:
I call the meeting to order.
Thank you, everybody, for joining us today for our 35th meeting, and what will be our last one of not only this study but also this session.
I want to repeat some of the remarks I made at the conclusion of the last meeting, and that is to thank everybody for their hard work, their commitment and their spirit of co-operation and enthusiasm not just for this study, but also for the committee. Again, I extend particular thanks to all of the people who make this meeting work twice every week—the translators, of course our wonderful clerk and our amazing analysts. Thank you all again.
Thank you to our witnesses today for joining us on our last meeting on the study of low-carbon and renewable fuels.
We're doing this virtually. I'm sure all of you have done this before. You have headsets. I ask you to be patient. Wait until the other person is finished speaking so that translators can pick up the communication back and forth. There's a translation button at the bottom of your screen, which you can use. You will be asked questions in both official languages. You're welcome and encouraged to use both.
I will give every witness group up to five minutes to deliver opening remarks, and then we'll open the floor to committee members to pose questions.
I may have to interrupt from time to time if people go over their time limit. I apologize in advance for that.
We have four groups of witnesses today. We have Advanced Biofuels Canada, Air Liquide Canada Inc., Dr. Ross McKitrick from the University of Guelph, and Renewable Industries Canada.
I will let you speak in that order. We will start with Advanced Biofuels Canada. I welcome Mr. Ian Thomson and Fred Ghatala.
I have overlooked the fact that Mr. is not here today. He is being kindly replaced by Ms. Martinez Ferrada. Thank you for joining us today as well.
I'll turn it over to Advanced Biofuels. You have the floor for up to five minutes.
My name is Ian Thomson, and I am the president of Advanced Biofuels Canada. I'm joined here by my colleague Fred Ghatala, the director of carbon and sustainability for our organization.
I wish to convey this morning two core ideas relative to the committee's study.
The first is that the advanced biofuels and renewable synthetic fuels made by our members have improved dramatically on all fronts in the past decade and are being deployed at commercial scale here and around the world, yet the revolutionary nature of these innovations is not widely known and old perceptions prevail.
My second message is that the clean fuel regulation, or CFR, currently under final review has immense potential, but needs several straightforward amendments to deliver on its promise.
Renewable fuel regulations of a decade ago had only a handful of solutions, but these regulations worked as intended. They kick-started widespread efforts to deploy a new generation of low-carbon, energy-dense fuels.
Today these fuels can be 100% substitutes for, or blended with, fossil fuels, fully functional in existing engines and infrastructures, and some are indeed produced at existing petroleum refineries. Clean fuel feedstocks have expanded beyond sustainable crops to include household and industrial wastes and residues, and even CO2 captured from air or from industrial flue stacks. Clean liquid fuels complement an array of other low-carbon transportation energies now also being scaled up.
The results of these innovations are that advanced biofuels made today in Canada can be carbon competitive to, for instance, electric vehicles on a full life-cycle basis. A vehicle running on these fuels can be a zero-emission vehicle, reducing greenhouse gases from 80% to 120% below those of fossil.
We know that electricity and other low-carbon energies will have a rapidly growing role in transportation. The IEA's sobering report of last month starkly noted that, even under fully executed, ambitious, global net-zero pledges, by 2050 more than 80% of final energy demand in transportation can rely on the internal combustion engine. Marine, rail and aviation sectors may be reliant on those fuels even longer. In short, we can't wait until 2030 or 2050 without the rapid scale-up of these liquid fuels.
The new clean fuel regulations can play a key role in Canada's net-zero future, and we have two recommendations relative to its design.
Our first addresses an inescapable fact that 75% of vehicle greenhouse gas emissions is from crude oil in fuel combustion and the other 25% is from the energy that goes into extracting and refining fuels. In plain terms, the CFR will fail to get Canada on the path to net zero unless it addresses, proportionately, these combustion emissions. The only solutions capable of delivering zero combustion emissions are advanced biofuels, renewable electricity, low-carbon hydrogen, renewable natural gas, and bio-crude for refineries. Put another way, you can't capture and store a car's tailpipe exhaust.
Unfortunately, the CFR draft design offers many incentives for fuel suppliers to focus their actions on reducing upstream emissions that will never be able to take us more than 25% of the way to net zero. In addition, other provisions will award credits for activities that have nothing to do with liquid fuels or transportation. I would be happy to describe the straightforward solution to this misalignment, but it roughly follows the precedents set by other global clean fuel regulations.
Our second recommendation relates to CFR feedstock criteria and the new greenhouse gas measurement tool. Canada's providers of sustainable crops, agricultural and forestry residues and waste resources are concerned about market access requirements and seek clarity on carbon intensity scoring under the new LCA tool.
The practical solution is to align the life-cycle assessment model and feedstock criteria with established industry standards in the North American fuel trade and to adopt it with an orderly transition.
