Appearance before the Standing Committee on Public Accounts – December 2, 2022

Meeting scenario

Sequence of events

2022 Report 3 of the Commissioner of the Environment and Sustainable Development - Hydrogen’s Potential to Reduce Greenhouse Gas Emissions

Hybrid Meeting
(Zoom Video Conference and in Person)

Date: Friday December 2, 2022
Time: 1:00 p.m. to 3:00 p.m. (EDT)

Event description

Deputy Ministers from ECCC and NRCan have been invited to appear before the Standing Committee on Public Accounts on December 2, from 1 p.m. to 3 p.m. along with the Commissioner of the Environment and Sustainable Development to discuss the Commissioners Report 3 - Hydrogen’s Potential to Reduce Greenhouse Gas Emissions.

Officials will appear as part of a panel and will each deliver 5 minute opening statements beginning with an official from the Office of the Commissioner of Environment and Sustainable Development.

The panel will consist of the following officials:

Environment and Climate Change Canada

• Christine Hogan, Deputy Minister, Environment and Climate Change Canada
• Derek Hermanutz, Director General, Economic Analysis Directorate

Natural Resources Canada

• John Hannaford, Deputy Minister, Natural Resources Canada
• Sebastien Labelle, Director General, Clean Fuels Branch

Office of the Auditor General of Canada

• Martin Dompierre, Assistant Auditor General
• Philippe Le Goff, Principal

Hybrid Meeting – The meeting will be conducted through Zoom and in person. All Environment and Climate Change Canada officials have already been provided with mandatory head-sets. Committee technicians may conduct tests with each participant prior to the meeting to ensure that all equipment is fully operational.

Log-in – Witnesses are encouraged to log onto Zoom a full half-hour prior to the meeting.

Chat Session – Adam Borden, Senior Parliamentary Affairs Officer, will create a chat on MS Teams to link in officials who will be on standby to assist if needed.

Official Invitation – Adam Borden will send out an official invitation to all officials ensuring that all pertinent information is contained within their respective schedules.

Event timeline

Logistics Contact: Adam Borden
Senior Parliamentary Affairs Officer
Parliamentary Affairs Unit
Mobile: 613-716-7971
Email: adam.borden@ec.gc.ca

Opening remarks

Remarks for Christine Hogan, Deputy Minister, Environment and Climate Change Canada

Appearance at the Standing Committee on Public Accounts

Report 3 of the Spring 2022 Reports of the Commissioner of Environment and Sustainable Development

December 2, 2022

Check Against Delivery

Thank you, Mr. Chair, for inviting Environment and Climate Change Canada to your Committee.

I am pleased to have this opportunity to discuss Environment and Climate Change Canada’s response to the Report 3 of the Spring 2022 Reports of the Commissioner of Environment and Sustainable Development.

Before I begin, I would like to acknowledge that this meeting is taking place on the traditional territory of the Algonquin Anishinabe peoples.

The department welcomes the Commissioner’s report on hydrogen’s potential to reduce greenhouse gas emissions.

We agree with the recommendations addressed to the department, and as our action plan shows ECCC is acting on them.

Let me highlight two primary points: First, I can provide some context regarding how ECCC approached it’s modelling work. Second, I would like to emphasize that despite differences that may exist between ECCC and NRCan’s approaches, ECCC has the same overall assessment of the potential for hydrogen to play as a clean fuel and industrial feedstock that both helps the Canadian economy decarbonize and that represents an important economic diversification opportunity for the Canadian economy.

On the modelling question, Environment and Climate Change Canada and Natural Resources Canada, conducted complementary but quite different modelling exercises.

The objectives, analytical approaches and scope differed.

I will let Natural Resources Canada speak to their analysis developed for the Hydrogen Strategy.

ECCC’s modelling was about the overall impact of the full suite of measures in the December 2020 Strengthened Climate Plan, and was not intended to provide a disaggregated impact of any specific set of measures or targeted activities, including measures specifically to hydrogen.

In addition, although our modelling included a proxy for the Hydrogen Strategy that was still under development at the time, that proxy on its own was not intended to estimate the full role hydrogen could play in reducing emissions.

Since then, the government has announced a number of initiatives to encourage the increased production and use of clean hydrogen.

The 2030 Emissions Reduction Plan, for example, released at the end of March of this year, references a number of hydrogen related initiatives.

The Clean Fuel Regulations, finalized in July 2022, will reduce emissions by requiring gasoline and diesel to become less polluting over time. They will also drive innovation in clean technology and will increase demand for low-carbon energy, including biofuels and hydrogen.

The Natural Resource Canada’s Clean Fuels Fund will help producers by investing to de-risk the capital investment required to build new or expand existing clean fuel production facilities. This will help grow domestic production capacity for clean fuels, including clean hydrogen.

The Government of Canada is also supporting the production and use of clean hydrogen through the support for projects funded by the Strategic Innovation Fund’s Net Zero Accelerator initiative.

Finally, in Budget 2022, the Government committed to establish an investment tax credit to support investments in clean hydrogen production.

Working with departments, particularly NRCan, ISED and Finance Canada, ECCC will continue to build on and improve such initiatives as we move forward with the government’s climate change agenda.

In closing, the department will also consider the Commissioner’s observations as we move forward on the 2030 Emissions Reduction Plan in the coming months and years.

Thank you.

Questions and answers

Modelling

Q1. Can you explain the gap and disconnect between your department and Natural Resources Canada?

