THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Thursday, November 2, 2023
The Standing Senate Committee on Energy, the Environment and Natural Resources met with videoconference this day at 9:15 a.m. [ET] to study emerging issues related to the committee’s mandate.
Senator Rosa Galvez (Chair) in the chair.
[Translation]
The Chair: Honourable senators, my name is Rosa Galvez, I am a senator from Quebec and chair of the committee. Today, we are holding a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
I’d like to begin with a quick reminder. Before asking and answering questions, I would ask members and witnesses in the room either to refrain from leaning too close to the microphone or to remove their earpiece when leaning into the microphone. This will prevent feedback, which could have a negative impact on the committee staff in the room.
[English]
I will ask my fellow committee members to introduce themselves.
[Translation]
Senator Miville-Dechêne: Senator Julie Miville-Dechêne, from Quebec.
Senator Gignac: Senator Clément Gignac, from Quebec.
[English]
Senator Sorensen: Karen Sorensen, Alberta.
Senator Anderson: Senator Margaret Dawn Anderson, Northwest Territories.
Senator Massicotte: Paul Massicotte, Quebec.
Senator Wells: David Wells, Newfoundland and Labrador.
The Chair: I wish to welcome all of you and the viewers across the country who are watching our proceedings.
Today, the committee has invited government officials to appear as part of the continuation of its special study on climate change: Canadian oil and gas industry. From Environment and Climate Change Canada, we welcome John Moffet, Assistant Deputy Minister, Environmental Protection Branch; Jacqueline Gonçalves, Director General, Science Reporting and Assessment, Science and Technology Branch; Lindsay Pratt, Director, Pollutant Inventories and Reporting, Science and Technology Branch; and Matthew Watkinson, Director, Regulatory Analysis and Valuation, Strategic Policy Directorate.
Welcome and thank you for accepting our invitation. Environment and Climate Change Canada already appeared before this committee on this topic on November 22, 2022, but there are some remaining questions. We thank you in advance for your kindness in coming back to answer these remaining questions.
There won’t be any introductory remarks, so we will go directly to the question period.
[Translation]
Senator Miville-Dechêne: Welcome. Thank you for agreeing to come back to the committee to clarify some of the numbers and things that were said in the past. The situation is evolving.
According to an analysis published this year by researchers at the International Monetary Fund, Canadian fossil fuel subsidies exceeded $50 billion in 2022, which represents about 2% of gross domestic product.
Do you agree with those figures, which still seem very high to me? And can you provide us with a table detailing these expenditures? I know you talked about it at the beginning of this agreement, but because of the number of programs, I confess I’m a bit confused by the figures.
I’d like to know this: in terms of fossil fuel subsidies and decarbonization, where is this $50 billion going?
What I would like to know first of all is whether you think these figures are accurate, in terms of direct or indirect fossil fuel subsidies.
[English]
Matthew Watkinson, Director, Regulatory Analysis and Valuation, Strategic Policy Directorate, Environment and Climate Change Canada: Thank you. In the development of the inefficient fossil fuel subsidies framework, the Government of Canada has taken the unprecedented step — among G20 colleagues — of putting forward a forward-looking framework to prevent the implementation of future measures that would be deemed inefficient fossil fuel subsidies. As part of that exercise, we looked at the world of subsidies. On the tax side, the Department of Finance phased out nine measures. When looking at the various studies out there — and there are many of them — one of the things to bear in mind is that definitions are very important. How someone defines “inefficiency” could be whether all subsidies to the oil and gas industry are deemed inefficient. There are also scoping issues.
In Canada, our exercise is there are three mechanisms for dealing with the reform of subsidies for the fossil fuel sector. One of those mechanisms is to deal with our international support, and that’s the Glasgow Statement guidelines led by Natural Resources Canada. Then, the inefficient fossil fuel subsidies framework is limited in scope to World Trade Organization-defined, or WTO-defined, subsidies. Those support or confer a direct benefit; it’s not on commercial terms. Work is under way on the reform of public financing — a phase-out of the public financing of the fossil fuel sector.
When we look across the spectrum of those different studies, it really matters whether you are scoping in public financing, as it can make a huge difference in the numbers, and whether you are defining or considering all support to the fossil fuel sector to be inefficient also matters. You get a huge range of numbers across different studies. Our emphasis in this exercise for the inefficient fossil fuel subsidies framework is that it’s forward-looking, and the first country to issue these guidelines to prevent future subsidies. The Department of Finance did some significant work in phasing out a number of tax measures.
[Translation]
Senator Miville-Dechêne: I understand that you are in the middle of a reform to try to eliminate inefficient subsidies, as they are defined.
That said, my question was quite specific. I can imagine definitions being important, but if we broadly define the amount of money the government invests in oil, in fossil fuels — does it add up to $50 billion in 2022?
[English]
Mr. Watkinson: I don’t know the answer to that question.
John Moffet, Assistant Deputy Minister, Environmental Protection Branch, Environment and Climate Change Canada: May I suggest, senator, that we follow up with you, and give you a list of what the government considers to be fossil fuel subsidies, as well as how that compares to the International Monetary Fund, or IMF, report you mentioned — the $50-billion total.
Senator Miville-Dechêne: That would be great, and, if possible, I would like a breakdown just to understand. As you say yourself, it all depends on what we calculate — what we put in and put out — but, as legislators and senators, we need to understand the details of that. Thank you.
The Chair: Would you please send that information to the clerk within the next days? Would that be possible?
Mr. Moffet: We’ll have to talk to our colleagues at the Department of Finance. I think we’ll be able to tell the clerk when we would be able to do it. We will follow up right away, but I can’t commit another department at this time. We will give you a timeline.
The Chair: Thank you.
Senator Wells: I was going to ask a completely different question, but I want to jump on Senator Miville-Dechêne’s question about the inefficient fossil fuel subsidies. I’m assuming they are inefficient subsidies — is that what that means?
Mr. Watkinson: Inefficient subsidies, yes, are defined by the framework that the government issues.
Senator Wells: Can you give me a simple example of an inefficient subsidy?
Mr. Watkinson: Anything that would increase the production of oil and gas.
Senator Wells: Some would see that as efficient?
Mr. Watkinson: In this instance, there are six criteria that define what would be considered an inefficient fossil fuel subsidy in the context of this policy: one that enables significant greenhouse gas, or GHG, emission reductions in Canada or internationally in line with Article 6 of the Paris Agreement; one that supports clean energy, clean technology or renewable energy; one that provides an essential energy service to a remote community; one that provides short-term support for emergency response; one that supports Indigenous economic participation in fossil fuel activities; or one that supports abated production processes, or projects that have a credible plan to achieve net-zero emissions by 2030.
Senator Wells: Thank you. That’s interesting because helping Indigenous communities and some green efforts — which I agree with — are terrific. But they’re part of the category of a subsidy to an oil company — did I get that right? I’m looking at the broader line of fossil fuel subsidies. When we talk about fossil fuel subsidies, everyone assumes — and I assume — it’s money or funds going to the fossil fuel industry, but some are green efforts or outreach to Indigenous communities, or other broad categories that are not necessarily cash in the bank of the large producers. Do I have that right?
