THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Thursday, March 3, 2022
The Standing Senate Committee on Energy, the Environment and Natural Resources met by video conference this day at 9:03 a.m. (ET) to study emerging issues related to the committee’s mandate.
Senator Paul J. Massicotte (Chair) in the chair.
[Translation]
The Chair: I’m Senator Paul Massicotte from Quebec. I’m the chair of this committee.
Today, we’re conducting a hybrid meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
Before we get started, I would like to remind senators and witnesses to please keep your microphones muted at all times unless the chair calls on you. When you speak, please do so slowly and clearly.
For those participating by Zoom, please use the “raise hand feature” to take the floor. For the others in the room, please let the clerk know if you wish to speak.
I’ll do my best to get to everyone who wants to ask a question. To that end, I ask that you keep your questions and preambles brief. This also applies to the witnesses, if possible.
Should any technical issue arise, particularly in relation to the interpretation, please let the chair or the clerk know so that we can resolve the issue quickly.
Please note that we may suspend the meeting if technical issues arise so that all members can fully participate in the meeting.
I would now like to introduce the committee members who are participating in today’s meeting. We’re joined by Senator Margaret Dawn Anderson from the Northwest Territories; Senator David Arnot from Saskatchewan; Senator Claude Carignan from Quebec; Senator Roza Galvez from Quebec; Senator Clément Gignac from Quebec; Senator Mary Jane McCallum from Manitoba; Senator Julie Miville-Dechêne from Quebec; Senator Judith Seidman from Quebec; Senator Karen Sorensen from Alberta; and Senator Josée Verner from Quebec.
I would like to welcome all of you, as well as the Canadians across country who are tuning in.
Today we’re meeting pursuant to our general order of reference.
Our first panel consists of representatives of the Office of the Auditor General of Canada. We’re joined by Jerry DeMarco, Commissioner of the Environment and Sustainable Development; Kimberley Leach, Principal; James McKenzie, Principal; and Francis Michaud, Director. Welcome, everyone. Thank you for accepting our invitation.
The main topic of your fall report entitled Lessons Learned from Canada’s Record on Climate Change also addresses emissions reduction funds.
Mr. DeMarco, you have the floor.
[English]
Jerry DeMarco, Commissioner of the Environment and Sustainable Development, Office of the Auditor General of Canada: We are happy to be before your committee today. I would like to acknowledge that this hearing is taking place on the traditional unceded territory of the Algonquin Anishinaabe people.
As you know, I presented five reports to Parliament on November 25, 2021. Today, I will focus my opening remarks on the two reports that I understand are of most interest to the committee: Lessons Learned from Canada’s Record on Climate Change and Emissions Reduction Fund.
With me today are Kimberley Leach, James McKenzie and Francis Michaud, who were responsible for my recent reports.
First, I would like to focus on Lessons Learned from Canada’s Record on Climate Change. This report is not an audit but a summary of lessons learned from Canada’s climate change efforts since 1990. After more than 30 years, the trend in Canada’s greenhouse gas emissions, which create harmful climate impacts, is going up. Despite repeated government commitments to decrease emissions, they have increased by more than 20% since 1990.
Canada was once a leader in the fight against climate change. However, after a series of missed opportunities, it has become the worst performer of all G7 nations since the landmark Paris Agreement on climate change was adopted in 2015. There has been some recent momentum in the form of legislation and stronger plans, so I’m still optimistic that Canada’s performance can be turned around. However, we can’t continue to go from failure to failure; we need action and results, not just more targets and plans.
At the heart of this report are eight lessons learned from Canada’s action and inaction on the enduring climate crisis. Leadership is the first lesson. Stronger leadership and coordination are needed to drive progress on climate change. Other lessons include reducing dependence on high-emission industries, learning to adapt to climate change impacts, investing in a climate-resilient future, increasing public awareness, acting on and not just speaking about climate targets, involving all climate solution actors and protecting the interests of future generations.
To help frame discussions on climate change, our report provides critical questions that legislators and others can consider to prompt action against commitments. We have provided these in an appendix to this statement for your reference today.
[Translation]
I’ll turn now to our audit of the Emissions Reduction Fund for the oil and gas sector. This fund was part of the measures that the Government of Canada rolled out in response to the COVID-19 pandemic. It aimed to reduce harmful emissions while maintaining employment and encouraging investments in oil and gas companies.
We found that the program was poorly designed. It didn’t link funding to net emission reductions from conventional onshore oil and gas operations. For example, in two-thirds of the 40 projects funded by the Emissions Reduction Fund’s first intake period, companies stated in their applications that the funding would allow them to increase their production levels. When production increases, so do the related emissions. These increases weren’t reflected in Natural Resources Canada’s projections.
To help Canada achieve its national targets for reducing greenhouse gas emissions, Natural Resources Canada should make sure that its policies, programs and measures are based on reliable estimates of expected emission reductions.
The COVID-19 pandemic has shown that, in a crisis, strong and concerted government action has a positive impact. The enduring crisis of climate change looms larger than ever. Like pandemics, climate change is a global crisis. Experts have been raising the alarm about this crisis for decades. Pandemics and climate change both carry risks to human health. Both require whole-of-society responses to protect present and future generations.
In closing, the federal government must achieve real outcomes when it comes to environmental protection and sustainable development — not just words on paper or unfulfilled promises. All too often, Canada’s environmental commitments aren’t met with the action needed to protect air, land, water and wildlife, now and for future generations. We urgently need to reverse this trend.
Mr. Chair, this concludes my opening remarks. We’re happy to answer the committee’s questions.
The Chair: Thank you, Mr. DeMarco. We appreciate it.
[English]
Senator Seidman: Thank you, Mr. DeMarco, for your presentation. As you know, in September 2015, Canada adopted the United Nations 2030 Agenda for Sustainable Development, which includes 17 Sustainable Development Goals. The sixth goal is to ensure availability and sustainable management of water and sanitation for all.
As the Commissioner of the Environment and Sustainable Development, you have a responsibility to monitor and report on the work done by federal departments and agencies to fulfill the federal government’s commitment to implement these Sustainable Development Goals. The Minister of Environment and Climate Change has been mandated by the Prime Minister to establish a Canada water agency to improve freshwater management in Canada. In what way does the establishment of such an agency help Canada meet the sixth sustainable development goal? Given that freshwater management in Canada is a responsibility shared among federal, provincial, territorial and Indigenous governments, is the establishment of a central agency, such as a Canada water agency, an achievable goal?
Mr. DeMarco: Thank you for the question. Yes, the establishment of a central agency can help. I didn’t speak about it in my opening statement, but we did release a November report on three water basins and coordination among the departments in the three water basins. We do have James McKenzie here from our office who can speak directly to that report.
Perhaps James could address Senator Seidman’s comments regarding cooperation and coordination in the three water basins we looked at in the November report.
James McKenzie, Principal, Office of the Auditor General of Canada: Thank you for your question, senator. Your question regarding the role of the agency and its contribution to the sixth Sustainable Development Goal is important.
