THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Thursday, November 7, 2024
The Standing Senate Committee on Energy, the Environment and Natural Resources met with videoconference this day at 9 a.m. [ET] to study emerging issues related to the committee’s mandate.
Senator Josée Verner (Deputy Chair) in the chair.
[Translation]
The Deputy Chair: Honourable senators, my name is Josée Verner, I am a senator from Quebec, and I am the deputy chair of the committee.
Today, we are conducting a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
I ask my fellow committee members to introduce themselves, beginning on my left.
[English]
Senator Arnot: Good morning. I am David Arnot from Saskatchewan.
[Translation]
Senator Galvez: Good morning. Rosa Galvez from Bedford, Quebec.
[English]
Senator D. M. Wells: Good morning. I am David Wells from Newfoundland and Labrador.
Senator Fridhandler: I am Daryl Fridhandler from Alberta.
Senator Robinson: Good morning. I am Mary Robinson from Prince Edward Island.
Senator McCallum: I am Mary Jane McCallum from Manitoba.
Senator Cardozo: I am Andrew Cardozo from Ontario.
[Translation]
Senator Moreau: Pierre Moreau from Quebec.
Senator Miville-Dechêne: Julie Miville-Dechêne from Quebec.
The Deputy Chair: Today, the committee has invited witnesses to appear as part of its examination of two reports by the Net-Zero Advisory Body entitled Closing the Gap: Reaching Canada’s 2030 Emissions Target and Climate’s Bottom Line: Carbon Budgeting and Canada’s 2035 Target, which were published in September 2024.
[English]
For our first panel, we welcome, by video conference, Simon Donner, Co-Chair of the Net-Zero Advisory Body; and Anna Kanduth, Director, 440 Megatonnes, the Canadian Climate Institute.
Welcome, and thank you for being with us. Five minutes are reserved for your opening remarks.
The floor is yours, Mr. Donner, followed by Ms. Kanduth.
Simon Donner, Co-Chair, Net-Zero Advisory Body: Thank you. I am speaking with you this morning from the unceded traditional territories of the Musqueam, Squamish and Tsleil-Waututh Nations in Vancouver, British Columbia. On behalf of the Net-Zero Advisory Body, or NZAB, I want to thank the senators for the invitation to discuss our annual reports.
The NZAB was established into law through the Canadian Net-Zero Emissions Accountability Act. We are mandated to provide the Minister of Environment and Climate Change with independent advice with respect to achieving net-zero emissions by 2050 and the key milestones along the way.
Last year, the minister requested advice on how to achieve Canada’s 2030 target and the setting of Canada’s 2035 target. To inform this advice, we sought input from industry experts, academics, labour representatives, Indigenous organizations and non-governmental organizations. We also worked closely with the Canadian Climate Institute, which provided analytical and modelling support.
In our first report, which is entitled Climate’s Bottom Line: Carbon Budgeting and Canada’s 2035 Target, it offers three pieces of advice. First, we advise that the government develop a national carbon budget that reflects the total greenhouse gas emissions that Canada will emit over time. Carbon budgets are used by countries like the U.K. and France, as well as cities like Montreal and Edmonton, to better track the impact their emissions have on the planet. Annual targets are valuable, but they only measure the amount of emissions in one year. What matters to the climate is the total emissions over time.
By setting a carbon budget, Canada can better connect the dots between its short-term targets and long-term goal of net-zero emissions. It also provides an intuitive way to map the impact of the choices that we make today. I think Canadians all know that how much you earn and spend now determines how much you have left for later.
The second piece of advice is that the government adopt a 2035 reduction target of 50% to 55% below 2005 levels. This target range emerges from our carbon budget analysis and keeps Canada in step with its trading partners. For example, although the U.S. is undergoing a change in government and has not yet announced its 2035 target, there is already a target in the U.S. for the year 2030 of 50% to 52% below 2005 levels, and modelling suggests they could come close to that. Other countries, including the U.K. and the EU nations, have announced or are developing even more ambitious targets than the one we suggest for Canada.
Third, the NZAB encourages the federal government to address Canada’s excess emissions through means such as international support for climate action and removal of carbon dioxide from the atmosphere. What do we mean by “excess emissions”? Canada is already one of the world’s top 10 emitters, both per person and in terms of total or absolute emissions. That means we have already consumed our fair share of the global carbon budget remaining to avoid the temperature limits that the world agreed to in the Paris Agreement. In addition to adopting the carbon budget that we propose, we’re recommending that Canada acknowledge that the budget will be more than our fair share and develop a plan to help address those excess emissions.
In our second report, which is entitled Closing the Gap: Reaching Canada’s 2030 Emissions Target, we find that meeting the existing 2030 target will be a challenge, but it is possible. To develop this advice, we worked from the existing policy suite. We did this because history tells us that adjusting existing policies is cheaper, faster and fairer than redesigning the entire policy architecture.
Here we recommend five sets of actions. These include the following: first, finishing the policy work that is under way by implementing announced measures like the clean electricity regulations; and second, reducing possible negative interactions between the different policies. We also recommend strengthening the industrial pricing system in order to provide certainty to investors and securing absolute emissions reductions from the oil and gas sector, which is responsible for almost one third of national emissions.
After these sets of actions, we identify an additional small set of actions that can help close the gap to the 2030 target. This includes strengthening the oil and gas methane regulations and promoting low-emission modes of transportation.
We recognize our advice may seem ambitious, but the research shows that the recommended actions and targets are achievable and can contribute to economic growth. The federal government, however, cannot do this alone. Getting there will require action from the provinces, territories, municipalities and the private sector.
Canada is in a race to address climate change and to win the net-zero economy of the future, but this is not just any race. This is a relay. If we run too slowly on the first leg or run in the wrong direction, we’re going to leave our teammates with an even more difficult task.
We hope that our advice is heard and that ambitious measures are put in place to avoid dropping the baton. Thank you.
[Translation]
The Deputy Chair: Thank you, Mr. Donner.
[English]
Anna Kanduth, Director, 440 Megatonnes, Canadian Climate Institute: Good morning, members of the committee. My name is Anna Kanduth, and I serve as the Director of the 440 Megatonnes initiative at the Canadian Climate Institute. Thank you for the invitation to discuss our recent analysis for the Net‑Zero Advisory Body.
Our task was to help inform the Net-Zero Advisory Body’s advice to the Minister of Environment and Climate Change on two questions: first, identifying strategies to close the gap to Canada’s 2030 emissions reduction target; and second, setting Canada’s 2035 emissions reduction target.
The evidence is clear that climate policies in Canada are working. Our analysis finds that emissions would be 41% higher in 2030 without policies implemented to date by all orders of government. In addition, developing and announced policies will deliver even deeper emissions reductions this decade, bringing Canada closer to its 2030 target. However, both the institute’s independent analysis of the federal government’s 2030 Emissions Reduction Plan and projections from Environment and Climate Change Canada have identified a gap between current policy plans and the 2030 target.
The Net-Zero Advisory Body asked the institute to evaluate policies that could bridge this gap. Working with Navius Research, we identified a suite of policies that the federal government could implement to meet Canada’s 2030 target. Our analysis found that meeting Canada’s 2030 target is technically achievable. However, success will depend on how quickly and effectively governments implement policy. We identified three steps to get on track to 2030.
Our modelling indicates that the majority of emissions reductions to reach the 2030 goal will come from current and proposed policies, so finalizing them should be a priority. Examples include the draft regulations to reduce methane emissions from the upstream oil and gas sector by 75%.
The second-largest share of emissions reductions in our analysis comes from strengthening existing and proposed policies, including by addressing negative interactions between them. Previous analysis from the institute found that industrial carbon pricing systems are the single biggest driver of emissions reductions in 2030, delivering between 20% and 48% of reductions from Canada’s climate plan moving forward. However, interactions with other policies risk weakening price signals in Canadian carbon credit markets, which reduces the impact of industrial carbon pricing systems. Our research finds that tightening benchmarks in these systems can minimize the negative impact of policy interactions and drive an additional 15 megatonnes of emissions reductions from Canada’s current policy mix by 2030.
Finally, while the first two steps can get Canada most of the way to the 2030 target, closing the gap may require a limited number of new targeted measures. However, introducing new policies now to meet Canada’s 2030 target presents practical challenges, as policies take time to develop, implement and have an impact.
We also provided analysis to inform the Net-Zero Advisory Body’s advice to the minister on setting Canada’s 2035 target. We approached this analysis with the view that target setting is about balancing different considerations and that, ultimately, Canada’s 2035 target should be an ambitious yet achievable next step for Canada. We again worked with Navius Research to evaluate six potential targets against a set of criteria, including emissions, affordability, competitiveness, economic growth and policy implementation.
Setting a target requires making trade-offs across these considerations. While steeper emissions reduction targets perform higher on certain indicators such as cumulative emissions and long-term competitiveness, they score relatively lower in other areas such as affordability, economic growth and policy implementation.
At the same time, while setting a relatively less ambitious target may be more achievable in the short term, it also presents risks. Delaying action could make future targets more challenging to meet, while also increasing the risk of stranded assets or delaying investments in Canada’s low-carbon transition. Delaying action in the short term will only amplify global climate impacts.
