Chemistry, Canada and a net zero economy

Lisa Raitt: Thank you for tuning in to The Raitt Stuff. I’m your host Lisa Raitt, former cabinet minister in Stephen Harper’s government from 2008 to 2015. I’m here now at CIBC Capital Markets and in this podcast, I’m going to share insights on current hot topics in the areas of public policy, politics and business with some guests along the way. Welcome back to The Raitt Stuff. Today I have a guest who also is involved in the critical mineral industry, but not exactly in the way that you anticipate. I’m delighted to have with me today, the President and CEO of the Chemistry Industry Association of Canada, Bob Masterson, who I have had a number of chats with over the years. I think with respect to matters of transportation, but not necessarily matters that we’re going to talk a little bit about today. Bob, thanks so much for joining me here on The Raitt Stuff.

Bob Masterson: Thank you, Lisa. It’s a pleasure.

Lisa Raitt: It’s really great to have you here because I think there’s a lot of things that people may assume when we say something like Chemistry Industry Association of Canada and one of them may very well be, is that, you’re not the new economy? Are you yesterday’s industry?

Bob Masterson: Well, the short answer is no. And there is no new economy without chemistry. Most people don’t realize, but you look around you. If you can see it, feel it, touch it, taste it, it involves chemistry. But then we look at that future economy. And what are some of the things we’re looking at? You know your show here, we’re talking about critical minerals. Well, I like to say you don’t get minerals out of rocks with a lot of energy and a heck of a lot of chemistry. And here we’re talking about flotation agents and solvents and dust controls and purification agents. I could go on, water treatment, I could go on at length, but the main message is there’s a lot of chemicals there. And then we ask the question, well, what are we using those critical minerals for and why are we so attentive to that right now? A lot of it has to do with the electrification of the automotive industry. Well, there’s a lot of chemicals in cars today, 40% of the volume’s plastic, about ten thousand dollars of every car will be chemicals, and that figure is only going to increase as we go along. Batteries, that’s chemistry. Lightweight cars, that’s more plastics. And again, the future economy is a chemistry economy. It is how we’re going to innovate to meet our more sustainable needs.

Lisa Raitt: One of the things that we’re all driving and striving for around the world right now is this notion of net zero. So where does the chemistry industry come into a net zero economy?

Bob Masterson: Yeah, it’s a complex relationship since it’s two parts. Again, part of it is that solution side, so people don’t think about it. But even a wind turbine, you’re talking about tons upon tons upon tons of plastic resins and other chemicals to make that. Solar panels, the same thing. So clean air, clean water, fresh, nutritious, abundant food, clean energy. You need a lot of chemicals to make that happen, so the products themselves are a key part of the transition to a net zero economy. But the other side of the coin is that the chemistry sector globally is a major emitter. We consume about 12% of all energy flows and responsible globally for about 7% of greenhouse gas emissions, so the industry has its own work to do. I think the interesting thing here, though, is the industry accepts that, and you’re seeing many leading global companies saying they’re on board for the transition to net zero. And we don’t have to just look around the world, in the past five, six months here in Canada, we have actually had seven proposals from our sector, all in Alberta mind you, seven proposals for new chemical facilities, every one of which would be net zero from day one. And that includes the world’s first global scale ethylene and derivatives facility that Dow Can is proposing in Fort Saskatchewan, Alberta. So that transformation, that’s not a thing in the future. It’s starting now. It’s starting quickly. And the good news is it has the potential to start right here in Canada.

Lisa Raitt: One of the things that I keep hearing in discussions around plastics is this notion of a circular economy. Tell us what the circular economy is.

Bob Masterson: Sure. Well, I can tell you what it isn’t. To start with, what it isn’t is what we’re doing now. We take things, we make them and we waste them, typically to landfill in Canada. So, you know, Canada is not a major contributor to ocean marine litter, but we send 90% of our plastics end up in landfill and there’s a great deal of resources that go into these and there’s a great deal of emissions associated with them. What the circular economy looks to do is to take the materials after the consumer has used them and put them back into the production process as inputs rather than as waste to landfill. And maybe just to give an example of that, you know, five years ago, British Columbia transitioned its recycling system. It’s no longer paid for by the taxpayers, it’s paid for by the people that put packaging into the British Columbia economy. And five years ago, the province had, like the rest of Canada, 10 to 15% plastics recycling. That system now achieves almost 50% plastics recycling, hopes to go to 75. And based on that success, now we have Alberta, Ontario and Quebec all moving to an industry paid recycling system that will allow for these materials to stay in the economy. So in fact, back to some of the early examples on climate change. We actually have companies taking, Nova Chemical, for instance, taking plastics out of British Columbia and putting them into their plastics production facility in Alberta to make a post-consumer resin, which is a very valuable commodity these days. That’s two major transformations taking place in this chemistry sector. Overall growth is ongoing, but now we’re transforming for circular economy and we’re transforming for net zero. So a very exciting time, and it’s going to involve billions upon billions of dollars of investment for whoever gets investment conditions right.

Lisa Raitt: So you mentioned to me when we were speaking about this earlier that this is a $6 trillion a year global wide industry and growing. So where is Canada in terms of getting their share of the pie?