We looked more specifically at the collaboration between the Environment and Climate Change Canada and Agriculture and Agri-Food Canada in terms of the collaboration at the level of the science and monitoring that they were conducting. It is clear that both departments are working together. There is room for improvement. We noted that in our report, and we had recommendations to that effect.
We also recognized that there are numerous federal departments and agencies that are involved in water, one way or the other. We chose Environment and Agriculture because of the important roles that they play in terms of scientific activities. But given the number of federal departments, agencies and the other jurisdictions, as you have mentioned, that are involved in managing water resources and, more broadly, other third parties — research organizations, academics, industry associations and, certainly, Indigenous groups across the country — they all have a role and are contributing to the management of water and have vested interests.
I would say that a Canada water agency that is able to take that broader view would certainly contribute to enhancing collaboration. Not only collaboration in terms of the science that we looked at, but also in sharing that information and ensuring that the needs and the interests of organizations are being met by the research that’s being done at the federal level.
Senator Seidman: That is a really helpful answer, Mr. McKenzie. I might follow up on that because, at the very end, you noted the importance of the coordination of data, managing the scientific aspects and the communications aspects as well, of course. Do you feel that the federal government has the mechanisms in place to manage the coordination among those multiple jurisdictions, especially through a centralized body?
Mr. McKenzie: Thank you. It would certainly be challenging given the number of organizations. We saw that there was room for improvement just looking at the two federal departments that we examined. But if there is a concerted effort — particularly with respect to not only collaborating on the science and the monitoring but equally as important on the communications — that’s a potential role that an agency could play, being able to consolidate that information and share it with the various organizations.
It would be challenging, as I mentioned, but I think that the mechanisms would exist to help facilitate that. An agency that has a broader scope would be well placed to play that role.
Senator Seidman: Thank you very much. That’s very helpful.
Senator Galvez: Thank you, Mr. DeMarco, for your remarks.
For someone who follows what is going on with climate change and emissions, your reports were not a surprise. Still, it was very shocking to learn about the Emissions Reduction Fund, which had almost the opposite effect of what was desired. I want to ask you a few questions about that.
Given that big amounts of money were given for reducing emissions but it had the opposite effect of increasing production, would you consider this type of assistance a subsidy or a subvention to the oil and gas industry?
We see that money still flows into this polluting sector and that we are not obtaining our targets. So we have this dislocation and, as you have said many times, we don’t walk the talk.
What can we do about the financial sector in order to align with all the commitments that we have internationally and also our own commitments here domestically with the new legislation that we are given?
If I have time, I will ask a third question.
Mr. DeMarco: Thank you, Senator Galvez. The Emissions Reduction Fund is a fossil fuel subsidy. We are in the third round now of that fund. Most of the fund is still in the kitty and ready to be disbursed. The federal government has committed to making changes for the third round of funding. We’ll have to see whether there are improvements that are made in response to the recommendations we made.
Most definitely it is a fossil fuel subsidy. It targets methane, which is regulated under the Canadian Environmental Protection Act and that itself is meant to operationalize the “polluter pays” principle. So it is an interesting issue, with the choice to fund emissions reductions or at least attempt to fund emissions reductions while also, ostensibly, implementing the “polluter pays” principle.
The issue of most concern with the implementation of that fund is the failure of Natural Resources Canada to look at net emissions. This remains a difference between our view and the department’s view to this day. We’ve had several hearings about this now. We are saying that the principle of comprehensiveness needs to be looked at in the Emissions Reduction Fund so that increases in production are factored in and that they do not just look at the particular emission reduction equipment that was installed but also the net effect of, for example, in many of these applications, the indication from the applicant that they would increase production. And with production increases, emissions increase. So that’s the answer to the first question.
The second question, on lesson 4 from our Lessons Learned from Canada’s Record on Climate Change report, focuses on the financial aspects of addressing climate change. There have been some recent developments, including, for example, under the Net-Zero Emissions Accountability Act, the Minister of Finance now has to report annually, once that section comes into play, section 23, I believe it is. Once that comes into force, the Minister of Finance will be reporting annually on risks and opportunities related to climate. The global momentum on this in the government sector and in the private sector within the world of ESG — the environmental, social and governance issues — it is moving along quite rapidly.
I would say Canada has been slow off the mark, in terms of participating in the momentum regarding climate finance. It has some catching up to do.
We will likely see, because of the content of the mandate letters to the Minister of Finance and to the Minister of Environment and Climate Change, some initiatives in that regard in the coming year.
Senator Arnot: Thank you, Mr. De Marco, for your opening remarks. I would like to focus on Report 6, Departmental Progress in Implementing Sustainable Development Strategies— Healthy Coasts and Oceans, Pristine Lakes and Rivers, and Sustainable Food, which applies to 12 departments and agencies. I notice that the progress in reporting was very poorly performed. There were a number of deficiencies and weaknesses there and 50% of the results on actions were not reported at all.
What is your strategy to bring more motivations to those departments and agencies and to bring rigour, focus and intention to the commitments? If you apply lesson 1 to that question, how have those departments and agencies performed post their commitment to accept those recommendations in the report?
Mr. DeMarco: Thank you, Senator Arnot. I will introduce our response to that question before turning the microphone over to Francis Michaud regarding the responses to the recommendations.
For the information of everybody else, Senator Arnot is referring to the report on sustainable development strategies implementation. This is a report that we produce annually and it is a required report from our office from the Auditor General Act that cross-references the Federal Sustainable Development Act. And you made a link, Senator Arnot, between that report and lesson 1 from our Lessons Learned from Canada’s Record on Climate Change report, which is about leadership.
We are in the process of modifying our own approach. We have learned our own lessons from years of doing the Federal Sustainable Development Strategy reports. Mr. Michaud can talk to you both about the changes we are making to our approach and the hoped-for changes from the departments as well as the responses to the specific recommendation from Report 6.
Francis Michaud, Director, Office of the Auditor General of Canada: Thank you for your question. We’ve been auditing the contribution by departments and agencies to the Federal Sustainable Development Strategy for many years. Over the last cycle, the 2019 to 2022 cycle, we noticed serious shortcomings in terms of progress reporting, and it has been like this for every year that we audited this. For the next cycle, we decided to audit whether departments contributed directly to the targets that are part of the strategy. There are more than 30 targets to implement the strategy.
For this year, fiscal year 2020-21, we selected one target under the goal of healthy wildlife populations. This is a new approach that we took this year, compared to the previous years, to focus more on the impacts of the departments on plans to contribute to the implementation of the Federal Sustainable Development Strategy.
One thing that is a significant change that happened last year was amendments to the Federal Sustainable Development Act that came into effect December 2020. That expanded the number of organizations that must contribute to developing the Sustainable Development Strategy. So the total number of organizations subject to the act is now 99. There is a significant increase of organizations to audit. For the cycle 2022 to 2026, we will have to audit their contribution to the next strategy.