Our analysis found that a target range of 47% to 50% below 2005 levels by 2035 strikes a balance across the indicators we assessed. However, there is no one perfect target for Canada, and placing different emphases on different considerations, including ones beyond the indicators we assessed, could lead to different conclusions.
In closing, these targets matter. They enhance certainty and accountability, and they guide government decision making. However, it’s important to look beyond pass-fail perceptions of targets. Every megatonne of emissions reduction matters, and what’s most important is that governments implement effective policies to deliver sustained emissions reductions that set Canada on a path to net zero.
Thank you for the opportunity to discuss these reports. I welcome any questions you may have.
[Translation]
The Deputy Chair: Thank you. We will now proceed with questions.
[English]
Senator Arnot: I have a question for Mr. Donner and a question for Ms. Kanduth.
Mr. Donner, as a member of the Net-Zero Advisory Body, what are the most significant challenges that you see in translating scientific evidence into actionable policies? How receptive has the federal government been to these science-based recommendations? How can Canada’s climate policies integrate the preservation of marine ecosystems like coral reefs in coastal regions while pursuing net-zero targets?
The question for Ms. Kanduth is this: Based on your analysis, what are the most critical gaps in Canada’s climate change policies, and how do these gaps affect the ability to achieve net‑zero emissions by 2050? How can policy-makers ensure accountability across industries and provinces to meet reduction targets effectively?
Mr. Donner: Thank you, senator, for the questions.
To your first question about the reception of scientific advice and using science in decision making, generally I have only positive things to respond.
I am a climate scientist. That’s my training. I have a PhD in atmospheric and oceanic sciences, which is effectively physics. What I have found over the years, particularly in my work at the Net-Zero Advisory Body, is that science provides one of the pieces of evidence that you can use to try to inform policy. Science alone can’t do it, because scientists are not the only ones who should be making those value judgments about what policies should be.
So far, I think it has worked very well. Part of our mandate at the Net-Zero Advisory Body is to build from the best available science, and that includes both the physical sciences, like what I do, and also social sciences, et cetera.
One of the things I will note is that in this particular round of advice in these annual reports, the advice on Canada adopting a carbon budget comes pretty directly from what the scientific community has been saying. Just thinking of the cumulative emissions over time, carbon budgeting is the most scientifically accurate way to think about this problem. We tend to think about setting climate targets the way we do with other environmental problems, where we set annual emissions targets or annual pollution targets, but climate change is a cumulative problem because carbon dioxide stays in the atmosphere for a very long time.
The advice on the carbon budget is, in a sense, one of the pieces of evidence that the Net-Zero Advisory Body is taking science into account. I will say that first.
On the second question about protecting marine ecosystems, coral reefs, coastal areas, et cetera, that’s a particular interest of mine in my day job. I can say, obviously, the work of the Net‑Zero Advisory Body is focused on the pathway to net-zero emissions, not specifically on how we let ecosystems adapt to climate change.
Again, I will point you to the advice on the carbon budget and thinking about excess emissions. One of the things that becomes really clear is that Canada, at the government level, has never clearly acknowledged that we are a high per capita emitter, and we are a high emitter in total over time, which means that we are contributing more to this problem than the rest of the world. If you look at what the Intergovernmental Panel on Climate Change is saying about the impact that 1.5 degrees Celsius or 2 degrees Celsius of warming will have on the world’s marine ecosystems, it suggests that we want to avoid that level.
That is why we are giving this advice around using carbon budget thinking, but also thinking about how we compare the budget that Canada uses to what our fair share would be to make sure Canada is doing what it can to help the world, as a whole, respond to climate change and avoid some of the severe impacts on the ecosystems that we care about.
Senator Arnot: Thank you.
I gave a question to Ms. Kanduth.
Ms. Kanduth: Thank you for the question. I would say that implementation delay and lack of policy certainty, in my view, are the biggest gaps or challenges to getting Canada on track.
We know what the solutions and the policies are that can get the country on track, but it is about following through and implementing policy that can accelerate the deployment of those solutions.
A number of the policies that we identified in our analysis for the Net-Zero Advisory Body set Canada up to achieve the 2030 target but also to achieve emissions reductions beyond 2030 and achieve those deeper reductions on the route to 2050. Putting those policies in place and keeping them in place is critical for enhancing that policy certainty for Canadians, for industry and for other orders of government.
It is a great question on the role of provinces and territories. We know that getting to Canada’s emissions reduction targets and setting Canada up for long-term prosperity in the global race to net zero will require an all-hands-on-deck approach. That requires, of course, action from the federal government but also provinces, territories and municipalities.
I would say the provinces are taking action to advance climate policy. Two strong examples we’ve seen to date and where there is room for growth are in the electricity sector and in the building sector. In the electricity sector, we’ve seen coal phase-outs in Alberta and Ontario. We are also seeing most provinces build out their electricity systems with massive investments in new emissions-free electricity generation.
On buildings, I think amending building codes is one way to ensure that we are building the buildings of the future that are not locking in fossil fuel infrastructure for decades to come.
Senator Arnot: Thank you.
[Translation]
Senator Miville-Dechêne: I’d like to talk to you about a more topical issue. Last Monday, the government announced that the oil and gas sector will have to reduce its greenhouse gas emissions by 35% below 2019 levels by 2030. As a body responsible for examining such issues, do you think that’s fair? You seem to be saying that it will take a series of measures. What do you think of that measure? We’re asking them to cut emissions but not production. We’re relying on carbon capture, which isn’t a universally accepted method. As an advisory body and given your lengthy reports, what do you think of that measure? Is it the right way to achieve our objectives?
[English]
Mr. Donner: Thank you for the very important and timely question.
The advisory body has done a lot of work thinking about oil and gas, not just this year. In previous annual reports, we wrote about advice on the oil and gas sector.
The first thing for everyone to recognize is just simply the data. The oil and gas sector is responsible for about 31% of Canada’s emissions, according to the latest available data. What’s notable about this is that it is the one major sector of the economy in which emissions have been increasing. Canada’s emissions would be 16% below 2005 levels rather than 8% below 2005 levels if we did not count oil and gas.
The reason the federal government, in my mind, and the reason the advisory body has been paying so much attention to oil and gas is that the lack of emissions reductions — of absolute reductions — from the oil and gas sector is currently holding and will continue to hold Canada back from being able to meet its targets.
For that reason, the advisory body is 100% in agreement that more needs to be done to reduce emissions from the sector and ensure we’re getting absolute emissions reductions, not just reduction per unit of production.
Senator Miville-Dechêne: But is that the right solution? The government says production will continue to increase with that particular solution. Is that the right way?
Mr. Donner: I will say two things to that: Basically, in our report, the advisory body proposed two different ways that you could go about this. One would be to work with the oil and gas emissions cap that is proposed; the other would be to work with the industrial pricing system, expanding a program called carbon contracts for difference and hoping to address the issue that way.
What I will say about the oil and gas emissions cap is that our advice is if you are going to go ahead with the oil and gas emissions cap — as it seems that the government is — there are some things that can be done to tighten it to make sure that it works as well as possible.
One of the challenges, for example, is that because there are other policies to address methane emissions, it is possible that methane emissions reductions that will happen for other reasons from the oil and gas sector will lead to excess credit creation within the oil and gas system and could make it less effective.
We are kind of saying that we think it could be the right policy, but it needs to be implemented tight enough, and we give a bunch of suggestions as to how to do that.
I will add one small thing. I think it’s important for the Senate and for everyone in Canada to keep in mind that all of the international reports by folks like the International Energy Agency warn Canada and the world that in the world we’re heading toward, where countries are aiming toward deep decarbonization, the demand for heavy oil goes down, particularly the demand for Canadian products.
We need to think not just about the next decade, but we also have to be thinking about what the landscape is going to look like 50 years from now. Part of the advisory body’s advice is to always make sure we are thinking about the long term.
Senator Cardozo: Thank you, witnesses, for being here.
I had the good fortune to attend COP 16 on biodiversity last week, along with Senator Rosa Galvez. It struck me that there were 21,000 people there who knew a lot about the environment, understood the terminology and the acronyms, and had a common, shared sense of truths, but many people in the rest of the world don’t understand that.
My feeling is that environmentalists are losing the narrative and that we have gotten far down the road of accepting certain truths, and then we have gotten to all of these acronyms and terminology that the rest of the world doesn’t understand. Just when you thought you understood everything, along comes digital sequence information, or DSI, which is a whole different issue that I will not get into.
For the general public who are watching this and who don’t know a lot about the environment or are somewhat skeptical, I’d like to return to square one and ask a few basic questions about what we’re talking about, and then I will come to net zero.
Mr. Donner, I will ask you to start. In terms of carbon, we’re talking about carbon dioxide, which is an essential element of planet earth. When and where is carbon good, and when is it bad?
Mr. Donner: Thank you for the question. I feel like we’re back at university today, so this is great.
Senator Cardozo: I’m talking high school or elementary school.
Mr. Donner: Carbon dioxide is a natural part of life on the planet. All organisms on the planet and all life on the planet are made up of carbon. But like other elements, too much carbon in the wrong places can be a bad thing.
Basically, since the Industrial Revolution, the world has been taking carbon that is locked away in deep reservoirs of the planet and using it to extract energy, which is in the form of fossil fuels. The process of doing so leaks carbon in the form of carbon dioxide into the atmosphere. The result of that is the carbon dioxide levels in the atmosphere are now 50% higher than they were back in the 1800s.