Clarity on how Canada's farmers, foresters and clean fuel producers can participate will support new investments. Our recent analysis indicates that a well-designed CFR can create over 20,000 new jobs and add $10 billion in new economic output.
Last, I'd like to add that several of the clean energy tax measures and funding programs in the strengthened climate plan in budget 2021 need refinement to create competitive conditions for private sector investments.
In closing, let me reflect again that Canada's advanced biofuels sector is helping drive Canada's economic recovery and underpin climate plans. Our task is clear: to decarbonize the internal combustion engine.
We appreciate your work on low-carbon fuels and the invitation to meet today. My colleague and I look forward to your questions.
[Translation]
My thanks to the members of the committee.
:
Mr. Chair, ladies and gentlemen of the committee, thank you for giving us the opportunity to present our vision of how Air Liquide Canada plans to contribute to the energy transition, particularly in the area of fuel mobility.
A few words about Air Liquide. The group is a little over one hundred years old, with a presence in 78 countries and with 65,000 employees. I feel that it is important for me to tell you that our business is to play with small, very simple molecules and to put them to work for our clients and our patients. We do so in a reliable and long-term way, with the objectives of improving the processes, of better, quicker and more efficient production, and of delivering the products with a carbon footprint that is as small as possible. All with the goal of improving our patients' quality of life.
Air Liquide has had a presence in Canada since 1911, from the east coast to the west coast. We have four pillars: the primary production of those molecules with existing pipeline systems; activities that are predominantly industrial, at a small to medium scale, or involving captive fleets, such as fork lifts that today are fuelled by hydrogen cells; and two very transactional activities, both extensive: in industry, particularly for welding, and in health care.
The Air Liquide group's path is clear: we want to reach carbon neutrality by 2050. Those are not empty words but they are not easy to put into effect because we are a structure and a growing entity at the same time. The entity puts great stock on its historical assets: separating air into component gases, producing molecules and enhancing energy. We also put a lot of stock on our clients as we improve their processes, which involves working and innovating together. Finally, we really wish to be involved in creating these new ecosystems. Our group has a strong ambition to use the hydrogen society as a means to growth. The object is to add value, but within a society with a low carbon footprint, including for mobility.
The hydrogen molecule is small, simple, efficient, and generally easy to store and to use. As a fuel, it can help to decarbonize our society, especially in transportation, including heavy transportation.
Those are lofty words, but our current vision in the Air Liquide group is to invest eight billion euros in the hydrogen value chain, in the coming decade and all around the world. Basically, that means an objective to invest three gigawatts of electrolysis, and, I repeat, all around the world. I also stress the importance of working on basins and greatly expanding the needs. For us, this is an extremely important point that we can come back to.
The Air Liquide group sets itself apart because we are investors at the same time as we work on the technology at all stages of the hydrogen value chain. They include primary production, transportation by pipeline or in liquid or compressed form, and delivery at the points of use via fuel refilling stations that we design and manufacture ourselves. In addition, we really see scaling-up as our calling.
We will come back to the importance of increasing the size of all these facilities because our objective for them is relatively simple. Whether it is to decarbonize the industry or to improve transportation, it seems critical to us to increase the size of our facilities. We can then significantly reduce the cost of our investment in those facilities and in the value chain in its entirety. Even more, we have to make sure, either immediately, or with the help of a number of industrial, private and public partners and clients, that we can move towards a low-carbon world where the price of hydrogen for the end user is as low as possible, which is what this is all about. It would allow us to properly position ourselves among the other technologies, including fossil fuels.
In that context, we are convinced that we can reduce the price of hydrogen by 60% in the coming decade. One of the great stages that we have achieved, as you have probably already heard, is at our Bécancour site, where we have produced 20 megawatts, or a little more than eight tonnes, of totally renewable hydrogen. That product, which started to flow at the end of last year, is today fuelling industrial and transportation needs in Canada and the northeastern United States.
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Thank you, Mr. Chairman, and committee members.
I appreciate the chance to speak to you today.
I hold a Ph.D. in economics from the University of British Columbia, where I specialized in natural resource and environmental economics. At the University of Guelph, for 25 years I have taught courses in environmental economics and policy, econometrics and microeconomic analysis.
Canada is a world leader in finding ways to protect the environment while maintaining growth, economic opportunities and living standards. I hope that the information learned through your hearings will assist your committee as you aim to continue doing so.
While most of my research is aimed at peer-reviewed academic publications, I have also written extensively in the public domain, including think tank reports and media op-eds. Anyone familiar with my writings will know that I have certain biases, which I can summarize very simply.