• The difference between NRCan’s modelling of the Hydrogen Strategy and ECCC’s modelling in the Strengthened Climate Plan is the result of different scope and analytical approaches used by the departments for different purposes.
• With respect to scope, NRCan explored the economic and emissions reduction potential offered by hydrogen by focusing on total energy demand opportunities, while ECCC focused on modelling the set of policies and measures announced in the Strengthened Climate Plan (SCP), including a proxy for the Hydrogen Strategy that was still under development at the time.
• As noted by the Commissioner of the Environment and Sustainable Development (CESD), NRCan looked at a transformative scenario where hydrogen could fill the gap in energy demand not met by other decarbonization means (such as electrification, biofuel, and emissions offset for fossil fuels). The Transformative Scenario was meant to represent the potential size of Canada’s hydrogen opportunity if bold action is taken in the near term, reaching 45 Mt of GHG emissions reduction in 2030. In addition to the transformative scenario, NRCan also considered an Incremental scenario, which was based on a business as usual approach with lighter policy measures and a slower start to adoption of hydrogen. Under this scenario, the potential reductions from hydrogen were expected to reach 22 Mt.
• In contrast, ECCC focused on modelling the Hydrogen Strategy as one of the many policies and measures announced in the SCP and used a proxy - a 7.3% hydrogen–natural gas blending mandate – to incorporate potential emissions reductions from hydrogen. This difference in scope led to the ECCC estimate of 15 Mt suggested by Environment and Climate Change Canada. This same approach was taken in the modelling of the Emissions Reduction Plan.
• When modelling climate plans, ECCC models a package of measures together to estimate the GHG emissions reductions associated with all of the measures contained in the plans. This is consistent with existing UNFCCC reporting guidelines. The NRCan modelling focused specifically on the potential for GHG emissions reductions from the Hydrogen Strategy.

Q2. Your modelling shows that you are now at 36% below 2005 emission levels. How will Canada achieve its 2030 target of a 40% reduction?

• This plan shows a credible pathway to achieving Canada’s 2030 emissions reduction target of 40% below 2005 levels. It highlights the emissions reduction potential for all economic sectors to reduce emissions by 2030 and includes concrete action that the Government will take to reach our target.
• Canada’s strengthened climate plan – A Healthy Environment and A Healthy Economy – released in 2020, positioned Canada to reach 31% below 2005 levels. The additional measures in the 2030 Emissions Reduction Plan build on this progress and bring us to a reduction of approximately 36-37% below 2005 levels – an additional reduction of 33 million tonnes of GHGs.
• The Government is consulting and will consult with partners and stakeholders on key measures such as the emissions cap for the oil and gas sector, the Canada Green Buildings Strategy, a comprehensive CCUS strategy, and a Green Agricultural Plan for Canada. As we develop these measures, we will account for them in our upcoming progress reports in 2023, 2025, and 2027, as required under the Act.

Q3. What is the modelling approach for the 2030 Emissions Reduction Plan?

• The 2030 Emissions Reductions Plan uses economic modelling to show a pathway to achieving Canada’s 2030 target, including the potential for each sector of the economy to reduce emissions by 2030.
• Projections for the 2030 Emissions Reductions Plan utilize a combination of two modelling approaches. It captures the greenhouse gas emissions reductions that could be achieved from existing and planned climate measures, while also identifying economically efficient potential reductions by each sector of the economy that could be pursued to achieve the 2030 target.
• Broken down by sector, Canada’s pathway to 2030 is based on today’s understanding of the potential for each sector to reduce emissions by 2030. Given the economic interdependencies and interactions within and between sectors, the exact areas for emissions reduction potential may shift in the future as Canada further decarbonizes, costs of abatement technologies change and other opportunities emerge.
• Canada will continue to update its modelling projections, including in Canada’s next Biennial Report in December 2022 and first Emissions Projection Plan progress report expected in late 2023.

Q4. What quality assurance is done on the modelling by ECCC?

• ECCC uses a comprehensive, peer-reviewed suite of integrated energy and economy models to project GHG emissions and support internal policy and regulatory analysis. These models have been peer reviewed internationally (UNFCCC and Industrial Economics, Incorporated) and domestically (Office of the Auditor General).
• Validation of projections and model inputs are done via the extensive annual consultation process with provinces and territories and other government departments.
• ECCC’s annual reporting of GHG emissions projections follow international reporting standards (UNFCCC). ECCC also supports the international review processes of its greenhouse gas emissions reporting (e.g., National Communications, Biennial Reports, and National Inventory Reports) and will continue to address the recommendations of the expert review teams.
• ECCC participates in several domestic and international modelling initiatives to continuously improve the models such as the Stanford University Energy Modelling Forum, COMMIT Consortium, and Canadian Energy Modelling Initiative.

Q5. What is the status of the commitment to convene an expert-led process to provide advice on the modeling regime?

• To both maximize transparency and address the inherent uncertainties in all modelling processes, ECCC committed in the ERP to “convene an expert-led process to provide independent advice in time for the 2023 Progress Report ensuring a robust and reliable modelling regime to inform the basis of future ERPs.”
• An independent expert has completed a scoping exercise with ECCC staff and internal and external modelling experts; and has developed a report. The report identifies issues and considerations related to the modelling transparency, engagement with the Canadian modelling community, and continuous improvement of modelling processes.
• ECCC will look forward to incorporating the advice from the expert-led process in the 2023 ERP Progress Report.

Q6. Environmental groups say that the Carbon Capture, Utilization and Storage (CCUS) tax credit is yet another subsidy. Why are you putting that in place?