Senator Gignac: Welcome, commissioner. Just like my colleague Senator Galvez, I am concerned with the fact that two thirds of 40 projects funded by the Emissions Reduction Fund has assisted with the increase of production. But these days there is a huge game changer in Europe with what has happened. As you know, or you may know, Russia is in fact the third-largest oil producer and is the second-largest natural gas producer. In Europe now, countries are likely re-evaluating the reliability as an energy supplier to Europe, Germany and France. Some experts suggest that maybe Canada could be a solution as a reliable supplier of energy in Europe.
I know that your role as a commissioner is more to analyze whether Canada reaches its targets in terms of greenhouse gas emission reductions. Climate change, as you know, is a significant challenge. By the same token, when we talk about leadership, we have to be sensitive to what happened in Europe.
Do you have any thoughts regarding the path that Canada has to use — fighting climate change, but be a reliable partner if Germany, France, Italy knock on our door for natural gas or liquified natural gas or something like that?
For me, I think it’s something that I have difficulty in reconciling, what the best choice for Canada will be, because, after all, we live in the same global village and on the same planet.
I think that environment is very important but governance is very important as well. I think some partners look at Canada. They will have a huge impact on greenhouse emissions for Canada, but not necessarily overall for the planet if they are a new supplier for European countries.
Mr. DeMarco: Thank you, Senator Gignac.
As you know, our report predates the terrible situation that is occurring right now in Ukraine. I can offer some thoughts on the issues that you raise.
First of all, going back to something that I mentioned in my opening statement, when production increases, emissions increase, not only at the facility but also in whatever country is consuming that fossil fuel.
We are supposed to be on a road towards net zero in 2050. The past 30 years have seen efficiencies gained in terms of emissions intensity. However, because the rate of production was going up at a faster rate, unlike our G7 colleagues, Canada’s emissions went up. So we have to address that fundamental problem between now and our 2030 target and the 2050 target of net zero.
Having said that, no one is suggesting that we can switch off fossil fuels immediately. So there will be issues like those you just described that come up where immediate needs need to be addressed. We don’t have the capacity in terms of non-emitting sources to make a wholesale change from fossil fuels to renewables, for example, in a matter of years. It will take some time.
It’s a difficult question. I’m not in the position to answer your question fully. I do wish to reiterate that any short-term decisions that lead to increase in production partly account for why Canada’s emissions graph has gone up over the past 30 years. We do have to tackle that at some point or another if we are going to make our contribution to address the global climate change crisis.
Senator Gignac: It’s more food for thought.
I think an increase in the carbon tax is one solution. We will use the receipts to invest more in the new technology, carbon capture or other things, to improve the intensity reduction, improve the efficiency. Is that something that you will suggest to government, that at some point if we have to “accommodate” our partners in Europe that, by the same token, one solution will be to accelerate the carbon tax increase and invest more in technology? Is that one approach that you will recommend?
Mr. DeMarco: Carbon pricing is an essential component of Canada’s current plan. We will have a new plan later this month under the Canadian Net-Zero Emissions Accountability Act. We will have to see what contribution it makes.
Next hour, you have the Parliamentary Budget Officer, who has done some analysis in terms of the contribution of carbon pricing to the overall target, to the previous target of 30%; carbon pricing was going to contribute more than 50% of the target, so it’s a major component of Canada’s plan to reduce emissions.
The question of accelerating the price increase is a matter of policy for the government of the day to decide. We do know that Canada has signalled to the market and to Canadians the stepwise increases from now to 2030 in terms of the $170 price that will be coming. That price is much higher than it is today. It is lower than some other countries in Europe though, so there is the opportunity to consider. That’s something for the government to decide, as you mentioned.
[Translation]
Senator Carignan: That’s the gist of my question. I’d like to follow up with the carbon tax. Isn’t the current increase in prices, especially oil prices, which are skyrocketing right now, having the same effect as a massive carbon tax?
The carbon tax hasn’t been very effective to date. Have you looked at the effectiveness aspect? Aren’t there other ways to meet greenhouse gas reduction targets?
My second question is about the use of the Emissions Reduction Fund. Why provide funding for applications whose justification or rationale states that there will be more oil or gas production? Is funding being allocated based on increased emissions in Canada, but an overall reduction, for example, with the retirement of coal-fired plants in China or in other parts of the world? Is the goal an overall reduction in greenhouse gas emissions, even if emissions will increase locally? Is this part of the justification for awarding the funding?
My first question is about effectiveness and my second is about the fund.
Mr. DeMarco: I’ll start with carbon pricing. In the current action plan, which will be amended in a few weeks, the price of carbon is a key factor. It’s one of the 64 components of Canada’s climate action plan. It constitutes a significant part of the plan. There are many other options, such as regulations, subsidies and behavioural changes by individuals and corporations. Yes, carbon pricing is a key part of the Government of Canada’s plan. When the new plan is released in a few weeks, this component will continue to play a major role in meeting the 2030 and 2050 targets and the net-zero emissions target.
In terms of your second question, no, Natural Resources Canada hasn’t looked comprehensively at the possibility of reducing net emissions with the projects approved by the program. The department hasn’t even looked at the net emissions in Canada. It used a very narrow calculation, but didn’t look at emissions in Canada or emissions overall. As I said before, the narrow perspective makes a significant difference. I would recommend that the department take a broader view, as you said, to determine whether net emissions will change as a result of these subsidies.
[English]
Senator McCallum: Thank you, Mr. DeMarco, and to those who are here to meet with us today.
I wanted to go to your closing statement where you said that “ . . . actions needed to protect air, land, water, and wildlife, now and for future generations.”
These are all groups that don’t have a voice of their own in society and, therefore, I think people find it difficult to take these seriously. How can the federal government ensure that the interests of future generations are included in present decisions? How can the principle of intergenerational equity be incorporated into institutional decision making?
Mr. DeMarco: Thank you for that question, Senator McCallum. This venue is a perfect place to talk about that issue because the Senate has an important role in giving voice to under-represented groups. That has evolved over history from a geographic point of view to a demographic point of view. I would suggest that the Senate is well placed to consider extending from the geographic to the demographic to the temporal as well. Future generations are an under-represented group. Non-human nature is also an under-represented group in terms of biodiversity. These are sectors, if you want to call them that, Senator McCallum, that do not have a voice and that are under-represented. The Senate is well placed to give voice to those that are under-represented in current decision making.
As we note in lesson 8, government decision making tends to focus on the short term. It’s also true of the private sector as well, in terms of profits in the next quarter and so on, which has the effect of discounting the interests and the rights of future generations. You see the youth of today standing up more for the youngest generation and, by extension, the generations to come. Canada and governments worldwide have had difficulty factoring long-term problems into political expediency and the pressure for short-term solutions. This, in fact, was a lesson we learned in putting together this report.
Our audits typically look at shorter periods of time, but we thought the root causes of Canada’s inaction on climate change had to be looked at from a multi-decade point of view. In this case, we looked at 30 years. This was one example of a government institution, in this case, the Office of the Auditor General through the commissioner, trying to look at things through that longer-term view you just talked about.