Fundamental physics and chemistry that was discovered back in the 1800s tells us the more carbon dioxide in the atmosphere, the more the planet is going to warm. There is no controversy about that within the scientific community because it’s not a new form of science. The science that shows that carbon dioxide is affecting climate change builds on the fundamentals of physics and chemistry. For scientists to be wrong about that, basically we would have to throw out all of the world’s physics and chemistry textbooks.
Senator Cardozo: You are talking about global warming. In the winter, we have some crazy storms, and people laugh and say, “Hey, what happened to global warming?” How do you explain those storms in the wintertime and in the summer?
Mr. Donner: There is an old saying in the weather and climate research community: The climate is what you expect and the weather is what you get. What we mean by that is the term “climate” is referring to the average range of conditions that are possible at any given place and time. The weather is what you actually experience day to day.
Even as the climate is changing, we’re basically talking about a statistical property that the average weather is changing over time. You are still going to have a range of weather experiences on a warmer planet, so you are still going to have cold days. You are just going to have more warm days. It is the distribution of weather events that would be changing over time.
We’re still going to experience winter, but winters are more likely going to be warmer, and summers are more likely going to be warmer. We’re going to experience the effects of that over time, as we have been.
Senator Cardozo: Is that why we’re having a lot of wild weather patterns — everything from winter storms to wildfires?
Mr. Donner: Absolutely. As the planet gets warmer, there are many predictable things that will happen with that. Obviously, we expect to see more heat waves. We also expect to see, together with more heat waves, more of what scientists call fire weather, which are the weather conditions that are conducive to wildfires starting because of lightning strikes but also spreading and spreading more widely.
Senator Cardozo: I have a couple more quick questions, if I may. What is GHG, and what are the main sources of it?
Mr. Donner: There are many acronyms in the climate science world. GHG stands for greenhouse gas. Carbon dioxide is one of the major greenhouse gases. Other greenhouse gases include methane, which comes from some industrial activities, and it also comes from agriculture. These are the gases that can lead to the warming of the planet. The analogy that you sometimes hear is that it’s like we’re adding a blanket to the atmosphere. What these greenhouse gases do is absorb some of the radiation and some of the energy emitted by the planet’s surface, and they stop it from getting out into space. Instead, they absorb it and emit some of it back downward. It’s basic physics.
Senator Cardozo: Thank you.
Senator McCallum: Thank you for your presentations.
In the report entitled Closing the Gap: Reaching Canada’s 2030 Emissions Target from September 2024, it states, “Even with ideal implementation of announced policies and meeting of sectoral goals, Canada will fall short of its 2030 target.” This is despite the Canadian Net-Zero Emissions Accountability Act.
What are the reasons for Canada falling short? If the oil industry refuses to decrease their production, which they have, and if they invest in AI to increase this production — when we went to Alberta, we saw the machines that will not be driven by humans. They will be running 24-7 and will actually increase production. How will that impact your solutions and advice? How do you think that advice — grounded in values and principles to guide incremental action toward transformative change — will somehow change the behaviour of industries that are focused on economy?
Mr. Donner: Thank you. I take it that question was for me. Thank you, senator.
To the first part of your question, Canada’s target of a 40% to 45% reduction below 2005 levels for 2030 is the target that we’re referring to. Of all the policies that they already have planned and implemented, or that have been announced and are put into place, the government’s own modelling shows they could get a 36% reduction, so it’s close to the target but not all the way there.
The minister came to us and asked, “How are we going to close that gap and get that extra few percentage points?” That is really the core of the advice in our 2030 report that we worked on with the Canadian Climate Institute.
I think it’s important to determine how to interpret the government’s modelling. To get that 36% reduction, the policies would all have to be finalized and implemented. As was mentioned by my fellow speaker, timelined implementation has been one of the obstacles. All of those things would need to be implemented, and they would have to work exactly as intended. I think as we all know, no matter how well you design a policy, sometimes it doesn’t have quite the impact that you had necessarily intended — sometimes more and sometimes less.
Our advice was focused on not just how you close the gap from the government’s modelling to the target, but also how do we make sure that the policies that are in place and have been announced are going to actually achieve what the modelling says they will?
The way that the Canadian Net-Zero Emissions Accountability Act is helping is it’s telling Canada that we’re not just looking to this 2030 target, but we’re also making sure that we’re running past the 2030 target and thinking about what the long-term goal is to get to net zero. It also means that the government has people like the Net-Zero Advisory Body who are external people giving them advice on how to make sure they do that. That’s the best answer I can provide to that question.
On the question related to oil and gas production, as we all know here, regarding the emissions associated with the oil and gas sector and the way the accounting is done, that comes from the production, obviously not from the combustion of oil and gas. It is possible to reduce emissions from the production of oil and gas even though more is being produced, as the sector is planning, but it takes real investment. The problem, to date, is the effort to reduce emissions from production just hasn’t been happening enough. There have been reductions in emissions per barrel, but it’s not enough. We need to see absolute emissions reductions. There are ways to do this. The industry is talking about implementing carbon capture and storage. It’s not perfect. That does not capture every molecule of carbon dioxide and bury it in the ground forever, but there are additional regulations, like regulations on methane, that we hope can have an impact.
I will say that in our advice, we are pushing the government to tighten the implementation of the oil and gas emissions cap to make sure it works as well as it can.
Senator McCallum: I wish to look at how you advocated for moving toward electricity and the recommendation of electric vehicles. Yet there have been no studies done to ensure that this is actually achievable.
I went to look for a vehicle last week. Dependable vehicles are not there yet. For the vehicle I looked at, the battery was going to be $20,000. Not every household will be granted electrical outlets, with only four per street; otherwise, they will blow the circuits.
Why is this move toward electricity being recommended as a solution?
Mr. Donner: Thank you for that. It is an important question. There are two sides to this. First, from the vehicle side, why are electric vehicles being recommended? Because it’s recognized that we need to find a way to shift away from using liquid fuels that contribute CO2 to the atmosphere. The best available technology to do that is to move toward electrifying vehicles.
A similar thing can be said about heating and cooling in much of Canada but not all of Canada, where the best solution for heating and cooling is moving from using natural gas to using electricity. That is one side.
The other side is what it will mean for the electricity system. We need to increase electricity generation in the country. Some estimates say we need to potentially double the electricity production by 2050 because of both an increasing population and the demand for electrification.
We do not talk much in these reports about those details, but it’s something we have been working on separately in our advice in previous years. How do we get the provinces to talk to each other? How do we get the electricity grid operators to better talk to each other? There’s a lot of work to be done on that in Canada. The government’s plan for the clean electricity regulations is one way to help encourage Canada in that direction.
On the vehicle side, I agree with you that it is clear — the signs are there from all around the world — that electric vehicles will be the future of passenger transportation. Canada’s challenge right now is not just about setting a mandate to say, “You will only sell electric, zero-emission vehicles by a certain year,” but we also need all the complementary policies to make sure that those vehicles will be affordable and available and that charging is available for Canada. That is why we have that recommendation on closing the gap to the 2030 target. It’s not just about setting the vehicle sales mandate; it’s about all of the complementary policies.
Right now, those really depend very much upon which province you are in. For example, here in British Columbia, it is a lot easier to get an electric vehicle because of provincial policy.
Senator D. M. Wells: Thank you to the witnesses for appearing.
Mr. Donner, in your discussion, you indicated that Canada is among the worst emitters in the world. You mentioned the per capita number. I have always challenged the per capita number of our low-population country versus other countries with higher populations and much higher absolute emissions.
I want to ask you how bad Canada is. I understand the trick of per capita, but China has 1,200 coal plants and more than 300 under construction. The U.S. has 214 coal-fired plants and more under construction, and probably much more given the recent turn of events in the United States. India has almost 300 coal-fired plants. Canada has eight.
Being from Newfoundland and Labrador and being previously involved as the environmental regulator for the offshore, I point out that Newfoundland and Labrador’s offshore emissions are insignificant when it comes to the oil and gas sector emissions in Canada.
When you talk about per capita, I understand the intent of that. When it’s convenient, it seems you talk about absolute emissions. Canada has less than 1.5% of global emissions, and that number is only decreasing because others are increasing.
Can you talk about the numbers and how they support the narrative that Canada is among the worst in the world? You said we’re in the top 10 worst. I assume one of those top 10 is the EU with 27 countries, which don’t go into that calculation.
Mr. Donner: No, I appreciate the comment and the question. Canada is in the top 10 in two categories, basically. We are in the top 10 per capita, but we’re also in the top 10 in total emissions, which is a way of thinking about it. That’s just the total emissions. We are one of the smaller countries by population in the world; you are right about that. So we should not be among the top 10 emitters in the world by total, not just per capita.
One thing to note is that our per capita emissions are much higher than China’s per capita emissions. I would have to check the numbers, but I think that we’re two to three times higher than the per capita emissions in China. Our per capita emissions are also higher than in the U.S., right? The fact is, as Canadians, we are disproportionately responsible for the problem, person per person. In total emissions, we are disproportionately responsible given Canada’s population. There’s no real dispute about this. The numbers are fairly clear.