• All of the major and national global decarbonisation studies indicate that CCUS will play a critical role in enabling the transition to a net zero economy.
• Carbon capture, utilization, and storage (CCUS) is a particularly significant opportunity for Canada given our existing experience and expertise with the technology. Projections show it will play a critical role in enabling a prosperous net-zero economy in Canada by 2050, but that will be one among many elements needed.
• CCUS will be needed for three reasons in particular:
  • It can help us tackle emissions from the toughest-to-abate but crucial sectors of Canada’s economy (such as oil and gas, or process emissions from some heavy industries);
  • enable low-carbon pathways like hydrogen; and
  • deliver negative emissions to support carbon dioxide removal.
• Canada is implementing a number of measures to help drive the market for CCUS, including federal and provincial carbon pollution pricing regimes, the federal Clean Fuel Regulations, as well as a new Investment tax credit for CCUS.
• Through Budget 2021, the Government of Canada committed to providing $319 million to support research and development to improve the commercial viability of CCUS technologies. This funding will help Canada achieve its goal of net zero by 2050 while being a supplier of choice for cleaner energy and innovative new technologies around the world.
• Budget 2022 proposes a refundable investment tax credit for businesses that incur eligible CCUS expenses, starting in 2022. The investment tax credit would be available to CCUS projects to the extent that they permanently store and captured CO2 through an eligible use. The CCUS investment tax credit is a part of the government’s broader plan to work with industry towards the goal of decarbonization, including through initiatives like the Clean Growth Fund and Net-Zero Accelerator.

Hydrogen

Q7. What is Hydrogen’s Role in Meeting Canada’s Climate Targets?

• Launched on March 29, the 2030 Emissions Reduction Plan is the Government of Canada’s next major step in taking action to address climate change and to create good, sustainable jobs in Canada. The plan includes continued support for the development and use of hydrogen both to reduce emissions in various sectors and as an important source of economic diversification.
• An important early deliverable under the Canadian Net-Zero Emissions Accountability Act, it is an evergreen plan that goes sector by sector with the measures needed for Canada to reach its ambitious and achievable emissions reduction targets of 40-45% below 2005 levels by 2030 and net-zero emissions by 2050 in a fair and affordable way. The Act also ensures that the Government will continue to be transparent and accountable to Canadians throughout its implementation, with three progress reports required in 2023, 2025, and 2027.
• From transportation to the oil and gas sector, to heavy industry, agriculture, buildings and waste, every sector in all regions has its role to play in meeting Canada’s 2030 climate target. The plan includes $9.1 billion in new investments and a suite of novel measures to help mobilize Canada towards a truly sustainable economy and as a leading competitor in the global transition to cleaner industries and technologies.
• The plan references a variety of ongoing initiatives relevant to hydrogen, including the publication of the final Clean Fuel Regulations, the government’s work with key stakeholders on the Hydrogen Strategy for Canada, as well as the investments made to grow the clean fuels market through the Energy Innovation Program and the $1.5 billion Clean Fuels Fund.
• These investments will also help implement early opportunities identified in the Hydrogen Strategy for Canada by supporting the increased production of clean hydrogen. This domestic growth will position Canada to become a world-leading supplier of hydrogen and hydrogen technologies, generating economic opportunities through exports and direct foreign investment.
• And while Canada already has one of the cleanest electricity systems in the world, low carbon intensity hydrogen can help to reduce emissions related to power generation and can help to further green the electricity grid.
• With respect to hydrogen specifically, it presents great potential for mass deployment across the economy where clean hydrogen could lower emissions in sectors such as primary resource extraction, transportation, power generation and manufacturing.
• Canada, as one of the top 10 global hydrogen producers globally (approximately 4 per cent of global total), has emerged as a leader in hydrogen and is home to ample feedstock for both clean hydrogen and biofuels.
• The Hydrogen Strategy for Canada sets out a path for integrating low-emitting hydrogen across the economy. It is a call to action and lays out an ambitious framework that will reinforce hydrogen as a tool to achieve our goal of net-zero emissions by 2050 and position Canada as a global, industrial leader in clean fuels.
• Canada has enormous potential to develop and sell technology to enable Canadian and foreign companies to produce low emissions intensity hydrogen. It is estimated that by 2050, Canada’s hydrogen industry could create up to 350,000 jobs, reduce emissions by up to 45 MT/year, and create a domestic and export market potential of up to $100 billion.
• However, we can do more. We know that Canada’s cleantech sector still faces challenges, and many clean tech companies need support to grow and reach the stage where they can compete globally.

Q8. What are some of the regulatory incentives for clean Hydrogen?

Carbon Pricing

• Since 2019, every jurisdiction in Canada has had a price on carbon pollution.
• Canada’s approach is flexible: any province or territory can design its own carbon pricing system that meets minimum national stringency standards (the benchmark) or choose the federal pricing system.
• The federal pricing system has two parts: a regulatory charge on fossil fuels (the fuel charge) and a performance-based system for industry (the Output-Based Pricing System).
• Carbon pricing encourages individuals and businesses to make choices that reduce their emissions, such as switching to cleaner fuels, including hydrogen.
• The precise incentives may vary in different parts of Canada depending on which carbon pricing system applies. In general, carbon pricing creates incentives for industries to become more efficient and use cleaner technologies and fuels. Generally, if an industrial facility reduces its emissions, it will pay less in carbon costs or earn saleable credits.
• Pricing can therefore create an incentive to switch fuels to use hydrogen, which in turn creates increased demand for the production of clean hydrogen.
• The carbon price trajectory is set to increase to $170 per tonne in 2030, increasing certainty and the incentive for individuals, businesses and industry to invest in cleaner options.

Clean Fuel Regulations (CFR)

• The final CFR were published in July 2022. Along with the complementary $1.5 billion Clean Fuels Fund, the CFR is intended to incentivize clean fuels and technologies, including hydrogen.
• While CFR only has a regulatory obligation on gasoline and diesel used in Canada, it provides an incentive for the uptake of hydrogen in a number of ways. Regulated parties can comply with the regulatory obligations through the purchase or creation of CFR credits. The following uses of hydrogen can create CFR credits:
  • When hydrogen is used as a feedstock in the production of liquid fossil fuels, any captured CO2 that is either permanently stored or used for enhanced oil recovery.
  • Hydrogen used as a fuel or feedstock at a low-carbon-intensity fuel production facility.
  • Hydrogen used as a fuel in stationary applications (e.g. hydrogen injected in natural gas pipelines). These credits can only be used by regulated parties to meet up to 10% of their annual obligation.
  • Hydrogen supplied for use in transportation (e.g. refueling hydrogen fuel-cell vehicles).
  • A quantification method specifically for hydrogen is being developed to allow for additional hydrogen credit creation pathways, such as electrolysis.

