The Journey to Net Zero through Advanced Manufacturing

October 13, 2022

The Empire Club of Canada Presents

The Journey to Net Zero through Advanced Manufacturing

Chairman: Sal Rabbani, President, Board of Directors, Empire Club of Canada

Distinguished Guest Speakers
Linda Hasenfratz, Executive Chairman of the Board & CEO, Linamar Corporation
Scott MacKenzie, Director, Corporate & External Affairs, Toyota Motor Manufacturing Canada
Kiril Mugerman, President & CEO, Geomega Resources
Tony Valeri, Vice-President, Corporate Affairs, ArcelorMittal Dofasco
Gara Hay, President, MTB Transit Solutions
Pam Vermeersch, Managing Partner, Gowling WLG

Moderator
John Laughlin, Chief Technology Officer, Next Generation Manufacturing Canada

Head Table Guests
Martin Gangadeen, Tax Practice Leader, Industrial Markets, Partner, KPMG LLP, Guest of Sal Rabbani
Arthur Kong, Director, Project Development, Next Generation Manufacturing Canada, Lead Director
Tom Glover, Vice President, Sales and Marketing, MTB Transit Solutions
Mellanie Nimchand, Business Development & Marketing Manager, Gowling WLG

Introduction
It is a great honour for me to be here at the Empire Club of Canada today, which is arguably the most famous and historically relevant speaker’s podium to have ever existed in Canada. It has offered its podium to such international luminaries as Winston Churchill, Ronald Reagan, Audrey Hepburn, the Dalai Lama, Indira Gandhi, and closer to home, from Pierre Trudeau to Justin Trudeau; literally generations of our great nation's leaders, alongside with those of the world's top international diplomats, heads of state, and business and thought leaders.

It is a real honour and distinct privilege to be invited to speak to the Empire Club of Canada, which has been welcoming international diplomats, leaders in business, and in science, and in politics. When they stand at that podium, they speak not only to the entire country, but they can speak to the entire world.

Welcome Address by Sal Rabbani, President, Board of Directors, Empire Club of Canada
Good afternoon. Welcome to the 119th season of the Empire Club of Canada. I'm delighted to be here with you and our esteemed panellists today. Thank you for your participation and support. This incredible variety of colleagues and peers is the driving force behind our mandate to engage, debate, educate, and advance the dialogue on issues of importance to Canadians. Welcome. My name is Sal Rabbani, and I'm the President of the Board of Directors of the Empire Club of Canada.

To formally begin this afternoon, I want to acknowledge that we're gathering today on the traditional and treaty lands of the Mississaugas of the Credit, and the homelands of the Anishinaabe, the Haudenosaunee, and the Wyandot Peoples. We encourage everyone to learn more about the traditional territory on which you work and live.

Turning to today's program on the journey to net zero emissions by 2050, efforts must be coordinated across the ecosystem to develop, de-risk, and strategically integrate commercially viable solutions that are manageable and cost effective. Today, we welcome an exciting group of industry voices from across the supply chain to discuss the opportunities and challenges in accelerating industrial decarbonization in Canada.

The Empire Club of Canada is a not-for-profit organization, and I now want to take a moment to recognize our sponsors who generously support the club and make these events possible and complimentary for our online viewers to attend. Thank you to our lead event sponsors, MTB Transit Solutions, ZEV Clean Power, and Gowling WLG; and thank you also to our season sponsor, Bruce Power. I also want to recognize the Empire Club's distinguished past presidents, board of directors, and staff. Thank you for your contributions to making this event a success.

Now, to the audience, if you require technical assistance, please start a conversation with our team using the chat button on the right-hand side of your screen. We invite questions from the audience by accessing the Q&A function under the video player. It is now my pleasure to invite Gara Hay, President of MTB Transit Solutions, to introduce our guest speakers. Gara, welcome.