The second piece is to say that you’re right; Canada is still a small country and still only 1.5% of the world’s greenhouse gas emissions.
I don’t think any of our fellow members of the advisory body would say that is an argument not to take action. Why do we go out to vote? Individual people vote because it is a collective challenge, right? This is a collective challenge. Canada needs to participate.
The coal argument is really critical to what you’re saying. Canada has a very low-emission electricity system. That is a great potential benefit for the country going forward into the future. Canada could be a leader in electrifying the economy, right?
This gives us a real opportunity to win one of these net-zero, low-carbon markets of the future, with electric vehicles and electric heating and cooling, because we have the potential to generate so much clean electricity. That is why, as you said, there are fewer coal plants in Canada.
This is not just about reducing emissions. This is with respect to the questions asked previously as well. Our advice is not just about emissions. It is about the economy, jobs and affordability. It is about saying that the actions we’re suggesting are good for Canada, not just because they are going to reduce the contribution to climate change, but they will also help Canada with the direction the world’s going which is toward a lower-carbon energy system.
Senator D. M. Wells: Thank you for that. When I asked the question and made my comment about per capita emissions, your answer went straight to per capita emissions to support your assertion. You mentioned jobs and affordability, and that’s where I wanted to go next.
I want to go to Ms. Kanduth on this. I know you are the Director of 440 Megatonnes, but in a previous committee meeting, we asked this question: What is this costing Canadians? What is this project of reduction of emissions costing Canadians?
We were told $2 trillion. This has an effect, obviously, on affordability. It’s an expensive project for Canada being such a low absolute emitter. Do you have any comments on the cost-benefit of this project of emissions reduction for a country that has such a small carbon footprint?
Ms. Kanduth: Yes, I will repeat some of Professor Donner’s comments as well. There are two pieces here.
On the affordability dimension, our analysis from the Canadian Climate Institute has shown that moving toward lower-carbon energy systems can save Canadians money over time. We know that, obviously, there will be barriers for lower-income households in adopting things like electric vehicles and heat pumps, but with support for those households, Canadians can save money. There are affordability benefits when we are looking at the transition.
To Professor Donner’s point as well, we are looking at a global energy transition, and there is a choice here for Canada. We can either fall behind in that transition and potentially have huge risks to Canada’s economy in the long term, or we can prosper through that transition by starting to think ahead now in how Canada can have a competitive advantage in that global energy transition.
We didn’t look at economic impacts in particular for this Closing the Gap analysis. That wasn’t part of the scope of our work, but it is a good question.
Senator D. M. Wells: Thank you.
Senator Galvez: Thank you to our witnesses for appearing this morning to answer our questions.
My first question is more about understanding your relationship with the government and how the government responds to your recommendations. Then I will have another question more specifically on methane.
Professor Donner, the carbon budget has been in talks for 10 years, or maybe more, from the science, but governments are not hearing this. They are focused on the emissions counting, not on the total carbon.
Most importantly, you advise the government, but you advise the government under the previous government decisions. For example, the government decided to buy a pipeline to favour the oil sands, so when we have to produce oil, then it will go to my friend here in Newfoundland, which has a carbon footprint that is much, much lower than the oil sands.
When you are asked to give advice, the conditions at the beginning are set by the government. How does this work? Is the government hearing your advice?
Mr. Donner: I really appreciate that question.
First, I will comment on how to choose what we work on. There are two parts to it.
The first is that we have lines of inquiry that the Net-Zero Advisory Body can set during the year, so we can choose the subjects that we’ll be working on. That is why, over the past few years, we have been focusing on what the net-zero energy systems of the future look like, focusing on governance and focusing on industrial policy. Those were our own choices.
At the same time — and it is right there in the act — the minister can refer questions to us. For the past year, we spent most of our time answering two questions: What’s the advice on the 2035 target, and how do we close the gap to the 2030 target?
To some degree, there is only so much that we can work on at any one time, so that is where we have been focusing our energy in the past year. That is how we choose what to work on.
The second piece, of course, is this: Is the government listening to the advice? As we all know from the act, the government does need to legally respond. Within 120 days of us submitting the advice, the government has to respond to the advice.
In those previous responses, when we map them against the advice, we see they are adopting some of the advice but maybe not completely, and there are other items that are not necessarily being adopted. I would say, in general, a lot of it has to do with signalling how much they know in advance. If we suggest something that there had been no planning for, it is going to be very hard to take up that advice. That is just being realistic.
In addition, I would say that with the carbon budget advice and these reports in particular, this is the most interest we’ve had from government, and I do not mean from the minister’s office because they are doing what they are obligated to do — I mean from within other branches of government. Within the individual ministry but also other ministries as well and other pieces of the government are asking us about this particular advice.
Senator Galvez: Thank you. I have my second question on methane.
To complete the education of the public, between CO2 and methane, methane is 80 times more powerful as a greenhouse gas, and it has a very detrimental impact on warming.
This is a low-hanging fruit that we should tackle because methane is a punctual source, and we know this regarding the exhaust of the oil and gas explorations but also in landfills and, of course, in agricultural lands. Why are we not doing enough on methane? We’ve known forever that methane is more powerful, and it can be neutralized or reused.
In Quebec, we have two biomethanizers that deal with our agricultural waste and our waste water, so we have been solving this problem with that. Why are we not doing this at the Canadian scale?
Mr. Donner: I will say two things about the Canadian scale: Some major sources of methane in Canada are leakage from the oil and gas industry, leakage from old wells, emissions from landfills and then sources from agriculture which are, admittedly, harder to address.
The leakage from landfills and the emissions from the oil and gas sector are very addressable, and that is one of the reasons that we are encouraging the government to increase the target of the methane emissions reduction from the oil and gas sector to 80% below 2012 levels by the year 2030.
Why is it not happening? A lot of it is logistics about whether the federal government or the province is actually enforcing the regulations, but this is the biggest piece of low-hanging fruit in Canadian climate policy. I agree with you 100%. This is very doable. In many cases, it is unevenly distributed where the methane is coming from, so if it can just address the few sources in the oil and gas sector that are responsible for most of the leakage, we could accomplish a lot. That is going to take, basically, the provincial governments — particularly in Alberta and a little bit in Saskatchewan — really being willing to work with the federal government on this, because the provincial governments do some of the enforcement of the regulations.
Senator Galvez: Thank you.
[Translation]
The Deputy Chair: If I may say so, Mr. Donner, in your report, you propose phasing down the sale of new and replacement fossil fuel heating and cooling devices in residential and commercial buildings, beginning no later than 2030. Did you assess the potential economic impact of that proposal on Canadian businesses, merchants, consumers and taxpayers?
[English]
Mr. Donner: Thank you for the question.
We have not done that directly. It is somewhat indirectly being done for the modelling that was done with the Canadian Climate Institute.
I want to be clear about what the advice is and what it isn’t. We are not saying that we should start blocking the sale of fossil fuel heating and cooling devices tomorrow. The advice was saying that beginning no later than 2030, begin to phase it down. That is different than saying, “Stop doing something now.” And there is a specific reason that we give that advice.
We need to signal this to Canadians and particularly to industry. There is a huge potential industry for Canadians in developing electric heat pumps, and it is not just in the development and sale of them. It is also in the installation of them. There are not enough installers available in the country. If you talk to people who build homes and work in the net-zero building industry, they will tell you, “We just need more training; we would like to do more of this.”
This advice is as much about the emissions reduction as it is about building the industry of the future. We are saying that we want the government to signal that this is the direction Canada is going long term. We are going to have to go this way one way or another. Let’s be honest about it, and let’s just say it to everybody now so that we can start planning for the future.
[Translation]
The Deputy Chair: Thank you.
Were you able to determine by what percentage that measure could reduce greenhouse gas emissions by 2030? The government’s target is a 40% to 45% reduction.
[English]
Ms. Kanduth: For this analysis, we didn’t attribute emissions reductions to individual climate policies. We did that analysis earlier in the year for another set of policies that didn’t include this building sector regulation. Because of the timeline that the policy would be implemented, it would have a minimal impact on emissions reductions in 2030. However, to Professor Donner’s point, this is about setting Canada up for those longer-term emissions reductions, recognizing that heating systems have really long lifespans. They are slow capital stock turnover. When replacing these systems, if a household is putting in a new furnace with a heat pump, it will help ensure that we are not putting in those furnaces for another 15 to 20 years. It is really about the deeper, longer-term emissions reductions as well.
[Translation]
Senator Moreau: I noted in your report that you concluded that measures being implemented…. The question might be better put to Ms. Kanduth, who broached the issue of how long it would take to implement the new measures you’ve deemed essential. The 2030 target is only six years away and we know that current measures are insufficient. You’re referring to a series of additional measures needed to reach those targets.
Assuming that the political will exists, have you estimated how long it would take to implement the additional measures you’re proposing and which, in my opinion, fall under both federal jurisdiction and, in many cases, particularly in the area of transportation, provincial jurisdiction?
In your study, did you estimate approximately how long it would take to implement the additional measures via legislation or regulations?
[English]
Ms. Kanduth: Thank you for the question. First, I will acknowledge that the majority of the emissions reductions to get to the 2030 target either come from policies that are already in place or strengthening policies that are in place. The bulk of the emissions reductions is coming from the existing policy architecture, and the last leg of emissions reductions would come from these new policies.