Mr. Watkinson: One form of subsidies considered to be inefficient is the consumption subsidy. We don’t have a lot at the federal level in Canada. But some of our G20 peers have looked at consumption subsidies — subsidies to consumers that would encourage wasteful consumption is one category. In the context of this policy, as it’s looking at the government support to the sector, the intention, in a general sense, is to support its decarbonization efforts.
Senator Wells: I have a brief final question on this round: You mentioned the international support for the Glasgow Statement. That’s, I guess, part of another subsidy — or is it the same subsidy? Who gets that money? When that’s an investment or money spent by the Government of Canada, who gets that money?
Mr. Watkinson: Our guidelines to implement the Glasgow Statement framework cover Canada’s support for projects internationally that would be fossil fuel —
Senator Wells: Green projects internationally — that is, in your definition, considered a subsidy to the oil and gas industry.
Mr. Watkinson: It could be, and Natural Resources Canada administers that policy, but it covers both subsidies and things on commercial terms, including loans or the activities of Export Development Canada, or EDC, for example.
The Chair: Since we are on that point of subsidies, I remember reading in the news that over the COVID period, EDC was not only collaborating or assisting fossil fuels on their exportation, but it was also helping at the domestic level. Can you please include in your answer, which you will send, whether this is considered a subsidy — efficient or inefficient?
Mr. Watkinson: EDC operates on commercial terms, so they’re not considered a subsidy. They’re offering loans, loan guarantees and insurance on commercial terms.
They are out of scope for the inefficient fossil fuel subsidies framework, but in scope for the next phase of work, which is on public financing.
The Chair: Thank you.
Senator Sorensen: It’s nice to see you all again.
I have a few questions that I will ask over the morning with the intent of learning more about some of the federal programs that are here to assist us in the transition, as well as to understand the uptake and the roadblocks coming with some of those. I will ask my questions to whoever is the best person to answer.
The first question is with respect to clean electricity. If I am correct, the formal consultation period for the federal government’s proposed clean electricity regulations ends, I think, at midnight today. Do you have any update that you can share with us on the level of interest received from Canadians, and what the time frame might be on finalizing the regulations — are we looking at, hopefully, some time in 2024?
Mr. Moffet: Yes, the formal response period to the draft regulations concludes today.
We’re not closing the doors to further input. We’re engaged in some extensive back and forth with many of the electricity providers in some provinces, which is a partial answer to your question regarding the level of interest — a tremendous level of interest. You follow the news; there has been some rhetoric, but there has also been a lot of very practical feedback, and the focus is how to achieve the goal of the regulations, with which I think there is widespread support: We need to expand the grid and we need to make sure the grid is clean, and we need to do that well before 2050. Why? Because in order for the rest of the economy to get to net-zero emissions by 2050, many parts of the rest of the economy will need to rely on clean electricity. We are going to want to charge our cars, and we are going to want to know that our cars are using clean electricity. Buildings are transitioning to electric heating. Many industries are transitioning to electric sources of energy. If they are going to accomplish all that by 2050, we need a larger, cleaner grid well before 2050. That is the goal, but we need to get there in a way that continues to provide reliable and affordable electricity — and that’s the nature of the engagement that we’re involved in.
How do we set the guideposts so that we ensure we get there, but don’t create any unintended consequences that lead to dramatic spikes in electricity rates, or challenges with providing reliable power, as we start to build out new sources of energy that may be intermittent, like wind and solar?
Senator Sorensen: Do we think that by 2024 we will see some real outcomes?
Mr. Moffet: We have said publicly that we are planning to coalesce around what the views are regarding which changes need to be made to the draft regulations by around the end of the calendar year, which would mean that we would be able to publish the final regulations by the middle of next year.
Senator Sorensen: Thank you.
[Translation]
Senator Massicotte: Regarding subsidies, you mentioned a list of five criteria that have to be met. For this list you mentioned, did people receive a subsidy or not? I’m a little confused about all of that.
[English]
Mr. Watkinson: I didn’t catch the last part of the question.
Senator Massicotte: In other words, for the six things that you mentioned — Aboriginal help and so on — are those inefficient subsidies, or are they efficient subsidies?
Mr. Watkinson: The criteria defined what would be efficient, or allowable.
Senator Massicotte: One of them is a loan to the Aboriginal community to be involved in the oil and gas industry. Is that an inefficient or an efficient subsidy?
Mr. Watkinson: That would be an efficient subsidy, so you need to meet —
Senator Massicotte: So for anybody that qualifies, the fact right there is that they’re automatically deemed to be inefficient?
Mr. Watkinson: No, sorry, if they qualify for one of the six criteria, they are deemed to be efficient, so they are allowed.
Senator Massicotte: Let me go back to where I was. I want to talk to you about the carbon capture — the whole program.
I think we set aside a lot of money — $12 billion or something. There was a lot of money set aside. How much money is that, and where is that at? Have we concluded some deals? Are we close to concluding deals? Are we talking to each other?
Mr. Moffet: I can take that question.
I’m not sure where the $12-billion figure comes from.
Senator Massicotte: Well, what’s the right number?
Mr. Moffet: I don’t think there is a right number, and I will explain why. I’m not trying to be difficult.
There are essentially two sets of measures. One is an investment tax credit, and the Department of Finance is finalizing an investment tax credit for carbon capture and storage activities. They attribute a number that it could be worth if it is fully utilized. We can follow up and confirm that number. It is publicly stated. That is not a direct expenditure by the government, but it’s a foregone tax, right? That’s the way that is calculated.
Then, there are a number of government programs — including the Strategic Innovation Fund under Innovation, Science and Economic Development Canada, as well as the Canada Growth Fund that the Department of Finance announced a year ago — that make money available in various forms for various activities that could include carbon capture, utilization and storage, or CCUS. Whether those funds will be used for CCUS partially or wholly depends entirely on what activities come to those programs and ask for money. It is impossible to say, at this point, how much money will actually be given to CCUS.
Senator Massicotte: Those are the two or three programs that you have where basically money is available to the best proponent, right? But there is some money going directly to CCUS.
Mr. Moffet: No, not at this time.
Senator Massicotte: No?
Mr. Moffet: No.
Senator Massicotte: I thought you made a request to the oil and gas industry to say, “Give us your proposal for the best CCUS deal,” and so on.
Mr. Moffet: Discussions are under way at the moment with a consortium of the oil sands companies; it’s called Pathways Alliance — the five major oil sands producers. They have put in a request to the government for various kinds of financial support. Those negotiations are under way. No commitment has been made to date.
Senator Massicotte: Are we far from doing the deal?
Mr. Moffet: I don’t know what arrangement is going to be made. The government is taking it very seriously. There is a deputy minister who is chairing the negotiations, but nothing has proceeded to the point of any kind of tentative agreement.
Senator Massicotte: So we’re not even months away. We are probably years away?
Mr. Moffet: No, I think the goal is to get to a yes or a no within months.
Senator Massicotte: Within a month?
Mr. Moffet: Months.