Oil and gas cap

• The federal government has committed to cap and cut oil and gas sector emissions at a pace and scale necessary to achieve net-zero emissions by 2050.
• The details of how this cap will be implemented have not yet been determined. A discussion document to seek input on the approach is planned for publication in the coming weeks.
• Regardless of the cap requirements, clean hydrogen production and use represent an important opportunity both to reduce emissions from oil and gas production and as an economic diversification opportunity for the sector.

Clean Electricity

• Hydrogen can play a role in greening Canada’s electricity grids, notably where there is a reliance on fossil fuels for power production.
• Hydrogen could:
  • serve as a fuel for power production through either hydrogen combustion in turbines or electrochemical conversion in stationary fuel cell power plants.
  • provide load management, long-term energy storage, and a path to market that enables the growing use of intermittent renewables.
  • provide stability for off-grid renewables-based power solutions in remote communities and remote industrial sites such as mines that are today largely dependent on expensive, highly emitting diesel power.

Transportation

• Hydrogen is being explored as a direct fuel in transportation for hydrogen fuel cell vehicles (LDV, buses, HDVs, marine and rail), through additional policy action and investments are likely required in some areas (HDVs, marine and rail).
• Current investments in infrastructure, pilots and incentives in the MHDV space will need scaling to fully realize the emission reduction potential of clean hydrogen.

Inefficient Fossil Fuel Subsidies

Q9. What is being done to stop providing fossil fuel subsidies?

• In 2009, Canada as a part of the Group of 20 (G20) Leaders committed to rationalizing or phasing out inefficient fossil fuel subsidies. The government recently accelerated its commitment to do so from 2025 to 2023.
• The Government of Canada’s efforts to reform fossil fuel subsidies have resulted in the phase-out or rationalization of nine tax expenditures that supported fossil fuel exploration or production.

Q10. 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 nine 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 (announced in 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 (announced in Budget 2011; completed in 2016)
  • Phase-out of the Atlantic Investment Tax Credit for investments in the oil and gas and mining sectors (announced in 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 (announced in Budget 2013; completed in 2018)
  • Phase-out of the accelerated capital cost allowance for mining (announced in Budget 2013; completed in 2021)
  • Allowing the accelerated capital cost allowance for liquefied natural gas facilities to expire as scheduled in 2025 (announced in Budget 2016)
  • Rationalize the tax treatment of expenses for successful oil and gas exploratory drilling (announced in Budget 2017; 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 (announced in Budget 2017; completed in 2019)
  • Phase-out of flow-through shares for oil, gas, and coal activities (announced in Budget 2022; to be completed in 2023)
• 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.
• The December 2021 mandate letters have also directed Ministers of Environment and Climate Change, Finance and Natural Resources to develop a plan to phase out public financing of fossil fuels both internationally and nationally.

Q11. Can you provide the definition of efficient and inefficient fossil fuel subsidies?

• Members of the G20 committed to phasing out or rationalizing inefficient fossil fuel subsidies that encourage wasteful consumption. There is intentionally no definition of “inefficient fossil fuel subsidies,” so that countries can define this term in the context of their national circumstances.
• However, the G20 commitment does provide some consideration by indicating that inefficient fossil fuel subsidy reform “will not apply to support for clean energy, renewables, and technologies that dramatically reduce greenhouse gas emissions.”
• Consultation with stakeholders, including representatives from ENGOs, industry associations, Indigenous peoples, and those from the academic community, focused on soliciting feedback with respect to the definition of a “fossil fuel subsidy”, and the definition of “inefficient”.
• Finance Canada and Environment and Climate Change Canada have integrated the feedback received as we continue to develop a framework to identify and analyze inefficient fossil fuel subsidies.

Q12. In terms of reviewing inefficient fossil fuel subsidies, Canada has committed to undergo a peer review process under the G20. When will the government complete the peer review?

• Our department is working closely with Finance Canada who is leading the peer review process under the G20 commitment.
• ECCC is working with Finance Canada and other departments to develop an approach that reflects the feedback we have received from the CESD audit, targeted and public consultations undertaken in 2019, and lessons from the 6 countries that have completed the G20 peer review so far. The pace of the review and analysis has been accelerated to meet the Government’s commitment to phase out and rationalize inefficient fossil fuel subsidies in 2023.

Q13. Why aren’t all fossil fuel subsidies considered inefficient?

• The 2009 G20 Leaders' statement noted that inefficient fossil fuel subsidies “encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change.” The commitment further states that inefficient fossil fuel subsidy reform “will not apply to our support for clean energy, renewables, and technologies that dramatically reduce greenhouse gas emissions”.
• The Leaders' statement also noted that reforms must take place while ensuring "targeted support for the poorest".
• We understand there is a need for continued support for communities in northern and remote regions, including access to essential energy. In addition, in the context of the energy transition, we will continue to support Canadian workers and communities who may be disproportionality affected.
• As the Government of Canada continues to review measures under the G20 commitment, it is taking into account the text from the Leaders' statement and other Canada specific considerations in assessing whether or not each form of government spending that goes towards the fossil fuel sector is inefficient.

Q14. Why would government continue to provide any funding to the fossil fuel sector?

