THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Tuesday, November 22, 2022
The Standing Senate Committee on Energy, the Environment and Natural Resources met with videoconference this day at 6:32 p.m. [ET] for its study on emerging issues related to the committee’s mandate on the topic of climate change in the Canadian oil and gas industry.
Senator Paul J. Massicotte (Chair) in the chair
[Translation]
The Chair: Good evening. My name is Paul Massicotte, a senator from Quebec, and I am the chair of the committee.
Today, we are conducting a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. I would like to begin with a reminder. Before asking and answering questions, I would like to ask members and witnesses in the room to please refrain from leaning in too close to the microphone or removing their earpiece when doing so. This will prevent any sound feedback that could negatively impact the committee staff in the room.
I have a few comments to share with you. As you know, we are undertaking a study this evening whose subject is climate change in the Canadian oil and gas industry. We are trying to learn more about the importance of this industry to our country and our economy, and how it relates to our stated climate change commitments. While economic growth is very important, part of our goal is to be very aware of and concerned about the impact of climate change.
We’ll begin our study by welcoming government representatives this evening. I’m sure that you’re going to find it very interesting.
Now, I would like to introduce the members of the committee who are participating in this meeting: Senator Denise Batters from Saskatchewan; Senator Julie Miville-Dechêne from Quebec; Senator Judith Seidman from Quebec; Senator Karen Sorensen from Alberta.
This evening, we have a two-hour panel, and we will welcome the following witnesses by video conference.
From Environment and Climate Change Canada, we welcome John Moffet, Assistant Deputy Minister, Environmental Protection Branch, with whom our committee is familiar.
From Natural Resources Canada, we welcome Erin O’Brien, Assistant Deputy Minister; Sébastien Labelle, Director General, Clean Fuels Branch; Nada Vrany, Director General, Petroleum Resources Branch; Drew Leyburne, Assistant Deputy Minister, Energy Efficiency and Technology Sector.
From the Department of Finance Canada, we welcome Miodrag Jovanovic, Assistant Deputy Minister, Tax Policy Branch; Michael Garrard, Director General, Economic Development and Corporate Finance Branch; Marie-Josée Lambert, Acting Director General, Crown Investment and Asset Management.
We also welcome, from Innovation, Science and Economic Development Canada, Kendal Hembroff, Director General, Clean Technology and Clean Growth Branch.
Welcome, and thank you for being with us.
Senator Batters, would you like to say something?
[English]
Senator Batters: Thank you, chair. I’m new to this committee and to this new study, but I just wanted to make the point that it’s unfortunate we just received the briefing material just a few hours ago, while the Senate was still sitting today. It made it quite impossible to properly prepare for this meeting.
We do have nine senior federal civil servants here for this meeting from four different departments, and we’re launching into this study. It’s just not a very good way to be able to start it.
As well, we’re starting this new study while this committee is still completing a different study. So that one has been interrupted, and meanwhile, we’re launching into this new one.
I just wanted to make those points. I am normally fairly vocal in a committee meeting. I may not be today because I have not had an opportunity to prepare, and that’s too bad.
The Chair: I want to comment that most of us share your thoughts. The disappointment has been shared with the people from the library and they’ve undertaken to make sure things change, so we don’t have a similar experience again.
[Translation]
Senator Miville-Dechêne: It is indeed a new study and I see that the subject is described as “Climate Change: Canadian Oil and Gas Industry;” that’s fairly short, but it’s also a huge topic. Do we have something more specific to go on?
You said that we were going to discuss the importance of the oil and gas industry; is that also in the mandate? I’m trying to understand exactly what our mandate is.
The Chair: We have already circulated information about the topic in general, along with specific questions that our witnesses have received. Today, according to the meeting agenda, we are also going to get an overview of where the industry stands from the economic and climate change standpoints.
Senator Miville-Dechêne: So it’s about climate change and the industry’s contribution to the economy?
The Chair: It’s extremely important, and the challenge is to determine how to achieve economic success while meeting our climate change objectives. It may well be one of the biggest challenges we have in Canada; it’s our country’s largest economic sector, but several objectives must nevertheless be met.
Welcome to the witnesses. Thank you, on behalf of the committee, for having accepted our invitation. We’re going to begin with the opening address from the Natural Resources Canada representative.
Ms. O’Brien, you have the floor.
[English]
Erin O’Brien, Assistant Deputy Minister, Natural Resources Canada: Good evening. Thank you very much, Mr. Chair. Nice to meet you, senators. Thank you, colleagues, for joining me this evening. Thank you for the introduction and the invitation to speak with you this evening about the role of the oil and gas sector in supporting Canada’s energy transition and net-zero future.
Today, I’m joining you from Ottawa, which is built on the unceded Algonquin Anishinaabe territory.
Before Russia illegally invaded Ukraine, there was significant momentum among developing countries to meet 2030 and 2050 climate goals. That included commitments to phase out coal, accelerate the use of zero-emission vehicles, and increase renewables and low-carbon fuels. But the illegal war in Ukraine and the resulting sanctions against Russia have made global energy markets even more volatile. This has introduced challenges and opportunities for the role of Canadian oil and gas in the context of a continued imperative to decarbonize and achieve net zero while continuing to respond to global and domestic energy needs.
The invasion came at the worst possible time. There was new demand for oil as COVID-19 restrictions eased, and the world was, and still is, under-investing in all forms of energy, including oil. This is problematic because most reputable market forecasts see oil and gas persisting in the supply mix for quite some time. Even the International Energy Agency’s, or IEA’s, net-zero forecast see global oil demand remaining constant until about 2030.
The IEA’s, Net Zero by 2050 scenario has global oil demand falling from about 100 million barrels per day in recent years to 24 million barrels slated for non-combustion purposes, if countries can meet the scenario’s milestones. Projections for natural gas are somewhat more variable and hinge upon how much countries use gas as a transition fuel.
So what does this mean for Canada?
[Translation]
Canada has been a source of oil supply growth globally, with production increasing by 53% in the decade before Russia’s invasion.
Since Russia’s invasion, Canada announced, and is on track, to further increase its oil and gas production by 300,000 barrels per day of oil equivalent by the end of 2022.
Most of our exports flow to the United States, and have helped reduce that country’s dependence on Russian and Saudi Arabian oil.
The U.S. Gulf Coast has substantially reconfigured its refinery complex to process Canadian heavier types of crude oil.
At the same time, the emissions intensity of Canada’s oil production has steadily decreased. Per-barrel emissions intensity of oil sands production dropped 19% between 2010 and 2019, even though absolute emissions have grown.
As for natural gas, Canada is the world’s fifth-largest producer, with almost all our exports going to the United States. This will change when LNG Canada goes online around 2025, allowing us to export to Asia. Since so much of Canada’s oil and gas is exported, production hinges substantially on global demand.