If governments were required to do so, just like, for example, in recent years the Canadian Gender Budgeting Act has required a gender-based analysis plus, or GBA+, lens to be applied to important financial decisions made by the federal government, there could also be a requirement to factor in to longer-term considerations.
Looking at the longer term is implicit, in part, in the concept of sustainable development and in the reference to future generations in the Federal Sustainable Development Act, but it is not well operationalized, as you mentioned in your question. That’s something the federal government needs to do with many of these horizontal initiatives, whether they be through the United Nations Sustainable Development Goals that Senator Seidman mentioned, GBA+, future generations and so on. The federal government needs to figure out how not to discount the future and under-represented groups in its decision making.
One way would be to require that to be done, similar to what has been done on the gender side with the Canadian Gender Budgeting Act. There are many other mechanisms as well.
Senator McCallum: Would you comment on those other mechanisms, please?
Mr. DeMarco: We touch on this in our report. Some countries have actually established an office responsible for monitoring the government’s treatment, if you could call it that, of future generations. This isn’t just for environment and sustainable development. There is a financial component, a health component and education component as well. For example, Wales and Hungary have operationalized it by having commissioners for future generations. That’s one practical example that exists in other countries.
Given my title has the phrase “sustainability development” in it, I will do my best to operationalize it through our work as evidenced, for example, by the 30-year time frame of our climate report, as opposed to looking at it through the more traditional 2- to‑3‑year time horizon we see in a program-review type of audit.
[Translation]
Senator Miville-Dechêne: Thank you, commissioner, for your candid responses. I’ll focus on Report 5. We know that the federal government has increased its reduction targets, which some say are quite ambitious. My question, as a neophyte, is what happens next? How are the calculations made? Do you have enough transparent data from the government to assess how much of the expected future reductions will result from federal government policies?
In other words, can we compartmentalize, in this reduction, what stems from government policies and what results from the actions of other players? How can we obtain a relatively scientific measurement of the situation? I must admit that I imagine that it’s quite difficult. However, can we be sure?
Mr. DeMarco: Thank you for the question. We are part of the Office of the Auditor General of Canada. We have access to the information we need in order to conduct our analyses and make our observations. We have a new mandate.
Section 24 of the new Canadian Net-Zero Emissions Accountability Act asks us, by 2024 at the latest, to publish reports on the federal government’s climate measures. As yet, we have not chosen the option that we are going to use for that report. I would like to hear this committee’s observations and recommendations for determining how we can best use our new mandate.
We are listening to you and to the other stakeholders, to find out how to use the new mandate and to ensure that our reports accomplish the things you spoke about previously. We have to publish our first report by 2024, as I said, but we can begin to do so beforehand because we are currently in a crisis. I would like to know whether you have recommendations for us as to our new mandate. We are currently studying it.
Senator Miville-Dechêne: In terms of the Emissions Reduction Fund, like my colleagues, I am quite scandalized when I see what is happening. Aside from talking to the Department of Energy and Natural Resources, is there a mechanism, in your office or elsewhere, for studying these grant programs before they are implemented?
Mr. DeMarco: Only one provision in the act requires the government to consult us before it makes a decision. It applies to the strategy for sustainable development. This year, there will be a new strategy and we are going to be sent the new strategy, and how it will be used, for our comments. As for the other policies, there is no obligation to consult us before decisions are made.
We try through our recommendations to say where problems exist and where they can be improved, in order to get through other stages in the programming process. But the government is not required to listen to our recommendations.
Yes, that is the nature of the Office of the Auditor General. It’s our role to look at the government’s performance, but it’s the government’s role to choose the policy.
Senator Miville-Dechêne: Thank you.
[English]
Senator Anderson: Mr. DeMarco, I am from the community of Tuktoyaktuk, which is experiencing profound impacts of climate change. You spoke about inaction regarding climate change. We have been experiencing climate change since the 1950s, but I can tell you that I see drastic changes every time I go home. Every two to three months, I see the impacts of climate change.
In addition to the homes that have been relocated, we anticipate that further community infrastructure, our landfill, several community buildings and our cemetery — our one and only cemetery — will have to be relocated in the future.
In addition to the challenges we’re facing, in the 1980s, we had an oil and gas boom. What happened with the oil and gas is that they left a number of slumps, as well as a man-made island that is degrading. They are now leaching into the water, which is affecting the lands and the animals.
Who is responsible for the reparation and remediation of these slumps and this man-made island that sits close to my home? Has it been monitored? Is it being monitored? If so, by whom?
Mr. DeMarco: Thank you for the question. I’ll have our team follow up with you in regard to that specific site. I don’t have first-hand knowledge of it myself, but I certainly share your concerns.
In exhibit 5.1 of our Lessons Learned report, we do talk about the degrading permafrost in the North affecting community infrastructure and traditional ways of life. It’s something we have highlighted in our report and is especially important for Northern communities like yours.
Having spent a considerable amount of time some years ago in the Yukon, Northwest Territories and what is now Nunavut, I know — not as well as you do, but I do know — there are significant issues such as the ones you talked about today.
The responsibility is a difficult question. As I mentioned, we will look into that site specifically for you in a follow up, but we have had the same issue in Alberta with orphan wells and with abandoned mines across the North, including Giant Mine, for example, in the Northwest Territories.
The Government of Canada, on paper and in law, has adopted the “polluter pays” principle and the cost-internalization principle, but in practice, that isn’t always the case, especially if the previous owner of the site is no longer a viable financial entity.
The government has an important role in ensuring through mine closure plans, sureties or financial assurance that these orphan sites are not left to the taxpayer or to the community to absorb the financial or social costs in terms of the impacts on communities.
As for historical sites, some of those come from quite some time ago. The government will have to be holding the bag on them, unfortunately, because of past inaction in implementing the “polluter pays” principle. We’ll be happy to follow up with your office to find out more about the site that you’re talking about specifically in Tuktoyaktuk.
The Chair: Do you have a supplementary question, Senator Anderson?
Senator Anderson: No, thank you. I look forward to discussing it with you further.
The Chair: Before I go to Senator Galvez for our second round, I would like to take the time to thank our commissioner. His reports are quite frank and detailed. They hold people accountable. We have been reading reports for 30 years, but this one is very good. I thank you, Mr. DeMarco, for your work and your courage. You give us a bit of hope.
I’m going to share my frustration that in spite of 30 years of talking about climate change, we haven’t done very much. If you look at every province, the amount of CO2 goes up. It’s discouraging. We talk lots. We look good, but now we are the worst of the G7. We get good reports, but there is a lack of motivation or lack of leadership.
It’s obviously only going to change if there are repercussions for not following the plan. Commissioner, are you hopeful, now that we’re reaching a stage where we have a new process under way and we have a new minister, that it’s going to make much difference? Are we going to talk about this 10 years from now and say, “Boy did we ever fail?” What are your thoughts?