Senator Massicotte: Now, having said that, if you read — and I’m sure you are more aware of all this than I am — there are a lot of technical articles, and there are a lot of well-researched opinions out there, which say that CCUS is high-risk, and they discourage us from looking at it and talking to experts about it, and they’re basically saying, “This is too risky for the government to put up its money.”
Does that influence you? Has that been considered, or do you not agree with that comment?
Mr. Moffet: Well, I will try to give you the government’s view. I’m not an engineer, so I’m not qualified to comment.
I think the criticism of CCUS is twofold: One is that it is challenging to know precisely how effective it will be. I don’t think there is anybody who is saying that it doesn’t work. It has been used for well over a decade in Canada and elsewhere, and it has been successful in reducing emissions by taking emissions from a large project and making sure those emissions don’t go into the atmosphere, and then taking them and sequestering them underground. It does work.
The question is this: Does it work at an 80% efficiency or at a 90% efficiency? Can it be relied on for decades? There are questions about exactly how effective it is.
I think the bigger issue that we hear about is that it’s a very costly way to continue to produce oil and gas, and, fundamentally, in order to address climate change, at some point the world needs to stop using oil and gas.
Is this the right thing to do? It’s not really a technical question; it’s sort of a moral hazard question: “Should we do this and, thereby, enable continued use of oil and gas?” I’m not giving you a government position here; I’m just trying to explain the nature of the critique that we hear publicly.
Senator Massicotte: There are a lot of opinions out there, which recommend strongly, “Do not touch this thing; it’s just not appropriate.” Plus there is the cost. The equivalent costs are as much as $175 to $200 per tonne. I mean, it’s extremely inefficient.
But I gather from a department sense that you are onside, or somebody is onside, to do a deal in spite of this issue?
Mr. Moffet: I hope you don’t interpret my words to say there will be a deal. I’m saying that the government is taking this seriously. This is a major part of the Canadian economy. We’re a major contributor to the globe’s oil and gas demand, which is diminishing but not going away immediately. These are serious questions that need to be addressed.
I do not know what the answer will be. I do not know how these negotiations will be concluded. I’m not saying the government is all in for subsidizing CCUS. We have provided an investment tax credit for CCUS. Whether the government will go further and provide any additional support is yet to be determined.
Senator Massicotte: Talking about the investment tax credit, if it is structured a bit like the federal structure, I would argue that in light of the engineering aspect, how you do a deal and how you align the interests are so critical — people forget that all the time. If we’re stuck here in 10 or 20 years from now with a deal that’s not properly aligned, we’re probably wasting taxpayers’ money today.
What do we do to make sure the alignment is there, and that their interest is equal to our interest, and we both lose — and not the government pays all? The government is us. We want conditions on that. How are we doing that? As you know, the Pembina Institute is highly regarded. They have issued some documents and papers on how to best align. What does the deal look like? Could you comment on that, and on how your investment tax credit is structured?
Mr. Moffet: First, I agree that the Pembina Institute provides very credible analysis and advice, and is taken very seriously within the government.
The investment tax credit for CCUS was announced in a previous budget. The final rules for the CCUS tax credit have not yet been finalized. That will be done by the Department of Finance. There’s obviously commercial pressure to do that, but the Department of Finance is taking the time necessary to establish detailed rules, precisely for the reason you talked about. This tax credit will only be available in very circumscribed situations and under very clear kinds of deal arrangements so that it’s not a one-sided arrangement.
I don’t know all the details, and they’re not even finalized yet. If you want to follow up, I’d suggest you invite our colleagues from the Department of Finance who are in the middle of developing those rules.
Senator Massicotte: Let me jump a little bit to the big picture. Everybody is worried that — these are significant sums of money for any — the investment tax credit is a lot of money.
When you fast-forward 20, 40 or 50 years, there will be a time when oil and gas will not be sold because there will be a cheaper alternative — one that is more well known and less risky. What does that scenario look like? I presume from normal, logical stuff that Pathways Alliance, or the guy who has the fewest operating costs — whose marginal costs are the lowest — will be the guy operating, if everybody acts reasonably, including Saudi Arabia and so on.
What does your scenario look like? How does this story end? Will we be producing oil and gas because we’re the most efficient for political reasons, or because we don’t want to cut the tap? It’s pretty dramatic in some parts of our Canadian economy. How do you see that? How do you protect yourself?
Mr. Moffet: There are a few elements to that question.
In regard to the future scenario, of course, there are lots of different projections. In Canada, we rely on a wide range of projections, but the two that are most credible come at the international level from the International Energy Agency, or IEA, which provides global projections of what the demand will look like for oil and for gas over multiple decades.
As you say, while all the projections vary, all the projections suggest a decline. The question is this: When do we reach peak demand? Most recently, just a week or so ago, we saw an international projection that we’ll see peak demand this decade. Is it going to be this decade or the next decade? There will be a peak, and then it will decline. As you say, the demand will decline, so the question becomes this: Where will the supply come from?
The Canada Energy Regulator provides a similar kind of forecast at the Canadian level. That’s a useful source of information. The Canada Energy Regulator would be available to come and talk to you about their projections.
In terms of where we see Canadian oil and gas, and whether Canadian oil and gas will be a part of that, those are issues that the government is wrestling with right now. Part of the question, of course, will be around what kinds of restrictions the federal government or the provincial governments place on the production of oil and gas in order to ensure that production minimizes or actually gets to net-zero emissions.
So you have to deal with the use of oil and gas, on the one hand, but even the production is the largest source of emissions in Canada. What kinds of restrictions will we put on production, and what kinds of cost impacts will that have? In turn, what impacts will those costs have on the ability of Canadian producers to supply at a competitive rate as demand declines?
Senator Massicotte: The IEA basically —
The Chair: Senator Massicotte, your time is over. I will put you on the second round.
Senator McCallum: Thank you for being here today.
As we were studying this bill and witnesses came, it was very hard for me to get a good grasp of what is truly happening with oil and gas and with subsidies, as well as with not cleaning up their pollution and leaving orphaned wells. It seems like the questions weren’t being answered.
Do you feel that there’s progress by the oil and gas sector, and that they are invested in the movement toward net-zero emissions? What areas seem to be the most resistant to net zero? I’m asking this because they had such good production this year, right? Yet, the orphaned wells are building — it seems like there’s no change happening. That’s why I’m asking about progress.
Mr. Moffet: I need to be cautious. I don’t think I can give you a government opinion about the overall attitudes of the oil and gas sector as a whole, or even in part.
I would acknowledge that a number of the issues you talked about, including the orphaned wells, remain a very serious problem for a number of reasons. It’s something the federal government has attempted to address, but does not have direct authority over; it’s largely a provincial issue. In typical federal fashion, there have been financial incentives provided to help address the issue. Again, though, it’s largely a provincial issue, so the significance of the issue varies from province to province. It continues to be addressed through changing policies.
In terms of production, as Senator Massicotte suggested, Canadian production will be driven by global demand. If there’s continued global demand, and Canadian producers can produce at a cost that enables them to sell, then they will do that. For the government and the industry, again, the question is this: What kinds of constraints will be put on emissions — not on production, but on emissions — associated with production?