[English]
Now let’s look at the impact that the oil and gas sector has on our country and workforce. Fundamentally, the sector is a key driver of innovation. As a primary employer in 303 communities, it contributed 178,000 direct and 415,000 indirect jobs in 2020. Ten thousand four hundred of those workers were Indigenous. It’s also a significant driver of trade. It was responsible for $140 billion in exports in 2021 and was 7.2% of our GDP, strengthening the Canadian dollar and supporting other sectors’ competitiveness.
While the industry is concentrated in B.C., Alberta, Saskatchewan, and Newfoundland and Labrador, its economic footprint benefits all Canadians, including our Indigenous communities. Revenues from taxes and royalties sustain our social safety net, including schools, hospitals and infrastructure. Dividends, procurement spending and other financial benefits flow back to investors and companies, primarily outside of Western Canada.
Those revenues also fund investments in the energy transition.
The sector is the largest contributor to energy research and development, or R&D, responsible for about $1 billion per year of investments, on average more than half of the total private sector investment in energy R&D over the last decade. In addition, oil and gas companies spent more than $2.6 billion on procurement from 250-plus Indigenous businesses in 2019. This is up 43% from 2017.
In 2018-19, $55 million in oil-and-gas-related revenues were collected on behalf of First Nations in Alberta, Saskatchewan and British Columbia. We’re seeing growing interest in some Indigenous communities in becoming equity owners in oil and gas projects.
[Translation]
Now let’s consider what the energy transition and Canada’s commitment to achieving net zero by 2050 may mean for the oil and gas sector. Achieving net zero will require a transformation of energy delivery systems with clean electricity meeting a growing share of demand. However, the global economy is around 80% reliant on fossil fuels. Retrofitting and increasing the use of renewables is expensive and takes time. In the meantime, experts say the world will continue to rely substantially on oil and gas.
[English]
The question is this: How do we do that in a way that balances the need for an orderly energy transition that avoids price spikes, with the need to minimize emissions?
There are a number of commercial or near-commercial technologies that could help to solve this challenge, such as carbon capture, storage and use; steam-assisted solvent extraction processes; cogeneration of steam and electricity; supply chain electrification; and small modular reactors. That will take a lot of capital and the creation of a predictable regulatory environment so that the private sector has conditions in which they can invest. That is why the government has been working closely with provinces, territories, Indigenous peoples and stakeholders to inform key policies, such as the oil and gas emissions cap and methane regulations.
Earlier this year, the government released a discussion paper that outlines how an emissions cap could drive down emissions intensity. Its intention is to give industry the flexibility to invest in the most promising and economic emissions-reduction solutions. At the same time, the government can help industry hedge the risk associated with investing in emissions-reducing technology and infrastructure. That includes $15 billion to develop the Canada Growth Fund, a public investment vehicle that will operate at arm’s length from the federal government and attract corporate investors; the $6.7 billion investment tax credit that promotes investments in clean technology; and an investment tax credit for clean hydrogen, with an investment tax credit of at least 40% for projects in the lowest carbon intensity tier. It also includes a carbon capture, utilization, and storage, or CCUS, investment tax credit for projects that permanently store captured carbon dioxide in dedicated geological storage, or in concrete, as well as nearly $320 million in direct funding for CCUS RD&D; $8 billion for the Net Zero Accelerator initiative as part of the Strategic Innovation Fund, which has positive implications for the oil and gas sector; $300 million to develop small modular reactor technology; increasing the impact of the Canada Infrastructure Bank so it can invest in private sector led infrastructure projects that will accelerate Canada’s transition to a low-carbon economy; and $750 million under the Emissions Reduction Fund to help oil and gas companies adopt green solutions and retain jobs.
[Translation]
We’re also developing regional economic strategies through the newly established regional energy and resource tables. These tables will bring the federal, provincial and territorial governments together with Indigenous partners, municipalities, industry, workers, unions and experts to advance the top economic priorities in the natural resources sectors by developing tailored regional economic strategies that include sustainable job plans.
[English]
All of these initiatives are part of a larger partnership. Neither the government, meaning the federal government or sub-federal components, nor industry, can undertake and achieve what we have to do with respect to our 2030 Paris commitments or the 2050 net-zero goals. We must all work together. Thank you.
The Chair: Thank you very much. Ms. Hembroff?
Kendal Hembroff, Director General, Clean Technology and Clean Growth Branch, Innovation, Science and Economic Development Canada: Thank you, chair. I would be delighted to offer some brief remarks to elaborate on the specific role of Innovation, Science and Economic Development Canada, or ISED, in decarbonizing the oil and gas sector.
ISED’s funding portfolio supports a range of technologies that are aimed at decarbonizing the Canadian economy. This includes programs and initiatives which support the development, commercialization and deployment of clean technologies that are aimed at driving down the emission intensity of oil and gas production, transmission and distribution.
For example, the Strategic Innovation Fund’s Net Zero Accelerator, which was mentioned earlier by my colleague, helps to support Canada’s net-zero goals to help transform the economy for clean and long-term growth. This initiative provides up to $8 billion in support of projects that will enable Canada to reduce its domestic greenhouse gas emissions, including in the oil and gas sector.
Notably, the Strategic Innovation Fund has provided support for early-stage clean technology development and demonstration in the oil and gas sector through a $100 million investment in the Clean Resource Innovation Network, or CRIN.
More recently, earlier this year, the Strategic Innovation Fund launched a call to action for large emitters to target key industrial sectors across the economy to drive industrial transition and secure significant greenhouse gas, or GHG, emission reductions.
Path one of the calls to action closed on June 30 of this year. Earlier this month the government announced 10 projects which will proceed to the next stage of assessment, and this includes several projects in the oil and gas sector.
ISED is also responsible for Sustainable Development Technology Canada, or SDTC, which supports Canadian companies to develop and demonstrate new environmental technologies, including those that reduce emissions in the oil and gas industry.
For example, last year, Minister Champagne announced a $1.2 million investment to Toronto-based Validere Technologies to help it commercialize a data-driven platform that helps create supply chain efficiencies in the oil and gas industry to help reduce overall emissions.
Canada’s Global Innovation Clusters, an initiative of Innovation Canada with industry leadership and co-investment, are also playing a key role in supporting decarbonization of the oil and gas sector.
One example of a project under the clusters that will contribute to decarbonization of Canada’s oil and gas sector is the Adaptive AI powering the oil and gas supply chain project through which project partners are using simulation tools to model the field operations chain to optimize asset flow along the oil and gas supply chain and reduce emissions.
Finally, ISED also supports technology innovation through the Natural Research Council Canada’s, or NRC, suite of programs, which include the Materials for Clean Fuels Challenge program, a program which seeks to decarbonize Canada’s oil, gas and petrochemical sectors by supporting discovery and development of new materials for zero-emission fuels and chemical feed stocks.
The NRC also delivers the Industrial Research Assistance Program, which provides advice, connections and funding to help small- and medium-sized NR businesses increase their innovation capacity and take ideas to market.
