on the record.
Mr. Wallace: At the time, Senator Yussuff, who was then the chair of that committee, did an excellent job on the worker portion. You could see by the makeup of the committee, as it was heavy on labour and very light on community. Therefore, I don’t think they had access to the information that would allow communities to remain whole through this transition. It was an absolutely great report. We’ve had full access to those folks.
We also had full access with officials at NRCan and PrairiesCan — Prairies Economic Development Canada — who have been fantastic but, unfortunately, are limited by budget because there is no more budget for coal transition going forward.
Senator Arnot: To follow up, I know that you — the rural municipality, the Town of Coronach and other communities — have, of your own volition and your own innervation, come up with a model that you’d like to implement. I know the Government of Saskatchewan has given you $4 million to initiate this act, and you need $7 million to complete it. I would like you to talk about that, because I understand it’s about taking brown coal and creating green energy sources from it, for instance, hydrogen and other rare-earth minerals. That is an important thing too.
Mr. Wallace: Thank you for the question.
The project is basically science. We are creating a demonstration plant to manufacture lignite. Lignite is a very interesting commodity. We have a Nobel Peace Prize-winning scientist working on our team. One day he said, “I think we’ve been using this the wrong way the whole time.” It’s actually more valuable than burning it, the way that we want to use it.
We’d be manufacturing things like hydrogen, biochar, graphite and graphene for the computer industry. It’s a very valuable commodity.
If we do get support from the federal government, this will maintain all the jobs at the mine and most of the jobs at the plant, which means it will keep our region whole.
Economic development at its base is you concentrate on your strengths and your resources, which we did because that’s what we have. We have mining and energy production. It made sense to concentrate on the base. We have a great project.
Everyone is at the table, all the stakeholders, except for the federal government. Unfortunately, we have met with the federal government on numerous occasions, but we don’t seem to be getting any traction. We are hoping that they’ll see the value of this project and keep our rural communities alive through this transition.
Senator Arnot: Professor Poelzer, you’ve spent your whole career working on policy issues with First Nations and these energy issues.
I’d like you to amplify the idea of giving loan guarantees by the federal government to First Nations communities or corporations so they can inject real dollars into energy partnerships and reap the benefits of that.
Secondly, I’d like you to talk about the exemplar model that you’ve identified in Alaska and how that actually works. Do you believe Canada has the courage to take a lead and make Canada an exemplar model, working with Indigenous peoples in this country on reconciliation and those kinds of examples? Do we have the courage to actually follow what is being done in some other jurisdictions to ensure that First Nations take their rightful place in this country?
Mr. Poelzer: Thank you very much, senator.
On the first point, in terms of the capital opportunity, we’re not setting a precedent in Canada if we are to do it, but it’s absolutely essential.
There was a recognition in Alaska that many of these communities simply didn’t have the fiscal resources to participate, even providing local energy services. It was that foresight in Alaska, first with the federal government with the Rural Electrification Administration, which has transformed but still exists; it happened in the continental U.S., it happened in rural Alaska. Electrification would never have happened without it.
This transition now from diesel to greener energy to reduce diesel costs — again, this particular program was capitalized through the dividend fund with their sovereign wealth fund in the State of Alaska. They capitalized at $50 million a year. It was renewed and is continuing to run.
I really appreciated the conversation today that put the emphasis on community. Communities are not going anywhere. If the goal is to have sustainable communities, wherever they are — whether in southern Saskatchewan or the Northwest Territories, and sustainable Indigenous communities in this case — we need to find those mechanisms.
In Alaska, it was actually grants. It was everything from feasibility studies to actual steel in the ground. Communities typically would come up with approximately 20% of their own funds, and 80% would be by grants. As long as they reached their objectives and were on their timelines, they didn’t have to repay those grants.
Of course, now those dollars circulate instead of being wasted on high imports of diesel and can be used in other community economic activities. That model not only has proven successful but, in fact, the State of Alaska renewed it, even under tough fiscal times because of the positive impact for Indigenous communities.
To answer your final question about Canada, I hope we do have the courage to follow.
Senator Sorensen: I’m going to direct my questions to the municipal witnesses. I have much respect for the service that you provide to your communities, and certainly a great appreciation for the challenges that municipalities face, constantly on bended knee to whatever your province is, and the Government of Canada.
I do want to remind the others in this room, and anyone watching, that municipalities are the most grassroots level of government. These elected officials directly serve residents every single day. They also directly see the impacts of decisions that are made at other levels of government and rarely have the means to respond in an appropriate way through their funding, which is the tax base. As you know, I’m a fan of mayors and municipal politicians.
I’m going to direct my questions, and I’ll ask them at the same time. One is to Mayor Martin, which is just a recap of something you said in your comments, and my other is for Mr. Wallace.
Mayor Martin, you made a comment about some funding that had been provided and what you are in the process of doing with that funding, but if you could just repeat that section for me. I’m going to continue and then I’ll stop talking.
Mr. Wallace, because I’m a bit of a nerd, I’m curious to know if South Saskatchewan Ready is a volunteer or mandated membership as a regional partnership, as I see it. I also want to thank Reeve Eger and Mayor Martin for being here together. That is also something that municipalities are doing very well: working together.
I have a higher-level question for Mr. Wallace. When you made reference to thoughtful economic sustainability at the highest level when we look at all areas of Canada that do need to go through “just transition,” what does that look like for regions in Canada? What is “thoughtful economic sustainability” as we go through significant transitions in many provinces?
I’ll just start with Mayor Martin commenting on those numbers again for me.
Mr. Martin: It was grants through PrairiesCan I guess for infrastructure replacement programs. Many communities in our area and our province have capitalized on this. For us, as a small community of 750 people, in order to replace this major water and sewer infrastructure, it would be physically impossible to put an assessment on every ratepayer in the community without this funding, which we are very grateful for.
If things go without any sustainability, my community goes to fewer than 200 people; being a realist, roll up the sidewalks. The community could not afford to run this stuff. This infrastructure grant is close to $7 million. We received grants earlier from the same group to redo our water treatment plant. Our water treatment plant was installed in the 1980s, designed for a community because we were going to grow, as we were told by government. So we are set for a community of close to triple the size we are. Our water treatment plant idles. It costs money to maintain this. In the end, where does this money come from? We’re talking about — sorry, I’m just going to take a little bit more time.
Senator Sorensen: I understand. Money for infrastructure does not provide money for operation. The operation is paid for by the taxpayer.
Mr. Martin: Excuse me. I’m emotional.
Senator Sorensen: If you want to come back, Mayor Martin, we’ll bring you back. Yes, Mr. Wallace.