Of course, any delay in putting new policies in place will widen the gap to Canada’s 2030 target and make those targets more challenging to meet. There is a real urgency here for governments at all orders to move forward with policy implementation. It is not something that we looked at in particular — different implementation timelines for different policies — but we do have an annex to our report for the Net‑Zero Advisory Body that maps out when we’re expecting these policies to be put in place. For example, for the oil and gas emissions cap, we’re assuming what the federal government has said, with the 2026 start date, and it will be different for different policies depending on what we modelled. Again, I’m coming back to the point that there is a real urgency here with policy implementation, and any delay will put those targets at risk.
[Translation]
Senator Moreau: Under Advice 5, I see that opposition to the implementation of the additional measures to which you’re referring relates to economic concerns; in other words, individuals employed in the oil and gas sector, for example, don’t want to be out of a job tomorrow because new measures are being implemented.
Is there a reason why you aren’t recommending any measures to retrain those working in the oil and gas sector? Wouldn’t it be a good idea to implement measures or create additional credits to retrain those workers in order to make those additional measures and the phasing out of oil and gas more acceptable?
[English]
Mr. Donner: Thank you for the comment. I agree with you 100%. The simple reason why that’s not in this report is that the report is specific to what can be done to reduce the emissions gap. But that is exactly the advice that we were basically giving in previous annual reports when we focused on the oil and gas sector. Job transitions and skills training was one of the things that we highlighted. The advisory body agrees with your argument.
Senator Robinson: My question is for Professor Donner. In 2021, Canada was the twelfth-largest emitter of greenhouse gases in the world, accounting for 1.4% of global emissions. In 2022, Canada exported a total of $587 billion, making it the number nine exporter in the world. How do you reconcile the fact that Canada is one of the top exporters in the world, yet we also carry the title of one of the top emitters in the world? It almost sounds ironic to me: the fact that we are applauded as an export-based economy yet also shamed with the title of being one of the top contributors to GHG emissions.
Mr. Donner: Well, I will say two things. First of all, to be clear, in the most recent data, Canada is number 10 in the world in terms of total emissions. That’s more total emissions than Mexico and more total emissions than Germany, which are much larger countries.
Why are we a big source of greenhouse gas emissions? Well, it is the nature of our economy, and it is the nature of being a physically large country, but it is also because we have been slow to act, and other countries are ahead of us in trying to respond to this problem. We can still have an export-based economy while we’re reducing emissions. That’s not a problem. However, it’s about thinking about what are the industries of the future that will not only help Canada reduce greenhouse gas emissions, but also recognizing that the world is moving toward reducing greenhouse gas emissions. A lot of our advice is centred on not just the emissions reduction, but also making sure that Canada is competitive going forward into the future. There is a concern that if we double down on everything we’ve always done in the past, we will miss out on a lot of opportunities going forward into the future.
That’s why our advice last year — and you will see more coming out from us in the coming months — is focused a lot on industrial policy and trying to make sure we are investing in the right areas going into the future.
Senator Robinson: When I continue to see stats cited about other countries’ emissions, I still go back to trying to reconcile the fact that we have incurred this GHG cost within Canada as the provider to the world of many goods that they need because we are rich in natural resources and we can do that. That is our obligation. That’s our honour, our duty and our privilege as Canadians to produce for the world. I just continue to feel that we are not truly reconciling, and we’re not assigning the emission to the consumer. I find that ironic because we continue to — within agriculture, you know, we’ve flatlined on our emissions for 20 years, yet we’ve doubled our production. When we look at the intensification and the increased productivity for the same number of inputs, I feel that we are missing giving proper recognition and reward and incentivizing those components of our economy to do even more.
Mr. Donner: I’m not necessarily disagreeing with you on that. I just warn you to not look only at one side of the ledger. Because if you want to think about what we’re exporting, we also have to think about what we are importing. We also import a lot of goods that produce emissions in other countries. Traditional ways to do greenhouse gas accounting are based on just the territorial emissions. That is what we, as the Net-Zero Advisory Body, are legally supposed to focus on: what is emitted from within Canada.
There is a method of consumption-based accounting that is done. Researchers around the world do this. In Canada, if you do consumption-based accounting, where you think about what we are exporting but also what we are importing, in terms of emissions, the two sort of balance each other out. I hear your argument, and I don’t want to disagree with what you are saying, but we have to also think about what we import and the emissions that is generating in other parts of the world as well. I just encourage you to think on both sides.
Senator Robinson: Are you able to supply us with that accounting?
Mr. Donner: I have not looked at it in a while, but I could look for it, sure.
Senator Robinson: Great. If you could get it to the clerk, that would be wonderful. Thank you.
Senator Cardozo: Thank you, colleagues, for allowing me one more question. Professor Donner, I noticed that the light in your background has changed since you started. You obviously started at 6 a.m. while it was dark in Vancouver, and we appreciate that very much.
I have a quick question to close my line of questions, and it sums up the discussion we’ve had today. It comes back to your advisory body. Net zero — what is it?
Mr. Donner: Thanks for the question. Net-zero greenhouse gas emissions refers to not adding any greenhouse gases to the atmosphere. It means the emissions from human activity minus the removal due to human activity equals zero. For example, as we reduce emissions, if we don’t reduce emissions all the way to zero, we could do other activities, including planting trees, to take carbon dioxide out of the atmosphere to balance the remaining emissions. The idea of net zero is not greenwashing, as many people may believe. It literally comes straight from the advice of the scientific community that the world’s governments should aim to get to net-zero emissions.
Senator Cardozo: [Technical difficulties] — from emissions but net would be zero?
Mr. Donner: Yes.
The Deputy Chair: Thank you.
[Translation]
Your contributions will be taken into consideration by senators.
For our second panel, we welcome Vincent Ngan, Assistant Deputy Minister, Climate Change Branch; and Judy Meltzer, Associate Assistant Deputy Minister, Environmental Protection Branch, from Environment and Climate Change Canada.
[English]
Welcome. Thank you for being with us. Five minutes are reserved for your opening remarks. The floor is yours, Mr. Ngan.
Vincent Ngan, Assistant Deputy Minister, Climate Change Branch, Environment and Climate Change Canada: Good morning, honourable chair and members of this Senate committee.
[Translation]
My colleague Judy Meltzer, Associate Assistant Deputy Minister of the Environmental Protection Branch, and I are very happy to be here today to speak with you about the two recent reports from the Net-Zero Advisory Body, or NZAB, regarding carbon budgeting for Canada’s 2035 target and strategies to close the gap for Canada’s 2030 emissions target. I would also like to thank the NZAB and the Canadian Climate Institute for their dedication to these issues and for joining us here today.
[English]
First, I would like to recognize that I am joining you from the traditional, unceded and unsurrendered territory of the Anishinaabe Algonquin people. We honour the Algonquin people’s enduring relationship with these lands and express our gratitude for their stewardship.
As many of you know, the Net-Zero Advisory Body was established under the Canadian Net-Zero Emissions Accountability Act, with a mandate to provide independent, expert advice to the Minister of Environment and Climate Change on how Canada can achieve net-zero emissions by 2050. The advisory body offers a valuable independent perspective, helping to shape Canada’s climate policies.
In their report entitled Closing the Gap: Reaching Canada’s 2030 Emissions Target, the advisory body outlines recommendations to help Canada meet its commitment of reducing emissions by 40% to 45% below 2005 levels by 2030. This report responds to a request from the Minister of Environment and Climate Change, seeking advice on additional measures that could help support our 2030 goals. While Canada’s 2030 Emissions Reduction Plan, which was released in March 2022, established a comprehensive road map with sector-specific measures — including federal actions across transportation, oil and gas, heavy industry, agriculture, buildings and waste — recent data indicates that more acceleration is needed to meet our targets. The advisory body’s report highlights the need for collaboration across all orders of government, Indigenous partners and civil society, as well as the role of innovation and clean technology, to bridge the gap and achieve our 2030 targets.
[Translation]
The second report, Climate’s Bottom Line: Carbon Budgeting and Canada’s 2035 Target, provides recommendations on setting carbon budgets to ensure a structured and transparent approach to reducing emissions, which will be instrumental in setting Canada’s 2035 target. The NZAB emphasizes that carbon budgets can serve as essential tools for accountability and for assessing progress over time. Their insights will inform the government as we work to establish Canada’s 2035 target by December 1, 2024.
Under the Canadian Net-Zero Emissions Accountability Act, increasingly ambitious targets are required every five years to keep Canada on track to achieve net zero by 2050. The advice from the NZAB will be integral in shaping this next target, alongside engagement with provinces, territories, Indigenous peoples and all Canadians.
[English]
Since launching the Pan-Canadian Framework on Clean Growth and Climate Change in 2016, Canada has made substantial progress toward reducing emissions, and the government has made historic investments in support of this journey. In Budget 2024, we committed $800 million to the Canada greener homes affordability program. As we talked about earlier this morning, it’s about how we can accelerate efforts and provide incentives so that we can address advancements in the building sector. Also, we have put in place four investment tax credits to drive innovation and move our economy toward net zero, amongst some hundred other measures that have been announced through the emissions reduction plan.
