Technology, energy and transport: appearance before the Standing Committee

Clean technology

Can you inform the committee about what the Government’s position is regarding Clean Technology?

• Canadian businesses are getting on board with clean tech, and taking advantage of the tremendous economic opportunities that await in the field of clean technology and renewable energy – estimated by the World Bank to be worth $6.4 trillion worldwide.
• The Government of Canada has been there to support these Canadian businesses, including by investing over $3 billion since 2016 in clean technology research, development, demonstration and adoption, and support to accelerate the growth of clean technology companies. Funds are available through programs, such as the Low Carbon Economy Fund.
• Canadian businesses have a key role to play in growing a low-carbon economy, creating jobs, spurring innovation, and reducing emissions.
• Global Cleantech Innovation Index ranked Canada number one for innovation in the G20.
• Twelve Canadian companies were named to the 2020 Global Cleantech 100 list. The list represents the most innovative and promising clean technologies from around the world.

Clean Fuel Standard

What is the status on developing the Clean Fuel Standard?

• The Government of Canada is developing the Clean Fuel Standard to make the fuels used in vehicles, buildings and industry cleaner. By setting performance standards for various types of fuel, the Clean Fuel Standard will encourage the production of clean fuels, drive innovation in the oil and gas sector, and create an incentive to use less-polluting fuels.
• The Clean Fuel Standard will complement other climate change measures, including Canada’s vehicle standards and carbon pollution pricing.

Q. What fuels will be affected by the Clean Fuel Standard?

• The first phase of the regulations will target liquid fuels (e.g. gasoline and diesel), used mostly in transportation.
• Subsequent phases will target gaseous and solid fossil fuels used mostly in buildings and industry. The regulations are being informed by extensive consultations with provinces and territories, industry, and other stakeholders, as well as drawing on the experience of California and other jurisdictions that have already implemented similar measures.

Coal (including the Strategic Assessment of Thermal Coal)

What is the Just Transition Task Force?

• In an effort to better understand the impacts of phasing out traditional coal-fired electricity and how to support those affected, Canada launched an independent Task Force on Just Transition for Canadian Coal Power Workers and Communities in 2018.
• In response to the Just Transition Task Force’s recommendations to support coal workers and communities affected by Canada’s coal phase-out, Budget 2019 contained new measures including $185 million to support infrastructure, skills development and economic diversification.
  • Create worker transition centres that will offer skills development initiatives and diversification activities in western and eastern Canada, supported by the $35 million Canada Coal Transition Initiative.
  • Work with those affected to explore new ways to protect wages and pensions.
  • Establish a $150 million infrastructure fund to support priority projects and economic diversification in impacted communities.
  • Create a new Canada Training Benefit to help Canadians gain new skills and seize the opportunities of the clean growth economy. This includes a training support benefit through the Employment Insurance program.

Q. What is the strategic assessment of thermal coal mining (SATCM)?

• As one of the tools under the Impact Assessment Act (IAA), strategic assessments allow the Minister of Environment and Climate Change to assess any policy, plan, program or issue that is relevant to conducting impact assessments. They can offer guidance on how policies and measures, as well as domestic and international commitments, should be considered in project reviews.
• The strategic assessment of thermal coal mining (SATCM) will provide guidance to proponents, stakeholders, Indigenous Peoples and decision-makers on how federal impact assessments will consider new thermal coal mine projects in Canada. The SATCM will consider, for example, issues such as: environmental and health impacts of thermal coal mining; market analysis of projected demand for thermal coal; economic impacts and impacts on jobs in Canada; and the use of thermal coal mining, including its impact on Canada’s international commitments and initiatives.

Q. How will the SATCM be developed? What is the Status on the SATCM?

• Draft Terms of Reference will be published in 2020 for public comment, followed by the publication of final Terms of Reference. The Terms of Reference will describe the process, scope and timelines for conducting the SATCM.

Q. Why is the Government developing SATCM?

• While Canada is phasing out coal power, a proposal to expand coal mining raises broader policy questions.
• For instance, Canada is a cofounder of the Powering Past Coal Alliance, launched in 2017 in partnership with the UK, to advance the transition from coal power generation to clean energy. Canada is also contributing up to $275 million to the Energy Transition Program of the World Bank to support global efforts to phase out thermal coal combustion and to help developing countries, particularly in Asia, increase the use of renewable energy.
• Strategic assessments were designed to consider those kinds of broader questions under the Impact Assessment Act.

Q. What is the link with the strategic assessment of climate change (SACC) and will there be overlaps?

• The strategic assessment of climate change (SACC) provides guidance on information requirements related to climate change impacts for all projects subject to a federal impact assessment, supporting consistent accounting of a project’s likely climate change-related effects in assessment decisions.
• The SATCM will include, among other things, an assessment of the potential adverse environmental and health impacts of thermal coal mining and its use. These impacts could also include GHG emissions and climate change.