Mr. Wallace: The partnership is a volunteer partnership, and I don’t think every member on our partnership is an elected official. I don’t think the elected officials really understood how big of a job this was, so they actually spent a lot of their free time supporting this regional group. Without their help, we wouldn’t be where we’re at currently. I think we have done a great job so far.
In terms of thoughtful policy, you just have to look at every other “just transition” jurisdiction in the world to see what thoughtful, sustainable economic policies are. For instance, our neighbours to the south of us, under the new Inflation Reduction Act, put $10 billion toward green energy projects; $4 billion of that $10 billion was dedicated specifically for coal-transition communities to attract investment.
We recommended this over a year and a half or two years ago to the federal government, and I’m not sure whatever happened to it, but we’ve made many other recommendations on sustainability policy.
That would be funding diversification activities going forward up until 2030, of course. These are all economic-development-based activities. So that’s investment attraction and simple things like making sure your community is investment-ready.
The funding for my position was provided through PrairiesCan. That ended March 31, 2023, so about a month ago. SaskPower is actually funding my position currently because they saw the value in the work we’re doing.
We’re going to be able to carry on for another year, but all the work that I’m doing right now is going to be meaningless in a year from now because statistics change; investment environments change. So who is going to update that? In our region we have absolutely no capacity in terms of experience and skill in economic development. I’ve been doing this for 25 years as a senior public servant. We don’t have that skill set currently in my region.
I actually came from Alberta — or actually I was in Saskatchewan but I came back to take this position, because I think the mayor could probably tell you they couldn’t find anyone who would move to such a rural jurisdiction to actually be there, because if you’re going to do the job properly, you have to have boots on the ground.
Senator Sorensen: Thank you for your leadership. I know bringing people together often needs a facilitator, so thank you for that.
Mr. Martin: I would like to apologize for a few minutes ago.
Senator Sorensen: No apology needed.
The Chair: Please, no apology is necessary.
Mr. Martin: With our project, we sustain our own community. We’re not looking for handouts but a hand up.
Senator Sorensen: Also, congratulations on creating a solution — not just coming with a problem but trying to work towards a solution.
Mr. Martin: When you have a Nobel Prize-winning scientist and other guys who say this works, we are not here with a dream. This is a reality.
The Chair: Thank you very much.
Senator Miville-Dechêne: First, I want to say how moved I am by what’s happening in your municipalities, and I realize there is no easy solution because there is a transition coming. How do you do it in a small area where coal, in this case, is so important for all of the economy? I understand you are all working towards that and I’m impressed by all of you.
[Translation]
I have a more technical question for Mr. DeMarco. I would like to hear about the drama unfolding in small towns. You cannot turn a blind eye to it, even though I know your focus is more on government issues.
You point out that Canada does not know the impact of its greenhouse gas reduction regulations. In your opinion, is that because the impact is not measured properly or because of insufficient indicators? Is it because the regulations are not intended to produce measurable reductions, but simply to encourage companies to move in that direction?
In your opinion, what kind of regulations would be needed to achieve our greenhouse gas reduction objectives in a more targeted way? It is a broad topic, but I would like to hear your thoughts on it because we cannot achieve anything without the right kind of regulations.
Mr. DeMarco: Thank you for the question. First, the price of carbon and regulations are essential parts of the government’s overall plan to reduce emissions. The problem that our audit identified last week relates to some aspects of your question.
First of all, we have little information from the government on the exact impact of each regulation. There is a broad plan with dozens of policies and regulations. The focus is on awareness, the price of carbon and subsidies. The plan’s expected results are a reduction in the order of 40% to 45% by 2030 and carbon neutrality by 2050. If we do not analyze the effects of each policy though, or of each regulation in this case, we will not know if we are on the right path.
We can reach our destination, as we have done a number of times over the past thirty years, but we have not met our targets. Each time, we had a plan that would enable us to meet the target, but once we got to the destination, the target had not been met. So we recommend that the federal government do its homework, not only to estimate the effect of each regulation, but also to provide ongoing analysis during implementation to see if it will be successful.
Otherwise, if we need other policies, or have to amend the regulations or draft new regulations, we see estimates when the regulations are put forward, but we do not see the work involved in their implementation to determine whether they are working as expected.
Senator Miville-Dechêne: Is it possible to divide reality that way and to know the exact effect of each regulation when there are so many of them? I am asking because in the social sciences, that is not entirely possible; we recognize that a number of factors may contribute to a result. Is what you are asking for possible?
Mr. DeMarco: It is possible, in general terms. It would not be exact, but it is better than doing nothing at all. There are interactions between the policies, especially in Canada, because there are a lot of policies, interactions or connections.
Senator Miville-Dechêne: Can you tell us briefly about the drama your neighbours have been going through, which after all is the result of everything you analyze?
Mr. DeMarco: We produce reports, we see a lot of words and parts of reports, but today we are seeing in real time the effects of a transition that is not just. In our report, we talk about the workers, the communities and the municipalities. It is essential to look at the real impact, and we have seen that today.
Senator Verner: Thank you all for your powerful testimony this morning.
In the same vein, my question is for Mr. DeMarco. In your April 2022 report on the just transition, you shared your concerns about the lack of preparation and the government’s slow reaction to support more than 50 communities and 170,000 workers who depend on the fossil fuel sector.
A year later, in February 2023, the government presented a provisional sustainable jobs plan, which includes 10 initiatives to be implemented by 2025.
Yet 2025 is less than two years from now. In view of this plan, are you less concerned today than you were in April 2023 about the government’s real level of commitment? And, in your opinion, is the government’s deadline for implementation by 2025 realistic?
Mr. DeMarco: Thank you for the question. Am I worried? As with many of our files, I would be less worried if I had results. There have been too many words and too many plans over the past 30 years to be optimistic with words alone.
So I will be less worried once there are results in this area and others.
Is it possible to catch up? Yes, if the will is there, we can achieve results. I am disappointed. This is not a new issue; the concept of just transition appeared in the first pages of the Paris Agreement, which was now eight years ago. The Paris Agreement was in 2015. The federal government has had a lot of time to be proactive and plan and create a just transition. That has not happened, as we have seen, but it can be proactive for the communities that will soon be affected, in Saskatchewan and the Atlantic provinces.
Senator Verner: One of the initiatives in the interim sustainable jobs plan published in February 2023 is designed to improve the collection and analysis of labour market data for workers in the fossil fuel sector. This is an important issue because there seems to have been some confusion regarding changes in the market in this sector since 2023.
The government’s official message is that the number of jobs will decrease by 2030, but more recently the Minister of Labour told the Senate that more and not fewer workers will be needed in that sector during that period.
Is there anything in your April 2022 audit that would help the committee better understand the two different messages the government is sending about the just transition?