We have a number of federal constraints and a number of provincial constraints. As you know, we are working on a number of additional issues, including methane regulations — that we plan to finalize later this year — that will significantly reduce methane emissions from the oil and gas sector. The Prime Minister has also committed to a regulatory framework this year to cap emissions — not production, but emissions — which will then place a constraint on the ability of producers to ensure that any production they do is done in a way that is as clean as possible. That cap, of course, will decline to net zero, which will compel the producers to continue to invest in decarbonization efforts.
Senator McCallum: When you look at the areas, combustion is one area that really has not received a lot of research in that people are travelling and trucks are travelling. Emissions are happening. Can you speak about capping emissions related to combustion?
Mr. Moffet: When I talked about a cap, senator, I talked about a cap on the emissions associated with the production of oil and gas. We need to clearly distinguish the efforts — on the part of the governments in Canada and elsewhere — to reduce demand for oil and gas from the efforts to reduce emissions associated with the production of oil and gas.
On the demand side, Canada is moving faster than many countries. We are introducing a zero-emission vehicle mandate which will require an increasing portion of the fleet of light-duty vehicles to be zero emission — reaching 100% by 2035. We’re going to introduce a similar requirement, though not phased in as quickly, for heavy-duty vehicles. We will be reducing the emissions associated with the combustion of oil and gas by vehicles.
Similarly, we have measures to reduce the emissions associated with the combustion of oil and gas by industry, and many measures are intended to encourage industry to transition away from fossil fuels entirely to start using clean hydrogen or electricity, for example.
The Chair: Can I ask Senator McCallum’s question in a different way? The fossil fuel sector is the first sector to know about the greenhouse gas effect on the warming of the planet.
Let’s take a reference time: 2015. Have they reduced their emissions since 2015? Have they invested in renewable energy? What percentage is it?
Mr. Moffet: I’ll turn to my colleagues in a second, but I’ll preface it by saying that the sector has invested in decarbonization of its production so that its emissions intensity has declined. The question of whether its absolute emissions have declined is a function of emissions intensity and absolute production levels. We can give you the data.
The Chair: Can you clarify for the public the difference between “absolute” and “intensity”?
Mr. Moffet: What I mean by “intensity” is emissions per unit of production. If you’re at a steady state, and you produce 100 units and your emissions intensity goes down, then your overall emissions will go down. But if your production goes from 100 units to 200 units, even if your emissions intensity goes down, your overall emissions may go up.
Lindsay Pratt, Director, Pollutant Inventories and Reporting, Science and Technology Branch, Environment and Climate Change Canada: I can provide a few figures in terms of the overall level of greenhouse gas emissions from the oil and gas sector as a whole.
I don’t have the 2015 data year in front of me, but in 2016, we see that the oil and gas sector emitted 191 megatonnes of carbon dioxide equivalent within Canada. That increased up to 201 megatonnes in 2019. The years 2020 and 2021 were unique because of the impacts of the COVID-19 pandemic. In 2020, we saw a decrease down to 183 megatonnes, and in 2021 there was a bit of a rebound up to 189 megatonnes.
The Chair: What was the last number?
Mr. Pratt: In 2021, it was 189 megatonnes. The source of this information is Canada’s National Inventory Report on greenhouse gas emissions. It’s the official reporting of Canada’s greenhouse gas emissions to the United Nations.
Mr. Moffet: We can send you the reference for that.
The Chair: Thank you.
Senator Miville-Dechêne: It’s more production of oil but with less emissions because it’s increasing production?
Mr. Moffet: Production is increasing. Well, it went down and then it went back up. Intensity continues to improve.
The Chair: We’re becoming more efficient, but we are increasing our production. So the absolute is bigger — is that it?
Mr. Moffet: Essentially, that’s the simple story, yes, senator.
The Chair: Thank you so much.
[Translation]
Senator Gignac: Welcome to our witnesses. About two weeks ago, the Supreme Court of Canada ruled in Alberta’s favour and declared that the federal government’s Impact Assessment Act infringed on provincial jurisdiction. As we know, natural resources fall within provincial jurisdiction.
My question is this. Do you have any legal assessments to fall back on? Could this compromise Minister Guilbeault’s intention to impose emissions caps on the petroleum sector? That undeniably relates to natural resources, and I’m trying to understand whether it’s unconstitutional in terms of environmental assessment. Can it be unconstitutional to cap the oil and gas sector’s emissions?
[English]
Mr. Moffet: That question has been the source of considerable analysis and discussion since the Supreme Court’s decision.
The view of the government continues to be that it has the authority to regulate emissions from sources. When I talk about methane regulations or an emissions cap, those would be in the form of a regulation on emissions. Those would not take the form of actually how to manage your resources — where you can drill, or what kind of equipment you can use, or what royalties you pay. Those are within provincial jurisdiction.
Regarding your emissions, it doesn’t matter whether it’s an oil and gas production, or a vehicle, or an aluminum plant, the federal government has jurisdiction over emissions and pollution of any kind. We’ve been regulating pollution for 30 years. Essentially, that’s what we’re doing when we’re regulating emissions from the oil and gas sector.
Senator Gignac: These days, the carbon tax attracts a lot of coverage in the newspaper and in the House of Commons as well.
We have shown some leadership on that in Quebec, but they have another system. As you know, Quebec is like California. It has a cap-and-trade system for greenhouse gas emissions rights.
Since you’re there, and since the debate on the carbon tax will probably continue for some time here, and we have a study, could you comment, if possible, or send me a written answer if the answer’s too long, on the pros and the cons of the two systems — the carbon tax? Apparently, politicians have problems staying the course when it becomes too hot for them. I’m curious as to which system is better because Quebec and California have it, as do some other countries. I’m curious to have your analysis regarding that. If it’s too long, feel free to send me a written answer.
Mr. Moffet: Perhaps I can do both. I’ll start with a quick overview.
There are two or three different ways to impose a price on emissions, and they have different attributes. It’s hard to say that one is better than the other. They each accomplish goals in different ways.
At a high level, Quebec has put a cap on emissions. They know exactly what the total emissions will be, or at least what they won’t exceed. The market underneath the cap then sorts out where the emission reductions occur. It’s a way of ensuring a certain level of emission reductions yet with uncertain economic impacts because you don’t know how the market will work.
The alternative is to put a price on emissions, where the government sets the price. The market knows what the price is, so there is more certainty for the market, but the outcome is less uncertain because the outcome will depend on how the market responds to the price. That’s why I won’t tell you which one is better. I am saying that each has different pros and cons.
Senator Gignac: I worked in the private sector for many years, and I like it when the private sector establishes the price — it’s not the officials or the government.
Two or three years ago, the Parliamentary Budget Officer, or PBO, mentioned that the carbon tax should already be above $100. I believe it is now $170, so the federal government is $60. In reality, to make an impact in reducing emissions, the carbon tax should be much higher, but, as you know, it is tough for politicians to take that decision.
When you have the cap-and-trade system, politicians do not decide the price; the market decides the price. The politicians decide the cap, and the market determines adjustments to that. This is a significant difference. We have an electoral system here every four years — it is not nominations, like senators. We have to think about that as part of the equation.