• The fossil fuel sector is a significant part of the Canadian economy. The Government of Canada recognizes that environmental commitments, such as net-zero, do not mean shutting down the oil and gas sector, but rather transforming it to become cleaner and more sustainable. As such, it will be an important player in helping Canada achieve net-zero by 2050.
• The Government of Canada remains committed to fulfilling the G20 commitment to phase out and rationalize inefficient fossil fuel subsidies in a way that aligns with Canada’s vision for transitioning to net-zero.

Q15. What role does the commitment on inefficient fossil fuel subsidies play in supporting Canada's 2030 Emissions Reduction Plan and Canada's efforts to cap oil & gas emissions?

• The government has begun charting a course to achieve net-zero emissions by 2050. All sectors of the economy need to evolve to seize the opportunity of the global transformation, with the federal government investing significantly to support this transition - including in the energy sector.
• By implementing the G20 commitment to phase out and rationalize inefficient fossil fuel subsidies, the Government is identifying measures that are consistent with the commitments on climate action and emission reductions.
• The G20 commitment alongside the Emission Reduction Plan and efforts to cap oil and gas emissions are all part of a suite of policies that will support the Government of Canada's commitment of net-zero by 2050.

Q16. You were audited in 2019. What have you done since then and why is it taking so long?

• Since 2019, Finance Canada and Environment and Climate Change Canada have been working to strengthen the approach to fossil fuel subsidy reform by reflecting feedback from the 2019 audit and by integrating the recommendations from the public consultation on the Government’s draft framework.
• We have taken a whole-of-government approach in working to ensure all relevant and reliable information is incorporated into our analysis, and that a full scan of measures will allow this government to meet its G20 commitment, which was recently accelerated from 2025 to 2023.
• The government remains on track to meet its G20 commitment in 2023.

Key messages on Report 3

CESD Report on Hydrogen

Issue/question: On April 26, 2022, the Commissioner of the Environment and Sustainable Development (CESD) will release several reports, include one entitled Hydrogen’s Potential to Reduce Greenhouse Gas Emissions. In particular, the CESD identified areas for improvement with Environment and Climate Change’s emissions modelling approach. Media attention is expected.

Key messages

• Hydrogen is an important part of Canada’s pathway to achieve its 2030 and 2050 climate targets.
• The Government of Canada recognizes the hydrogen’s sector contribution to Canada in creating good jobs, being a strong performer in our clean tech sector, and playing a key role in helping North America and Europe achieve long-term energy security during the transition to a net-zero economy.
• Canada is a world leader in the production of hydrogen as well as the technologies that can produce and use it. In 2019, the hydrogen sector generated $200 million in hydrogen technology exports (e.g. fuel cells), employing over 2,000 Canadians. Over the last two years, exports of Canadian technologies have grown exponentially to countries around the world.
• In the emissions modelling of Canada’s climate plans and assessing progress towards the country’s emissions reduction targets, ECCC follows international guidelines established for reporting on progress to targets, by clearly making a distinction between the existing and planned initiatives. For example:
  • Recent modelling by Environment and Climate Change Canada for the 2030 Emissions Reduction Plan, followed a modelling process that was robust, reliable, and in-line with international standards.
• Environment and Climate Change Canada (ECCC) and Natural Resources Canada (NRCan) are in agreement with the audit recommendations and action will be taken to address them, leveraging coordination already in place between the departments.
• To address the recommendations on the modelling, the Government of Canada plans to convene an expert-led process to provide independent advice on how to enhance the current modelling regime, and we will proceed based on this advice and on our own analysis of international best practices.
• Next steps by ECCC and NRCAN also include developing a standard framework on how the adoption of hydrogen contributes to reducing GHG emissions in Canada.
• Canada will continue to update its modelling projections for hydrogen, including in Canada’s next Biennial Report in December 2022 and first 2030 Emissions Reduction Plan progress report expected in late 2023.

Supplemental messages – Hydrogen strategy and NRCAN

• Growing the domestic hydrogen economy can lead to economic and environmental opportunities across the country, driving down emissions from hard to abate sectors like mining, freight, heavy-industry, and the built environment. As such, hydrogen and other clean fuels are an essential component of Canada’s climate plans, contributing to our 2030 climate objectives, and laying the foundation to be net-zero by 2050.
• The Government of Canada is committed to updating the modelling based on the evolving energy market, as well as developing a comprehensive reporting framework and delivering biennial reports that track the progress in implementation of the Hydrogen Strategy focused on both and the growing the domestic hydrogen economy, as well as cementing Canada’s role as a secure, reliable exporter of clean hydrogen and the technologies to produce and use it.
• Over the past two years, the Government of Canada has committed significant investments to support early actions outlined in the Hydrogen Strategy for Canada, laying the foundation to unlock hydrogen’s full potential including:
  • establishing a $1.5-billion Clean Fuels Fund – which will support 10 hydrogen production facilities;
  • investing $8 billion to the Strategic Innovation Fund Net Zero Accelerator – which is supporting some hydrogen production, as well as industrial end-use projects;
  • expanding the mandate of the Canada Infrastructure Bank to invest in hydrogen, small modular reactors and carbon capture, utilization and storage projects. Budget 2022 also proposed new measures to mobilize new capital to establish hydrogen hubs.
  • announcing a new arm’s-length $15-billion Canada Growth Fund, which will provide concessional financing that could amount to a $60-billion injection in our national economy over the next five years; and,
  • expanding international agreements with long-time allies like the United States and European Union, as well as new partners such as Germany.