Fossil fuel subsidies

Q. What is being done to end fossil fuel subsidies?

• With Canada’s G20 partners around the world, the Government of Canada is rationalizing or phasing out inefficient fossil fuel subsidies and has committed to doing so by 2025.
• The Government of Canada’s efforts to reform fossil fuel subsidies have resulted in the phase-out or rationalization of eight tax expenditures that supported fossil fuel exploration or production.

Q. How did the government approach the review of fossil fuel subsidies?

• Finance Canada has been working on the commitment since 2009. Since November 2015, the Minister of Finance and Minister of Environment and Climate Change have worked together on this G20 commitment.
• Finance Canada is leading the review of tax measures and ECCC is leading the review of non-tax measures.

Q. What progress has the government made on the G20 commitment?

• The Government has made important progress on the G20 commitment to rationalize and phase out inefficient fossil fuel subsidies with the rationalization of eight tax expenditures for the fossil fuel sector to date that eliminate preferential tax treatment, including:
  • Phase-out of the accelerated capital cost allowance for oil sands (Budget 2007; completed in 2015)
  • Reduction in the deduction rates for intangible capital expenses in oil sands projects to align with rates in conventional oil and gas sector (Budget 2011; completed in 2016)
  • Phase-out of the Atlantic Investment Tax Credit for investments in the oil and gas and mining sectors (Budget 2012; completed in 2017)
  • Reduction in the deduction rate for pre-production intangible mine development expenses to align with rate for the oil and gas sector (Budget 2013; completed in 2018)
  • Phase-out of the accelerated capital cost allowance for mining (Budget 2013; to be completed in 2021)
  • Allowing the accelerated capital cost allowance for liquefied natural gas facilities to expire as scheduled in 2025 (Budget 2016)
  • Rationalize the tax treatment of expenses for successful oil and gas exploratory drilling (Budget 2017; to be completed by 2021)
  • Phase out tax preference that allows small oil and gas companies to reclassify certain development expenses as more favorably treated exploration expenses (Budget 2017; to be completed in 2020)
• In June 2018, the Minister of Natural Resources along with Argentina’s Energy and Mining Minister announced that Canada and Argentina would be partnering to perform peer reviews to ensure both countries are on track to phase out inefficient fossil fuel subsidies. The peer review process will increase transparency on Canada’s actions to fulfil the G20 commitment and further reaffirm our commitment to climate action and to sustainable economic growth at home and abroad.
• To make sure Canadians are heard from, in March 2019, the Minister of Environment and Climate Change launched a consultation on the Government’s draft framework to review measures outside the tax system. The consultation invited comments from all Canadians with an interest in Canada’s climate change commitments and policies and concluded in June 2019.

Q. What is the current status and what are the next steps?

• ECCC is supporting Finance Canada, who are the lead department for undertaking the G20 peer review.

Q. If pressed on IISD study released Feb. 20 entitled Canada’s Federal Fossil Fuel Subsidies in 2020?

• Officials from the department are reviewing the report and will engage the IISD, as necessary.

Q. Will the final consultation report be released publicly? Can members have a copy of the report?

• We are reviewing the report and will consider releasing it.

**If pressed on consultation report…

• We are reviewing the report and will consider releasing it. We are consulting with departmental Access to Information officials on this issue.

Q. Can you provide the definition of efficient and inefficient fossil fuel subsidies?

• Members of the G20 commited to phase out or rationalize inefficient fossil fuel subsidies that encourage wasteful consumption. However, there is a lack of international consensus around defining “inefficient fossil fuel subsidies”. In order to interpret these terms in the Canadian context, my department worked with central agencies and relevant departments to assess the inefficiency of measures identified as fossil fuel subsidies by taking into consideration the linkages between economic, social, and environmental sustainability, while aliging with the spirit of the G20 commitment to provide targeted support for the poor.
• After concluding the preliminary review, my department launched public and targeted consultations on this approach. We wanted to hear from Canadians to ensure we are using the right definitions and criteria needed to confidently move forward. These consultations concluded in June 2019 and input received will inform Canada’s peer review with Argentina.

Q. How will fossil fuel subsidies be considered in policy and planning to deliver on the net-zero commitment?

• Examining fossil fuel subsidies is but one component of the government’s efforts to take action on climate change and transition to a clean economy. Canada is committed to exceed our existing 2030 target of 30% below 2005 levels by 2030, and to achieve net-zero emissions by 2050 and our work on fossil fuel subsidies is aligned with these goals. Canada’s G20 peer review self-report will include a discussion of policy direction and provide an opportunity to highlight Canada’s policy actions and planned direction.

Q. What is an example of an inefficient fossil fuel subsidy?

Since 2007, the government has successfully assessed the alignment of tax measures with Canada’s G20 commitment. This work has supported significant actions by successive governments to phase out or rationalize eight tax preferences for the fossil fuel sector.