Mr. Moffet: I agree with both points. There are significant differences, and the differences require considerable thought and analysis.
One additional point is that when the federal government introduced carbon pricing in Canada, we already had four provinces doing carbon pricing in three different ways, so the federal government had a decision to make: “Do we overrule two of those systems, or do we introduce a system that enables all three systems to exist so long as they achieve, more or less, the same thing?” And, as you know, that’s the approach the federal government took rather than overruling a provincial system that had already been in place, and had been established, in some cases, for quite a long time, and was starting to make some significant contributions to emission reductions. I think that it is a quintessential Canadian decision.
Senator Gignac: Perhaps you could submit a written brief about the pros and the cons of the two systems. I think that debate will become important in the coming months or years in Canada.
Mr. Moffet: We can give you an analysis. To be clear, it will not conclude, therefore, that one is better than the other.
The Chair: Thank you.
Senator Anderson: Thank you to our witnesses. While Canada works to phase out fossil fuels moving forward, how is Canada — in conjunction — addressing the challenges that the three territories face with some of the proposed movements to decrease reliance on heavy fuels, as well as new greenhouse gas alternatives that will not work within the North’s infrastructure, climate, high costs of implementation and the challenges that we face with the advanced climate changes?
Mr. Moffet: The government acknowledges the challenges. I wonder, senator, if you could clarify what you meant by “alternatives that will not work.”
Senator Anderson: There is a strong movement by Canada toward electric vehicles. Recently, the Prime Minister has recommended heat pumps. There is already evidence that the ability of heat pumps decreases at minus 15 degrees Celsius. To say the least, that’s probably our temperature right now in the North.
The North has started the use of heat pumps, and has evidence so far that proves that they will not work in the North. Twenty-three of our communities are fly-in only, and our roads are isolated and have no infrastructure for electric vehicles. I frequently drive the Inuvik-Tuktoyaktuk Highway, and I can’t imagine the workability of electric vehicles on that road. When we have windstorms and snowstorms, that infrastructure would be buried.
The realities of some of the proposed greenhouse gas solutions that Canada is proposing, in reality, will not work in the North, and that’s often overlooked.
The opening of the Inuvik High Point Wind project that was recently celebrated was a year delayed. The projected cost was $40 million. The cost as it stands is $70 million. It’s $20 million to $30 million over the projected cost. I’m not sure if that project will even pay itself off at this point. The case has also gone to court because contractors have not been paid. This alternative to fossil fuels has now seen contractors go to court to recoup money that they are not being paid.
Those are some of the realities that we’re facing, so I would like to know how some of these will be addressed.
Mr. Moffet: Those are serious considerations that are considered in a variety of ways.
The first is the ongoing efforts by the Government of Canada in conjunction with the territories to introduce electricity to more and more Northern communities in order to enable those communities to reduce their reliance on diesel and other forms of carbon fuel to heat homes and buildings.
I appreciate that it will take a long time and will be challenging because of the remote nature of the communities, and because of the nature of the climate, et cetera, but that is at the core of the overall transition in the North.
The second is that when we introduce measures such as the zero-emission vehicle mandate, and other measures, we often introduce flexibility associated with the North. In the case of the zero-emission vehicle mandate, the mandate will be national, so it will not be that each province has to meet the test. It will be a national test, and we have also included provisions for plug-in hybrid vehicles so that a vehicle can run for 50 to 60 kilometres to do routine activities, but then if it gets on the highway and the battery runs down — either because you have gone farther than the range or it is extremely cold — then it switches to internal combustion, and those will continue to be available in the North.
Third — and maybe I am veering a little into personal views, but I think this is also the Government of Canada’s view — is that when we develop policies that are associated with pushing clean technologies, there is a view that technologies, despite some of them having limited ability now, will evolve. For example, electric vehicles 20 years ago were not effective in Northern conditions.
I have a 10-year-old electric car. It loses 25% of its power when it is minus 30 degrees Celsius. That’s changing. That battery technology is changing. That’s not the case for modern batteries. I’m not saying it’s perfect, but the technology is evolving, and will continue to evolve. It’s the same thing with heat pumps. For decades, heat pumps were available in Europe in a warmer climate, and in the southern United States. We now have cold weather heat pumps.
I have one. It operates at minus 40 degrees Celsius. It works just fine. I’m not saying that everything is perfect right now for Northern communities, but I’m saying that the technology is evolving, and will continue to evolve.
Senator Anderson: Thank you for that.
I just want to point out that electricity in the North is four times higher in cost than in the South. Also, the territory does not have the capacity right now to increase electricity, and cannot meet the demand. I would like to put that out there.
Thank you.
The Chair: I would like to take advantage of the question asked by Senator Anderson to say that a couple of days ago, I met with two mayors from Northern communities — from Yellowknife — and they were explaining about Norman Wells. They say that the exploitation has been there for a hundred years, and that it is owned by the federal government, but exploited by Imperial Oil. The oil and gas that are extracted from these sites are cheaper than the Alberta oil sands. At the same time, they were explaining to me that a bottle of water now costs $7 in the North.
Can you tell me why we have this situation, where Northern communities have to use cheap diesel oil, which pollutes more than gas, when there is gas very nearby that can serve to electrify and heat the communities in the North?
Mr. Moffet: We will have to give you a written answer to that. I apologize; I don’t know the details of the current ownership structure and arrangement for that facility.
The Chair: Can you send us the answer to that question? Thank you so much.
Senator Batters: Thank you for being here. I’m from Saskatchewan, so I found this conversation about heat pumps very interesting because our premier, Scott Moe, just put out a tweet yesterday that had a screenshot from your own federal department’s website. It was about heat pumps, and the Government of Canada’s website says that heat pumps only work to a temperature of minus 15 degrees Celsius to minus 25 degrees Celsius, and below that “. . . a supplemental system must be used to provide heating . . . .”
Mr. Moffet, you were just talking about cold weather heat pumps, which you say work to minus 40 degrees Celsius. It looks like your own website doesn’t even say that at this point. I’m not sure if this is something that needs to be updated to provide people with correct information, but the screenshot from your own departmental website says that heat pumps only work to a temperature of minus 15 degrees Celsius to minus 25 degrees Celsius.
The people of Saskatchewan are extremely concerned — as am I — about this latest move by the federal government to say that it’s not a discriminatory system to pause the carbon tax for three years because everyone can get heat pumps. But, unfortunately, in Saskatchewan, we have many days and weeks of temperatures in the winter that are considerably below minus 15 degrees Celsius to minus 25 degrees Celsius. How do you square that circle?
Mr. Moffet: I don’t think it is our website that is in the screenshot. Is it the Environment Canada website?
Senator Batters: It’s a screenshot in Premier Scott Moe’s tweet. It’s a picture saying that heat pumps only work to a temperature of minus 15 degrees Celsius to minus 25 degrees Celsius, and then it says:
It is important to note that the vast majority of air-source heat pumps have a minimum operating temperature, below which they are unable to operate. For newer models, this can range from between -15°C to -25°C. Below this temperature, a supplemental system must be used to provide heating to the building.