I’ll leave it there. I’m happy to answer any additional questions that the committee may have.
The Chair: To the people from the Department of Finance Canada, did you want to add something, Mr. Jovanovic?
Miodrag Jovanovic, Assistant Deputy Minister, Tax Policy Branch, Department of Finance Canada: Thank you, Mr. Chair.
I don’t think I’m going to add anything. My colleague, Erin O’Brien from Natural Resources Canada, or NRCan, went through what we’ve been doing through the tax system to incentivize and support firms in the oil and gas sector as they decarbonize, as well as support through the Investment Tax Credit for Clean Technologies and renewable energy. Thank you.
The Chair: Mr. Moffet, did you want to add anything?
John Moffet, Assistant Deputy Minister, Environmental Protection Branch, Environment and Climate Change Canada: Sure, very briefly.
As you and your committee well know, Environment and Climate Change Canada, or ECCC led the development of the Canadian Net-Zero Emissions Accountability Act and the 2030 Emissions Reduction Plan. I’m responsible for regulation in the department. All of our greenhouse gas regulations will have the effect of reducing demand for oil and gas.
In addition, we have a number of regulations specifically addressing the oil and gas sector.
[Translation]
That includes the carbon tax, the Clean Fuel Regulations, regulations to reduce methane emissions, a cap on oil and gas emissions, and clean electricity regulations.
[English]
We’re also working very closely with the other departments represented this evening in the design of their programs, both to provide technical expertise and to maximize complementarity.
Like my colleagues, I would be very happy to answer any questions about our work. Thanks, chair.
Senator Sorensen: Thanks very much. I’m going to direct this to Mr. Moffet.
Mr. Moffet, you can tell me if I have the wrong person and you can pass it on.
The oil and gas industry, through initiatives like the Pathways Alliance, has made a lot of investment in greening their operations and attempting to address climate change.
I was wondering if you could expand on the impact those programs have or, maybe more appropriate, are having, and then the role they play in helping meet our goals.
Is there anybody else on the call that wants to speak to that? We can pause that question. I have another one.
The Chair: Ms. O’Brien, did you want to add anything?
Senator Sorensen: Let me try another one for Finance.
Should I go to my next question?
The Chair: Yes, go to your next question and we will come back to that.
Senator Sorensen: The other question I had, more directed to Finance but it could be anybody there: Could someone provide me information on how the investment tax credit — and this was answered in the presentation earlier, but reiterate some of the highlights — the information on the investment tax credit for carbon capture, utilization and storage; how is the tax credit projected to promote the development of CCUS in Canada?
And then provincial centric, can you speak to the economic benefits this tax credit will have in Alberta specifically?
Mr. Jovanovic: Thank you.
I can speak to the value and the intended effect of the credit. This is a refundable investment tax credit of 50% for the capture technology. There is a different rate of 37.5% for transport and injection equipment. This is refundable, so it helps reduce the upfront financing and upfront costs of these projects. These are capital-intensive projects.
The eligible uses currently are that once it is captured, the firm has to basically put the captured CO2 into the ground in a saline aquifer or store it in concrete, basically. These are the eligible uses.
The idea of this credit is to significantly reduce the upfront costs; otherwise, these investments have little commercial value for these firms. The enhanced oil recovery, for instance, is not an eligible use, which is typically the way they would capture and make it more viable or economical. That is not eligible. It has to be put in the ground or in concrete. It has a significant environmental effect, potentially.
With respect to your second question, the value, especially for provinces and particularly in Alberta, for instance, we don’t have any specific information or study on this. I think the main value is derived from the environmental benefit that will, obviously, benefit all Canadians, and the idea is to try to accelerate these significant investments. As I said, they are capital intensive, and they are also quite risky for investors, so that is the objective here.
Senator Sorensen: The company spends the money, and then they apply for a refund on 50% or 37%?
Mr. Jovanovic: Yes, in a way. There is some process behind all that. They have to do a pre-validation of the investment. NRCan is involved. We have discussions with ECCC as well. The Canada Revenue Agency will be involved after the fact once the claim is being made. There is a verification process, in a way, and there is also a 20-year assessment period. Once it is in operation, for the following 20 years, every five years the operator has to submit a report to confirm whether they met their initial projection or not with respect to how much they captured and how much they stored. If there is a significant variation, and it is way less than they originally anticipated, they may be subject to a clawback, basically.
Senator Sorensen: Thank you.
The Chair: Did you get your two questions answered?
Senator Sorensen: I didn’t hear about the Pathways Alliance, and I’m not sure if Mr. Moffet can answer, but if you want to come back to me, that’s fine, too.
The Chair: We have time.
Mr. Jovanovic: What I can say, maybe, on Pathways —
Senator Sorensen: Yes, that would be helpful.
Mr. Jovanovic: — is that from what we know overall, their project has three phases. We know from the first phase that the potential for GHG emission reduction, I believe, is about 8 megatonnes.
The Chair: Which means what? We don’t go to sleep at night with megatonnes. What does that mean, megatonnes? What percentage of the total CO2?
Mr. Jovanovic: It means they anticipate that with that level of investment, they would be able to capture enough CO2 to store and lead to a reduction of 8 megatonnes of CO2.
The Chair: Just try and give me a sense. What does that mean? Is that 100% of the production of CO2 they produce, or is it 10%?
Mr. Jovanovic: It means that that project is significant. The objective of the carbon capture investment tax credit is about 15 megatonnes, so that gives you an idea of the importance of that project.
Senator Seidman: Thank you to all of you for being here to start our study.
I guess my question could start with Mr. Moffet, but I would happily hear from representatives of Innovation, Science and Economic Development Canada as well as Natural Resources Canada, and it is with reference to mandate letters.
The mandate letters for the ministers of Environment and Climate Change; Natural Resources; Innovation, Science and Industry; Public Safety and Emergency Preparedness all speak about collaborating to develop a climate data strategy to ensure that the private sector and communities have access to data to inform planning and infrastructure investments.
What I would like to hear is how these departments are supporting each other and what they are doing, because we all understand how absolutely critical data is going to be for anything that we do on this issue going forward.
Perhaps, if Mr. Moffet is able to speak with us, I wouldn’t mind hearing from him first.
The Chair: Mr. Moffet, you are on.
Mr. Moffet: Now that I’m finally on, I’m going to have to apologize. I’m involved in most of our activities. I’m not involved in the climate data strategy. I know that work is underway. I would be happy to commit to provide a report to the committee in the next couple of days about the work on the climate data strategy. I apologize; I can’t speak to it personally.
On the previous question, your question, chair, was what is the relative contribution? Just for information, current emissions from the oil sands are about 83 megatonnes, so 10 to 15, of course, would be in the order of about a 15% reduction.
Senator Seidman: How about Erin O’Brien from Natural Resources Canada or Kendal Hembroff from Innovation, Science and Economic Development Canada? Would you have any information to give us?