Bob Masterson: That’s a good question. Well, you know that $6 trillion a year industry and growing it requires almost $500 billion a year of capital expenditure just to meet growing demand. We’ve seen in the United States south of the border, we’ve seen them add 35 to $40 billion a year of new chemical investments. In fact, half of all manufacturing in the United States alone, manufacturing growth has been in the field of chemistry. Sadly, I guess the last, much of the last decade, Canada has missed out on those opportunities despite being historically a significant player. We’ve had a couple of important investments, but really missed out on our fair share. Now is the opportunity that we can’t look back, can’t change what happened, but can we capture the investments and these investments for net zero transformation circular economy going forward? So I’ll pause there and just to say, I think there’s a few different paths. One, Alberta and Quebec are clearly on where they want these investments to take place in Quebec’s case, because they want the chemistries to support the critical minerals and other key sectors, battery manufacturing and Alberta to add value to its natural gas resources. And they both have put in place very favourable investment conditions. And so now you see those seven projects that I’ve talked about. You know, there’s no dollar value yet, but clearly well over twenty five billion dollars minimum we’re talking about today. So slow start to come in, Canada will be playing its right role. I think the negative side, though, or the less encouraging side is in Ontario. The sector is the third largest sector in Ontario, manufacturing sector. It’s about a twenty six billion dollar a year industry and the industry is, let’s say, it’s in need of capital reinvestment. You have all that growth that I’ve talked about going on around the industry and very little, if any of that is coming to Ontario. What used to be the newest, largest, most productive, most efficient, environmentally efficient facilities in the company ranks are now amongst the oldest. The more costly, the more emitting. And that can’t continue for too long when the rest of the world and the rest of North America and the rest of Canada is investing. So Ontario is really at a fork in the road. It’s now or never to create the conditions where the capital will flow into the sector in Ontario, or it will start to decline and when it declines, it will decline very quickly.

Lisa Raitt: Why is it important for Canada to make sure that they’re part of this?

Bob Masterson: Well, again, I mean, people don’t think about the sector very much. First of all, it’s the overall economic value. It is Canada’s third largest manufacturing sector total, about $80 billion a year. Extremely, extremely highly skilled, well-paying jobs. Average selling sectors over one hundred thousand dollars. You don’t replace these with call centre jobs and keep the same economy. So there’s the overall economic value. Most people don’t see that. But then you look at the role the sector plays in supporting other key industries. And we’ve talked already about mining critical minerals. But forest product sector, hey, it’s profitable and does well in Canada. Why? Because we have a lot of the key forestry chemicals that are here. Automotive sector, huge consumer of chemistries. Whether you’re talking about the rubber for your tires, paints and coatings or all the stuff that goes in and many other sectors. Agri-food, you name it. Chemistry is involved. So we’re a bedrock unthought of sector, but very key to the profitability and well-being of many of Canada’s sectors. So overall economic value and then supporting the foundation for other critical sectors.

Lisa Raitt: So I mentioned at the beginning, Bob, that I’ve known the Chemistry Industry Association of Canada since I worked with them after the Lac-Mégantic disaster. And one thing that was always brought to my attention and it’s very true, is that, you were doing ESG even before ESG was ESG, in the sense of, you have a you have a program called Responsible Care. Why don’t you tell us a little bit about this program and, you know, tell us who your members are that are also taking part?

Bob Masterson: Sure. Well, you’d have to cast our minds way back to another major rail tragedy. Fortunately, the one in Lac-Megantic didn’t involve chemicals. It could have been even worse. But in 1979, we had the Mississauga train derailment and the entire people can’t imagine today, but the entire city of Mississauga pretty much had to pack up in the middle of a December night and leave because we had a train incident involving chlorine. That was at a time when the industry also had a lot of other issues, workers safety, chemical and community safety. And of course, we have the terrible tragedy in Bhopal, India. And the industry was faced with the choice. Either it got its act together and became a responsible citizen here in Canada, or its days were done and it would have to pack up and make its operations elsewhere. And so the industry reflected on that and started something with its key critics called Responsible Care. And that was meant to be back in the days before we talked about concepts of social license, corporate responsibility, ESG. It was meant to be a means to understand what society expected of the chemistry industry, for the industry to be responsive to that and held accountable to it. So I won’t go on the details, but it involves a comprehensive set of codes of practice. All members of our association have to adhere to it, they have to commit to it and they have to be third party audited every three years. And you can go to our website and you can see the results of all those audits. They’re publicly available. So we’ve been doing that since 1985. So again, well before the concept of ESG. But because society’s expectations also evolve, so has our initiative. So in recent years, for instance, Canadians expectations that all businesses engage in indigenous engagement, that’s now part of Responsible Care. We’re in the late stages of adding formal commitments that will be audited around having systems, management systems and targets in place for diversity and inclusion. Again, that’s what Canadians expect of industry today. And so we’re doing that. We ask companies, companies BASF Canada, Dow Canada, Nova, Owen Canada. All of our 60 member companies adhere to Responsible Care.

Lisa Raitt: Excellent. Well, Bob, thank you so much for giving us some insight into the chemistry industry here in Canada and the importance of it to not only our economy, but as well to our future prosperity. Delighted that we had you here with us today. Thanks so much.

Bob Masterson: Thank you for the opportunity. Thanks, Lisa.

Lisa Raitt: Thanks so much for tuning in. Now, if you have any questions or comments or even requests on topics to discuss, drop me a line at [email protected]. Your interactions actually will make this better. I’m your host, Lisa Raitt, and this has been The Raitt Stuff. I’ll talk to you next week.

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