It even has a little Government of Canada logo at the bottom.
Mr. Moffet: I’m not sure what your question is.
Senator Batters: The Government of Canada is saying on their website that heat pumps only work — even newer models, as they say in that quote — to minus 15 degrees Celsius to minus 25 degrees Celsius. You were just speaking about cold weather heat pumps that you say work to minus 40 degrees Celsius. Why doesn’t the Government of Canada’s website say that? Also, how are the people of the province of Saskatchewan supposed to see heat pumps as a viable method of heating homes in a very cold winter — many days of which are considerably lower than minus 25 degrees Celsius — when that is the case?
Mr. Moffet: I don’t actually know. I can’t take responsibility for the website, and I think that’s a political question. I think that’s better addressed to a minister.
Senator Batters: But isn’t it your department’s website?
Mr. Moffet: Our department isn’t responsible for the heat pump program — that would be Natural Resources Canada.
Again, I think you’re making a political point, which is perfectly legitimate. However, it is not one for officials to answer.
Senator Batters: Could you maybe check which website that is from? Is it from the Department of Environment and Climate Change Canada or the Department of Natural Resources Canada? I don’t know which one it is from, but wouldn’t you think that when you are speaking about heat pumps, your two departments probably coordinate?
I think the people of Saskatchewan would like to know what the correct answer about heat pumps is. You were just talking about minus 40 degrees Celsius, but this website says that even the newer models are only good to a maximum of minus 25 degrees Celsius, but it’s probably more like minus 15 degrees Celsius. Which is it?
Mr. Moffet: I certainly acknowledge that the information that the government provides should be accurate. We can get you information about where that website is located. My comment about heat pumps was about my heat pump. I do not have a supplemental source of energy. It works at all temperatures. I can’t tell you that this is the case for all heat pumps. I’m not a heat pump expert.
The Chair: Could you confirm that it is not your department, but rather Natural Resources Canada? Then, we may ask Natural Resources Canada to clarify.
It is Natural Resources Canada — thank you, Senator Gignac.
We are now on the second round.
[Translation]
Senator Miville-Dechêne: First, I’d like to ask a few clarifying questions about efficient and inefficient subsidies. You said you are in the process of reviewing all of this and that you have a set of programs, which may or may not be efficient. Of that set of programs, do you have any idea what percentage you currently have as subsidies or programs — efficient and inefficient — according to the international definition we have? That would give us some idea of what’s being reviewed: whether we’re talking about the percentage of programs or the value of programs. I even wonder whether we’re talking about a small portion of the $50 billion, which is a calculation, or whether it’s a very large portion of the total that’s inefficient.
[English]
Mr. Watkinson: There is a review process. That process has unfolded on the tax side, and they have identified nine tax measures that were deemed inefficient, and have been eliminated or rationalized and changed. I can provide a list of those measures in a follow-up. I don’t have them off the top of my head now.
Then, there is a review of non-tax measures as well — so other programming — that will unfold as part of the G20 peer review process. We’re partnered up with Argentina. We will do a peer review of our reports, and they will go through that process.
On the non-tax side, the review that is taking place will be part of that process. What we’ve announced in terms of the framework and the guidelines for government is really forward-looking. The emphasis is on not creating new measures at the program level or on the tax side that would be inefficient or inconsistent with those six exemption criteria.
Senator Miville-Dechêne: Would you have a ballpark figure of how much? If we are saying that the total is $50 billion, how much will you eliminate of inefficient measures?
Mr. Watkinson: It is difficult to put a figure on what will be eliminated going forward because it is hard to know what would have been introduced. If we look forward 10 years, we don’t have a good counterfactual of what would be.
[Translation]
Senator Miville-Dechêne: I have another question about carbon capture. Am I understanding correctly what you said? So far, you are not subsidizing the oil companies for these efforts?
They are doing it themselves, but you could potentially do it if there are agreements. That is what I think I understood from the discussion, but I want to be sure. You seemed to be talking about carbon capture methods for the future.
[English]
Mr. Watkinson: Carbon capture and storage is considered to be an abated technology, so within those six criteria, it would be eligible.
Senator Miville-Dechêne: But it’s not now. Are you providing grants to petroleum companies now to capture carbon?
Mr. Watkinson: There was a discussion earlier about the investment tax credit from the Department of Finance, and I don’t know the state of play of that.
[Translation]
Senator Miville-Dechêne: You say you’re reviewing the arsenal of measures you have to make the industry cleaner. Is the idea of taxing excessive profits — the so-called excess revenue of oil companies — one of those possibilities? The subject has been raised in the House of Commons, as it has for banks. Could this be another way of reducing emissions?
[English]
Mr. Watkinson: I’m sorry; the translation wasn’t working, but I think I got the gist of it.
Senator Miville-Dechêne: It was about taxing the excessive profits of the petroleum companies. The idea was floated at the House of Commons that you could get about $4 billion from excessive profits, which would be a way, I suppose, to eventually reduce emissions or production. I’m interested in that. Taxing excessive profits has been done for banking. Could it be done for oil companies?
Mr. Watkinson: It would be outside of the scope of the inefficient fossil fuel subsidies framework, which was looking at measures narrowly defined as WTO subsidies.
Senator Miville-Dechêne: Could it be an efficient measure? Could it be considered by the Government of Canada?
Mr. Watkinson: That’s outside of my area.
Senator Miville-Dechêne: That’s what I thought. Thank you.
Senator Sorensen: Thank you very much. On October 25, the Canada Growth Fund announced its inaugural $90-million investment in a Canadian geothermal company, Eavor Technologies, based in Calgary. As an Albertan, I am proud that the Canada Growth Fund is investing in a Canadian company that is using Alberta expertise to help reduce GHG emissions. I think that we need more announcements like this, so I’m looking for an update on the fund and its implementation.
To add to that, for the purpose of the report, this is a good collaboration. I’m looking for potential recommendations that would be beneficial to our report to help us highlight the importance of continual collaboration with various levels and regions of government. If you have the answer to that question, that would be fantastic. How do we continue to work together for the best of everyone? Think about our report, and what we might be able to put in it around the concept of the need for collaboration.
Mr. Moffet: I would mention collaboration in every second line of your report. It is essential that governments work together, and align regulatory signals and financial incentives. Indeed, I think that the first announcement from the Canada Growth Fund is a good example of collaboration within the federal family, which is important. For example, Natural Resources Canada has various programs that supported that company at the early stages of its technology development. The company is now in a position where it is able to be ready for a more commercial arrangement, which is what the Canada Growth Fund can provide. There was a good hand-off between federal programs that are designed for early-stage technology development to a more commercial stage financing in order to enable a company to grow and expand its market.
We similarly try to ensure that there is alignment and a good understanding of the various financial incentives that are available from municipal, provincial and federal programs for any given technology or corporate applicant. Is it perfect? It is never perfect. It could always be improved, but it is something we look toward.