I believe that policies should be critically analyzed to ensure the benefits exceed the costs. Not every environmental goal is sufficiently valuable to be worth the cost of achieving it. When a goal has been chosen, it is incumbent on policy-makers to try to achieve it at the lowest possible cost. The disaster regarding Ontario's electricity restructuring is a cautionary tale of what happens to an economy when this lesson is ignored.
I have done research for the Macdonald-Laurier Institute on the costs and benefits of Canadian biofuels policy. I'm referring to work I did with my colleague, Doug Auld, in 2014. I have also done research for LFX Associates on the costs of the proposed clean fuel standard, published last year, and for the Fraser Institute, published earlier this year as part of a study on the costs of the proposed carbon tax in Canada.
The biofuels report that I co-authored with my colleague, Professor Doug Auld, at the University of Guelph, showed that over the 2008 to 2012 interval, Canadians paid about three dollars in costs for every dollar in environmental benefits attained through biofuels. In arriving at this conclusion, we made assumptions as favourable as possible to the biofuels case. However, the expert literature has shown that switching to corn ethanol does not necessarily lower greenhouse gas emissions on a life-cycle basis compared to using gasoline. The rapid expansion of the biofuels sector after 2006 was driven by government support programs, not by the underlying economics.
My research for the Fraser Institute showed that the costs of blending ethanol go up in a convex fashion, meaning the costs go up non-linearly as the carbon intensity target gets lower. Since ethanol has less energy per litre than gasoline, consumers have to fill up the tank more often to go the same distance. Based on elasticity estimates in the economics literature and parameter values from other published sources—and there I relied chiefly on the Canadian Energy Research Institute in Calgary—I estimate that a 5% cut in carbon intensity below the current baseline will increase the cost of gasoline on a per kilometre basis by about 17%, while a 10% cut will increase it by 48% and a 20% cut will increase it by 156%.
My work for LFX Associates involved macroeconomic modelling of the proposed clean fuel standard. We modelled a policy package that would achieve a 30 megatonne greenhouse gas emission reduction. We estimated that even using a relatively high social cost of carbon metric, in other words, assigning benefits at the high end of the range, the policy would cost the Canadian economy six dollars for every dollar in environmental benefits, with net costs averaging $440 per employed person per year.
We also estimated it would cause a permanent loss of 30,000 jobs nationally, even after taking account of expanded employment in the biofuels sector, and it would put $22 billion in capital at risk of exiting the domestic economy. We also noted that in the context of population and income growth, the total emission reductions would be offset by a 7% increase in the size of the labour force. This means the actual emission reductions as of 2030 would be far smaller than 30 megatonnes, and would likely be zero or less.
I also note that a larger problem with climate policy generally is that emission reductions in Canada often lead to carbon leakage in which the emitting activity does not disappear. It simply moves to China or India or other competitive countries, taking the jobs with it.
The common catchphrase about the costs of climate inaction leads to a muddled argument.
:
Excuse me if I read Malcolm's presentation on his behalf just to get it going.
On behalf of Renewable Industries Canada, Malcolm West wishes to thank the chair and distinguished committee members for the invitation to present as part of your study on renewable fuels. In addition to Malcolm's role at RICanada, he is the executive vice-president and CFO of Greenfield Global, Canada's largest ethanol producer.
RICanada members produce more litres of renewable fuel right here in Canada than any other organization. As Canada moves towards implementing its own net zero by 2050 objectives, one sector is often top of mind. The transportation industry is too massive to slow down, but too impactful on the environment to ignore.
Members of Renewable Industries Canada, such as Greenfield Global, have found a way to thread the needle through innovative, modern biofuels. We continue to develop increasingly efficient biofuels that meet or exceed net-zero emissions on a life-cycle basis. Over the past 35 years, our technology has substantially reduced transportation's carbon footprint.
A key focus of this committee's study should be the need to implement affordable, market-ready technologies to achieve climate objectives. The value proposition offered by biofuels is incontrovertible. Ethanol is typically cheaper than gasoline, acts as an octane enhancer promoting vehicle performance, burns more efficiently and can be used with existing infrastructure. Existing technologies, including the use of biogas to replace natural gas in ethanol production, carbon capture and sequestration, and enhanced farming practices can make ethanol a net-zero fuel or even net beneficial for the environment.
All cars on the road as of 2001 can use ethanol blends of at least 15%, with others comparable with levels in the 25% to 85% range. These flex-fuel vehicles cost roughly the same as regular fossil fuel-burning cars and represent the most affordable way for consumers to reduce emissions from their commute.
Policy that favours modern biofuels also stimulates new R and D. For example, Greenfield Global has recently invested in a joint venture that uses anaerobic digestion of solid municipal waste to create biogas for its ethanol plant in Varennes, Quebec. Next steps include producing green hydrogen to meet increased renewable fuel demand.
So far I've spoken to you, on Malcolm's behalf, mostly about light-duty transportation and renewable gaseous fuels. I will now continue with my part of the presentation, about the heavy-duty and aviation sectors.