Mr. DeMarco: We have not done a follow-up as of yet, because our report was just released in 2022. The department and the minister could answer that question though.
I can say that if they take significant action on our recommendations, that will be very helpful. I am pleased that they accepted our recommendations. As I said earlier though, the actions and results are what counts. All I can say for now is that we have not followed up on any progress in this regard since the spring of 2022.
Senator Verner: Thank you.
[English]
Senator Batters: Thank you very much. I really particularly appreciate the witnesses from Saskatchewan for being here today. I’m from Saskatchewan. I have lived all my life in Saskatchewan, and my late husband was actually from Estevan. I lived there a few years after law school. I am certainly keenly aware of the challenging circumstances of being so dependent on resource revenue.
I’m really glad that today we’ve had a chance to hear directly from people who are actually affected by what I’ve long been calling the “unjust transition” that this government is employing, because they need to see this. This is stark reality here, and thank you for bringing it forward so forcefully.
I hope more people will see this, and I hope not only Saskatchewan media but national media will cover this story.
So to the three Saskatchewan witnesses, Mr. Martin, Mr. Eger and Mr. Wallace, I have a few questions for you. Maybe each of you could take one of them.
My first question is: What do you think the federal government can do to ensure that rural communities remain prosperous throughout this unjust transition?
Mr. Wallace: Again, through thoughtful policy development, rural communities are completely different than urban communities. We have many more challenges. For instance, if you live within 60 minutes of a Tim Hortons, you’re not rural. We have a lot of challenges that way. We actually have a very skilled and experienced workforce, which we’re in jeopardy of losing. The federal government needs to focus on economic activities around bringing investment to the region.
We see a $13 billion investment in Volkswagen in a non-coal-transition community. Why aren’t they putting funding into bringing investments into coal transition communities like every other coal transition community in the world has done? That’s a very easy one. It’s not reinventing anything. We have to look to all the different jurisdictions all over the world that are going through coal transition. Poland has a great program. Germany is the gold standard. The U.K. has done very well, and the U.S., with their Inflation Reduction Act, is targeting tax credits for companies that move to coal transition regions.
These are very simple things that the federal government can do. They can happen quite quickly. We’ve been going through this since 2016. There is a lot of uncertainty. I know the mayor is very emotional about this because this is his community. We’re on the ground. We see these people every day. They’re wondering how they’re going to sell their houses. Kids in schools are saying, “Oh, am I going to have to leave? I am going to lose my friends.” It’s really sad, what’s going on.
Senator Batters: Absolutely. It’s heartbreaking.
To Mayor Martin, thank you for expressing that emotion here today because it’s through something like that that people will actually realize what’s going on.
What would you like to see, Mayor Martin, or what do you think that the federal government does not understand? What would you like to tell them in your testimony today about the ability of your rural community to participate in a green economy?
Mr. Martin: That, and when you look at the proposed legislation that says to help workers move to new jobs, that’s looked at through a lens of whoever wrote the legislation of larger communities. For example, I’m not picking on southern Ontario, but take a compass and put a 100-mile radius around your house and I can find you a dozen jobs within that 100-mile radius. You put a 100-mile radius around us, and it says bull crap. I’m sorry.
Senator Batters: It’s okay.
Mr. Martin: You’re moving workers in our community; put an “R” and an “E” in front.
Senator Batters: Absolutely. We see that sometimes when we see the federal government come up with legislation and says that everything is rural that’s outside Regina and Saskatoon in Saskatchewan. I mean, get real. That’s just ridiculous.
Mr. Martin: I’m sorry.
Senator Batters: No, you are totally right.
Mr. Martin: Come out and walk a mile in our shoes.
Senator Batters: Yes, absolutely.
Mr. Martin: Come on out and see what we’re up against every day.
Senator Batters: That’s right.
Mr. Eger, we will eventually prepare a report on this issue and make recommendations to the federal government.
If you had one key recommendation on behalf of rural communities that we should make to the government, what would it be?
Mr. Eger: One? I mean, I guess listen to the people who are out there. Like Mayor Martin said, we have to deal with those people every day. They are our families, our friends and people we have known our whole lives, in my case.
As I said, there are people in my community who are paying two mortgages because they can’t sell their house in Coronach and they had to take a job because they’re scared of being stuck in Coronach and not being able to get out. If they’re a SaskPower person, they’re trying to stay. They don’t have enough years in to retire. It is pretty tough when you are paying two mortgages and now you’ve moved to Saskatoon.
People younger than me are moving out, taking their kids. We’re already losing about 7% to 10% a year because of people trying to get out. They are scared. We are scared.
Senator Batters: Absolutely. I come from a generation where among people my age with whom I went to university and law school, my husband and I were rarities in that we actually stayed in Saskatchewan, because that was at a time when we had an NDP government and everyone our age was leaving Saskatchewan. We were rarities. Then it rejuvenated and things were getting better. A lot of people were staying. Maybe you saw a time where there was some population increase in your communities. We have to change something, because that cannot happen.
In case anyone thinks this is a rarity, what you’re explaining here, no, this is very much an illustrative situation, but it is certainly not a rarity for the rural communities that I am familiar with in Saskatchewan and other places in Canada.
Thank you.
Senator McCallum: Thank you for your presentations and for all the effort that you put into the work that you do.
I wanted to also comment about First Nations being the grassroots that bear the most inequity in this country, despite the treaties that we have and all the reports that have been done, including our committees, and yet we haven’t made progress.
When you look at transition, you say transition is here. First Nations have not even been treated equitably and they’re transitioning into more inequity. They don’t have the ability to dig, something to grasp to move forward. There are some, but the majority aren’t.
We’re looking at transitioning from one inequity, through inequity, into the next inequity. How can there be talk about “just transition” when it was never just for First Nations, especially when you look at all the destruction of the lands, the environmental racism that exists there and the morbidity and mortality of the lives that industry has wrought?
This is a huge issue that has never been addressed with anyone. It keeps coming up in the reports. You look at the report that you just had where you said Canada continues to invest heavily in fossil fuel infrastructure while trying to make progress. There is a fundamental incoherence.
When we look at the polluter pays principle through the weaker provincial pricing system, Indigenous communities and other groups remain disproportionately affected by our carbon pricing system; that program was poorly designed because it didn’t link funding to net emissions. When we continue to see that, who has the sanctioning power over the federal government to ensure that they don’t just put the words in there without the actions?
The Commissioner of the Environment and Sustainable Development has noted that the Senate has a history of representing the under-represented and that committees such as this one can look at long-term issues like climate change, biodiversity loss and reconciliation. The commissioner also stated that short-term expediencies tend to get in the way of effective action on climate and have resulted in policy incoherence.