This is in every mandate letter of all these ministers, and I would like to know about the collaboration to develop this climate data strategy. Does anyone have any information to offer us?
The Chair: Ms. O’Brien?
Ms. O’Brien: I apologize, senator. Similar to my colleague, Mr. Moffet, I do not have details of that strategy. I would undertake to find those and come back to the committee.
Senator Seidman: Thank you.
What about our witness from Innovation, Science and Economic Development Canada? I think that’s Kendal Hembroff. Do you have anything to add?
Ms. Hembroff: Chair, I wish I could be more helpful in this case.
I am aware of a Clean Technology Data Strategy that I indicated ECCC and NRCan are collaborating on, but a climate data strategy, unfortunately, I’m not in a position to share any information on that.
Senator Seidman: That’s too bad. Maybe if you can discover something and forward it to our clerk, that would be helpful.
The Chair: Mr. Moffet, are you going to make sure we get a report on this nature?
Mr. Moffet: Yes, sir.
The Chair: Thank you.
Senator Seidman: Maybe I’ll try my next question, if I might.
The Chair: Go ahead. Hopefully, you’ll be luckier.
Senator Seidman: I don’t know if I’ll have more luck with this, but perhaps I’ll try with Natural Resources Canada. It is regarding the Canadian Centre for Energy Information, or CCEI. This is connected to the whole data issue.
CCEI is a partnership between Statistics Canada and Natural Resources Canada in collaboration with Environment and Climate Change Canada and the Canada Energy Regulator, or CER, and the CCEI serves to collate energy data from governments and NGOs from across Canada.
The reason I am interested in this issue is because we heard in our last study from Jerry DeMarco, the Commissioner of the Environment and Sustainable Development, who told us that:
. . . Environment and Climate Change Canada and Natural Resources Canada had different approaches to assessing the role hydrogen should play in reducing greenhouse gas emissions.
Environment and Climate Change Canada expected to achieve 15 megatonnes of CO2- equivalent emission reduction in 2030, whereas Natural Resources Canada projected up to 45 megatonnes by 2030, and that’s why the data issue is so important. It has to do with data modelling methods. So my question is: Does the CCEI also address the siloing of data modelling methods to ensure that all of our departments working on the energy file are consistent in their use of data? It is addressed to Ms. O’Brien.
Ms. O’Brien: Thank you very much for the question, senator. I’m familiar with the differences in terms of the modelling between NRCan and ECCC with respect to hydrogen. I think in that particular instance it isn’t necessarily an issue of different models. I think we were actually modelling slightly different things, which is why the outcomes were different. My colleague Sébastien Labelle could speak to that further.
With regard to your more specific question on the CCEI, I do not have further details on that. It is the responsibility of a colleague within the department. I can come back to you with details in terms of the scope of work they may or may not be doing with respect to the siloing of data, as you put it.
Mr. Labelle, I’m not sure if you wanted to speak to the hydrogen issue.
Senator Seidman: Not really —
Sébastien Labelle, Director General, Clean Fuels Branch, Natural Resources Canada: Sure —
Senator Seidman: I mean, that would be good. Obviously, we would all be interested because it was a big question in our previous work. But I have to say that I’m kind of surprised. The Canadian Centre for Energy Information was announced in Budget 2019 and it is mandated to work with a wide range of stakeholders to improve the accessibility and overall quality of Canada’s energy data. It has an impact on industry and business and investment and everything else if people can’t get the kind of data they need to make the proper kinds of judgment calls about sustainability and carbon emission reductions in particular industries. So I’m a little perplexed about this.
The Chair: Mr. Labelle, did you want to comment?
Mr. Labelle: As Ms. O’Brien just mentioned, it is being led by another group which I used to work with, so maybe I could comment briefly that there is a lot of collaboration that happens including on the modelling and with the community of modellers external to government. For example, University of Montréal works very closely with the centre and some of the members. We could certainly get back to you with more up-to-date information.
I will say briefly on the hydrogen modelling specifically, as Ms. O’Brien mentioned, the hydrogen strategy modelled the full opportunity for hydrogen in the Canadian economy and ECCC and the Emissions Reduction Plan really modelled the sum of the impact of the measures that were included in the government’s plan. So really looking at two different things: One a call to action and the other more of a plan that adds up to specific reductions.
Senator Seidman: Thank you.
[Translation]
Senator Miville-Dechêne: You’ve given us all kinds of information about several programs, and a lot of numbers. I’m trying to get my head around it.
It’s clear that the geopolitical situation in Europe is leading to growing demand for oil and gas, which benefits Canada from the economic standpoint. At the same time, in the presentations, particularly Ms. O’Brien’s, I can see that although we are generating lower levels of emissions per barrel of oil, in an absolute sense, more emissions are getting into the atmosphere. Our emissions are increasing and I believe that Mr. Guilbeault would like to see a cap on fossil fuels in 2023, which would lead to a decrease.
That time period looks rather short, which, of course, is very good for the environment. However, since you were talking about the various techniques being developed, but which are not quite ready yet, what’s your level of confidence about the possibility of capping emissions and seeing a corresponding decrease by next year?
[English]
Ms. O’Brien: Thank you for that question. It could be helpful to provide a bit more context I think with respect to emissions profile from the sector. As you have indicated, the oil and gas sector is the highest emitting in terms of the economy. It is precisely because of that that we need to drive down the level of emissions. In 2020 the sector contributed 27% of Canada’s emissions.
To your point, we will not meet our climate objectives if the sector does not make strong contributions to emissions reductions. I think we are seeing a strong commitment by both the oil and gas sector to do exactly that and to meet Canada’s 2030 and 2050 targets.
You are right, there are a number of elements that need to come together in order to make that transition and transformation successful. As I mentioned, there are a number of emerging technologies that will help us to meet the net-zero commitments.
As we know, a number of these technologies represent large costs. As I mentioned, it is working together, collaboration across all levels of government with industry, with stakeholders to avail ourselves of all of the collective levers we have in order to make necessary investments that will drive down the carbon intensity of the sector globally.
Senator Miville-Dechêne: Okay. I will ask you a more precise question on those different technologies. The only one I know is carbon capture because we have talked about it so much, but there are four other processes here. Are we talking about using electricity to clean up oil production? Just explain to me in simple terms because I’m not a specialist, what we are talking about here.
Ms. O’Brien: I can appreciate that, senator. In fact, I’m still relatively new to my position. I have been here for about four months, so I can appreciate the challenge involved in terms of understanding not only how the sector currently operates but the challenge of understanding the various pathways towards transition and the transformation.
I did make reference in my remarks to the application of carbon capture, storage and use technology. I have a colleague, Drew Leyburne, with us this evening who can speak to that in greater detail.
Some of the other technologies I had made reference to include steam-assisted solvent extraction processes. This is a technology that is applied to oil sands production, and it extracts the product and uses water and other resources much more judiciously. By applying that technology, there are significant environmental and emissions reductions.