I echo Malcolm's words of appreciation for this important opportunity to discuss renewable fuels together. I am the EVP of commercial operations and strategy at World Energy, a global leader in the production of biomass-based diesel and sustainable aviation fuels.
Some might worry that Canada's climate goals are too ambitious, while others might want the government to move faster. I'm here to tell you that net zero is real and possible. Today, right here in Ontario, my company produces a biodiesel that exceeds net-zero standards as measured by the Government of Canada's life-cycle analysis model. We're able to do this by taking waste, such as used cooking oils from restaurants and animal fats from rendering plants, and transforming them into biomass-based diesel. We also have the technology right now to make renewable diesel using other ingredients that would meet net-zero requirements.
You don't need to turn over the existing fleets of heavy-duty diesel trucks, buses and trains. The renewable diesel that RICanada members make is already 100% compatible. The same goes for diesel generators in northern and remote communities. They can all produce low-carbon power tomorrow, simply by putting in the right fuel.
Advanced biofuels are a here-and-now solution to significantly reduce carbon emissions.
Sustainable aviation fuel is another example of instant decarbonization. Right now, global demand for sustainable aviation fuel is off the charts, but supply is low because we do not have the right policies in place. Our renewable fuels are proven to be compatible with existing air fleets and are currently being used by many airlines, including United, KLM and Alaska, to name just a few.
As we aim to build back better coming out of the pandemic, Canada needs to ensure that sustainable aviation fuel is leveraged to attain important GHG reductions. Ultimately, this kind of policy will stimulate investment and grow the Canadian economy.
Mr. Chair, thank you for the opportunity to present to the committee. It will be a pleasure for Malcolm and me to answer any questions.
Thank you to all the witnesses. We're building on some blocks from our last meeting. We've heard a lot of witness testimony, some of which is quite contradictory.
There's been conflicting input on Canada's and the world's ability to replace our energy system with either biofuels or hydrogen. I appreciate most of the biofuels part of it here. The pathways for each transition seem daunting, given the complete uncertainty that we've been presented here. The bigger concern, of course, is that this transition will result in GHG emissions, or are we just looking to subsidize industries that don't add environmental value in the energy equation?
My first question goes to Mr. Thomson at Advanced Biofuels Canada.
You talk about decarbonizing the internal combustion engine, which I think is a laudable goal, but we heard from Michael Wolinetz of Navius Research at the last meeting. He advised us to be careful about using new bio-feedstock for biofuel production because of the inherent depletion of soil carbon stocks and the obvious release of this carbon to the atmosphere.
Can you comment on that, please?
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I can. Thanks for the question.
I can point to Canada. The data in Canada indicates that, over the last 20 years, soil organic carbon in the agricultural regions that have produced biofuel feedstocks have increased substantially, so Canadian soils have become a net sink, if you will, for carbon sequestration. As a result, the carbon intensity reduction potential or biofuels produced off those have declined substantially.
Competent regulatory authorities supported by their scientists with deep LCA knowledge have examined all aspects of the biofuel supply chain, which the committee knows goes all the way from all of the crop inputs, forestry inputs, waste, etc., all the way through to tailpipe combustions. That's how we measure LCA.
The science 10 years ago on some of the other aspects was less well known, because these kinds of regulations have been promulgated so far and wide that there's an immense amount of work going into it and—
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—I'm limited in time here.
The EPA has a study, and we've talked about 30 different studies that talk about actual CO2 emissions from biofuels being about double what they replace when you put them in, life cycle-wise, from an internal combustion engine. The latest one, of course, from the Environmental Protection Agency in the United States indicates that sinks are a contentious way of looking at this, I think, more than anything else.
Let me ask my next question.
Mr. McKitrick, we've had a few witnesses here, Mr. Jaccard from Simon Fraser University being one. He famously told us, as you can appreciate, that it's the policy you need and don't worry so much about the outcome, which I don't agree with. You can comment on that. He told us that he'd reviewed 20 to 30 studies that show that biofuels produce more GHGs than the product they replace, but they are wrong, according to him, because they don't use his own dynamic analysis; they use static analysis.
Could you please comment, Mr. McKitrick?
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I didn't hear Professor Jaccard's presentation, so I can't comment on the specific studies.
Some of the issue depends on where you get the fuels. If they're imported from the United States, they're being produced with the American electricity system, which is much more carbon intensive than the Ontario electricity system. Another issue is the scale. It's possible to do things on a small, experimental scale with very favourable parameters, but if you then need to scale it up to an economy level operation, then you do need to pay attention very carefully to those studies, because they're going to be indications of what lies ahead.