Together, these initiatives reinforce our commitment to a sustainable economy and a resilient future. As we move forward, the Government of Canada will carefully consider the advisory body’s recommendations and consult with stakeholders and partners as appropriate.
Achieving our climate goals requires immediate action but also long-term planning, and the insights provided by the advisory body reflect the complexity of balancing economic growth, environmental stewardship and social equity. This includes the need to engage Canadians throughout the entire transition and to support communities, including Indigenous communities and key economic sectors, as we move toward a net-zero future.
[Translation]
In closing, I would like to thank the NZAB and its secretariat once again for their work on the reports and their contributions to Canada’s net-zero journey. Some colleagues are with us today. Their advice provides a valuable framework, but turning this framework into action will take collective effort, careful consideration and collaboration across society.
We look forward to continuing our work with the NZAB and all partners to advance Canada’s climate goals in a responsible, ambitious and inclusive way.
[English]
Thank you, honourable senators, for your time and attention. My colleague Ms. Meltzer and I look forward to our discussion this morning.
[Translation]
The Deputy Chair: Thank you.
[English]
Senator Arnot: Thank you, Mr. Ngan. Your work has always emphasized the importance of intergovernmental cooperation in environmental policy. What are the key challenges in implementing the Pan-Canadian Framework on Clean Growth and Climate Change? How can these challenges be addressed to make the framework more effective?
I have a specific question for Ms. Meltzer as well: As the lead for carbon pricing initiatives, how do you address regional disparities and opposition to carbon pricing from provinces like Saskatchewan and Alberta while maintaining Canada’s commitment to the national carbon market? What progress has been made in developing a standardized approach to greenhouse gas offsets in Canada, and how will that impact Canada’s overall emissions reduction goals?
Mr. Ngan: Thank you very much, senator, for the question. I will address the part about the efforts and the collaboration to date between the federal government and all orders of government when it comes to the journey of implementing Canada’s climate plans, whether it is the Pan-Canadian Framework on Clean Growth and Climate Change in 2016, the strengthened climate plan in 2020 and the 2030 Emissions Reduction Plan in 2022.
First of all, absolutely, the Government of Canada cannot do this alone. No single order of government can actually solve this problem because climate change is a global problem that requires local and regional actions. Since day one of the adoption of the Paris Agreement, there have been mechanisms and there has been work — we work within existing mechanisms of working with provinces and territories, but we have created more because we know that we need a full-court press, all-hands-on-deck approach, as was mentioned this morning.
Some of the examples that can be used to help advance the collaboration includes the following: Within the environment portfolio, there is the Canadian Council of Ministers of the Environment. When I was in my previous capacity as Director General of Horizontal Policy, Engagement and Coordination, I co-chaired that committee with British Columbia and subsequently with Saskatchewan. We had a work plan. We talked about how to actually focus on some areas where there is great alignment, but also to increase areas where we need better understanding. That is the starting point.
On the other hand, as we all know, when we roll out initiatives to tackle specific sectors — that might be oil and gas, housing, agriculture, waste management and so forth — we also know that each individual region, province and territory plays a very different role and has a very different concern as well as different considerations. On those initiatives, we also establish them either on a project basis or as a round table, such as energy — there is a regional energy table established by Natural Resources Canada to really focus on some of those advancements from a more holistic perspective, whether it is regulations, investment, project readiness, regulatory environment and so forth. These are some of the examples in terms of the efforts we have made in order to recognize the ambitious goals but also the importance of collaboration between all orders of government.
It’s the same with the Federation of Canadian Municipalities and Indigenous governments as well. I hope that is helpful.
Judy Meltzer, Associate Assistant Deputy Minister, Environmental Protection Branch, Environment and Climate Change Canada: Thank you very much, senator. It is a pleasure to be here today. I will address some points in the second part of your question around implementation of carbon pricing in different regions and also the role of offsets.
In terms of implementation of carbon pricing across the country, the approach is designed to try to take into account regional differences and to try to give flexibility. Folks are probably aware, but just for context, the way the federal government implements carbon pricing is to give provinces and territories the flexibility to implement the types of systems that make sense for their circumstances. In order to ensure that all systems are comparable in terms of stringency and how effective they are, we set what we call the federal benchmark, and these are criteria that just set some minimum, common national stringency requirements that all systems have to meet. It still gives some flexibility as to how different jurisdictions can design their systems.
It is probably helpful to think about carbon pricing in terms of industrial carbon pricing systems. Currently, most provinces implement their own industrial carbon pricing system tailored to their circumstances. You asked about standardization. We ensure these are comparable overall by ensuring that they adhere to these common, minimum national standards. So we allow some flexibility in how they want to design the specifics for their region, but overall we have consistent coverage and stringency and effectiveness.
This is the second part of carbon pricing: Typically, this is where the federal fuel charge applies in most jurisdictions. One of the ways in which, I think, the government is looking to address concerns, for example, around affordability is ensuring that in all the provinces where it applies, all the proceeds from the federal fuel charge are returned back to that jurisdiction of origin and, principally, to households to make sure that households are not out of pocket. I point to those two pieces just for context.
Provinces and territories have the flexibility to implement their own systems, but where they don’t, the federal government implements a federal carbon pricing system as a backstop. For example, this could be in jurisdictions that maybe prefer the federal government to implement, such as in the Yukon and Nunavut — and our industrial system, for example, applies in Manitoba, P.E.I., the Yukon and Nunavut. Also, where a province or territory chooses not to implement a system, the federal system applies.
In terms of your second question, I really appreciate that question on federal offsets, so maybe I will briefly speak to this, and I can come back to it if more detail would be helpful. Again, for context, offsets are voluntary removals and reductions of emissions that take place in sectors that are not already incented by carbon pricing. Those are reductions in sectors like agriculture, forestry and waste that go above and beyond what is business as usual.
The federal government launched a really robust federal offset credit system: Canada’s Greenhouse Gas Offset Credit System in 2022. It is creating incentives by crediting voluntary projects that are brought forward by the private sector. We have projects and protocols that sort of set out the guidance of how to get a credit in areas like landfill methane, emissions from beef cattle and improved forest management. We develop these on an ongoing basis, and we are currently working on one for direct air capture. These can be used by regulatees to help with compliance and provide a bit of flexibility, but they can also be used for greening government and for corporations looking to meet their own net‑zero targets. So there is no limit. But let me come back to that. Provinces also have offset systems. Sorry. I will try to be more synthetic in my follow-up.
[Translation]
The Deputy Chair: Thank you.
[English]
Senator Galvez: Thank you so much for being here with us this morning. My first question will again be on the interaction between you and the advisory body, but I will start by saying that, yes, we are exporting things and we are importing things, and there is a huge difference between when we export non‑renewable items and when we export renewable items. In this case, oil and gas and coal are non-renewable. We should have a responsibility not only to the present generation but also to the future generations.
I want to know what the criteria are that the minister uses to ask questions. We heard from the advisory body, and they say that you’ve been keeping them busy by asking questions, so they cannot have independent opinions on some things. Yes, you asked about closing the gap. I would like to know why you didn’t ask them about the Trans Mountain Expansion, or TMX, project? Why? For the TMX, you know, economically, the promoters disappeared. We have 12 insurance companies that don’t want to be named because it is becoming a stranded asset.
Can you compare the profits of the industry with the compensation and tax breaks that we have given to the industry, as well as the liability of the cleanup of that site, and how that compares with, for example, another site in Newfoundland?
Mr. Ngan: Thank you, senator. That is a very thoughtful question.
I will tackle this question in multiple dimensions at a time. The part that I probably would not be able to have the expertise to answer is about the cost-benefit of the pipeline, but I’m happy to talk about the relationship with the advisory body from a legislative and operational perspective, as well as how all of this came to bear.
As we all know, the relationship was established through the Canadian Net-Zero Emissions Accountability Act through two things. There are specific requirements that advise us to resort to the Net-Zero Advisory Body on an annual basis so that upon the receipt of the annual report, the minister will have to make it public within 30 days and provide an official response within 120 days.
In terms of the questions — the line of inquiries — that the minister can request the Net-Zero Advisory Body to pursue, there are two ways of doing so. Number one, it is specified in the terms of reference, which is also made public on the Net-Zero Advisory Body website, and which really provides quite a lot of flexibility in terms of how the Net-Zero Advisory Body could undertake their own lines of inquiries in order to assist and provide advice to the Government of Canada.
Of course, the minister has also provided questions specifically for the Net-Zero Advisory Body to take on in addition to the lines of inquiries that they have determined for themselves. As you said, closing the gap to 2030 and the advice to establish the new emissions reduction targets for 2035 are two of them.
You may ask this: Why these two in particular? Because they are timely. According to the Canadian Net-Zero Emissions Accountability Act, by December 1, the Minister of Environment and Climate Change must set a new target for Canada to meet the 2035 emissions target. In order to do so, we will also need to see what additional measures and methods there are in order to reach that target.
That is the reason why he posed those two questions that are complementary to our journey to 2050.
Senator Galvez: Another question that the minister did not ask to the advisory body was about increasing subsidies to oil and gas in the oil sands for carbon capture and storage. This technology has been in development for the last 40 years. When I was starting my PhD in 1985, we were studying that. We know it has reached a plateau; it is not going anywhere.