The cogeneration of steam and electricity is another kind of technology that is applied to industrial processes as well as electrification. As you had suggested in terms of your question, for instance, one of the technologies that is being considered is increasingly using the electrification of production facilities — for instance, turbines that are used in all sorts of processes like natural gas, liquefied natural gas, or LNG, and oil sands production. Instead of using gas turbines, electric-driven turbines would be used, which would result in significant reductions in GHG emissions.
I think there are a number of technologies that can be applied throughout the production chain. Some are tried and true and others are more along the developmental spectrum. But there is a lot of innovation and investment in this area that hold a significant promise to further drive emissions reductions across the sector.
Senator Miville-Dechêne: Who is going to pay for that? Who is going to pay for those new technologies?
Ms. O’Brien: I think these are discussions that are underway. It’s primarily the responsibility of industry, but, as I have also indicated, the government has a number of support programs and mechanisms in place to support industry and drive the use of these innovative technologies. For instance, the release of the ITCs indicated in the Fall Economic Statement. There are various funding programs available across the government. My colleague, Kendal Hembroff, made a reference to the Strategic Innovation Fund, for instance. There is the Canada Infrastructure Bank. There are a number of tools available across government that can provide support to drive down the cost and risk associated with a number of these large-scale investments that would be required to make oil and gas production more environmentally responsible.
Senator Miville-Dechêne: Thank you.
The Chair: If I could permit myself to ask a question — I know it is a challenge, but let me just go back. I just want to get a bigger picture. Where I come from, you have supply and demand issues. When you come up with a product, it defines the demand. I want you to explain to me from that sense how you see this happening. What are we going to be offering the world? The world will need oil and gas for another 50 years — maybe decreasing some, but there is still a need for it. How do we compete? What are we going to be offering that population to encourage them to buy our product versus Saudi Arabia’s? I understand that Saudi Arabia’s cost base is very low. Apparently, they produce very clean oil. How do we compete? Make it simple for me. We’re sitting, we’re having a coffee, and what are we going to sell?
Ms. O’Brien: I can appreciate the question. We are working collaboratively across government partners and with industry to create a competitive and low-carbon or clean Canadian petroleum sector — that’s both oil and gas. We would like to supply the cleanest barrel of oil or gas to the world. We are well on our way to achieving those targets. I don’t want to minimize the effort involved and the work that is still required to be able to get us there. But there is a real commitment from industry, I think, to work with government to drive us in that direction. We are seeing some results. Total emissions intensity per barrel in the oil sands has decreased significantly over recent years. As well, total emissions coming from the natural gas sector are lower, recently, than they have been — despite increased production.
As we go forward, as I made mention, some of these technologies that will need to be applied to production are very expensive and represent significant risk. We are concerned about maintaining the competitiveness of Canada’s sector as we drive down emissions intensity. That is not necessarily what we are seeing from global partners. As we place these demands on our sector, there can be discussions around how government can consider support through various means to ensure our industry remains competitive moving forward.
The Chair: Where are we at today? When you compare our product to the California product or Saudi Arabia’s, where do we stand today? Are we less dirty? Are we very far from your objective of being the cleanest in the world?
Ms. O’Brien: This is where things quickly get complicated. I do have some notes, and so I can dig out some of the emissions intensity numbers. But I would caution you, Mr. Chair, about making simple comparisons in terms of comparing Canadian products versus, say, that from Saudi Arabia or California. In Canada, we are very lucky because we have a vast diversity of supply. We produce a full range of oil and gas products, everything from very heavy crude through to lighter crudes and gas. You have to make sure you are comparing apples to apples. It is not fair to compare, say, heavy crude to a lighter crude that might be produced in other jurisdictions.
However, when you do compare like with like, Canada’s levels of emissions intensity actually compare very favourably, and, in fact, we are producing some of the less emissions-intense heavy crude that is produced internationally.
I see Mr. Moffet has his hand up. I might take advantage of having Mr. Moffet intervene. Then I can look up some more specific numbers we have on some of the emissions intensity related to Canadian oil and gas products.
Mr. Moffet: First, I’ll build on my colleague’s point. Some Canadian oil and gas products are now produced with the least emissions in the world. The latest offshore production facility that we just approved in the Bay du Nord will produce oil with the lowest emissions of any oil production facility in the world that we know of.
If some of the proposed LNG facilities in British Columbia are connected to the British Columbia grid, which is, of course, a clean grid, then they would be far and away the least carbon-intensive production of LNG in the world.
Other products are not, but as my colleague emphasized, they are significantly improving. In that regard, I think it’s important for the committee to appreciate that from the government’s perspective, the goals for the oil and gas sector are at least threefold. First, as my colleague explained, it’s to ensure that as long as there’s a demand for oil and gas, of course, we want that demand to come to Canada. To ensure that, we want Canadian oil and gas to be able to compete both on a carbon intensiveness basis — in other words, the emissions required to produce that oil and gas — and on a cost basis. To do that is going to require financial contributions and innovation contributions from industry and governments working together.
In addition to that goal, we’re working to reduce demand for oil and gas in Canada. We’re deploying zero-emission vehicles and we’re trying to electrify industry and increase the use of hydrogen by industry. Those will all reduce the demand for oil and gas in Canada, and we’re going to see similar emphasis around the world. It will take time, but that’s a second goal.
For the third goal, at the same time we’re working with the sector to reduce their emissions, we’re also working with the sector to enable and encourage the sector to diversify its products into products that take advantage of that rich resource that my colleague described, but to produce products that do not emit greenhouse gas emissions in their use. We’re sort of on a three-legged stool here trying to achieve three objectives at the same time, which, of course, is why this is such a complicated and interesting challenge, one that’s ripe for review by your committee.
Senator Batters: Thank you. I just wanted to make a few points to stand up for the very strong environmental record of Canadian oil and gas. I was glad to hear Mr. Moffet stand up somewhat for some of these things, but I’m a little surprised that the senior official at Natural Resources Canada didn’t have the same figures at her fingertips. Here are some of the ones that I’ve come across.
Among the 20 top producers, Canada ranks fourth on the environment, as BMO Capital Markets indicated. If the rest of the world followed Canada’s flaring standards, total GHG emissions from every barrel produced would drop by 23%. GHG intensity in Canada has already dropped by about 24% from 2012 to 2020.
Canadian oil and gas leads the world in environmental, social and governance. The top 10 oil exporters in the world are all lower than we are.
We’re ranked number one on many different indexes, including Democracy Index 2020; Global Peace Index 2020; Social Progress Index 2020; Rule of Law Index 2020; Corruptions Perception Index 2020; Women Peace and Security Index 2019-2020; Green Future Index 2021; World Press Freedom Index 2020; Environmental Performance Index 2020; and Sustainable Development Index 2020.