I think that Professor Jaccard tends to be very optimistic about technological change in the way that he models it, that it's induced by policy changes. That's a controversial idea in economics, that policy-makers can induce favourable technological changes. It doesn't always work out, but I would say that there's always a chance. There's always a chance that we're on the cusp of very favourable changes in technology. If we are, the carbon tax alone will get it. You don't need to add to the carbon tax mandates to force industries to change what they're doing. The carbon tax puts a price on the emissions that will cause—
Mr. McKitrick, I need to move on. I'm sorry. I have only a short period of time left here.
I'll ask you the follow-up question here.
Don O'Connor from S&T Squared Consultants was here last time. He talked about not including the emissions associated with a capital build in these energy transitions for life-cycle analysis.
Contradictorily, he did acknowledge that reductions immediately are more important than eventual emissions.
How do you view capital costs of biofuels production in the life-cycle analysis of these carbon emissions?
Thank you, again, to all the great witnesses we have today for your very interesting testimony with respect to biofuels.
We're hearing on the one side of the ledger that biofuels should be part of the future and that advanced biofuels will help certainly reach our climate targets. Then we hear Mr. McKitrick from the University of Guelph saying that's maybe a bit too hopeful.
Let's go to industry and the market.
[Translation]
Mr. Masselot, you said that you are making massive investments in decarbonization and that you want to attain carbon neutrality by 2050. Why are you making those decisions?
Since Air Liquide Canada Inc. is a public company, you must be looking at making a profit. It might be said that it won't work and won't be worth the effort. It might also be said that it is a very interesting business opportunity that would provide Canada with huge good fortune and potential. Could you tell us more about that?
:
Thank you. Let me make two points.
First, we understand hydrogen, because everything at Air Liquide revolves around it. We are totally convinced that this molecule is what we need. We produce several tens of millions of cubic metres of it per year, and we have done so for a little more than 50 years.
Second, we are investing for our own assets and for our clients simultaneously, not just to make a profit, but to make a profit in the long term. In other words, we want to create value for the duration.
We—the company and its managers, as individuals in the broadest sense of the term—are totally convinced that creating sustainable value will come through the acceptance of all our focus on energy, intensive though the activities may be. That is why we are conducting those activities now and why we started them some years ago. We think that we are in a position, not only to create value but to create it for the long term.
:
There's been a lot of talk here about the scale of putting this in and what the actual life cycle is. I'd like to refer to a significant project, our largest one that we have in California right now, where we actually converted an existing and yet no longer viable petroleum refinery. We bought a 63-acre parcel just about 10 miles east of Long Beach. It was a 100-year-old asphalt refinery. It started out as a crude refinery and we're converting that. We saved the jobs. We kept every single employee who was there.
We're converting that into a 25,000 barrel per day renewable diesel and sustainable aviation refinery. We're operating right now at about 4,000 barrels a day and by 2023 it will be at 25,000 barrels a day, all using waste products, recovered vegetable oils and used cooking oils, etc.
In terms of the life-cycle analysis of these, it's been pretty clearly established right now. We want to make sure we're comparing apples to apples with the data that is now available as opposed to data that was available 15 or 20 years ago. There have been significant advances in that.
We find that the demand for the product and our primary customers are obligated party oil and gas companies. That's who we partner with. We have a joint venture with Shell, who is our neighbour in Hamilton. We've been supplying them for over 10 years.
We find that the oil and gas companies are the ones—
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Yes. We can certainly talk about the various colours of hydrogen. I would rather describe hydrogen in terms of its lack of carbon. Green hydrogen will always keep a portion of a carbon molecule, whereas other types of hydrogen will have more carbon.
Today, if we consider the projects among which we are positioning ourselves, we see projects based on electrolysis first and foremost. That does not make green, or low-carbon hydrogen by itself. It first needs the electricity in order to do so, including intermittent and other kinds of power.
We are also positioned for carbon capture, using more classic hydrogen-producing units. We have already conducted projects of that kind. An example is with natural gas steam reforming units. Since 2018, we have been recovering carbon dioxide from a natural gas steam reformer.
Most of our investments are being made in the hydrogen with very low carbon emissions. As I have told you, we are looking at investments in the order of three gigawatts of electrolysis, compared to the 20 megawatts we have just invested in Bécancour.
:
Certainly. Today, an industrial concern like Air Liquide is able to invest in all those means of primary production. I would tend to say that we will be guided by the energy situation and the possibilities in the countries in which we find ourselves.
In Canada, and in Quebec in particular, clearly the abundance of renewable energy, in the form of hydroelectricity, is pushing us towards electrolysis. On the other hand, we are in the process of investing in and starting up a unit that will produce 30 tonnes of liquid hydrogen per day for the transportation market in California. The plant is located in Nevada and works by reforming natural gas, renewable to a huge extent, because we are fuelling it using our own fuelling technology for that type of unit, mostly with biomethane.