Shouldn’t it be the industry that believes in that technology to put the money in front? We just gave them more subsidies for carbon capture and storage.
Then it comes to the question about the total emissions — reducing production or reducing emissions. How was this decision taken? We already gave to the industry between $12 billion and $20 billion in subsidies per year, apart from these ones.
Ms. Meltzer: I won’t speak specifically to the subsidies piece, which is not Environment and Climate Change Canada’s, but I will say that it’s a really important question. As was mentioned in the previous panel, we have just released draft regulations to cap emissions from the oil and gas sector. One of the reasons is to encourage reinvestment of profits in the technologies that are critical to decarbonizing the sector and also to ensure there is an absolute limit on emissions for the sector.
There is agreement, and we’re looking forward to getting comments on these draft regulations. One of the reasons is to make sure that there is a strong incentive and reward for advancing those investments from within the sector.
We have already seen it; the sector is already making progress in moving forward. The oil and gas emissions cap is an important piece of that dynamic that you have described.
Senator Cardozo: Thank you, witnesses. I have a question regarding the September 2024 report of the Net-Zero Advisory Body, which is our subject today.
It has five sections. I go to Advice 1B, which is to finalize announced measures, and in this case, it’s the oil and gas sector emissions cap. You started to discuss that. I take it that the November 4 announcement by Minister Guilbeault is going to this very point.
Could you explain the announcement a little more? Please explain the difference between an emissions cap and a production cap, about which there seems to be a controversy. What does the federal government do if a provincial government — in this case the Government of Alberta — has said they are not part of this at all? How do you make this happen?
Ms. Meltzer: Thank you for that question.
That’s right; earlier this week, on November 4, the government announced and published draft regulations to cap emissions from the oil and gas sector. They are posted for comment until about January 8.
These propose a cap-and-trade system. Ultimately, it will cap emissions from upstream and liquefied natural gas, or LNG, production in the sector. I am happy to talk more about how a cap-and-trade system works, but, essentially, facilities under the cap will be given distributed allowances up to the maximum amount set by the cap. They will need to remit an emissions allowance for every tonne they emit to comply with this proposed regulation.
In terms of your second question, this will do a few things. You asked about emissions versus production, which is a really important point. It is a cap on emissions. We have designed it in our proposed regulations to be at a level that enables production to grow to respond to the global market and the changes in demand. As the last panel noted, we’re interested in ensuring that the emissions in the sector reduce and that products are produced more cleanly. It is important to know that it is a cap on emissions. It is also designed to encourage investments — to the last point — in the technologies we need in the sector to decarbonize over time to get to net zero.
In terms of how it will be applied and where there may be disagreement, it is a national cap-and-trade system, so it is being implemented under the Canadian Environmental Protection Act, 1999. It would apply nationally. It is most relevant to our upstream and LNG-producing provinces, which are B.C., Newfoundland, Saskatchewan and Alberta.
Senator Cardozo: If I may, these are draft regulations. How much room do you have to alter them to bring a province onside if they are willing to suggest changes? What is the difference — how does cap and trade work with the carbon tax?
Ms. Meltzer: Thank you for that question.
Yes, that’s right; these are proposed regulations. We consult on these for a period of 60 days. We look forward to comments. We will be engaging with provinces, territories, industrial stakeholders, Indigenous organizations and the Canadian public. We will take into account the comments we receive and consider them as we finalize the regulations. That is typical of how we develop, draft and move to final regulations in general.
What was your second question?
Senator Cardozo: It’s about the relationship.
Ms. Meltzer: Yes, the relationship. That is a good one.
It returns a little bit to the Net-Zero Advisory Body’s recommendations to ensure we minimize any adverse interactions between instruments. We get that question quite a lot. We have carefully designed the proposed cap-and-trade system for oil and gas emissions to make sure that it works well with carbon pricing insofar as the incentives are driving in the same way. For instance, a facility covered under a provincial industrial carbon pricing system that is reducing its emissions in order to meet their obligations for carbon pricing will also contribute to their compliance under the emissions cap. They are not having to double the number of reductions in order to meet different regulations. That is the same for methane regulations as well. We want these incentives to work together. When you have a system like cap and trade or carbon pricing, which is a market-based system, there is a continual incentive to improve because you are economically rewarded. You are continually getting an advantage if you can improve your emissions intensity, but you have the flexibility to trade with other facilities if your reductions are more costly and take more time.
We are working hard to make sure these work coherently together. We are looking forward to getting comments. Obviously, that is the benefit of draft regulations.
[Translation]
The Deputy Chair: In its report, the NZAB recommends phasing down the sale of new and replacement fossil fuel heating and cooling devices in residential and commercial buildings, beginning no later than 2030. Is your department currently considering making that recommendation an additional measure?
Mr. Ngan: Thank you very much.
[English]
Thank you so very much for the question.
This is in terms of the transition of home heating oil as well as fossil fuel-based home heating equipment as part of measures to be considered. As we know, Natural Resources Canada has released the Canada Green Buildings Strategy, which includes incentives in terms of how we actually can support the acceleration of deployment of less fossil fuel-dependent equipment between now and 2030. We are still in the process of considering the advice put forward by the Net-Zero Advisory Body, but we’re also working with industry and working with municipalities in order to see how to further refine and also achieve the goals of the Canada Green Buildings Strategy.
In short, we welcome their advice. We are now carefully and duly considering their advice as part of the broader measure.
Senator McCallum: Thank you for your presentation, and thank you for being here.
The report states that the impact of climate change on Indigenous peoples is disproportionate and requires a correspondingly focused and self-determined response strategy. The report also states that all governments must consistently and meaningfully implement the United Nations Declaration on the Rights of Indigenous Peoples, particularly with free, prior and informed consent.
Why is there not a recommendation that free, prior and informed consent and polluter pays and prevention principles be enforced so that there is not an ongoing violation of rights and so that it will lessen the need for ongoing mitigation and destruction of lands, water, air and lives? Our lives, culture and knowledge systems are not sustainable in this context because environmental stewardship continues to be ignored. If these are not addressed, does this mean that the government will continue to leave First Nations in a deplorable state to get to a reduction of emissions?
Mr. Ngan: Thank you, senator. I want to fully agree with all of your perspectives in terms of the impacts of climate change disproportionately affecting Indigenous communities because Canada is warming twice as fast as other countries in the world, but three times as fast up north. Therefore, communities that are in northern and remote regions are bearing the brunt of the extreme impacts of climate change and also the increasing intensity of those effects.
Since the adoption in 2016 of the Paris Agreement, in 2017 the Prime Minister with the three national leaders of the distinctions-based organizations — the Assembly of First Nations, the Métis National Council and Inuit Tapiriit Kanatami — established three distinctions-based bilateral tables in order to talk about joint climate actions and support self-determined priorities of Indigenous partners: First Nations, Métis and Inuit. I am the co‑chair of those three distinctions-based tables that meet regularly with First Nations on a quarterly basis, with Métis on a biannual basis and also with Inuit on an annual basis. We fully recognize that we are taking baby steps. We are not meeting the expectations or rising to the challenges that are faced by our Indigenous partners.
That being said, we have heard about how the some 100 climate programs actually are not really working for Indigenous partners because they have to go through the entire federal family in order to access funding. We have heard that. We have been working with them through cross-country consultation for the past two years to see how we can increase access to climate funding for Indigenous partners on a distinctions-based basis, as well as based on where they are, and how to support their self‑determined priorities.
As you know, within the past 12 months, all three distinctions — First Nations, Métis and Inuit — have released their climate strategies. The federal family is looking at those strategies to see how we can actually support them and also advance this under the rubric of the United Nations Declaration on the Rights of Indigenous Peoples.
I could go on and on, but in the interests of time, I will stop there. But I thank Senator McCallum for the question. Also, we need to do more.
Senator McCallum: People say that environmental regulations deter economy, but that is not right. A study conducted in 1999 revealed that Canada has the lowest business cost of all countries in the G7. It concluded that it throws up less red tape than any other nation it examined and that industries in Canada face fewer regulatory obstacles in the environmental field than their competitors in the United States. In any case, studies have not found that environmental policy reduces business competitiveness. Environmental legislation can be a driver spurring technological changes that lead to efficiency and competitive advantages. Strong air pollution standards helped make Germany a world leader in air pollution technology. And the strategy of using environmental regulations to promote industrial competitiveness is a truth. Numerous American studies have found that states with the strongest environmental laws and policies enjoy the highest levels of economic growth and job creation.
Yet we keep hearing that this pathway toward net zero will create havoc in the country. Why are thoughts like that not brought forward to say that it will not?
Mr. Ngan: I can take a first cut at that. It is a thoughtful question in terms of the instrument choice of the government and also how they interplay in order to create this environment that is optimal for both reducing greenhouse gas emissions and also spurring economic growth and innovation. That is exactly what we were trying to strike a balance under the 2030 Emissions Reduction Plan that was tabled in Parliament in 2022. We are not looking at one single government policy instrument such as regulation.
There also needs to be complementary measures such as investment and fiscal instruments such as tax credits, as well as our role in advancing research and development of climate technology, but also the acceleration of deployment of that technology in certain sectors. With all of those instruments, how did they come up with this optimal mix of impacts and outcomes? It is a constant discourse, but also an important subject of engagement because data evolves. New technologies emerge. The market has changed. Geopolitical situations have evolved. It is right on in terms of how to have that optimal mix.