Mr. DeMarco: Before answering that question, I want to point out that I’ve been in this position for only a year, but principal Kimberly Leach, who is responsible for the Lessons Learned report, as well as many of the prior reports that are an appendix to Lessons Learned, is here with us. I’m riding on the coattails of the work that our teams have been doing for the last couple decades. Many of those teams have been led by Ms. Leach. I wanted to point out that it’s somewhat easy for me to be in this position, because we have such an all-star team within our office. I wanted to acknowledge that.
To answer your question, I’m somewhat optimistic. One of the reasons for doing this report on lessons learned was that I was very optimistic as a Canadian student participating in the Rio conference in 1992. Canada was a leader back in 1988 by bringing this issue to the fore, in 1990 with the Green Plan and in 1992 by encouraging other industrial nations to sign on to the climate change and biodiversity conventions.
My degree of optimism has gone down at the same rate the emissions graph has gone up in Canada, but I am a little more optimistic now than I was a few years ago for some of the reasons you just mentioned. We now have net-zero legislation. That’s a stronger commitment in the form of laws rather than policies. We have a plan that, at least on paper, will add up later this month to reach our next target. We’ll have to analyze that under our new mandate to see whether it does add up.
More importantly, we have seen the environment and sustainable development become mainstream issues across the world, across Canada and across generations. What was perhaps more of a niche issue when I started studying this as a student many decades ago is everywhere now. Even in the time of COVID, which is an emergency, or in the time of armed conflict, you still see the prominence of this week’s Intergovernmental Panel on Climate Change, or IPCC, report and the strong word from the Secretary General of the United Nations about the lack of leadership to date on climate change. I’m somewhat optimistic but not naively optimistic.
We do need the Government of Canada and the other countries of the world to implement lesson 6, which is that climate targets need to be backed up by action. We have no shortage of plans in Canada. I have spoken frankly about that, and we have the graph and the exhibit in our report about that. There has been no shortage of plans and good intentions. What is sorely lacking is concrete action and results.
The Chair: We have two senators left. If I could ask both of you, Senator Galvez and Senator Gignac, to give us your questions, and we’ll ask the commissioner to answer both at the same time.
Senator Galvez: The government’s role is to level the playing field in terms of economics and finances. By giving subsidies to oil and gas, I think we are distorting the market. We see that’s not working. Canada was supposed to get rid of inefficient subsidies. We see that they’ve added one more to that list, instead of taking any off.
Could you please tell us where we are with getting rid of inefficient subsidies?
The Chair: Senator Gignac, could you add your question?
Senator Gignac: Commissioner, Quebec has a cap-and-trade system, and I think the EU does as well. That includes Norway, which is an oil producer. [Technical difficulties] analyze as a potential thing for Canada that we are an oil producer as well. So far, I think Quebec, California and Ontario are phasing that system out, but the EU is not. If we have to partner with the EU for oil or natural gas supplies down the road, this is something Canada has to analyze. Have you released any studies on that?
The Chair: If you could answer both questions at once, that would be appreciated.
Mr. DeMarco: I’ll try to do so quickly, so I don’t take any of the time for Mr. Giroux.
Our office, prior to my arrival, looked at fossil fuel subsidies a couple of times. The current government’s commitment, at least one iteration of it, is to eliminate fossil fuel subsidies. Sometimes, you see the word “inefficient” associated with it, but in some documents, you don’t. You’ll have to ask the minister as to whether there is a commitment to get rid of all fossil fuel subsidies or just what they deem to be inefficient ones — however narrowly or expansively they may define them. It is mentioned in the mandate letter, so we’ll have to see. We may look at the issue at a meta level again if we see a lack of progress on eliminating fossil fuel subsidies.
Regarding carbon pricing and cap-and-trade specifically, yes, you are correct: Europe, California and Quebec use the cap-and-trade system, and Ontario used to have a cap-and-trade system. It has been eliminated. It’s a form of carbon pricing. I would not recommend that governments continue to flip-flop from government to government with the chosen mechanism of carbon tax, then just regulation, then just cap and trade, and then nothing happens because there is so much time spent in the transitions that there is no time then to implement the chosen initiative before the next election cycle.
Now that Canada has chosen, through the Greenhouse Gas Pollution Pricing Act, a mechanism that is flexible, that allows for, for example, a carbon levy or a cap and trade system to co-exist — and in Europe they co-exist as well; there are both cap and trade and carbon levy systems in place there — I would not suggest that we start again from scratch on this debate. So much time was lost in talking about the best mechanism that our emissions just kept going up and up while the debate went on endlessly.
The Chair: Thank you, commissioner. Let me thank you on behalf of our committee and all Canadians for the hard work you’ve done. This is extremely important. I know you must sometimes get discouraged because we’re not getting the traction you deserve, but keep it up. This is very, very important. This is very important to our grandchildren and to future Canadians, so thank you for being with us. Thank you, also, to your team for their support in this very important endeavour.
We will now turn to the second panel.
Mr. DeMarco: Thank you for having us. We will be happy to return whenever you would like us to. Thank you and have a good day.
The Chair: You, too. Thank you.
[Translation]
For this second part of the meeting, we welcome Yves Giroux, Parliamentary Budget Officer, from the Office of the Parliamentary Budget Officer. Welcome and thank you for accepting our invitation. We are ready to listen to your presentation. We are mostly interested in your 2021 report on the reduction of greenhouse gases in Canada by 2030 and the issue of the Trans Mountain pipeline. The floor is now yours. We will have questions for you right after your remarks.
Yves Giroux, Parliamentary Budget Officer, Office of the Parliamentary Budget Officer: Thank you very much.
Honourable senators, thank you for the invitation to appear before you today. This is the first time since the start of the 44th Parliament that our office is appearing before this committee.
My office provides independent analysis on the state of the nation’s finances, the government’s estimates, trends in the Canadian economy, and upon request, estimates the cost of any proposal under Parliament’s jurisdiction. Under the Parliament of Canada Act, I am mandated to support Parliament by providing economic and financial analysis for the purposes of raising the quality of parliamentary debate and promoting greater budget transparency and accountability.
I am pleased to be here today to discuss the analyses my office has published over the past year that discuss measures with impacts on the environment and energy sectors, including reports about the costs of cleaning Canada’s orphaned oil and gas wells, the foregone tax revenue from the energy sector, the economic impacts of achieving Canada’s 2030 greenhouse gas reduction commitment and the Trans Mountain pipeline system.
According to our most recent report, the cost of cleaning Canada’s orphan oil and gas wells is expected to rise from $361 million in 2020 to $1.1 billion by 2025. As of 2020, roughly 36% of all wells in Alberta and Saskatchewan were active, the lowest share in recorded history. Inactive and plugged wells make up roughly 37% of all wells. As the number of orphan wells increases, so does the expected cost for cleaning up environmental liabilities.