So we can assume that the next stage will be to capture and sequester the carbon dioxide produced, making it net carbon negative in this case.
:
This is where it is so important to have all the players all lined up, including the authorities and the politicians. Generally speaking, what we can certainly say, and say very clearly, is that our situation today is that, if we compare today's cost of so-called grey hydrogen from regular natural gas to what we are currently doing with elecrolysis, we end up with a product that is not expensive and that is top-of-the-line. That is how I would describe it, and therein lies the interest in scaling-up, of course.
Scaling-up provides us with three things. It means that we can drastically reduce the cost of the investment by automating the actual manufacture, such as with the electrolyzers. It also allows us also to reduce the price per kilo or per tonne of hydrogen that is produced and shipped to the point of end use.
Today, actually, we no longer worry about the competitiveness of a hydrogen solution in relation to any other kind of fuel. Hydrogen is already competitive for fuelling forklifts. For heavy transportation, we know that we are going to quickly reach that level of competitiveness. After that, everything will actually depend on the use made of it, using figures showing the frequency of use, the number of kilometres covered, and so on.
What actually happens is that price levels are not the same. They are dependent on geography, the input costs and the method by which the hydrogen is produced.
To begin, according to us, what is totally critical is to make sure that the investment we're going to do, scaled up larger, will be based on what we could define as encore customers. No matter if the encore customer is a large industry or basin, like a captive fleet of trucks in—I don't know—an airport, what's important is that it's based on solid, reliable, relatively continuous need of hydrogen, preferably, low-carbon hydrogen, to build a demand justifying the set up of the primary production of hydrogen. That's the first step. Then it would be far easier in the second step to add multiple other types of use, including intermittent ones. When we're dealing with transportation, notably passenger vehicles for example, it's very intermittent.
That's why, according to us, it's important to create or to build the demand. There, for sure, authorities and communities can help with their own fleets. It could be buses. It could be ferries. It could be trains. All of those captive fleets have the interest of very often, if not always, coming back to their original location. That means it's limiting, to a certain extent, the importance of the investment in terms of overall supply chain or the set up to be in a position to fuel vehicles. That's the first point.
The second important point is de-risking. I'm an industrial; I'm ready to take risks. That's why, by the way, I'm asking for a certain return. Nevertheless, we need a good level of policy alignment. We need to have strategies. We need to have an overall coordination. It's the same thing for regulations, ease of doing business and permitting, typically.
At the same time, it's key for us and for all players around the table, I'm sure, to do it in a safe and sustainable way. That's something we're doing now, if you are speaking about hydrogen, for four or five decades.
Last but not least, incentives will help as there's still, and it's known, an economical gap, not negligible, between volumes we need to hit and it's the scaling up or the ramp up where hydrogen or any other fuel—it's one that's a technical breakout parameter—will be at par with the historical way of fuelling for fossil fuels or others.
In a nutshell, that would be my answer.
:
Thank you very much for the question.
I think there is an immense opportunity to be able to expand. As I say, in California, we're taking this plant from 3,000 barrels a day when we bought it, up to 25,000 barrels a day. We're looking to make additional investments. We can expand our plant in Hamilton, Ontario. We can do that because we have to have a way to have transparent trading credits that can establish this market here. Right now, the California market has a very strong and transparent trading economy on carbon reductions. If we could establish that in Canada through the clean fuel regulation, that is going to attract investment and we will be able to scale up and make significant advancements.
That's not to mention we're constantly looking on every upgrade that we do to any plant. We assess that on a carbon basis as well. What is the most efficient way to do that? By generating more carbon reductions with every capital investment we make and every gallon we produce, we can achieve that faster.
Over the last 15 years that we've been producing, we have made investments that have made every gallon more valuable from a carbon reduction perspective, including upgrading the by-products to replace petrochemicals and things like that, which allowed us to get past a net-zero basis.
I'll just get in one more question for you, Dr. McKitrick.
Six to one doesn't seem very effective to me at this point. Like you said, maybe in the future it will be.
Being an economist, how do you make it effective? What needs to be done to make it effective, where we actually are seeing a dollar-for-dollar efficiency?
It's interesting on this side to hear all the complaints. I hear other members of the committee talk about incentivizing or subsidizing this when they decry subsidizing oil and gas. I would agree with them. I don't think we should be subsidizing oil and gas, but then, in some respects, we have to expect it on the other side of the coin.
Can you explain what can be done to make this an effective policy?
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There are two or three reasons for that. First of all, when we are looking at the technology provider, it's the company Cummins—ex-Hydrogenics—based in Mississauga, where Aire Liquide has 19% of shareholding. It's Canadian technology and a Canadian project in terms of investment.
For sure, the abundance of relatively non-intermittent green energy through Hydro-Québec is helpful. The price of megawatt is helping, as well as subsidies that we had from the Minister of Finance of Quebec as well.