Between 2000 and 2018, the emission intensity of Canada’s oil and gas operations decreased by 36% due to technological and efficiency improvements, fewer venting emissions and the reductions in the percentage of bitumen being upgraded to synthetic crude oil.
The emissions intensity of the oil sands is projected to improve another 16% to 23% by 2030, and Alberta, accounting for about 80% of Canada’s oil production, is one of the few global oil jurisdictions with mandatory disclosures, regulated emissions protocols and carbon taxes on excess GHGs.
We have a proud record. I wanted to highlight that because it’s very important to note for this study.
Senator Seidman: Thank you. Let me try again to see if I can get anywhere with some questions. I understand that this has many complex issues as we start this study. We’re trying to develop an understanding.
It’s my understanding that there’s currently a two-year lag in reporting Canada’s greenhouse gas emissions. How feasible is it to publish close to real-time estimates of greenhouse gas emissions? How does the lack of real-time emission estimates affect Canada’s capacity to develop emission reduction strategies and policies?
Mr. Moffet: We do report national emissions across all sectors and disaggregated by sector to the United Nations framework commission on climate change. Those do lag by about two years. That’s because of extensive modelling compilation that needs to be done, fact-checking et cetera. That’s done on the same schedule as every other country in the world.
That said, we do have much more current reported information from all the major oil and gas facilities in Canada through a program known as the Greenhouse Gas Reporting Program under the Canadian Environmental Protection Act. We also have the ability to issue requirements to emitters of any pollutant, including greenhouse gases, to provide additional information, if we need that information to be able to develop regulations.
I’m by no means claiming that our information base is perfect, but we do have relatively current information.
As we develop specific regulatory measures, in particular, we embark on extensive engagement with the industry. One of the main purposes of that engagement is not just to say, “Hey, what do you think we should do,” but is actually to generate as current and accurate information as possible so that we can provide an accurate information base to the government to enable ministers to make an informed decision on choices about how stringent a measure should be, what kind of measure should be adopted, that sort of thing.
That’s a rather long-winded way of saying that while information is not perfect, timely or current information is not a significant barrier to our ability to develop measures to reduce emissions from this or any other sector in Canada.
Drew Leyburne, Assistant Deputy Minister, Energy Efficiency and Technology Sector, Natural Resources Canada: Thank you. While my colleague is correct about regulatory reporting, it doesn’t provide the sort of day-to-day dashboard that you might want to see your progress. There are certain areas of the oil and gas value chain where it is possible to get that near real-time feedback. Methane is a good example. The technology gains we’ve seen in the last few years with regard to satellite imagery and improved sensoring at field sites, drones and other technologies do allow companies, regulators and provincial and federal authorities to have much more real-time feedback in certain areas of the GHG profile.
Senator Seidman: That’s important. Are we saying that we do have the kind of emissions data that allow us to develop our strategies and policies? We’re reporting something that is two years old but we have something that’s closer to reality, so it doesn’t really affect our capacity to develop emission reduction strategies and policies. Is that what we’re saying?
Mr. Moffet: That summarizes my position. To be clear, the reason the report to the UNFCCC is more dated is because it covers the entire economy. We report on a cycle that’s established by the UNFCCC, and we only report when we have all of the information at the same level, whereas for some information, we may have much more current information. That’s always the case, for example, with the oil and gas sector.
Senator Seidman: Thank you.
[Translation]
Senator Miville-Dechêne: You said that there were several technologies that could help reduce emissions in the oil and gas industry, but at the same time, Canada committed itself at the G20 to discontinue grants for fossil fuels by 2025 and to formulate a plan to gradually eliminate public funding for the fossil fuels sector.
How can the government’s commitment be reconciled with the fact that you are telling us it’s important for the industry to receive grants for decarbonization? The year 2025 is not that far away, after all. Is all that realistic or not?
The Chair: For whom is the question?
Senator Miville-Dechêne: I don’t know. Who can answer it?
Mr. Jovanovic: I can answer the question, Mr. Chair.
I think it’s important to make a distinction between fossil fuel subsidies and subsidies for inefficient fossil fuels. The word “inefficient” becomes important in the context of a transition to carbon neutrality. At the outset, the G20 commitment — excuse me, I have the English version here.
[English]
It describes inefficient fossil fuel subsidies as those that encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change.
[Translation]
It’s important to make this distinction. What the federal government did was support the industry in a manner consistent with a transition to carbon neutrality. That’s what distinguishes an efficient subsidy from an inefficient subsidy.
Senator Miville-Dechêne: So the government’s commitment is to eliminate inefficient subsidies by 2025, not subsidies in general. Is that what you’re saying?
Mr. Jovanovic: Yes, inefficient subsidies. The commitment date was moved closer, to the end of 2023.
Senator Miville-Dechêne: Okay. I’m going to ask you another question that may be related to Senator Seidman’s question about data.
At the moment, there’s a two-year lag for Canada’s declaration on greenhouse gas emissions. Would it be possible to publish these results in real time? It seems to me that two years is long enough to be able to take corrective action and get the figures on time. Does this interfere with our capacity to develop strategies?
The Chair: For whom is the question?
Senator Miville-Dechêne: Excuse me, I’m not sure who should take it.
[English]
Mr. Moffet: In fact, we do publish a number of sets of information, some much more current than the UNFCCC report.
The report you’re both referring to is the National Inventory Report that goes to the UNFCCC, but we report annually under the Greenhouse Gas Reporting Program. When we have regulations, for example, our methane regulations, we require reporting on a much more frequent basis than that. As we move ahead to develop or modify regulations, we will be taking advantage of the emerging technology of the sort that my colleague Mr. Leyburne referred to. We have much more current reporting now, and we will see increasingly current information coming to Canadians in the future.
Senator Miville-Dechêne: Thank you for correcting me on that.
The Chair: Let’s go back to the scenario you were trying to explain in simple words — supply and demand. I totally agree. I concur that if you could get real quality and you’re the cleanest one around, I think what you have to do — because there will be heavy competition as we decrease consumption, there will be a lot of competitors, including Saudi Arabia. We have to be very sharp and efficient to basically win that argument.
Having said that, when I look at the presentation by Ms. O’Brien, I have to admit, you’re all over the map. There are subsidies here, there is money there. In any federal government, a subsidy less than $1 billion is not very much. It gives me the sense that we don’t know where we’re going. When you proposed the issues, it was all tentative. It was all “possibly.” I’m having difficulty being convinced. I agree with the objective, but I’m not sure we’re going to get there with all these tentatives. We hope the technology will be there. We don’t have it yet. I have to say, I’m a little bit worried about that.
I also buy into the idea that, in a world sense, there will be a need for oil and gas for decades. If we are the cleanest, I think we have to compete. But you realize when I say that I buy that, most Canadians are under the impression — including some committee members — that we are actually committed to shutting it down. We’re committed to not having oil and gas. We talk about a reduction in subsidy and all kinds of stuff. Maybe it’s politicians’ fault because we do give most Canadians the impression that we will be decreasing and be out of the business. Yet I say if somebody wants to produce oil and gas and we’re competitive about it, why not us? There should be a reduction, but why not us? If we’re number one, we should benefit from that.