Gara Hay, President, MTB Transit Solutions
Hi Sal, thank you very much. Hi, everyone. As Sal said, my name is Gara Hay. I'm the president of MTB Transit Solutions here in Milton, Ontario. MTB has been working with transit authorities across Canada for over 45 years to keep their buses running smoothly. With transit authorities’ recent move from diesel to battery electric power, MTB has created a new initiative called ZEV Clean Power to help transit operators reach their GHG reduction goals sooner. By taking a mid-life diesel bus and converting the propulsion to battery electric, ZEV will help improve the quality of air and communities, and allow transit operators to save considerable operating dollars due to lower costs of fuel and maintenance gained from this conversion. ZEV has been approved for funding from the Ministry of Infrastructure and Communities, and as well as financing programs from the Canadian Infrastructure Bank. Please see this quick video on ZEV Clean Power:

[Video is shown]

We are now taking this repower conversion program to other fleet vehicles, such as school buses, coach buses, mining trucks, garbage refuse fleets, and Class 5 to 7 trucks. We are very proud that our supply chain is one hundred percent Canadian-sourced, and we are very excited about this new clean service we are offering to Canadian companies. MTB is proud to sponsor today's “Journey to Net Zero Through Advanced Manufacturing.” Thank you to the Empire Club for organizing this event, to our special guest panellists, and to all of you for attending.

Now, I'm pleased to introduce today's moderator for today's discussion. It's John Laughlin, who is Chief Technology Officer for Next Generation Manufacturing Canada. John joined NGen from the UK, where he was responsible for setting the strategies and running the UK’s R&D programs in automotive, aerospace, and intelligent mobility, worth more than 8.5 billion dollars. John has held engineering positions at Ford and then Visteon, working with Honda, Mazda, Toyota, Suzuki, and Volvo. In 2007, he joined the London Underground, where his brief was to deliver part of the Olympic transport strategy for the London 2012 Olympic Games. Over to you, John.

John Laughlin, Chief Technology Officer, Next Generation Manufacturing Canada
That's amazing. It's hard to believe that the Olympic Games were decade ago, in 2012. Thank you so much, Gara, for the introduction. We've got a fantastic panel here today. Sal, as well, thank you very much. The journey to net zero is such an important one. Canada's industrial sector forms the backbone of our global supply chains. And the sector itself is economically important to the country; it contributes thirteen percent of Canada's GDP. But the real important piece here for the discussion today, it also contributes fifty percent of total greenhouse gas emissions. And Gara, just like the video you showed, one of the first bullets was, the next biggest emissions contributor is transport, about twenty-five percent of emissions coming from transportation. That's nearly 185 metric tons of carbon. So, you know, we've got some long-term goals in terms of 2050, and also some short-term and medium-term goals. The federal government committed last year to emission reduction goals of forty-five percent below 2005 levels by 2030.

And so, to that end, we've got three phenomenal speakers here today that have not just a company corporate view, but a Canadian view and a global view. This isn't just a Canadian challenge, but a global one. So, I'd like to invite each of our speakers, starting with Kiril, to introduce themselves. Kiril, would you mind doing a short introduction?

Kiril Mugerman, President & CEO, Geomega Resources
Yep, sorry. My name is Kiril Mugerman, President and CEO of Geomega Resources. We are an innovator for clean and sustainable processing technologies when it comes to rare earths, and other metals, and extracting them in better and simpler and innovative ways.

John Laughlin
Okay, next on my on my list is Linda. Linda, would you mind doing a short introduction?

Linda Hasenfratz, CEO, Linamar Corporation
Yes, absolutely. Linda Hasenfratz, I am CEO of Linamar Corporation. We are an advanced manufacturing company, and we're focused on a variety of markets, including mobility, automotive, as well as other types of vehicles. We also are in the agricultural market and construction equipment, where we make aerial work platforms, like scissor lifts, boom lifts, and telehandlers. We are a global organization but headquartered in Ontario. We have about twenty-seven thousand people globally, sixty-five plants, and close to eight billion in revenue.