How can the government ensure that the transition to a low‑carbon future for the oil and gas sector is just and equitable for all Canadians, including Indigenous communities, the municipalities and all communities affected by this sector?
Do you want to respond?
Mr. DeMarco: Yes. I would be happy to address that question, in part.
First, I’d like to start off by agreeing with you that implicit in the idea of a just transition is that the starting point is already just. What you’re saying, and I’m agreeing with you, is that with respect to Canada’s history with Indigenous peoples, we don’t have a just starting point to go to a just transition. We have much work to do to make the starting point — the present — a just one, let alone the transition that follows.
Our office has termed the various different issues that have arisen in our reports, both from the commissioner and the Auditor General, as long-standing problems with respect to issues around reconciliation, most recently, for example, with the Auditor General’s report on drinking water access and safe drinking water on First Nations reserves. There are long-standing issues that need to be addressed.
With respect to this transition — the energy and economic transition that gives rise to the need for a just transition for communities, workers and Indigenous communities — there are opportunities. Much of the focus is on softening the blow associated with the transition but, of course, there are many opportunities associated with the transition. Some of our witnesses talked about it at the beginning of the hour in terms of new opportunities around critical minerals and renewable energy, for example.
There is an opportunity to build forward as opposed to just continuing on our current path. One of the things — and you alluded to it during one of my recent appearances before this committee — is for government to take a much longer-term view and a more inclusive view of things. This is really the heart of our lesson number 8 in our Lessons Learned report from 2021. Governments are often focused on short-term deliverables or political expediency, and by virtue of that, they are discounting the long-term futures of communities, of Indigenous communities, of workers and so on. That just makes things worse in the future. It makes it even harder to deal with these issues, like a just transition, if all of the focus is on the short term. Overcoming the biases toward short-term thinking and short-term solutions would be one part of it.
Your question is much larger than that in terms of the concept of a just transition and the concept of a genuine reconciliation between Indigenous and non-Indigenous peoples in Canada. But I would say a longer-term view, and that’s not just about environmental issues but a socio and economic would go a long way to addressing some of the issues we’ve spoken about.
The Chair: Professor Poelzer, if you have something else to add, please send it in written form because we’ve exceeded our time. Please send your comments on this particular question of Senator McCallum in written form to the clerk of the committee. Thank you so much.
Senator Arnot: Chair, I have a question. We have a very compelling panel in front of us here today, and much information from Professor Poelzer hasn’t been explored yet. Yet, it’s the same group, the same witnesses more or less, for the next panel, so why can’t we just extend this to make sure that Senator Audette and Senator Massicotte are heard and there’s a full answer to Senator McCallum’s question?
The Chair: We’re going to exceed the time for sure.
Senator Arnot: Senator McCallum was in the process of asking Professor Poelzer to answer her question.
Senator Sorensen: Can we just keep all the witnesses here for the next hour?
The Chair: The subjects are different, but let’s go for another 15 minutes.
Professor Poelzer, can you complete your answer, very succinctly, please?
Mr. Poelzer: Absolutely. I agree with Senator McCallum’s general observation. We have an opportunity in this: There’s going to be a massive investment in the electricity network, both in transmission and generation. That can be achieved by carve‑outs in terms of addressing those kinds of inequities. We’re not even close to scratching the surface of what is actually possible.
One is carve-outs in terms of a percentage of new greenfield renewable energy in which Indigenous peoples actually are owners and have an equity stake, in whole ideally and sometimes in part.
Second, we can capitalize. The big advantage of capitalizing, especially electricity projects, is that they’re bankable. Unlike commodities, which bounce up and down with high volatility, electricity markets are very stable. They provide long-term, sustainable sharing of resources through energy production for First Nations people and other Indigenous peoples in this country.
When you look at where Indigenous peoples are in this country, why make this kind of investment? If we look at typical OECD countries having a growth rate of about 3%, we consider ourselves doing well. TD Waterhouse had done a study over a decade, and Indigenous businesses have been growing at 8.2%. Only India and China as countries can rival that kind of growth.
The entrepreneurial spirit in Indigenous Canada is enormous. Business start-ups, the key marker of entrepreneurship, are 500% greater in Indigenous Canada than in mainstream Canada. It’s the most entrepreneurial class in Canada. These kinds of investments will have multiple effects that are simply enormous.
In terms of addressing inequities, again, this is a once-in-a-lifetime opportunity, a once-in-a-generation opportunity, to make a significant dent in the inequalities and, very positively, build partnerships together with First Nations peoples in this country.
The Chair: Thank you so much.
Senator Massicotte: We have an expert here. Dr. Poelzer is obviously very knowledgeable, so I would ask him this question: I look at your population issue, which is that it’s shrinking, and that is obviously something we’ve seen in the history of Canada. But how do you get there? That is the real question. Dr. Poelzer, how would you respond to this issue of a small town being crippled by its needs? It’s obviously very difficult, personally, but you’ve probably seen it many times. You’ve seen it in other countries with significant growth. How would you resolve that issue? What would you do?
Mr. Poelzer: You can call them “carbon-captive communities.” First is long-term planning. Second would be these kinds of capital investments in green energy or where our future energy production is going.
I give by example Berlevåg in northern Norway. It is a community that was in decline, a small community of just under 1,000 people, and there’s a weak grid in that northern Norwegian grid. But they made a choice to make a strategic investment to leverage new greenfield wind production in excess of 200 megawatts. They chose to invest by building a green hydrogen facility in Berlevåg that will be able to supply transportation of future green hydrogen — ammonia-based — energy needs throughout the northern region of Norway. That will support other sectors like fisheries and so on.
We could replicate those kinds of very bold initiatives here in Canada, in southern Saskatchewan and so on, with that kind of foresight. Again, it’s been done elsewhere in very similar kinds of conditions.
A secondary example is Cordova, Alaska, a fly-in community with boat access only and no road. The local community partnered with the First Nation to expand a small hydro facility, producing more energy. What ended up happening, because they had reliable and stable green energy, is more fishing fleet boats came in to do their processing. In a small community, that kind of thing is what you can do.
In Canada, 5% of the forestry sector workforce is Indigenous. In Saskatchewan, it’s 30%, which is enormous, larger by magnitudes of order. Why? Because of the investment in the mid-2000s when the provincial government gave forestry licences to First Nations communities. Again, it’s forward-thinking planning. That’s what we need to be doing with our carbon-captive communities, like Coronach, Estevan, Lloydminster, Fort McMurray, Fort St. John, in parallel, and as we should with First Nations communities in Canada as well.
Senator Massicotte: Thank you.