How do you deal with the fact that the Canadian public is not on side and that there is a reputation issue and a delivery issue? It’s tough to be convinced. Ms. O’Brien, do you want to comment on that?
Ms. O’Brien: Thank you, chair. I think that there’s a lot in your comment. Absolutely, we are very fortunate to have the resources that we have. This sector contributes an enormous amount to Canada’s prosperity across the country, despite localized production, primarily in Western Canada and in Newfoundland and Labrador. As my remarks indicated, this contributes to economic prosperity and growth across the country, which are important contributions to Canada’s social safety net.
It is critically important that this sector remains globally competitive, particularly given the geopolitical situation these days. Canada has a role to play to support global energy markets. To your point, we are driving to become the cleanest producer. As we drive towards that, important and significant investments are going to be made in order to support the transition across the sector, as well as to have cleaner fuels and products.
With respect to your comment about public support, there are mixed views across the country. There is an important role to play in terms of increasing energy literacy across the country. In general, there aren’t many Canadians who understand the complexity of the energy systems in our country. Do they understand the source of electricity when they turn on their lights? When we’re all using technology, when they fill the gas tanks of their cars, do they understand where these energy sources are coming from? Significant improvement could be made in terms of that level of understanding, which would support meaningful and robust public policy discussion of these important issues.
There are many pathways, and there are difficult and challenging decisions that need to be made. As I say, we have to bring a number of levers and tools to bear to support the broader transition and transformation.
I apologize if my remarks seemed scattered. The government has a number of initiatives underway to support, and it’s balancing incentives, as well as regulatory approaches, to drive towards a greater emissions responsibility from the sector. There are several levers and measures that the government has in place.
Senator Seidman: Thank you for your help in continuing to try to understand the issues here. In your presentation, Ms. O’Brien, you did say that the oil and gas sector is a key driver of innovation and a significant driver of trade. We talk a lot about how we’re driving to become the cleanest producer so we can be competitive internationally. That will be one of the most important aspects of moving forward in a competitive, feasible and sustainable fashion.
What does that really mean? If I might say, the Net-Zero Advisory Body proposed that the Government of Canada could accelerate emissions reductions in the oil and gas sector by increasing the stringency of the federal carbon pricing system. Mr. Moffet made a passing reference to that. For example, this advisory body suggested that the federal government could apply the full carbon price to the sector rather than using the output-based allocation system that is currently in place.
Is the federal government considering a more stringent carbon pricing system for the oil and gas sector? How is the federal government working with the provinces and territories that have their own carbon pricing systems that apply to the oil and gas sector, like Alberta?
Mr. Moffet: Environment Canada is the lead for the carbon pricing policy, along with our colleagues at Finance Canada. Your question is timely because today the government announced the results of the assessment of the exercise that we recently concluded, of reviewing all provincial pricing systems for the period 2023 to 2030.
We did, in fact, significantly increase the stringency of carbon pricing throughout Canada, including for industry and for the oil and gas sector. We set new criteria for all of Canada for the period 2023 to 2030. We did that last year. We then gave all provinces an opportunity to modify their own systems, if they wanted to retain their systems and demonstrate that their systems would align with those criteria. In fact, every province that had an industrial pricing system committed to significantly increase the stringency of their systems.
Minister Guilbeault announced today that the federal system, therefore, will not be imposed on any province that already has a system, including the major oil-and-gas-producing provinces of Newfoundland and Labrador, Saskatchewan, Alberta and British Columbia, each of whom have committed to increase the stringency of their pricing systems for the oil and gas sector.
We have no additional plans to change the overarching Canadian approach to carbon pricing. That said, we are in the middle of thinking about — and engaging with provinces, industry, civil society and interested Indigenous communities — the question of how to impose the cap that will effectively ensure that there are no increases in absolute emissions from the sector and that will drive emissions down over time to meet the target of net zero by 2050.
How we will achieve that cap remains to be determined. It may involve some kind of a market mechanism, but that mechanism will not directly interact with the existing pricing system.
Senator Seidman: Well, that is news. We’ve all been working today and haven’t seen the press conference or whatever it was that happened, so that’s news indeed.
Mr. Moffet: You need to take more time and watch TV, senator.
Senator Seidman: You’ve just broken the news right here to us tonight, so thank you for doing that.
You’re on the verge of moving into another interesting area, namely, what are the key pathways that will allow the oil and gas sector to reduce their emissions, and what are the most cost-effective ways that the federal government can support the oil and gas in order to help them reduce the emissions intensity of their operations, now that you’ve imposed more stringent controls?
Mr. Moffet: I can start, but I think this is a broader discussion. This actually reverts back to the initial presentation of Erin O’Brien.
We know there are technologies that hold significant opportunities for reducing emissions, such as carbon capture and storage. We know there are opportunities to electrify some parts of the sector.
Why is that important? Take the oil sands. Of course, oil sands are different than regular oil. You have to extract the oil out of the bitumen, and to do that you need a lot of heat and energy. At the moment, oil sands companies use natural gas and steam. If they changed those processes to use clean electricity instead of natural gas, they would significantly reduce emissions. If they change from water to various kinds of chemical solvents, they can do that more efficiently.
In other words, there are technologies that are known, that have been developed and that are now being applied in the sector that will reduce emissions. Investing in those technologies will take time in order for the emission reductions to occur. We expect emissions reductions to start to accelerate, and then to pick up speed over time as those investments are actually fully implemented.
Then the question arises: What is the government’s role? That comes back to the reason why my colleague laid out quite an array of measures. There is no one single best way to enable industry to change its behaviour while remaining competitive. That is why Canada has chosen to deploy a mix of regulations, trying to use the most efficient regulations possible in the form of carbon pricing, for example, together with various kinds of relatively well tested and proven incentive mechanisms ranging from an investment tax credit to support for collaborative research and development, to direct loans and grants available for specified activities.
Senator Seidman: Ms. O’Brien, I think you wanted to add something.
Ms. O’Brien: Thank you, senator. I wanted to support Mr. Moffet in his comments and actually bring to your attention a document that is published by Natural Resources Canada. It is the Energy Fact Book, and it includes a number of interesting facts and information with respect to the sector and a number of technologies and investments being pursued to drive down the emissions intensity of the energy sector as a whole. It includes information in terms of the petroleum or oil and gas sectors and, interestingly, statistics with respect to expenditures on energy R&D, such as Mr. Moffet had mentioned, carbon capture usage and storage, renewable non-emitting energy as well. It also details expenditures with respect to environmental protection measures in general. For instance, in 2019, the energy sector invested over $4.2 billion in environmental protection expenditures. If you are looking for some background information in terms of your study, you might find this particularly helpful.