[English]
On January 18, we published additional information identifying the federal revenue forgone from tax provisions for the energy sector and agriculture. These are provisions specific to fossil fuel development, including the deduction of resource-related expenses and incentives for liquid natural gas, or LNG, capital investment and the lost revenue from exemptions to the carbon levy for agriculture. We estimate that resource-specific expense claims by oil, gas and coal mining corporations reduced annual federal tax revenue by $1.8 billion, on average, from 2015 to 2019. Carbon levy exemption for agriculture was worth an estimated $179 million in 2019 when the levy was $20 per tonne. This will, of course, rise significantly as the levy increases to $170 per tonne.
Our June 2021 report Beyond Paris: Reducing Canada’s GHG Emissions by 2030 assessed the impacts of the government’s plan to exceed the 2030 reduction target for Canada’s greenhouse gas emissions under the Paris Agreement. Increasing the federal fuel charge to $170 per tonne and tightening the Output-Based Pricing System will help Canada achieve over half of the 168-megatonne reduction projected in Budget 2021. Nonetheless, significant reductions from less visible non-price policies, which have already been announced, will be needed to reach that objective. Our estimates of the cost of announced non-price policies required to achieve the emissions reduction in Budget 2021 — which is exceeding the Paris target — are based on the assumption that the measures chosen are those with the lowest cost. That is to say, they are inherently optimistic but still represent the equivalent of an additional $91 per tonne.
In the coming weeks, my office will be releasing new reports that may be of interest to this committee. The first report will provide a distributional analysis of federal carbon pricing under the government’s healthy environment and healthy economy plan. We will also be providing analysis of the economic and fiscal impacts of climate change, including assessing impacts at the program level. I would be pleased to present the findings of these reports to you when they are available.
For now, I would be pleased to respond to any questions you may have regarding these reports or other PBO work.
[Translation]
Senator Miville-Dechêne: I have a question about orphan wells. You talked about them and my colleague Paula Simons asked a question about them the other day. Perhaps she consulted one of your reports, or some report on the issue, when she said that, unfortunately, all the federal government funds allocated to Alberta had not been used to subsidize the cleaning of orphan wells. Instead, they were being used to subsidize oil producers who had operating wells that they were closing for cleaning. Once again, we have the feeling that a program has been diverted, I don’t know whether that’s the proper word, and being used for the profit of entrepreneurs for whom it was not intended.
What do you think about it? Is that right? Have you made any representations about the issue?
Mr. Giroux: Thank you for the question. First of all, I have made no representations about the issue. My role is limited to providing analysis and information. Lobbying and representations are not part of my mandate. This is what I can say about the federal funds that were allocated to repair or plug orphan wells. The federal government announced $1.7 billion, mostly for Alberta and Saskatchewan, with the goal, at the time, of supporting employment in a sector that was hard hit because of COVID-19. If the objective was to support employment, we can give the government the benefit of the doubt when it provided funds to profitable companies.
However, if the first objective was not to support employment, but to plug orphan wells, then the federal funds and grants given to profitable companies clearly did not have that objective, did not meet that objective. By definition, orphan wells are wells that belong to no one or whose legitimate owner is bankrupt or not financially viable. So providing funds to be used by profitable companies is a contradiction.
Senator Miville-Dechêne: So what is the answer to the question of whether the program was used to create employment or for orphan wells?
Mr. Giroux: When the government announced the program, it was to support employment in the oil and gas sector in Alberta, in Saskatchewan, and, to a lesser extent, in British Columbia, at a time when COVID-19 was at its height and the price of oil was at a historic low. The price of oil actually went negative for a few hours. The main objective seems to have been to support employment. However, even with that objective in mind, providing grants to profitable companies is not the best way of supporting employment. It would perhaps have been better to plug genuinely orphan wells.
Senator Miville-Dechêne: Thank you, Mr. Giroux.
[English]
Senator Galvez: Thank you for your opening remarks, Mr. Giroux. I’m coming back to the question of subsidies, because we are supposed to be levelling the playing field. The market is distorted by these subsidies that we are giving, and on top of that, they are inefficient. We are not calculating — I follow how much money we give to the fossil fuel industry. Some people say $3 billion and others say $12 billion and the reason is because of the definition.
Today we are talking about the natural resources fund that increased the emissions. You talked about the Trans Mountain pipeline and the 70% higher price, and it is a sort of facility that we give to the oil and gas to export petroleum. We gave $1.7 billion for orphan wells to be capped and they were not.
First of all, are these three things versions of subsidies to the industry so we are picking winners and losers? Second, by doing this, are we changing the principle that is enshrined in our environmental legislation that polluters must pay? In this case, polluters are being paid. Are we on a slippery road to being sued because of incoherence with our own legislation? Thank you.
Mr. Giroux: I am not a lawyer, senator. I cannot determine if we are in the process of being sued, but it is clear that if we have a “polluter pays” principle on the one hand, and on the other hand we are providing government funds to ensure that orphan wells, for example, are being plugged and reclaimed at taxpayers’ expense, it is not fully consistent. It is not the “polluter pays” principle. It is something else. It is the taxpayer-paid plugging and reclamation of specific orphan oil and gas wells. It is inconsistent from that perspective.
With respect to quantifying the amounts of subsidies flowing to the oil and gas sector, it is difficult to agree on a definition of “subsidies.” For example, there are tax references, the write-offs of losses or capital cost allowances that are available to all industries in all sectors, including the oil and gas sector. Should we count that as a subsidy to the oil and gas sector if it’s available to every other business? It’s debatable.
What is easier to determine as a subsidy are tax references that are exclusive to that sector. We have released a report at your request that estimates the value of these tax references that are devoted exclusively or in the vast majority to the oil and gas sector.
The Chair: Do you have a supplementary question, Senator Galvez?
Senator Galvez: You stated in a previous report that the Trans Mountain pipeline is still economically viable, but now that the price jumped to 70% plus, do still think it is still economically viable?
Mr. Giroux: Thank you, senator. Trans Mountain pipeline was deemed to be financially viable when the cost of construction was around $12 billion. Now that we have additional information from the Trans Mountain Corporation that the cost of construction for the expansion will be above $20 billion, it jeopardizes the financial profitability of the pipeline.
We don’t have an updated analysis. We have made an information request to the corporation. But if I had to determine or make an assessment right now with the information that’s already in the public domain, I would say it is very unlikely that the Trans Mountain pipeline will be profitable over its lifespan with the information that we have right now.
So unless the tolling structure changes or the discount rate used to put a net-present value on the future stream of revenues changes dramatically, I do not believe the Trans Mountain pipeline will be a profitable venture from the government’s perspective when it decided to purchase it.
Senator Seidman: Thank you, Mr. Giroux, for what is really relevant and important information you are providing to us this morning.
Budget 2021 proposed to provide $17.4 million over two years, starting in 2021, to Environment and Climate Change Canada for the establishment of a Canada water agency. More specifically, the allocated funds are meant to:
. . . support work with the provinces and territories, Indigenous peoples, and key stakeholders on the scope of the agency’s mandate, including identifying opportunities to build and support more resilient water and irrigation infrastructure.