Mr. DeMarco, I appreciate you being with us today to remind us where we’re at, but you must admit — I guess I’m frustrated — that for over 20 years we’ve missed every target we’ve set. We just can’t seem to get there.
Again today — I read your report — we’re failing. We have good words, and we always agree with the recommendations. Whether we do it, I’m not so sure. Is this the one? We are spending a lot of money. Is this the one where we will see a difference and finally meet our goals? Or will we hear more of these stories and then apologize after the fact, and so on and so forth? How do we get there?
I haven’t totally resigned myself, but I can’t see us meeting the targets. This is serious stuff. This is very, very serious.
Mr. DeMarco: We could all make our predictions as to whether they’ll meet the target in 2030, but the question for us as performance auditors is how they are actually doing and what they need to do to meet it, as opposed to just predicting all of the other different factors, political, economical and otherwise, that might come into play.
They can do it. It’s certainly physically possible to reach the 2030 target. The fact that they’ve missed every other target doesn’t doom them to failure in perpetuity. The other G7 nations are stable democracies that have all reduced their emissions since 1990, so it isn’t inevitable that we will miss the next target.
What we’re trying to do with this series of reports this year and last year and in 2021 is put the information out there for parliamentarians and Canadians to hold government to account so that it’s possible to see, if these recommendations are implemented, a future where they would meet a target.
That’s the ultimate goal. I would like to get to a 2030 report that says, “Target met.” That would be what I would like to see, and it is possible. We shouldn’t give up. We aren’t doomed to repeat history, as the saying goes; we can learn from history. Those who do not learn from history may be doomed to repeat it, but we can learn from the lessons, and that’s why we chose the title of our 2021 report, Lessons Learned from Canada’s Record on Climate Change. We could apply those lessons to succeed for 2030 and 2050, and that’s our obligation for future generations. We can’t continually leave the planet in a worse state for each generation to come.
Senator Massicotte: Thank you.
Senator Audette: I just want to say thank you. I give you water. One of our teachings, when there are sad tears, let’s clean ourselves with good water, so here is your water. Thank you very much.
This is very powerful, and I hope people from the other chamber and the government get it here, feel it, understand and act on what you shared with us.
I come from a small community where there are big promises, and then they close down, like the mining industry — poof — with nothing. So I connect with you.
Where we are also connected, Mr. Wallace — I think in French — you mentioned a high-level policy or something like that, according to my homemade translation. Could you recommend to us? Because we will stay here and we will see who the government is every time it changes or stays. Can we put a seed where this high-level policy is co-constructed or built with people with lived experience — municipalities, Indigenous people, provinces and territories?
So no matter who is there in the other amazing chamber, I guess, or that it stays so the human being at the end of the day is not coming here again — the person — to say, “What you did 30 years ago, it didn’t change, because I have to close my community or city.”
Mr. Wallace: That’s a great question.
I mentioned earlier the sustainable jobs act. If you put communities in with the sustainable jobs, you’re going to have a more holistic approach. That means you’re developing those policies in tandem with policies for workers, because workers are half of our community.
I think this country has amazing expertise in this area. Again, Mr. DeMarco mentioned this about history, and we know what happens when coal mines shut down if we do nothing. I worked on one in Nunavut, Breakwater Resources Ltd., many years ago.
Regarding having the right people at the table, I mentioned the just transition committee, which did a fantastic job on the labour side, but there should have been a sociologist there; there should have been an economist there; there should have been some policy experts there. If you have the right mix of people, you can actually come up with some brilliant policy, and I think if the federal government does that, I think a 2030 just transition is possible. But we have to act now, because rural communities move a lot slower than urban centres, so we need a little bit more time to react — again, that understanding of urban centres are totally different than rural centres.
I hope I answered your question.
Senator Audette: You did. Thank you.
The Chair: Thank you.
I will allow myself to ask a last question, because, of course, I’m also very — not shocked, I cannot say “shocked,” because in my professional career, I have been doing site remediations of mines, because the mine was abandoned, or because the mine went bankrupt, or because the mine was exhausted, and in all the communities around in Quebec, in Canada, in Alaska, in the Andes, it’s the same story: The mine exploited the mineral, and the money never trickled down to the community.
What is grown in the beginning is the economic model, and maybe it’s a little bit the elephant in the room, but can I ask you: How much money did you receive from all the years of exploitation of the coal so that you could, as the elected people, build other businesses that could have sustained? Was this enough? Was it too little?
Transitions — today we’re talking about energy — about closing a mine for different reasons have been happening — a town in Faro, Yukon, is a huge example, and the remediation will cost billions and will take 50 years.
Mr. Wallace, can you please comment on that? Then I would like to hear from Professor Poelzer.
Thank you.
Mr. Wallace: I had the opportunity many years ago when I worked in Nunavut to write impact benefit agreements between Inuit communities and the mining companies, and we always had certain things in there, like there would be employment levels that they would have to maintain with Inuit, that there would be funds that would go into communities for different types of economic development activities, cultural and social activities and all those types of things.
We’ve been very fortunate. Both Westmoreland, the mining company, and SaskPower — more so SaskPower — have been very generous in terms of contributing to the communities. So I think, in that sense, they could always do more, but I think for the most part, they’ve done a half-decent job.
With regard to the reclamation, in mining, where we’re at, it’s not like hard-rock mining. So if you’re mining for lithium or cobalt or something like that, you’re scarring the land terribly. It’s hard-rock mining; there are a lot of really dangerous chemicals. In our case, they just strip some layers off, take the lignite out, and then put it back over top and then folks are farming on it again a few years later if they manage to contour the land right. We’re very fortunate in the sense that that’s how lignite is mined in our region and that when the reclamation is done, people are actually doing economical work on top of it again — in the scope of mine lives — in fairly short order.
The Chair: Do you want to add to that, Professor Poelzer?
Mr. Poelzer: Yes, I’d love to.
With regard to the benefits and different models, in particular around mining, I’ll just give one example in northern Saskatchewan with uranium mining, and that’s been a better example than some other jurisdictions where 50% of the workforce is northern, which is overwhelmingly Indigenous. There’s been over $3 billion in procurement and services.
But First Nations like English River First Nation, for example, have been able to leverage that, not only for service provision, like construction services and so on for on-site mines, but to use that in other areas, including Ontario, and also diversifying, for example, social media services and communication services. They have their own Creative Fire business, for example. First Nations have been able to take advantage of those kinds of opportunities to diversify.
The bigger question is that there are life cycles, and mines do end. I’ll come back to one of the lessons we should learn: If we’re making large capital investments, make them in areas for First Nations, Métis and Inuit participation and equity ownership in things like the electricity sector. It’s a modest growth, but it’s a permanent growth, and it doesn’t go up and down in creating jobs for a future that is sustainable.