Mind you, I’m not really a regulatory expert. I do not know if Ms. Meltzer has anything to add as well.
Ms. Meltzer: In the interests of time, I will say that is an important reflection. You are probably absolutely right; we need to continue to articulate that. Certainly for regulations, it is the economic costs of climate change over time combined with the potential to increase competitiveness of new industries and economic development over the longer term that the regulations help to drive. I fully agree, and I appreciate the comment.
[Translation]
Senator Moreau: Thank you for joining us today. This morning, the honourable Senator Galvez very astutely asked about the relationship between the NZAB and the government and the extent to which its recommendations were being considered by the latter.
This morning, I asked Mr. Donner why there wasn’t any mention of specific additional measures in the report, such as retraining individuals working in the oil and gas sector, which is the sector with the highest GHG and carbon emissions in Canada. The professor told me that this recommendation was included in the previous report.
Can you tell us whether the government has put in place any retraining programs for workers? If so, what are they?
Additionally, in what ways is the federal government working with the provinces that will be affected by such measures, particularly Newfoundland and Labrador or Alberta? Clearly, when your economy or your survival depends on your job in the oil and gas sector, even if you share the good intentions of environmentalists to reduce emissions, you don’t want to be the first to sacrifice yourselves on the altar of the economy.
To what extent were the recommendations on worker retraining made by Professor Donner’s group followed, and what amounts did the Government of Canada invest to help the provinces contribute to such retraining?
Mr. Ngan: Thank you for the question, because that’s a very important issue.
[English]
Of course, we just received the information from the Net-Zero Advisory Body, and also the annual report will be provided in due course. More formal response will be provided in the near future.
That being said, I can talk about the current efforts and the thinking in terms of how we are being mindful that not all sectors or regions will be going through the transition as well as the journey to net zero in the same way. The Parliament of Canada enacted the Canadian Sustainable Jobs Act in June 2024, which was just a few months ago. This particular legislation will foster the creation of sustainable jobs and support industries and communities in regions across Canada so that we can help the workforce gain the necessary skills, training and tools to field those new job opportunities. This is a more holistic and historic step forward so that Canadian workers are at the centre of this particular Canada sustainable jobs action plan, and the global investment flows toward more low-carbon economic opportunities in Canadian industry.
For example, the Government of Canada will support and also provide leadership on effective action focused on preparing the Canadian workforce for jobs through this journey to leverage the opportunities that come from a low-carbon economy, as well as seizing the abundant benefits before us. It is an action plan with 10 key measures that were released in February 2023. Also, there is an ongoing discussion with the provinces and territories because some of the skills and labour workforce jurisdictions fall within provincial partners. It is important to work with them in order to create sustainable jobs but also seize these opportunities that present themselves.
Senator Moreau: Can you provide the board with the budget that goes with the action plan that you just mentioned? What will the level of investment be?
Mr. Ngan: Yes, we are happy to provide that through the budget but also through the information already released.
Senator Moreau: My understanding is that it would be different from region to region. Is that right?
Mr. Ngan: I do not have that information. This is led by Natural Resources Canada. I am able to share with you the act, the action plan and some other additional information, such as the role of the regional development agency and so forth.
Senator Moreau: Thank you.
Senator Robinson: I am cautiously optimistic to hear you note in your opening remarks that government will carefully consider the advisory body’s recommendations and consult with stakeholders and partners as appropriate. This committee heard testimony from Jerry DeMarco, the Commissioner of the Environment and Sustainable Development, and his testimony was on the Auditor General’s report on agriculture and climate change mitigation.
In the report, it was noted that Agriculture and Agri-Food Canada, or AAFC, did not consult with stakeholders, farmers or the industry experts on fertilizer prior to establishing the fertilizer emission reduction target.
Carbon tax — as I understand it — is meant to drive the adoption of more efficient technologies to get consumers to shift away from the bad stuff and move to the good stuff to get us to reduce our emissions. I wonder if you can explain this to us: Within agriculture, regarding the carbon tax applied to the fuel used to heat and cool barns, as well as in greenhouse farms, how is this carbon tax going to drive the adoption of new technology that simply does not exist?
Ms. Meltzer: Thank you for that question, senator.
For context, you are referring here to the federal fuel charge. Over 95% of emissions in agriculture are not priced under carbon pricing. They are exempt.
This includes biological emissions from livestock as well as the use of gas and diesel in farm machinery. There are technologies that are available over time to be able to heat and cool buildings more efficiently. We have seen the adoption of that. There is uptake. We know as a government that there needs to be not just the incentive, which is the price signal, but also support. There are a range of funding supports. I do not know, Mr. Ngan, if you want to add to that. It is an important question. It is that mix of the incentive but also the support to help farmers implement those. We know that both of those pieces are important.
Mr. Ngan: To add on to Ms. Meltzer’s comment, not only are the vast majority of the few uses exempt, but for those farmers who use natural gas or propane in their operations, the Government of Canada has provided a refundable tax credit to return the fuel charge proceeds to farming businesses. The impacts on farmers and agricultural operations are forefront in the mind on affordability, but also how to make sure we support farmers. I wanted to add that.
In addition to the pricing system, it is designed carefully and implemented to minimize impacts, being mindful of the sectoral characteristics. The Sustainable Agriculture Strategy, which is being led by Agriculture and Agri-Food Canada, provides a more holistic approach, not just about climate change but also sustainable growth and economic prosperity for the sector. Additional information can be found through our colleagues there as well.
Senator Robinson: I am happy that you mentioned the Sustainable Agriculture Strategy, or SAS. It is an example of consultation with industry, but, unfortunately, it’s downloading a huge amount of work to under-resourced commodity groups.
Can you answer two questions for me? First, explain to me what you mean by new technologies available over time. Second, do the refundable tax credits actually make the producers whole again, or is it a portion that they are given in the refundable tax credit?
Mr. Ngan: In terms of the refundable tax credits, there is a formula for farmers.
Senator Robinson: Does it make them whole, or are they spending more than they are getting back?
Ms. Meltzer: That is a question that we would have to defer to the Canada Revenue Agency, or CRA.
Senator Robinson: If you could give that answer to the clerk, that would be great.
Ms. Meltzer: Yes. To follow up, we have a few examples through the program. A portion of the proceeds from the federal fuel charge has been returned to farmers to support the uptake of new technologies. I will follow up to get you some examples for that question.
I want to flag this as a broader example in the sector: One thing in which we have had a lot of strong interest is that the sector has always appropriately noted that they are also leaders in finding ways to improve efficiency and reduce emissions.
Senator Robinson: Sorry, my other question that I wanted to ask was this: Can you explain to me what you mean by new technologies available over time compared to what is available right now? Are you talking about future technologies?
Ms. Meltzer: Both, but the technologies —
Senator Robinson: My other question would be this: You just mentioned that a portion of the fuel tax is returned to agriculture. What portion of the fuel tax that’s collected within agriculture is given back to agriculture?
Ms. Meltzer: It goes back in two ways. On the one hand, it’s going directly to households.
Senator Robinson: Is it 50% of it or 80% of it?
Ms. Meltzer: So 90% is going back to households, and that includes rural and farm households. Then about 10% of the remainder goes back to a mix of programs that includes the agricultural sector.
Senator Robinson: Are you tracking the farm fuel tax singularly?
Ms. Meltzer: The portion that we’re talking about that supports technologies is program-based. It’s not —
Senator Robinson: For the tax that’s collected on farm fuels, is that individually tracked?
Ms. Meltzer: We would have to defer to the CRA who implements the federal fuel charge.
Senator Robinson: Could you find out for us what portion of the tax collected through farming practices is actually returned to farms? I don’t want to take up more time, but if you could find that out and get it back to the clerk, that would be great.
Mr. Ngan: To seek clarification, are we talking about general taxes writ large, or are we talking about the carbon price?
Senator Robinson: We’re talking about the carbon tax on fuel used to heat and cool barns and for greenhouse production.
Mr. Ngan: We’ll take it back.
Senator Robinson: Thank you.
[Translation]
The Deputy Chair: That brings our meeting to a close. However, two other senators wanted to ask questions. You may put them to the witnesses and the witnesses may send their answers to the committee clerk.
[English]
Senator Galvez: It’s clear to me that you are saying that we are not going to cap production; we are going to cap emissions. And the reason that emissions are not going to be higher is because you count on future technologies or carbon capture, but that doesn’t change the fact that tailings will still be produced in these ponds. You need 30 barrels of water to produce one barrel of oil. These tailings are growing and growing and growing, with a new project to send by pipeline to the north of Alberta.
All of these produce emissions, too. You can please send your response to the clerk.
[Translation]
The Deputy Chair: You may send your answer to the committee clerk.
[English]
Senator Cardozo: Ms. Meltzer, you offered to explain this: Could you explain again in simple terms “cap and trade” as well as “carbon price” and “carbon rebate”? What’s the difference between the two? Will the two regimes apply to the same provinces or the same companies? Yes, it’s just that. That’s great. Thank you so much.
[Translation]
The Deputy Chair: I thank senators and our witnesses for their participation today.
(The committee adjourned.)