Now, given that the Canada water agency has not been established and we do not know the scope of its mandate, do you know what work this money is funding? Have you been requested to assess the costs associated with the establishment of the Canada water agency? In your opinion, is this funding too little or enough for the establishment of such an agency? Thank you.
Mr. Giroux: Thank you, senator. I will answer the last question first. Is this is enough funding to establish such an agency? It depends a lot on its mandate. Without having a very clear idea of its mandate, it’s very difficult to determine whether that funding will be sufficient. It could be sufficient if it is just an information-gathering entity, or it could be broadly insufficient if that agency will have strong regulatory powers and enforcement powers. It all depends on the specific mandate.
The fact that there is no clarity on its mandate several months after it was announced in the budget is not giving me hope that we will get that clarity in the near future.
Based on my experience — and I’ve worked on some 20 budgets in my career — when something goes into the budget, there is usually significant levels of detail, especially when an amount of funding is attached to an initiative. There has to be some thought that has gone into setting up and placing a statement of that nature in a budget. That’s why I am surprised that we are still not having clarity on that.
Have I been asked to look into that? The answer is no, and it’s not something that I have considered in great detail given the multiple other demands on my office. I haven’t looked at that issue specifically.
The Chair: Do you have a supplementary, Senator Seidman?
Senator Seidman: Thank you. I appreciate your response. I find the comments somewhat disturbing, given that there was $17.4 million proposed in Budget 2021 and, as you suggest, very little detailed description as to how that would be spent and what the mandate would be, as you also say. I am kind of speechless listening to this, and I am wondering if there is some kind of oversight or some kind of initiative that you would find yourself engaged in, with regard to what is clearly an important agency.
Mr. Giroux: That’s a question I did not expect, so I’m not sure how that would fit with my mandate, which is to look at economic and fiscal issues, mostly. I am sure that the Treasury Board Secretariat has an oversight and will be or has already been looking at a Treasury Board submission to establish the agency itself. Beyond that, I’m sorry, I can’t offer a more interesting or satisfying answer. I am a bit like you; to see a very specific number like $17.4 million but still not having details as to the mandate of the agency and its composition, that strikes me as a bit inconsistent with my previous experience.
Senator Seidman: Thank you, Mr. Giroux, for your frankness. I appreciate it.
[Translation]
Senator Gignac: Good morning, Mr. Giroux, and welcome to the committee.
I would like to talk about the macroeconomic effects of the increase in the carbon tax. Next April 1, it is going from $40 to $50. I am having difficulty finding the inflationary impact of an increase of $10 in the carbon tax. It’s going to go to $170 by 2030, according to the government’s plan.
My colleague Senator Carignan said that, because of the rising price of oil, there’s already a significant increase in prices. If we add in the increase in the carbon tax, there must be an inflationary effect somewhere.
Does that make sense? What is the rule of thumb? I am still looking for it. When inflation was under control, before the pandemic, people did not worry too much about the impact of a $10 increase in the price of carbon. Now, the world has changed. Because of what is going on in Europe and the price of commodities, including wheat, could your office talk to us about that a little more? I feel that you are in one of the best, and most independent, positions to do so.
Thank you.
Mr. Giroux: Thank you, Senator.
I do not have the figures at hand, but when we determined the economic impact on employment by sector, I believe that we also determined the effect of inflation.
I can certainly send it to the committee in writing after my appearance. However, we found that the economic impact on the GDP will be negative, to the tune of about 1.4%. Some sectors will experience greater impacts, specifically transportation and, of course, oil and gas.
However, there are positive outcomes for electricity generation. The increase in the price on carbon will result in electrification and decarbonization, which will benefit the electricity sector.
As for the specific question about the inflationary effect, clearly there will be an impact on inflation, but I do not believe it will be a major one. In any case, it will not be of the scale we are seeing these days because of supply chain problems and the price of commodities. I can send you that in writing.
Senator Gignac: For academic purposes, when you do these studies and analyses, you basically assume the price of gas at about $75 per barrel. If you updated the same study today, assuming a price of $100 or $125 for the next 10 years, does the result stay in proportion, or can it change?
I suspect that the impact could be very different.
Mr. Giroux: That is an excellent question, Senator.
We have reworked the scenarios with different prices of oil. It was a little lower in 2020 and 2021 and then it increased gradually to stabilize at $75 to $80 per barrel, I believe. If we redid those same simulations with a per-barrel price of $100, $120, $140, the impact on reducing greenhouse gases would clearly be greater.
However, it does not stay in proportion. Some prices that combine the carbon tax and the price of oil have little effect — say, with the price on carbon of $10, $20 or $30 per tonne. If you add it to a much higher price of oil, clearly, the impact on greenhouse gases is much more significant. It is not perfectly linear; a major cumulative effect has to be added.
Senator Gignac: Thank you.
Senator Carignan: Senator Gignac has asked some of the questions I had, but let me go back to the carbon exchange issue.
In the public information I receive, at least, from what I hear from the Government of Quebec, the carbon exchange, the cap and trade system, in Quebec seems to be working. The tax in the rest of Canada does not seem to be working.
Have you done a comparative, cost-benefit analysis of the two systems, the exchange as opposed to the tax?
Mr. Giroux: No, Senator, unfortunately, I have not done a comparative analysis.
However, when we do our analyses based on the federal government’s plans, meaning a progressive increase in the price on carbon, we are of the opinion that all provinces are meeting the federal standards. The federal government has determined that the program in effect in Quebec and in British Columbia, for example, is, in broad terms, similar in its objectives to the federal program.
All that to say that we consider the plan to be generally consistent with what the federal government is imposing. However, we have not done a comparative analysis to determine whether the results in the program in effect in Quebec and British Columbia are different from the federal system for governments that have no price on carbon.
Senator Carignan: Accepting that you have not done an analysis, which factors could explain the change, off the top of your head, without analysis? There are various factors, because the exchange price is lower now.
So how do we explain that the exchange. . . Perhaps I will ask you a question in writing, since we can do that, and send you the analysis. But, off the top of your head, if you attempted an answer, what would the distinction be?
Mr. Giroux: The distinction is that the economy is differently structured in each administration. For example, some have a carbon exchange and are less dependent on the extraction and use of fossil energy. That can explain why those administrations decided to adopt a carbon exchange.
Quebec and British Columbia do not do a lot of fossil fuel extraction. There is some in British Columbia but very little in Quebec because of the hydroelectric generation. That may be why those provinces have chosen to adopt a carbon exchange.
As for the statement that the carbon tax is not working, perhaps the results have not yet been conclusive because the price on carbon per tonne of carbon emitted, or its equivalent, has been low. But I am not ready to say that it has been a failure.
The Chair: Not yet, anyway.
Mr. Giroux: Right. It’s not a resounding success, but as the carbon tax increases, I believe that the transition will be more clearly seen, with sources of energy that are less carbon intensive.