I think that’s the second lesson we should take away from this. Thank you.
The Chair: Thank you so much.
[Translation]
For our second panel, we welcome in person Jerry V. DeMarco, Commissioner for the Environment and Sustainable Development, from the Office of the Auditor General of Canada. With him are four principals from his office: Kimberley Leach, James McKenzie, Philippe Le Goff and Nicholas Swales.
Welcome and thank you for being here.
Since you have already made your opening remarks, perhaps we can go straight to the questions, or if you can speed things up and talk about the three other reports that were published rather than the four other ones. Is that possible?
Mr. DeMarco: Yes. I would just like to mention that we are on the traditional unceded territory of the Algonquin Anishinaabe people.
You may read our opening remarks later on. Let us begin with the questions.
Senator Miville-Dechêne: I would like to ask you about the financial sector. In one of your reports, you stated that the Office of the Superintendent of Financial Institutions considers that its role is not to promote Canada’s broader climate objectives — that is, fighting climate change —, but rather to focus on the financial risks to financial institutions.
Mr. DeMarco, it seems you disagree with that choice. Should the banks be required to truly fight climate change as part of their loans and investments policy? This is especially relevant here: should more demands be made of the banks?
Mr. DeMarco: Thank you for the question. In our report, we pointed out that the Office of the Superintendent of Financial Institutions (OSFI) is now subject to a new requirement. Its mandate has not changed, but it has a new mandate because it is now listed with other federal agencies in the Federal Sustainable Development Act. This year, it has to create a strategy for the agency that is consistent with the federal strategy. This is an opportunity for the agency to think about its mandate and what it can do to contribute to the government-wide efforts to address the climate crisis.
We are not saying that the OSFI should change its mandate or the interpretation of its mandate, but that it should consider it because this is the first time that it is required to contribute to federal sustainable development strategies.
This is also a question for parliamentarians. We included it in our report because it is a question for Parliament. Will the mandate stay the same or will it evolve?
Senator Miville-Dechêne: That was not my question. Does the Office of the Superintendent of Financial Institutions currently have the necessary mandate to require the banks to consider climate risk in its investments?
Mr. DeMarco: According to its interpretation, it can require the banks to consider the financial risk related to climate change. Does it have the mandate the facilitate the necessary efforts to face the challenges of climate change? That is something it has to consider now because it will be drafting its strategy. I know its interpretation is narrower than what you are suggesting, and that is why, if that were the case, it would be an issue for Parliament as well.
Perhaps Parliament will say that if it interprets the mandate more narrowly, it will change the mandate, but perhaps not. That is an issue for Parliament. That is why we did not recommend that it be revised. That is just something that the agency and Parliament, including the Senate, can consider in its proceedings.
[English]
Senator McCallum: I had spoken to the Auditor General’s office to see if they could do an intersectional study on the impacts of oil and gas or any resource extraction to cover, and not have siloed reports. At that point, they felt it wasn’t doable.
What measures are being taken to address the broader impacts of oil and gas, including the legacy environmental impacts and health impacts and especially those on the rights of Indigenous peoples? How can the government ensure that future generations are adequately represented and their interests protected in the transition to a low-carbon future for the oil and gas sector? How can the government ensure that biodiversity and ecosystem health are protected in this transition as well?
Mr. DeMarco: Thank you for the question. I think I had the same question two years ago when I started as commissioner, and that is why we have the lessons learned report on climate change, because we are performance auditors that scope out particular areas of federal work to audit in terms of whether they are reaching their objectives and, if there is a gap, what recommendations we should make to help them address the gap. But sometimes when doing that you do not necessarily see the links of all the different programs. In the worst-case scenario, we stick to the same silos that are impeding progress in our audit work.
We are working on that in real time because we’ve obviously issued the lessons learned report, which is not an audit; it’s a synthesis piece regarding our more than 20 years of work in the area, with input from former commissioners and current experts in the area.
What we’ve also done is we’ve started to bundle together several reports on related subjects. You will recall from last year in the spring, we had a binder like this with five reports but they were all related to climate change. So even though they could each stand on their own and they have their own recommendations and scope, there are themes that come out from them. One of those themes that actually has been reflected in my comments about those reports and reflected in the lessons learned is that government hasn’t done a good job of working on horizontal issues like reconciliation, climate change and biodiversity conservation, and the silos of government structures that have a historical origin are impeding progress rather than facilitating progress.
So that is one issue that we are trying to talk about in our reports. While still doing performance audits of particular programs or endeavours, we are looking to see what these overarching themes or long-standing issues are that cut across many of our reports.
This is not something unique to the current office as it is. Former auditor general Michael Ferguson also talked about themes that were arising from many different audits in terms of long-standing issues that reveal themselves again and again but do not seem to be resolved after many reports.
It is frustrating when we do have to comment on similar issues in many reports over the years, but it would be worse just to accept the reality that they haven’t changed and get used to it. We still need to make those recommendations and hope that the changes that are required to meet the objectives are eventually met.
Senator McCallum: In that lessons learned report that you are talking about, you said that your mandate had been expanded, so this is the future work that you have by the Canadian Net-Zero Emissions Accountability Act. When we look at acts that are being passed, is there any way that your mandate can be expanded on the acts that come forward to increase the mandates that are involved? Would that help your office?
Mr. DeMarco: Our office is what’s known in legal circles as a “creature of statute.” We do what Parliament asks us to do, and we get our marching orders not only from the Auditor General Act but, for my work as commissioner, we have that whole last part of the Auditor General Act; the general parts of the Auditor General Act, including the performance audit sections towards the end of section 7; we have the net-zero act, which is the new one you just spoke about; and we have the Federal Sustainable Development Act.
Our mandate has been increasing over the years. Parliament has decided to ask us to do more given the importance of environment and sustainable development, so it’s entirely up to Parliament to do as they did just recently with the Canadian Net‑Zero Emissions Accountability Act to include a new mandate. The deadline for us for our first report under that act is 2024. Our hope is that we can lead by example in terms of meeting deadlines and perhaps issue our first one later this year rather than 2024 and then subsequently report on the issue over and over again in terms of holding the government to account on its progress for 2030 and 2050 under that act.
To answer your question more directly, yes, Parliament can change our marching orders, add to them, subtract from them. We’ll do whatever is required in the various pieces of legislation that give us our mandates.
Senator Batters: I really appreciate you being here, Mr. DeMarco. Actually, last week, your new audit report came out and I actually quoted you at that committee just as it was hot off the press. It was helpful that we already had a news article that talked about some of your findings, so I appreciate that.