You may be aware that late in the summer, the Government of Canada and the Government of Alberta announced a Canada-Alberta working group, and one of the purposes of that group is to dig into how we can better align the incentives in place to encourage decarbonization, which is occurring at a rapid rate in Alberta with some of the largest investments in Canada. How do we make sure the various incentive programs don’t duplicate one another, and instead complement one another? I am part of that working group, and there is a lot of active discussion.
Senator Wells: I would like to go back to two things. One is the question of subsidies and the $50 billion. Mr. Watkinson, you mentioned six criteria that are considered subsidies. Am I right in asking —
Mr. Watkinson: There are six criteria, where if you meet one or more of the six, you would be deemed efficient.
Senator Wells: How many are not considered efficient? Do you have a list, or is it all of the others?
Mr. Watkinson: All of the others.
Senator Wells: Of the efficient subsidies and the unallowable, inefficient subsidies, are those two numbers added together to make the $50 billion?
Mr. Watkinson: There is no $50-billion figure that is a government figure. This is a forward-looking framework that’s about not creating new measures or new spending that would be inconsistent with those six criteria.
Senator Wells: I understand. When we hear that the government will cut subsidies to the oil and gas industry, what would those subsidies be? Would that be the inefficient subsidies?
Mr. Watkinson: Yes, it’s the inefficient subsidies. The Department of Finance has identified and eliminated nine measures.
Senator Wells: Would you be able to supply to the committee what it has been for the last five years — if those numbers are kept, which I am sure they are if it is a subsidy eliminated? Is that something that has been quantified?
Mr. Watkinson: The Department of Finance’s nine tax measures were all announced in budgets, and usually there is some discussion or treatment of foregone revenue as part of the budget documents, so we can see what we can provide.
Senator Wells: I would like to get something because we do hear in public that the oil companies get subsidies. If they are not really subsidies, I would like to find out what it actually is and what the claim is, just so that the public is aware. Thank you for that.
Mr. Pratt, you had mentioned a cap on production of oil and gas based on emissions — was that you who mentioned that? Or would that be you, Mr. Moffet?
Mr. Moffet: A cap on emissions, not a cap on production.
Senator Wells: A cap on emissions. Did anyone mention a cap on production because I thought that was what I heard?
Mr. Moffet: Maybe I was not clear. I was trying to clearly differentiate a cap on emissions. I think I was responding to a question about the constitutionality following the recent Supreme Court of Canada reference case. The Government of Canada intends to put a cap on emissions, which would be a regulation on emissions — not a regulation on production. It would, thereby, not intrude on provincial jurisdiction over the management of natural resources.
Senator Wells: I have that.
You would be well aware that in Alberta and Saskatchewan, where oil is extracted from sand, there’s a higher emissions level, a higher cost and all of that, whereas in offshore Newfoundland, there are significantly lower emissions because the oil comes up by the pressure of the ocean, and there’s very little separation — all of the gas is reinjected to produce more efficiently. The only significant emissions would be from flaring, and flaring is a safety issue — it’s a production issue, but it’s primarily a safety issue.
Are the rules separate for offshore oil production than they are for onshore oil sands production?
Mr. Moffet: At the moment, we don’t have a cap. At the moment, we have methane regulations. They do not apply to the offshore. There are separate regulations for the offshore precisely because they are a completely different production process, and because they’re regulated under a joint federal-provincial management through the offshore boards.
The details of the cap have yet to be announced. Suffice it to say that the significant emissions intensity difference between offshore and onshore will be an important factor in the way that cap is implemented. Again, the details haven’t been announced, so all I can do is acknowledge that there is a difference, and it will be important.
Senator Wells: I’m going to wade into the political side. If you don’t feel comfortable — any of you — I get that.
Last year, after being asked by Chancellor Scholz about natural gas and the acquisition of natural gas from Canada, the Prime Minister said there was not a business case for gas.
Was that advice provided by Environment and Climate Change Canada or Natural Resources Canada? Was that government advice, or did he just come up with that from some other source?
Mr. Moffet: I know that advice was provided.
The issue at the time was whether Canada was in a position to be able to rapidly respond to the need in Europe for alternative sources for gas, given that they had heavily relied upon Russia and Russian allies for gas, and those sources were closed. Where could they get gas? That, of course, created a global demand, and the question was whether Canada could respond to that demand.
I’m simplifying, but I think the answer was that Canada was not in a position to be able to significantly respond. Why? Because in order to do that, we would need to build pipelines from many of the major gas-producing centres in Canada, and then build ports for export to Europe. It couldn’t be done in the time frame that Europe needed, and it certainly couldn’t be done in a cost-effective way to be able to compete with the Middle East, for example. So it wasn’t a response that Canada can’t produce gas, or that there isn’t a market for gas. I think the response was in the context of the immediate demand for gas — could we respond in a way where companies could make money? His answer was “No, there isn’t.”
Senator Wells: Was that advice provided by the department to the Prime Minister?
Mr. Moffet: I wasn’t part of —
Senator Wells: He said directly that there’s not a business case for gas.
Mr. Moffet: There was considerable analysis provided by, particularly, Natural Resources Canada on that question.
Senator Wells: Could we have a copy of that analysis?
Mr. Moffet: I don’t know what form it took, and I don’t work for the Department of Natural Resources. I’m sorry.
Senator Wells: Maybe that’s something we could ask for, chair.
Senator Massicotte: I’m going to ask you a quick question because there’s a lot of information, and I want to make sure.
First of all, from a —
Mr. Moffet: This is the speed round?
Senator Massicotte: Exactly. These are easy questions, if you choose to respond.
From the big picture sense, I remember having this discussion with the president of the IEA, as well as the president of the Renewable Energy Institute. Everybody agrees that if you look at the scenario of the supply and demand, it’s highly probable that we will not run out of oil and gas; there will be ample supply for all the years we want. But we will choose to limit those and so on. Therefore, the conclusion that we all arrived at was that there is unlimited supply. Saudi Arabia is probably the most efficient supplier, but we’re facing that.
But the only thing that we can influence — if supply remains constant — is demand. That’s where we, as a country, have a significant role, and we can say that it looks like there will be ample supply. Therefore, how do we cut demand to make sure we meet our CO2 emissions targets? Is that a good summary of the global supply-and-demand scenario?
Mr. Moffet: I think so. I doubt that anybody would say there is literally an unlimited supply; there is a finite supply. I think there is agreement that there is adequate supply. That’s a bit of a nuance.
There’s plenty of oil and gas. It will become increasingly expensive to explore.
But yes, the real issue is demand — how we manage demand, and how we reduce demand. Canada is taking action to reduce our domestic demand, and Canada is active on the international stage, encouraging other countries to reduce their own demand.
Senator Massicotte: I’m jumping, like I said; I warned you. On the investment tax credit applicable to CCUS, is it typical that we give back a percentage of the investment they make? What’s the structure of that credit?
Mr. Moffet: I think that question would be better responded to by Finance Canada.
Senator Massicotte: I’ll write them a letter.
Mr. Moffet: I’m sure they can respond, but it’s a standard investment tax credit. You basically get to write off a certain portion of your investment.