Background

• The CESD audit report compares the emissions reductions related to hydrogen that NRCan identified in the Hydrogen Strategy with those that ECCC included in the Strengthened Climate plan. When making this comparison, it is important to note that the approaches taken by each department were chosen to align with the specific purposes for which the modelling were being undertaken. Specifically:
  • For the Hydrogen Strategy it was important for NRCan to model what the full potential of hydrogen could be in Canada, specifically laying out the economic, environmental, and social benefits that could be realized, dependent on the actions taken and investments made across the economy – and this resulted in a range between 22Mt and 45Mt, depending on actions taken by governments, and the private sector.
  • For the Strengthened Climate Plan, ECCC modelled one measure (hydrogen blending) as part of 64 measures, with the sole focus being emissions reductions

Approved by:

ECCC’s Management Action Plan

Environment and Climate Change Canada Detailed Management Action Plan

Recommendations for ECCC: Hydrogen’s potential to reduce GHG emissions

Spring 2022 Reports of the Commissioner of the Environment and Sustainable Development

Paragraph number in report: 3.50

OAG/CESD Recommendation

To improve consistency across departments, Environment and Climate Change Canada and other federal departments should adopt a standard framework to estimate emission impacts of proposed policies, clean technologies, and fuels.

Departmental Response

Agreed. It is agreed that consistent and reliable emission estimates of proposed policies are necessary to inform decision making. The recently established Integrated Climate Lens Centre of Expertise, located at ECCC, has a mandate to ensure that major government decisions, namely through budget and Cabinet processes, consider climate mitigation and adaptation in a rigorous, consistent and, where possible, measureable manner.

Description of Final Expected Outcome/Result

Inventory of federal approaches to emissions modelling.

Development of guidance for evaluating emission impacts of relevant polices/programs.

Expected Final Completion Date

Fall 2023

Action Plan and Key Milestones (Description/Dates)

1. Establish working group with government partners to develop an inventory of emissions estimation models/tools, (expected completion date: June 30, 2022).
2. Inventory compiled, including an assessment of commonalities and compatibility issues between quantification tools being used by departments, (expected completion date: September 30, 2022).
3. Draft common guidance for estimating emissions impacts is developed for working group members for discussion/input (expected completion date: early spring 2023).
4. Guidance is finalized and circulated to departments for ongoing refinement (expected completion date by spring 2023).
5. Training and support is put in place to support emissions quantification among departments (expected completion date: fall 2023 and ongoing).

Responsible Organization/ Contact Person (Name, Title, Branch, Directorate)

Jeffrey Heynen, Executive Head, Integrated Climate Lens Centre of Expertise, Strategic Policy Branch

Paragraph number in report: 3.64

OAG/CESD Recommendation

In order to increase transparency of its emissions projections, Environment and Climate Change Canada should develop and publish results for scenarios

• that include a detailed list of measures and assumptions considered
• that show a clear distinction between (1) scenarios based on existing policies and measures and (2) exploratory scenarios that include proposed or aspirational policies and measures

Departmental Response

Agreed. This recommendation aligns with current Environment and Climate Change Canada practice. Environment and Climate Change Canada’s GHG emission projections are published in accordance with international standards that require a clear distinction between existing and planned initiatives. ECCC models and publishes two GHG cases: the “Reference” case, which includes federal, provincial and territorial policies and measures that are funded, legislated and implemented; and the “With Additional Measures” case, which builds on the Reference case by including planned policies. International guidelines for reporting from the United Nations Framework Convention on Climate Change (UNFCCC) are available online:

• Guidelines for the preparation of national communications by Parties included in Annex I to the Convention, Part II: UNFCCC reporting guidelines on national communications (PDF; 810 kB) (Annex starts on page 29, Section VI : Projections on page 35, para 26)
• UNFCCC biennial reporting guidelines for developed country Parties (PDF; 1.06 MB) (Annex I, starts on page 31, Section V Projections on page 33)

Canada’s reports to the UNFCCC include the detailed list of measures in both the Reference and With Additional Measures cases.

Description of Final Expected Outcome/Result

ECCC will continue to follow the UNFCCC reporting guidelines in clearly delineating the policies and measures that have been implemented and received legislative and financial support from the ones that have not yet been implemented, legislated or funded.

Canada’s reports to the UNFCCC are available at Canada. Biennial report (BR). BR 4

Expected Final Completion Date

Ongoing.

Dates will vary based on UNFCCC or other legislated timelines. Next report will be Canada’s 8th National Communication and 5th Biennial Report to the UNFCCC expected late in 2022.

Action Plan and Key Milestones (Description/Dates)

ECCC’s annual reporting of GHG emissions projections will continue to follow international reporting standards in their requirements to clearly describe the development of scenarios according to the status of the policies included in them:

1. Reference case includes policies and measures that have been funded, legislated and implemented by federal, provincial and territorial (FPT) governments.
2. Additional Measures Case, which builds on the Reference Case by including policies and measures that have been announced by FPT governments but have not yet received full financial or legislative support.
3. Policy scenarios that build on the Reference and Additional Measures Case by including other proposed and aspirational policies and measures.

To date, ECCC has followed these standards, such as in the emissions projections have been presented in the Emissions Reduction Plan published on March 29, 2022.

Responsible Organization/ Contact Person (Name, Title, Branch, Directorate)

Derek Hermanutz, Director General, Economic Analysis Directorate, Strategic Policy Branch

Paragraph number in report: 3.65

OAG/CESD Recommendation

In order to better inform decision making, Environment and Climate Change Canada, in coordination with Natural Resources Canada, should improve its pathways modelling by using reasonable, cost-effective, and technically feasible assumptions.

Departmental Response

Agreed. For purposes of modelling GHG projections in the context of Canada’s climate plan, ECCC publishes both a “Reference Case” and a “With Additional Measures” case. Both use reasonable, cost-effective and technically feasible assumptions. These assumptions are informed by the policy and program development work led by other government departments, including Natural Resources Canada, and include other considerations such as uncertainty in assumptions about future costs and technical parameters, particularly for rapidly-evolving or emergent technologies. The assumptions are also informed by reviewing the latest academic literature.