The location is very well positioned for the northeast corridor, and why not, later on, the Canada highway to Windsor, Toronto and more.
Last but not least, and important for us, it's the location where we have strong technical capabilities linked with the Université du Québec à Trois-Rivières. We have a Ph.D. working for us in this location. We have skills and we already had utilities in these locations.
We are already producing and liquefying, so we are back to the notion of basins, scale-up and making sure we have encore customers making this project viable and alive.
It's really very simple. Of the 100% of emissions coming out of a car, 75% of those come from the crude oil. You pull it out of the ground, process it and burn it. There's nothing you can do to take that fact away.
You could reduce the carbon intensity of the way you manufacture those fuels, but you could never take them to zero that way.
In it's comparable regulation, the renewable energy directive, the European Union said to obligated parties that they can do pretty much anything they want, but the credit they generate and the actions they take need to be proportionate to the life cycle. If we're going to fundamentally take all of the carbon—or most of the carbon—out of transportation, we can't focus just on the 25. We have to work on the 75. This might come as advanced biofuels, hydrogen, low-carbon hydrogen, renewable natural gas and electric. All of those things have to be part of it.
The Europeans quite literally said that they have to deliver their credits in proportion to those proportions. In Canada, its 75-25.
I would like to ask Professor McKitrick a question.
Earlier, you were talking about a price on pollution and on carbon. In your presentation, you talked about a study on ethanol that you conducted from 2008 to 2012.
I don't know whether you have the figures, but having quickly looked at the issue, we came to the conclusion that the oil and gas industry had received federal government financial support of about $24 billion in the period from 2017 to 2020. As we studied the very recent allocations in the Department of Natural Resources, we see that, for the 2021-2022 year, an additional amount of $560 million has been set aside for reducing greenhouse gas emissions.
Knowing that the oil and gas sector is hugely supported by the federal government, do you not believe that there should be a change in strategy if we want to reduce greenhouse gases?
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It's actually quite amazing.
We're seeing right now a significant expansion in the number of new facilities that are being built. The majority of them are being built by oil and gas companies that are pursuing more and more becoming producers of renewable fuels as well. Whether it's Marathon or Philips 66, Valero, they all have their own renewable diesel facilities. We are actually an independent, a merchant refinery, if you will. But it is becoming more and more a part of the integrated supply chain that gets blended with petroleum diesel and with biodiesel as well.
Right now, the places where these products are going are to the jurisdictions that are looking to have policies to reduce carbon the most. It really is about a carbon reduction that is carrying the weight and driving the investment. That market will be created.
In terms of the greatest interest, we know there are several majors that are looking to become net-zero emission petroleum companies or energy companies by 2040 and 2050. We've seen a significant drive around the globe to build more and more of these facilities. Neste is a Finnish oil company that is the largest producer of renewable diesel around the world. This is really about Canada carving out that the supply should be built here by ensuring that the demand is going to be here through policy.
Right now, these products are moving quite freely throughout the different jurisdictions. The only thing that's really happening with these protectionist policies is that you're changing trade flows. It is the same amount of product that is going in to the various sectors, but it is being displaced. Trade flows are being moved, but so far, we haven't seen that as being detrimental to our industry.
Certainly, as we come out of COVID, we're seeing excessive demands for certain feedstocks. It's not being driven so much by biofuels as by overall demand from other sectors, including food and other things like that. It's amazing how the agricultural and waste industries are also expanding to meet those demands.
:
Thank you very much, Mr. Chair.
I want, first of all, to thank all of the witnesses for being here today. This has been a fascinating study and today is no exception.
Before I ask my question, I have to jump in on one of the previous comments. Specifically, Mr. Zimmer brought up Ontario and the cost of the the transition. The cost is incredibly important, but I think it's important to get on the record the cost of inaction and the fact that here in Ontario we now have one of the greenest grids on the planet with zero smog days in places like Toronto, and of course a whole lot fewer kids having to carry puffers at school.
I'm a firm believer that if you want shade today, you should have planted the tree 30 years ago. I think this is the challenge that we have in front of us, that is, what do we do now in order to be prepared for our future.
Mr. McKitrick—
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No, it's good. I appreciate the opportunity to still be able to engage with the witnesses.
The direction I'm going to go is back to the cost.
Mr. McKitrick, you elaborated a little bit on the six dollars for every dollar of benefit, but you also said $440 per person, per year just on the clean fuel standard alone that this government is implementing.
We had a witness last week who said that, because you have one policy that's disproportionately impacting rural and remote Canadians, seniors living on a fixed income and single mothers, you should also have an offsetting policy in a different area of government to help make up the difference or make up the gap.
Are those some of the problems you've talked about with policy when you have to have multiple policies to offset other bad policies? Is that what you were alluding to there?