Senator Massicotte: Many years ago — I don’t know how many years; it’s too many years maybe — every time we would talk about the oil sands, we would talk about the improvements we were making, and that it was becoming cleaner, and not only was the density going up, which is very good, but we also had a better product. In your own presentation to this same committee several months ago, you made it clear that one of the objectives to make it legitimate — in a world sense — is to be very efficient relative to our production. It would, therefore, be cleaner. I had the impression that you were saying that we’re going to be the top of the world. That’s how we’ll get our licence and be credible to do so.
I’ve asked now many times — I wouldn’t mind seeing a graph that I saw once; we’ve asked for it, but we never got it — how clean is our energy? Where do we stand in a world sense? I saw a graph last week or so making that comparison. To my immense disappointment, the emissions that we have are not the cleanest in spite of the years and decades we’re talking about. It’s still above average.
Is that to remain, or can we expect our legitimacy to be more efficient, and to have a cleaner product?
Mr. Moffet: I think the answer is that the energy intensity of Canadian oil and gas production varies by the type of product. We have offshore oil, as Senator Wells pointed out, which is among the least emissions-intensive in the world. We have very low emissions-intensive natural gas production in some parts of Canada. The oil sands are much more energy-intensive to produce oil, and, therefore, it is more emissions-intensive. A lot of investment has gone into reducing that emissions intensity, but it does not compare to offshore oil, and it doesn’t compare to some oil that’s produced in the Middle East.
Senator Massicotte: The graph that I saw made all these comparisons, including in Newfoundland. We have areas where we’re more efficient —
Mr. Moffet: Yes.
Senator Massicotte: — but that’s a minority. The big volume of oil and gas is the oil sands — would you not agree?
Mr. Moffet: It’s a big volume — I don’t know if it’s “the” big volume. It’s a significant portion of our oil.
Senator Massicotte: It’s big enough.
Mr. Pratt: Of the 189 megatonnes of emissions in 2021, 85 of those were from oil sands.
Senator Massicotte: That is 85 divided by how much?
Mr. Pratt: It’s 189.
Senator Massicotte: It’s becoming more prevalent, am I correct? The density is going down? The relevancy is going down?
Mr. Moffet: The intensity is going down, but it’s also going down in all other productions. It remains the biggest source of emissions within the sector.
Senator McCallum: My perception is that we are moving toward alternate models of energy without taking into account the unique situations of certain geographic areas that could actually place people in danger with unnecessary expense.
On Environment and Climate Change Canada’s web page, it says heat pumps can work now to minus 30 degrees Celsius. But even in Winnipeg, where I live, we have four or five weeks of minus 40 degrees Celsius. My community is near the territories. One can say that there will be electric vehicles and heat pumps, but it doesn’t seem that people have fully explored how these regions will be impacted. When we come out on the winter roads, it’s 18 hours of travel through muskeg. Electric vehicles aren’t going to make it. I just wanted to say that.
By the way, Natural Resources Canada is saying it’s minus 25 degrees Celsius. There’s a conflicting statement there.
First Nations continue to be marginalized in many areas, including decision making, consultation and lack of economic opportunity. How do we ensure that economic reconciliation becomes a reality for them in a just transition, especially when we’re looking at hydro now?
Mr. Watkinson said that we need to look at the definitions of the words we use, and “clean” is not a word that we use with hydro because of the devastation that occurs when people are dispossessed of their land. It causes devastation, and it’s continuous.
How do you ensure that there will be a just transition, and that there will be economic reconciliation at this time of transition?
Mr. Moffet: I’m going to apologize to you, senator, because I will sound like I’m ducking the question. In fact, the question is so significant that none of us could give it merit to give you a proper answer. It merits a broader discussion. Many parts of the government are focused on developing processes and designing programs with the specific intent of addressing the long-standing need for reconciliation, on the one hand, and the importance of ensuring a transition by all Canadians to a future scenario where the country is able to function with net-zero emissions. That’s not going to be an easy transition. A key aspect of ensuring that transition is actually effective will be the inclusion of all Canadians, including Indigenous people.
I realize that’s a very high-level answer, but in order to provide more detail about the kinds of decisions that are being made, and the kinds of activities that are being undertaken, it would merit this committee arranging a discussion on that and bringing in the appropriate witnesses.
On the heat pump issue, the website that Premier Moe referred to is indeed the Natural Resources Canada website. I just want to clarify; it doesn’t say that heat pumps don’t work below minus 25 degrees Celsius. It says that supplemental heating sources may also be required. Those sources include all electric heaters and hybrid systems.
Basically, you can have an electric heater attached to your heat pump. That’s what I have in my house. You can have a hybrid system where, when the heat pump isn’t working, the natural gas furnace continues to work.
The point is that there are known limits. Those limits are evolving over time, but technology is also available to ensure that the house doesn’t literally become cold all of a sudden.
The Chair: In the climate science area, one field of expertise is growing rapidly: It’s attribution science. I’m sure you have seen studies that talk about the wildfires last summer that devastated an area equivalent to New Brunswick and Nova Scotia together — that was burned to the ground.
There was an interesting study on quantifying the contribution of the major carbon producers that increase the vapour pressure deficit. That was linked with the burned areas in the U.S. and in Canadian forests.
Are you looking into this attribution science, which I think is so important, in order to have the scientific background that backs the type of regulations you are proposing?
Mr. Moffet: Yes, indeed. Attribution is a very topical area of scientific activity. Within the Department of Environment and Climate Change, we have the Science and Technology Branch and the Meteorological Service of Canada, both of which are increasingly engaged in the issue of attribution. We don’t own the field. It’s a burgeoning field. But we do have research under way. I know that this is becoming a theme for me, but, if you want, we could arrange for expert representatives from the department to come and talk about that.
The Chair: That would be appreciated.
Senator Massicotte: Chair, after we are finished with our witnesses, may we have a discussion amongst ourselves on how we should proceed?
The Chair: Yes.
Senator Massicotte: I have a quick question. You had a very good discussion with Senator Gignac relative to the cap and trade, as well as the whole taxation issue and the choices you have. I understand the theory very well, but I also understand — from a real practice sense — it’s not working at all. The incremental increase of the taxation is not discouraging consumption because it’s not going higher. Penalties should be imposed for consuming too much from the cap and trade, but it’s not happening. Do we need to look at the system, or should we presume again that it’s working and leave the provinces to proceed as they’re doing?
Mr. Moffet: Sorry. Do you mean that the pricing in general is not working?
Senator Massicotte: With the cap and trade, the increase is so insignificant.
Mr. Moffet: Quebec’s cap-and-trade system has resulted in a relatively low market price for carbon; that’s true. The reason is that it is linked with California. California’s system has been supplemented by a significant number of publicly funded programs that have resulted in significant reductions in emissions, and then a generation of credits within the system that are relatively low-cost that can, in turn, be purchased in Quebec. As a result, the market price is fairly low.
The overall emissions in Quebec and California, however, remain below the cap. Yes, the price is low, but we know the emissions level in Quebec, and it is below the cap.
The Chair: Thank you so much for your contribution, colleagues, and thank you, witnesses, for your answers.
(The committee continued in camera.)