• First, the phase-out of the accelerated capital cost allowance for tangible assets in oil sands projects, completed in 2015.
• Second, the reduction in the deduction rates for intangible capital expenses in oil sands projects, to align with rates for conventional oil and gas, completed in 2016.
• Third, the phase-out of the Atlantic Investment Tax Credit for investments in the oil and gas and mining sectors, completed in 2017.
• Fourth, the phase-out of the accelerated capital cost allowance for tangible assets in mines (including coal mines), to be completed by 2021.
• Fifth, the reduction in the deduction rate for pre-production intangible mine development expenses (including coal mines), to align with rates for the oil and gas sector, completed in 2017.
• Sixth, announcing in 2016 that the accelerated capital cost allowance for liquefied natural gas facilities would expire as scheduled in 2025.
• Seventh, the phase out of the tax preference that allows small oil and gas companies to reclassify certain development expenses as more favorably treated exploration expenses, to be completed by 2020.
• And finally, the rationalization of the tax treatment of expenses for successful oil and gas exploratory drilling, to be completed by 2021.

Q. In terms of reviewing inefficient fossil fuel subsidies, Canada has committed to undergo a peer review process with Argentina. When will the government complete the peer review?

• Our department is working closely with Finance Canada to meet Canada’s peer review commitments. Most recently, ministerial mandate letters tasked the Minister of Finance with finalizing Canada’s peer review self-report. Therefore, I will defer this question to my colleague the Minister Finance.

Methane equivalency agreements

Q. Why has the government entered into methane equivalency agreements with some provinces?

• Equivalency agreements enable provinces and territories to design their own regulations in a manner that reflects provincial considerations, provided they can achieve an equivalent environmental outcome.
• The Government of Canada published national regulations to reduce methane emissions from the oil and gas sector in April 2018 and these come into force January 1, 2020.
• Discussions on establishing an equivalency agreement with Saskatchewan are ongoing.

Alberta/Saskatchewan

• Environment and Climate Change Canada is working with Alberta, Saskatchewan towards an equivalency agreement.
• Should an equivalency agreement be proposed, a draft would be published in Canada Gazette, Part I, for public consultation, as was done with the Province of B.C. for its methane regulations.

British Columbia

• The Government of Canada was pleased that the Province of British Columbia moved forward with regulations that drive clean growth and natural resource development while addressing methane emissions from the oil and gas sector.
• The Government of Canada determined that the Province of British Columbia’s methane regulations will achieve methane emissions reductions equivalent or better than Canada’s national regulations.
• The Minister has agreed to an equivalency agreement [*Redacted*]

Q. How serious is the Government of Canada in meeting and exceeding their 2030 commitments if major oil and gas projects (i.e. TMX) proceed?

• The Government of Canada has been very clear that fighting climate change is an important priority. At the same time, the Government of Canada will be as responsive as possible to the concerns and aspirations of all regions of the country, including hydrocarbon producing regions like Alberta and Saskatchewan.
• The Government of Canada is taking strong action on reducing emissions, in a way that also promotes economic prosperity and addresses the concerns of all regions of this country. This includes working to identify opportunities to support workers and businesses in the natural resource sectors that are seeking to export their goods to global markets, such as the construction and completion of the twinning of the Trans Mountain Pipeline. This work is anchored in a commitment to protect and create jobs, create economic opportunities for Indigenous communities and use revenues to finance Canada’s clean energy transition.
• In addition, the Government of Canada will ensure that all proceeds the federal government receives from the Trans Mountain Expansion project, including incremental corporate income tax revenue, dividends and capital gains on sale, are invested in nature-based climate solutions and clean energy projects.

Q.The Court's decision upholds the OIC- what happens next?

• The decision to dismiss these legal challenges affirms that government delivered on its legal duty to consult Indigenous peoples through a meaningful, two-way dialogue.
• Construction on this critical project is underway, and the federal government will continue to take the necessary steps to ensure this project moves forward in the right way, every step of the way.

Review of light-duty vehicle regulations

Q. Will Canada also roll-back their vehicle greenhouse gas regulations to align with the U.S.?

• Canada’s regulations for greenhouse gas emissions from automobiles and light trucks have generally been comparable to those of the U.S. since 2011 models.
• Any official decisions regarding changes to our light-duty vehicle GHG regulations in Canada will be informed by Canada’s mid-term evaluation that’s underway.
• The mid-term evaluation includes environmental impacts considerations, economic impacts to industry and consumers, importance of the integrated North American auto market, uniquely Canadian circumstances, and the final U.S. regulations; once they are announced.
• Canada’s current greenhouse gas (GHG) light-duty vehicle regulations will help to reduce emissions. These regulations reduce emissions by setting progressively more stringent standards through the 2025 model year vehicles. Under those standards, new 2025 model year vehicles would be expected to burn up to 50 percent less fuel and emit 50 percent fewer GHGs compared to vehicles built in 2008.