The Chair: Can you send a copy to our clerk so we can all get it on the committee level?
Ms. O’Brien: I would be happy to send it to the clerk if he doesn’t have it.
The Chair: Thank you.
Senator Seidman: Ms. O’Brien, in your presentation to us, you said that the oil and gas sector is a key driver of innovation. You went on to say that the sector is the largest contributor to energy R&D, responsible for about $1 billion per year of investments on average and more than half of the total private sector investment in energy R&D over the last decade.
Do you have more specifics? It’s important to understand the sector itself, what it is doing and where they see the most promises and where they are spending their R&D money. Is this in your fact book as well?
Ms. O’Brien: There are some details in the fact book, as I’m looking at that right now. For instance, it includes that petroleum and coal-product manufacturing has invested over $500 million in environmental protection activities, most largely in pollution abatement and control; significant investments in waste water management; protection and remediation of soil, groundwater and surface water; solid-waste management; air pollution management. It is quite illuminating in terms of the scope and breadth of investments that the sector is making to decarbonize so that it can, in fact, become the cleanest barrel in terms of production.
I notice that my colleague Drew Leyburne had his hand up. I welcome his input.
Mr. Leyburne: Mr. Chair, in addition to the resources that my colleague mentioned, Canada also reports through multiple international fora, including the International Energy Agency, on the investments that both the government and private sector are making in energy. If the committee would like to see some of that data, we can ensure that international comparisons can also be shared.
The Chair: That is a very good idea. Please send it to the clerk if you don’t mind.
[Translation]
Senator Miville-Dechêne: I’ll change tack a bit.
At COP27, countries agreed to establish a compensation fund for the global south countries whose populations were affected by the impacts of climate change. Like other countries, Canada will have to find ways to contribute financially.
Is Natural Resources Canada planning to require oil companies to contribute substantially to this fund to help the Global South countries?
The Chair: And your question is for?
Senator Miville-Dechêne: Anyone who can answer it.
[English]
Mr. Moffet: The short answer is that no decisions have been made about the exact commitment of each signatory country will make, including Canada, nor what the source of the funds will be. All these details remain to be determined.
[Translation]
Senator Miville-Dechêne: I was afraid of that. It means we’re going to have to be patient.
In the meantime, I have another question for you. The 2030 Emissions Reduction Plan expected oil and gas sector emissions to peak in 2019 and decrease every year after 2021. We will probably not achieve that, in view of the fact that, as you said, emissions are increasing.
Does the federal government plan to cap oil and gas sector emissions to keep them from exceeding 2019 levels? Is an emissions cap in the works at this time?
[English]
Mr. Moffet: Yes, senator. The government remains committed to imposing a cap that will stop any growth and ensure there is no growth in absolute emissions and to ensure that emissions decline over time to reach net zero by 2050. We have been engaged since Prime Minister Trudeau made that commitment at the previous COP in November 2021. Our two departments, NRCan, or Natural Resources Canada, and Environment and Climate Change Canada, have been engaged in extensive discussions with the sector and others about how to do that, including what the start year would be, what emissions will be covered, and what the reduction trajectory should be, what the legal form of the cap would be.
None of these decisions have yet been made, but ministers are quite preoccupied with this question. At the most recent Conference of the Parties, Minister Guilbeault did reiterate the commitment and indicated that more details would be forthcoming in the next few months.
I apologize, I can’t give you any more detail than that.
Senator Miville-Dechêne: I understand. It seems to me that there is a bit of a contradiction here, because our absolute emissions are growing. So how can we get there?
Mr. Moffet: The sector has been significantly improving its emissions intensity, so the emissions per barrel of oil or per unit of natural gas have significantly declined over the past 10 to 12 years. However, the growth in production of oil and gas has more than offset that improved efficiency.
What we now need to do is cross those lines so that any continued production or even increased production will be done in an increasingly and significantly more efficient manner so that absolute reductions do not increase and start to decline.
The way to do that, we know, is through the implementation of these four key technologies that Erin O’Brien described in her introductory remarks, together with other innovations that no doubt are underway and that we will see in the next few decades. But we know that there are technologies that have not yet been implemented and that could, if implemented, significantly reduce emissions while enabling production to continue.
Senator Miville-Dechêne: Thank you.
The Chair: Before we end this session, I have two quick questions. If I can get short answers, I would appreciate it.
Many people in Canada have difficulty with carbon capture and storage, or CCS, and they see a contradiction by CCS in doing so. Yet, we see countries like Norway basically applying that technology very successfully. Norway is very proud of their system, and the world talks about it.
What is so special about Norway in that they are doing CCS, and we are having so many obstacles?
Mr. Leyburne: I’m happy to jump in on that one, Mr. Chair.
To start, the world does view Canada as one of the handful of leader countries in carbon capture, utilization and storage, or CCUS. We established some of the world’s first projects. Weyburn-Midale has been in operation since the year 2000 and is the world’s first and longest example of an international CCUS project. We now have four of the world’s 25 largest CCUS projects. For a country of our size, I think that is noteworthy.
Norway has taken some very aggressive steps in the last few years to expand their CCUS leadership, and the U.S. is doing the same through 45Q tax credit and other measures.
As I said, the world does see Canada in that leadership position. To the extent there is a controversy about CCUS, it is the concern that CCUS might artificially extend or expand the use of fossil fuels.
Our stance on this is that there are real-world emissions in the oil and gas sector and in a lot of heavy industries: cement, steel, sustainable aviation fuel. These are real-world emissions that will happen this decade and beyond unless we have a technology that can address them, and CCUS fits that bill. As we bring down the cost of carbon capture over the next few decades, its use is going to expand across all parts of the economy and around the world and also lead to reductions in what we call carbon removal, which will be an increasingly necessary technology solution, probably as we get to 2050 and we need to overshoot, not just mitigate but also remove some of the historical carbon that’s already in the atmosphere.
The Chair: As we noticed approximately two months ago, the Americans came out with a very aggressive expenditure program, a very green program, with a lot of money. How do our producers compete when you have such significant sums of money, obviously for a worthy objective? How are we going to compete in our marketplace? How do we come out as a winner?
Mr. Jovanovic: Thank you, Mr. Chair. The government’s Fall Economic Statement addressed this question by announcing a few measures to start creating a level playing field following the Inflation Reduction Act in the United States, some of them being the refundable investment tax credits, one on clean technology, the other on hydrogen.
The Fall Economic Statement was also clear that the government is continuing to look at how to ensure that Canada remains competitive and that as we invest in the transition towards net zero, it is done in a manner that investments continue to be made in Canada. So the level playing question is important.
We are in the process of continuing to assess the gaps that exist following the Inflation Reduction Act.
The Chair: Thank you all very much. We have had a very good discussion. We have a lot to learn in the interest of ensuring we remain competitive. I know you are working hard, and we appreciate it very much. Thank you for sharing your knowledge with us tonight.
(The committee adjourned.)