[English]
Senator McCallum: In the report on the Trans Mountain pipeline, it says:
The Government’s decision to acquire, expand, operate, and eventually divest of the Trans Mountain Pipeline System continues to be profitable. However, the profitability of the assets is highly contingent on the climate policy stance of the federal government and on the future utilization rate of the pipeline
With the federal government owning Trans Mountain pipeline, does this affect the government’s climate policy stance? Is there a conflict of interest here? Thank you.
Mr. Giroux: That’s a good question. It’s difficult for me to determine whether it’s a conflict of interest because the government is multi-faceted. It has many objectives at once. To say that because it owns a pipeline at the same time as it wants to reduce carbon emissions constitutes a conflict of interest would mean that the government is probably in many other situations of conflict of interest.
But, with the recent information that was provided by the corporation that is responsible for owning and expanding the Trans Mountain pipeline suggesting that the construction costs have risen by over 70%, it is now quite clear that this pipeline, if and when the government decides to sell it, will be very difficult to sell at a profit. It’s very likely that the government will have to sell it at a cost that will not allow it to recoup the costs it has incurred so far by acquiring and expanding it unless other factors change significantly, for example, if the tolling — so the prices that producers have to pay to use the pipeline — goes up significantly or other revenue-generating factors increase significantly.
The climate policy stance that you were referring to in our previous report is an indication as to whether the government intends on favouring the production of oil in the future or not. That will obviously have an impact on the profitability of the Trans Mountain pipeline. If the government was to favour more oil production in the decades to come, then there will be a bigger volume of oil to be transported by Trans Mountain.
Conversely, there could be more than enough capacity to transport the reduced oil production, and that could lead to some unused capacity on the pipeline, reducing its profitability.
The Chair: Do you have a supplementary question, Senator McCallum?
Senator McCallum: What is the federal government’s constitutional jurisdiction and responsibility with respect to orphan oil and gas wells in different provinces?
Mr. Giroux: I’m not a constitutional expert. I find that topic interesting but not to the point of devoting my career to that. However, based on my understanding, I think the exploitation of natural resources is a provincial jurisdiction when it’s onshore, certainly, but people who are more qualified in that field are probably better placed than me to determine that.
Senator McCallum: Thank you.
Senator Anderson: In a report entitled Inuvialuit Settlement Region: Drilling Sumps Failure and Climate Change Report dated March 30, 2021, they identified 153 sumps on Government of Northwest Territories lands, 69 on private Inuvialuit lands and 7 on unknown lands. There were concerns expressed regarding the degrading permafrost containing drilling waste sump as being of high concern.
In your report, you identified the cost for Alberta and Saskatchewan. Has there been any costing for the Northwest Territories of orphaned oil and gas wells or sumps?
Mr. Giroux: Thank you, senator. We were faced with an issue that is unfortunately not uncommon when we try to assess the impacts in Northern regions of Canada. Usually there is a lack of solid, reliable information in many areas. For example, when we try to assess the long-term fiscal sustainability of governments across the country, it’s more difficult to assess the fiscal sustainability of individual territorial governments, so we have to lump them all together.
When it comes to orphan wells, my understanding is that the funding allocated by the federal government for that issue was for Saskatchewan, B.C. and Alberta. I’m not aware that there was any funding allocated for the territories. So if that is the case, I don’t think we got information to that effect, nor did we get information on orphan wells in the Northwest Territories, Nunavut or the Yukon.
Senator Anderson: If I were to follow this up with you so that information was advanced forward, how would I go about doing this?
Mr. Giroux: You can certainly send me an email or we can communicate by phone.
Senator Anderson: Thank you. That is much appreciated.
Senator Arnot: I was going to ask a question on orphan wells, which has already been covered thoroughly, so I don’t have a question now.
The Chair: Okay. Senator Galvez, we are on second round.
Senator Galvez: Mr. Giroux, I was at COP26 last November. I saw so much development in clean, renewable energy. Canada is behind in this area in spite of the fact that so many people have mapped where we can do solar, wind, tide and hydro.
Have you tried to measure or calculate — if we give part of the subsidies that we give to the oil and gas towards renewable energy — how that will impact our emissions? Because as you said, everybody says we are laggers, we don’t attain any of our targets so we have to do something very quickly. Have you attempted to do that estimate? If not, will you mind doing it if I ask? Thank you.
Mr. Giroux: Senator Galvez, when you ask me something, it’s always a pleasure to do it. But more seriously, we haven’t attempted to estimate that because it’s very difficult to try to estimate how much emissions reduction would be generated by investing in resources or in technologies that are new, are not yet fully tested or not implemented on a larger scale. And not being climate specialists ourselves, or technology specialists in each and every one of these fields, it would require a lot of expertise that we don’t have when we try to estimate the potential revenue or the potential emissions reduction that would be generated by investing specific amounts in these sectors.
That’s one of the elements that is not in our reports. We don’t factor in new technological developments or potential productivity enhancements that would arise from these new technologies if they were to become widely adopted or implemented, even in a smaller risk bank.
I admit that’s one of the shortfalls of our report because it’s very difficult to put an amount on unknown or untested technologies.
The Chair: Thank you.
[Translation]
Senator Carignan: Let me return to the issue of orphan wells. I find it a little bizarre that the government would create a program to compensate for, or assist in, the closure of orphan oil wells when, by definition, they are not orphan. So does the program define what an orphan well is, in order to at least exclude existing companies that are operating? Can we be sure that a well belongs to or is associated with a company that has shut down or gone bankrupt and whose administrators can no longer be found?
Mr. Giroux: I don’t have the specific criteria for the program at hand. We did ask for information from the government when we estimated the impact of that amount. We gathered information from provincial regulatory agencies and found that, from one administration to another, the definition of what constitutes an orphan well varies, if I may put it diplomatically. Some administrations consider that an orphan well is a well that is not in production. I don’t have the exact definitions, but the definitions vary greatly from one region to another for obvious reasons. They favour certain sectors of the economy and they ensure that companies receive government assistance to do things that should be done anyway by virtue of the obligations that regulate them.
So your point is quite valid, Senator. It is bizarre to provide that kind of funding to companies that were, and still are, financially viable. As I mentioned earlier, the objective was probably to support employment rather than to plug orphan wells.
Senator Carignan: Is it possible to send us the federal government’s various definitions? Once again, we have a government that says one thing but does another. If I say I want to subsidize the closing or plugging of orphan oil wells, and I later allocate those funds for something else, it’s important to point out that disconnect.
Mr. Giroux: Yes. We can send you that through the committee.
The Chair: Thank you very much, Mr. Giroux. You clearly play a very important role on behalf of parliamentarians. The energy area is very important for the future of our country and of our planet. We very much appreciate the studies that you have led. You are clearly going to be continuing to provide us with good information. Thank you very much and we look forward to seeing you soon.
Thank you, colleagues. That ends today’s session. Thank you for your participation and for the excellent questions. The meeting is adjourned. Thank you.
(Meeting adjourned.)