Description of Final Expected Outcome/Result

Implement a process with Natural Resources Canada and other departments as required to create an evergreen list of rapidly-evolving or emergent technologies (e.g., carbon capture, utilisation and storage, hydrogen, methane abatement technologies, oil sands solvents, etc.) that could have consequential impacts on results from models used in national-level projections of GHG emissions, with associated cost and technical parameters.

Expected Final Completion Date

Winter 2023 for the initial list and ongoing

Action Plan and Key Milestones (Description/Dates)

1. ECCC, Natural Resources Canada and other federal departments (as required) to compile draft list of technologies and associated parameters (expected completion date: Fall 2022).
2. ECCC-Natural Resources Canada determination of which parameters to use in modelling (expected completion date: Winter 2023).
3. Finalize list of technologies and parameters (expected completion date: Spring 2023).
4. Ongoing discussions and updates to list as required.

Responsible Organization/ Contact Person (Name, Title, Branch, Directorate)

Derek Hermanutz, Director General, Economic Analysis Directorate, Strategic Policy Branch

Sebastien Labelle, Director General, Cleans Fuel Branch, Fuels Sector, Natural Resources Canada

Paragraph number in report: 3.73

OAG/CESD Recommendation

To improve quality, transparency, and trust in climate change modelling, Environment and Climate change Canada should develop a formal review framework where its modelling would be subject to

• enhanced peer review
• formal consultations with stakeholders
• formal periodic quality assurance control
• public scrutiny

Departmental Response

Agreed. ECCC agrees with the importance of ensuring the on-going suitability of the models themselves and shares the objective of maximizing the transparency of the inputs to those models. In addition to the existing consultation, review and transparency measures, ECCC will consider what additional measures may be necessary to ensure that the modelling process remains suitable and reliable by reviewing international best practices and consulting with modelling experts. The details of the approach will be determined based on these consultations.

Description of Final Expected Outcome/Result

Emissions projections are published annually, following extensive consultation process with stakeholders.

Convene expert-led process to provide independent advice to enhance current modelling regime to inform the basis of future Emission Reduction Plans and progress reports.

Detailed data underlying the projections are published 0n the Government of Canada Open Data Portal.

International Review Processes of Canada’s National Communications and Biennial Reports by UNFCCC Expert Review Teams are supported.

Expected Final Completion Date

Fall 2023 for the expert-led process to provide independent advice

Ongoing for other actions: consultations with stakeholders for the development of projections and the publication of the projections annually with the underlying data on the Government of Canada Open Data Portal. Support International Review Processes as they are scheduled by UNFCCC.

Action Plan and Key Milestones (Description/Dates)

ECCC will continue to use its formal consultation process with stakeholders in development of its GHG and air pollutant emissions projections.

A commitment was made in the March 2022 Emissions Reduction Plan to convene an expert-led process to provide independent advice in time for the 2023 Progress Report, enhancing the current robust and reliable modelling regime to inform the basis of future Emissions Reduction Plans. The 2023 Progress Report is required by the Net Zero Accountability Act to be released by the end of 2023 (subject to validation).

ECCC will continue to support the international review processes of its international reports (National Communications, Biennial Reports, National Inventory Reports on greenhouse gas emissions), and will continue to address the recommendations of the expert review teams.

ECCC will continue to implement model improvements to respond to the peer review recommendations and participate in energy modelling discussions and workshops. It will continue improving and adding new data sets to the open data portal, subject to data confidentiality constraints.

Responsible Organization/ Contact Person (Name, Title, Branch, Directorate)

Derek Hermanutz, Director General, Economic Analysis Directorate, Strategic Policy Branch

Report 3 – Hydrogen’s Potential to Reduce Greenhouse Gas Emissions

Report 3 – Hydrogen’s Potential to Reduce Greenhouse Gas Emissions (oag-bvg.gc.ca)

Transcript of the April 7 Meeting of the Senate Committee on Energy, the Environment and Natural Resources

Standing Senate Committee on Energy, the Environment and Natural Resources (44th Parliament, 1st Session) (sencanada.ca)

Transcript of April 28 Meeting of the Standing Committee on Environment and Sustainable Development

Evidence - ENVI (44-1) - No. 14 - House of Commons of Canada (ourcommons.ca)

Hydrogen Strategy for Canada

The Hydrogen Strategy (canada.ca)

Standing Committee on Public Accounts (PACP)

Mandate of the Committee

When the Speaker tables a report by the Auditor General in the House of Commons, it is automatically referred to the Public Accounts Committee. The Committee selects the chapters of the report it wants to study and calls the Auditor General and senior public servants from the audited organizations to appear before it to respond to the Office of the Auditor General’s findings. The Committee also reviews the federal government’s consolidated financial statements – the Public Accounts of Canada – and examines financial and/or accounting shortcomings raised by the Auditor General. At the conclusion of a study, the Committee may present a report to the House of Commons that includes recommendations to the government for improvements in administrative and financial practices and controls of federal departments and agencies.

Government policy, and the extent to which policy objectives are achieved, are generally not examined by the Public Accounts Committee. Instead, the Committee focuses on government administration – the economy and efficiency of program delivery as well as the adherence to government policies, directives and standards. The Committee seeks to hold the government to account for effective public administration and due regard for public funds.

Pursuant to Standing Order 108(3) of the House of Commons, the mandate of the Standing Committee on Public Accounts is to review and report on:

• The Public Accounts of Canada;
• All reports of the Auditor General of Canada;
• The Office of the Auditor General’s Departmental Plan and Departmental Results Report; and,
• Any other matter that the House of Commons shall, from time to time, refer to the Committee.

The Committee also reviews:

• The federal government’s consolidated financial statements;
• The Public Accounts of Canada;
• Makes recommendations to the government for improvements in spending practices;
• Considers the Estimates of the Office of the Auditor General.

Other Responsibilities:

• The economy, efficiency and effectiveness of government administration;
• The quality of administrative practices in the delivery of federal programs; and,
• Government’s accountability to Parliament with regard to federal spending.