I think this may be my last question in a committee as a parliamentarian, so I certainly want to thank all of you, my colleagues from all sides of the aisle, and certainly you, Mr. Chair, and the great team. To the analysts, it's been an amazing run. Your team of analysts has been amazing, as well as the people who take care of the committees.
[Translation]
It was a great pleasure and privilege to work with you.
[English]
I'll direct my last question to Mr. Thomson and Mr. Lewis.
I want to talk about the job opportunities here. Certainly, as we're looking at biofuels and as we're looking at this transition, we've heard from many witnesses—a lot of scientists, anyway—that it needs to happen and that a lot of companies and a lot of businesses are going down that path.
I want to hear very quickly about the economic opportunities and the job opportunities in this sector. How do you see it, Mr. Thomson and then Mr. Lewis?
:
Thank you, sir, and thank you for your long years of public service. I hope you enjoy your “retirement”.
We will provide to the committee—in fact, we might have already done it in our briefing notes—the data that we have done. On our website you'll find an analysis from late last year, which is the source that I used to quote my sources.
I can give you an example. In British Columbia, we've had a low-carbon fuel standard since mid-2013. In the last 12 to 18 months, we've had about $500 million to $700 million of investments into the energy space here from companies in the forestry sector, refiners and others. Those are very directly tied to the British Columbia low-carbon fuel standard, which now has sent this very effective signal to the industry to build out.
We're very clear in British Columbia. We've seen it, and our studies indicate a similar kind of effect in Canada.
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On your first point, about our own investment, the support we received was provincial, as I said. This was both for the price per megawatt and in terms of the much appreciated efforts of Quebec's Department of Finance.
Then, the important thing for us today, as we have said, is not only to provide assistance and support, but also to generate demand. It seems to me that this is how, with policies that are both credible and proactive, we can generate uses for hydrogen in population basins and in quite large industries at the same time. This is specifically the case with transportation, as long as the demand is sufficiently great so that we are no longer in demonstration mode. We are past that.
We know that the technologies exist and that they work. So now we have to take quite a broad view and make sure that the whole hydrogen chain is progressively rolled out. It can be used all over the country, not only for transportation, but also to decarbonize anything industrial.
I'll go back to Mr. Lewis again.
While I can appreciate that we need to use every tool we can to decarbonize our economy, I want to try to establish what the limits of biodiesel are, for instance, in doing that, because we have to get to net zero by 2050. Maybe this doesn't involve biodiesel, obviously, but you mentioned aviation fuel, and that the supplies were low.
I've heard some very concerning things about the acreage of canola needed if we were producing aviation fuel from canola, for instance, for every flight across the Atlantic or Pacific. What are, I guess, the limits on that in terms of the feedstock, in terms of how much we would be able to use of that by 2030 or by 2050? What's the contribution that biofuels can make there?
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Well, I think it's significant in terms, of course, of the straight carbon reduction and the demand from the industry itself.
United Airlines is one of our customers. It has announced that it's going to be a zero-emission company by 2040. It's a challenge when what you do is fly planes. One way it's doing that is by engaging with us. We've been supplying it with sustainable aviation fuel out of our California facility since 2016. Currently we use animal fats and recovered vegetable oils. We haven't even looked into taking food crops there, because of where it's located. Of course, using these second-use products out of a very heavily populated area is one sector that is growing.
On another board I'm on, down in the Advanced Biofuels Association, we've actually recently committed to do a feedstock study for just these purposes, to look at it in the greater scope. I can say it isn't just about existing crops, because those are going to be very important, but I think that new technologies with algae, with camelina, with cover crops, that's where the expansion is going to come. Right now that's where the primary value is going to be created, by putting them into biofuels. They're not going to be done without having these policy indicators to allow us to expand.
We're not just looking at the food for fuel debate. We're looking at where we can get lipids on a massive scale. Certainly all of these feedstocks are a piece of the puzzle, a part of the layer, but I think we will continually be searching to go to the lowest carbon feedstock we can to generate some very high yields in very small areas with the new crops and lipid-based oils that are available.
That takes us to the end of our final meeting on a very interesting study. We're going to go in camera, but before we do that, I just want to say thank you to our witnesses today. We've had several amazing panels and today was no exception. Your contribution is much appreciated. It's a great way to cap off this study.
The last thing I want to say is that this probably will be Mr. Lefebvre's last meeting in this committee. Over the summer we don't know what's going to happen, but regardless, committee membership could change. I really hope I see you in September. I know, speaking on behalf of the committee, you've been an outstanding colleague. You've added so much to this committee.
Personally, you've made my experience as an MP much better. I've learned far more from you than you could ever learn from me. For that alone I'm very grateful. You are really going to be missed. Mr. Lefebvre, thank you.