Mr. DeMarco, when you last presented to this committee about the previous audit and report, you expressed great concern that Natural Resources Canada and Environment and Climate Change Canada — ECCC — were working in silos with entirely separate modelling methods, targets and definitions. Specifically, you stated that:
Environment and Climate Change Canada expected to achieve 15 megatonnes of carbon dioxide equivalent emission reduction in 2030, whereas Natural Resources Canada projected up to 45 megatonnes by 2030.
I’m just wondering if you are aware of any marked improvement in collaboration from those two federal departments and, if not, how seriously can Canadians take these kinds of government emission-reduction projections when those departments can’t even get on the same page themselves?
Mr. DeMarco: I’ll start by reiterating the need now on issues such as climate change, reconciliation and biodiversity conservation to look beyond the silos and work together across departments and look beyond the short-term deliverables in the departmental plans or departmental results reports and take a longer-term view.
I did ask a similar question of our principal Philippe Le Goff earlier this week in terms of what has happened since the release of our hydrogen report, because, as you noted, we were quite critical of the two-ships-passing-in-the-night situation regarding the 30-megatonne difference between their projections. I will pass it over to Philippe Le Goff to give us an update in that regard.
Philippe Le Goff, Principal, Office of the Auditor General of Canada: Madam Chair, I think the two departments got the memo. We have seen tremendous improvements in the way they are working together. They produce new modelling results, and we can see that they adopted some of our recommendations, so they are using a bottom-up approach. And we have seen an incredible reduction in the capacity of hydrogen to reduce GHG emissions.
In our view, what is now in the hands of the two departments is a much more realistic approach.
Senator Batters: Does that mean, then, that they end up at a closer target from Environment and Climate Change’s 15 megatonnes or are they closer to Natural Resources’ 45 megatonnes by 2030?
Mr. Le Goff: They are closer to the ECCC target, which is 15 megatonnes.
Senator Batters: All right. Thank you. I’m glad to hear that your hard work on that is producing some results.
Mr. DeMarco, with respect to your most recent audit and the failure of the federal government to track the impact of individual reduction policies, the explanation from federal department officials is that “. . . interactions among some of the policy measures make it challenging to attribute reductions to specific regulations.” I’m not sure if I’ve heard a more gobbledygook explanation than that. How do you respond to that explanation? Do you consider that a sufficient answer?
Mr. DeMarco: It’s not a sufficient answer, but it’s not a ludicrous answer either. There are interactions amongst the policies.
To give a very obvious example, if you try to model just a subsidy regarding electric vehicles without modelling the infrastructure needed to charge those vehicles, then there will be problems with it. There are policy interactions.
Having said all of that, the fact that there are policy interactions isn’t an excuse to just release projections when you put out a regulation as it comes into force, and then to leave it aside because it’s hard to track. The fact that it’s a challenge isn’t synonymous with it being impossible. There may be some level of uncertainty associated with it. It may be that certain bundles of policies have to be modelled together as opposed to each individual one all the time. That’s fine too.
What we’re saying in our report is to do what’s necessary to track them as well as possible so that you can course correct on time to make the adjustments needed to still meet the target, as opposed to leaving it aside, getting to the deadline and then checking whether you’ve met it. In Canada’s history, the answer has been they haven’t met it each time, even though they have had plans that add up.
A better job of tracking the individual performance of each policy measure, regulation or related bundles of them, whatever is most appropriate — this is not just our office saying that; the advisory body to the government on climate change has also recommended that they do a better job in parsing out the contribution that each measure makes.
Another reason why it’s very important is tackling climate change is going to disrupt a lot of things in terms our economic order and so on. The population will be more supportive of policy measures — whether it’s carbon pricing, regulations or subsidies — if they can see transparently what benefit they’re getting from them, and whether some of them are actually not doing anything but costing a lot of money, in which case you could curtail or eliminate them, and others are performing as expected.
It also has an important element of essentially gaining buy-in from Canadians in terms of showing that the measures that you’re taking are achieving the results and that they’re worth the costs. There’s a very large cost of complying with regulations, mostly on the private sector and on consumers. There’s a cost of administering each program at the government level.
We would like to know whether they are getting the results of each of these measures and, if there are so many measures, whether all of them are useful and whether some need to be deleted and others added. This is all part of an aligned plan that would have the ability to adapt and evolve in order to meet a target, as opposed to waiting to see if you hit the target or not and then start concentrating on the next target, which is the unfortunate history of Canada.
The Chair: Mr. DeMarco, I would like to ask you to talk to us a little bit about climate change financial risk. I don’t think Canadians understand this risk. What happens to a bank, an insurance company or investors when infrastructure gets destroyed before the end of their life cycle?
What happens when an insurance company receives thousands of claims due to an extreme weather event? In Canada, is this risk static or is it growing? Are we doing enough? Personally, I think that disclosure is not enough. We can compare disclosure to a doctor who tells a patient with cancer, “You have cancer; see you later.” Disclosing is definitely not the solution. It’s not enough.
Actually, disclosure of this risk has made an uneven playing field for everybody. Those who are disclosing are being penalized.
Mr. DeMarco: Yes. I would be happy to comment on that, Madam Chair. This is a fast-moving area of endeavour. Even yesterday the Bank of Canada was speaking about climate risks as well.
We focused on the Office of the Superintendent of Financial Institutions, which essentially supervises in terms of the macroprudential supervisory framework, banks, pension plans, insurance companies and so on that fall within the federal realm.
Disclosure is important. Information availability and transparency does matter. I also agree with you that disclosure is not the end itself. The end that’s being sought is, in Canada or in the world’s case, to meet the objectives of limiting global temperature rise and avoiding catastrophic climate change through the Paris Agreement and so on.
The ultimate goal is still about protecting the planet in terms of avoiding catastrophic climate change and, with respect to our other files today, protecting biodiversity and so on.
I would say that disclosure is important because, even if it’s not synonymous with results, what gets measured typically matters more with institutions and individuals than things that aren’t measured at all.
Senator Arnot: Mr. DeMarco, maybe you can help me with this idea. I’d like to explore it. You did mention a little bit.
Anecdotally, I happened to meet this last weekend with a friend of mine who is an automobile dealer in Saskatoon. He was telling me about the pressure that his dealership is receiving from big automobile corporations to make investments in the new technology, batteries and training.
His general comment to me was the expectation that government is setting is way too high. His impression is that targets are unrealistic. The expectation is unrealistic. The electrical infrastructure is not sufficient in its current form to handle electric vehicles, for instance. He’s not certain that a corporation like SaskPower, an electrical energy provider in the province of Saskatchewan, has infrastructure to meet the demand.