Committee Members

Bios of the Committee Members

John Williamson (New Brunswick Southwest)
Conservative
Chair

• Elected as MP for New Brunswick Southwest in 2011, he was then defeated in 2015 and re-elected in 2019 & 2021.
• Currently also serves as a Member of the Liaison Committee and Chair of the Subcommittee on Agenda and Procedure of the Standing Committee on Public Accounts
• Previously served on many committees, including PACP for a brief time in 2013
• Prior to his election, M. Williamson occupied different positions. He was an editorial writer for the National Post from 1998 to 2001, then joined the Canadian Taxpayers Federation until 2008. In 2009, he was hired by Stephen Harper as director of communications in the PMO.

Jean Yip (Scarborough - Agincourt)
Liberal
First Vice-Chair

• Elected as MP for Scarborough—Agincourt in a by-election on December 11, 2017, and re-elected in 2019 & 2021.
• Has served on Public Accounts (since 2018), as well as Government Operations and Canada-China committees in the past.
• Vice-Chair of the Subcommittee on Agenda and Procedure of the Standing Committee on Public Accounts
• Before her election, Ms. Yip was an insurance underwriter and constituency assistant.

Nathalie Sinclair-Desgagné (Terrebonne)
Bloc Québécois
Second Vice-Chair

• Elected as MP for Terrebonne in the 2021 federal election.
• BQ Critic for Public Accounts; Pandemic Programs; and Federal Economic Development Agencies.
• Vice-Chair of the Subcommittee on Agenda and Procedure of the Standing Committee on Public Accounts
• Worked at the European Investment Bank and at PWC London.
• Return to Quebec in 2017 to pursue a career in the Quebec business world.

Garnett Genuis (Sherwood Park—Fort Saskatchewan)
Conservative

• Elected as MP for Sherwood Park—Fort Saskatchewan in 2015, re-elected ion 2019 and 2021
• Conservative Shadow Minister for International Development
• Also serves on the Standing Committee on Foreign Affairs and International Development
• Served on multiple standing committees in the past, including Citizenship and Immigration, Canada-China Relations and Scrutiny of Regulations
• Prior to his election, Mr. Genuis was an assistant to former Prime Minister Stephen Harper and adviser on the staff of former minister Rona Ambrose.

Michael Kram (Regina—Wascana)
Conservative

• Elected as MP for Regina—Wascana in 2019, and re-elected in 2021.
• Served as Vice-Chair of the Standing Committee on Industry and Technology, as well as a Member of the standing committees on Transpart, Infrastration and Communities and International Trade
• Prior to his election, Mr. Kram worked for 20 years in the information technology sector, including a number of contract positions with the Department of National Defence.

Kelly McCauley (Edmonton West)
Conservative

• Elected as the Member of Parliament in 2015 for Edmonton West, re-elected in 2019 and 2021
• Also serves as Chair of the Standing Committee on Government Operations and Estimates
• Former Conservative Shadow Minister for Treasury Board
• Previously served on the COVID-19 Pandemic committee as well as the Subcomittee on Agenda and Procedure of OGGO in 2020
• Before his election in 2015, Mr. McCauley was a hospitality executive specialized in managing hotels and convention centres
• He has a graduate of BCIT in the Hospitality Management program
• He has a history of advocacy for seniors and veterans

Blake Desjarlais (Edmonton Greisbach)
NDP

• Elected as MP for Edmonton Greisbach in 2021.
• NDP Critic for Treasury Board; Diversity and Inclusion; Youth; Sport; and Post-secondary Education.
• Also a member of the Subcommittee on Agenda and Procedure of the Standing Committee on Public Accounts
• First openly Two-Spirit person to be an MP, and Alberta’s only Indigenous Member of Parliament.

Valerie Bradford (Kitchener South – Hespeler)
Liberal

• Elected as MP for Kitchener South – Hespeler in 2021.
• Also sits on the Science and Research committee and the Subcommittee on Agenda and Procedure of the Standing Committee on Science and Research
• Director of the Canada-Africa Association
• Prior to her election, Ms. Bradford worked as an economic development professional for the City of Kitchener.

Han Dong (Don Valley North)
Liberal

• Elected as MP for Don Valley North in 2019, and re-elected in 2021.
• Also sits on the Industry and Technology committee.
• Has served on the Ethics, and Human Resources committees in the past.
• Co-Chair of the Canada-China Legislative Association
• Prior to his election, Mr. Dong worked with Toronto-based high-tech company dedicated to building safer communities and served as the leader of the Chinatown Gateway Committee established by Mayor John Tory.

Peter Fragiskatos (London North Centre)
Liberal
Parliamentary Secretary to the Minister of National Revenue

• Elected as MP for London North Centre in 2015, and re-elected in 2019 & 2021.
• Serves as Parliamentary Secretary to the Minister of National Revenue.
• Has served on the Finance, Canada-China, Human Resources, Public Safety, and Foreign Affairs committees in the past.
• Served as a member of the National Security and Intelligence Committee of Parliamentarians (NSICOP).
• Prior to his election, Mr. Fragiskatos was a political science professor at Huron University College and King’s University College, as well as a frequent media commentator on international issues.

Brenda Shanahan (Châteauguay—Lacolle)
Liberal

• Elected as MP for Châteauguay—Lacolle in 2015, and re-elected in 2019 & 2021.
• Caucus Chair of the Liberal Party
• Has served on Public Accounts (2016-2018), as well as Ethics, Government Operations, and MAID committees in the past.
• Has served as a member of the National Security and Intelligence Committee of Parliamentarians (NSICOP).
• Prior to her election, Ms. Shanahan was a banker and social worker, who has also been involved in a number of organizations such as Amnesty International and the Canadian Federation of University Women.