As an example, he anecdotally said it may well be that someone will be able to plug in their electric vehicle and charge their car overnight but have to make a choice, because the cost of electricity will be very high, between washing or drying your clothes and driving your car.
Are those expectations or his impressions accurate? Is it something we should be concerned about? Is it something that your organization is, in fact, monitoring? I think you mentioned that you had done something on that. Should we be hearing from the Canadian Automobile Dealers Association, or others of that ilk, to get some advice on that?
The basic impression that he was trying to leave with me is that the government’s expectations are unrealistic. The demands are going to shift. He’s feeling the squeeze from a big automobile corporation because these investments are huge and he’s not sure they’re going to pay off.
Mr. DeMarco: Thank you. The best answer I can give is to please invite us back later this year, because we do have an audit ongoing regarding zero emission vehicle infrastructure. I’m glad we are on the pulse of your question. We’ll certainly be reporting on the issue. We would be happy to be back, if invited, to speak to that, as well as the government’s own operations in terms of its fleet. We’re looking at both of those aspects for the coming cycle of audits.
None of the five today get into any depth on those issues, but they are certainly on our radar and we’re working on them.
Senator Arnot: If he were here and asked that question about his being forced to make investments that he doesn’t think are going to pay off, what would your advice to him be?
Mr. DeMarco: I’m an evidence-based performance auditor so I would typically say I want to see the evidence first. I can give a general impression, though. If you plan for the electrification in advance — in the last hour, we talked about long-term planning in many different ways in terms of economic transitions and Indigenous reconciliation — it’s certainly possible to switch a fleet from largely combustion engines to largely electric if you’ve done all the homework necessary to have a grid that is green and sufficient to do that, and at a rate that’s affordable for people to use it and the charging infrastructure is there and so on. There are other countries that have a much higher percentage of the fleet that’s electric. Even within Canada, British Columbia and Quebec have larger percentages, so it is possible.
The short-term problems obviously need to be overcome. You can’t just have the idea without rolling out all of the measures necessary. With electric vehicles — and this goes back to my answer about the policy interactions — you’ve got the mandate, the subsidies and the charging infrastructure, and all of those things need to be coordinated. And then, beyond that, you need a relatively clean grid to power all of that because all of that is for naught if you end up having to use peak power from fossil fuel burning to add the incremental load necessary to run them.
So, yes, it’s something we’re looking at and it’s possible to overcome, but it needs to be planned out in an integrated and long-term fashion.
[Translation]
Senator Audette: Thank you very much. I was keen to ask you a question about one of your reports on forestry and climate change. Thank you for mentioning at the outset of your overview that, when initiatives are proposed such as planting two billion trees, not making the links with the provinces and territories will have a major impact.
I met some Innu women from the Mashteuiatsh community and their father, it is a family business with the Tshitassinu Forest Nursery. Quebecers will rally around this project because we do not all have the specialized expertise that is needed at a nursery.
On the other hand, not making the links means that we cannot compete or contribute to the economy or to a measure that comes from Ottawa. In your report, were you able to identify any systemic barriers created when high-level decisions are made without engaging Indigenous peoples, in this case — and we are still the big losers — to contribute to a struggle that we are facing collectively, as well as the poverty of Indigenous women as regards sustainable development?
Mr. DeMarco: That is another example of what we have talked about in the past hour. There are opportunities in transition; one aspect of fighting climate change is planting trees. If properly planned, planting can yield double or triple benefits, for the economy of the Indigenous community you are referring to, with respect to biodiversity, human well-being and recreational opportunities. Yes, it is possible.
We have to plant most of the two billion trees for this project in the next five years. The government has the time to negotiate and create partnerships with Indigenous communities, with the province, the territories, and the private sector so they can reach their objective of planting a large number of trees and deriving other benefits as to biodiversity and human well-being.
As to their carbon capture target for 2030, I can say, as I did last week, that the government will not achieve its program objective because carbon capture will come later on, when the trees are taller. It will happen, but it will take more than seven years. The government can plant all the trees by 2030, but most of the benefits in terms of carbon capture will follow in the decades after 2030.
Senator Audette: Thank you.
[English]
Senator McCallum: What role can your office play in bringing out the role that treaties play in resource extraction? I don’t think I’ve seen a report of treaties in any of your reports.
I was just reading that there is now another lawsuit from Treaty 9 area with the mining. They’ve just launched it in Ontario. We have Saskatchewan, Alberta and B.C. all with lawsuits, which is unfair to First Nations. They don’t have the money, but that seems to be their only recourse.
You look at the action plan that the Senate passed regarding the United Nations declaration, especially the free, prior and informed consent; the jurisdiction of rights holders; the issue of Crown lands in the provinces; the lack of mitigation; the human rights abuses that lead to health impacts and the increased susceptibility of climate change due to substandard infrastructure in communities because of the vulnerable environments that they’ve been left in — the question that Treaty 9 asked is whether the Crown can make land decisions without First Nations consent, and they say no.
If this committee was to make a recommendation that you do a report on the role that treaties play, would your office be able to do it? And if we couldn’t or it’s not agreed, then I would make it as an independent senator, but can you talk about the treaties and the role you may play in bringing out that issue?
Mr. DeMarco: Thank you for the question. I’m going to draw on my experience here at the office as well as my previous career in the adjudicative field to try to answer it.
We can definitely look at disproportionate impacts on Indigenous peoples, and that is an issue that arises in our carbon pricing report from last year. It was the focus, obviously, of the drinking water report from the Auditor General.
We do not duplicate or usurp the role of either the federal courts or the provincial superior courts in terms of determining whether the parties have abided by a treaty. So we would not go so far as essentially acting as another court in terms of assessing legal compliance with the provisions of a treaty, but we could look at government programs to implement treaties and the progress they’re making either in some of the subjects we have talked about here today or, for example, in the area of impact assessment where the duty to consult, obviously, arises quite frequently.
The question about whether it’s just a duty to consult or whether that’s going to evolve into free, prior and informed consent is something the courts will decide. Parliament could also change the law with respect to that and require it.
There are cases like you’ve mentioned and the Blueberry River case and so on that are informing that and have progressed from previous interpretations about the more limited impact of treaty obligations.
Within the area of performance auditing, we can look at impacts related to treaties, but we would not go so far as usurping the role of the courts, the central body in interpreting and determining the legality of actions with respect to treaties.
The Chair: Thank you to our witnesses and thank you to our colleagues for their questions.
Next Thursday we will be discussing the drafting instructions for the oil and gas report because we have progress with the witness. It’s time to think about where we want to go with our report.
On our next study, we will discuss extreme weather events and their impacts.
(The committee adjourned.)