John Laughlin
And last, but certainly not least, Scott.

Scott MacKenzie, Director of Corporate & External Affairs, Toyota Canada Inc.
Thanks, everyone. Hello. Scott MacKenzie. I'm the Director of Corporate and External Affairs for Toyota’s operations across Canada. We're the largest automotive manufacturer in Canada. We employ about eighty-five hundred people in our manufacturing operations, and we're also number one in retail sales. Nice to see everyone.

John Laughlin
That's fantastic. So, there's an opportunity for the audience. We've got quite a number of participants. This is going to be so much more fun if it's interactive, so please don't be shy. It's a rarity that you'll get three speakers of this calibre on the panel. So, do drop the questions into the appropriate chat, and we'll try and answer them as we go through the next sort of 40-45 minutes.

I'm going to kick off just with a—get straight into the 2050 targets. The three of you are all at various stages within the automotive value chain, and also diversified products, which, you know, the automotive sector is a fundamental critical part of Canada's manufacturing footprint. So, as we strive towards these net-zero goals by 2050, can each of you have a bit of a stab and let us know what your organization's plans are to try and meet those goals? And Linda, as the chair of the NGen board, it’s very rare that I get the tables turned where I can get some questions in and push some hard questions. So, Linda, can we start to start with you, please?

Linda Hasenfratz
Absolutely, John. Our next board meeting is coming up, so yeah, I’ll keep that in mind. So, we have a comprehensive plan we're building around moving to net zero. We have established a goal for ourselves of being net zero by 2050. That is not just for our own footprint of our facilities, but also that of our supply base, and also that of the products and markets that we supply to. So, it's a pretty comprehensive goal. Obviously, the first step is going to be our own facilities, so that's a key area of focus at the moment. On the positive side, we have a huge lead in terms of the electricity that we're using, and the cleanliness of it, because we have quite a strong footprint in regions of the world that have very clean energy.

So, for instance, right here in Ontario, our energy grid is ninety-four percent clean. And we have actually our biggest concentration of global plants in Ontario, so that's quite helpful. We also have quite a few plants in France, where also the energy grid is quite clean. In fact, if I look at our total global electricity consumption, sixty-three percent or close to two-thirds of our total global energy consumption, electricity consumption, is clean energy. So, that gives us a big, you know, a step ahead, which is great. Meantime, we have made significant investments in solar energy, for instance, for the rooftops of our facilities, and are continuing to make those investments to help offset the remaining carbon footprint. Next on the agenda, of course, is reducing gas usage. So, that is a key focus for our facilities at the moment, as well as energy reduction more broadly.

So, we have quite a few tactics we're focusing on; 2023 is actually going to be laser-focused in that area. We're also focusing at the moment on expanding our data gathering. So, we obviously have been gathering data in terms of our carbon footprint. We are expanding that, and trying to establish a more comprehensive baseline that we can measure against. And eventually, we will roll that data gathering out to our supply base as well. And then, of course, we have comprehensive work underway to design products to target green markets. Whether that be for electrified vehicles, for instance, in our mobility business, for precision agricultural products in our agricultural business, or sustainably powered scissor and boom lifts. So, a lot of work going on in that regard as well, John.

John Laughlin
That's phenomenal. And yes, I think my career-limiting moves are going to hold me back from picking on you, Linda. Scott, I would love to hear from a Toyota perspective and, you know, again, that global viewpoint. But also laser-focused on Canada, because we’ve got a serious, serious amount of production capabilities here.

Scott MacKenzie
Sure, thanks very much. So, back in 2015, Toyota announced its Global Environmental Challenge 2050. And that had six specific amendments, three related to emissions reductions, and then three other ones that I’ll get to in a second. But for the emissions reductions, it was being carbon neutral from the products that we make, being carbon neutral from our manufacturing operations—and that's across the globe—and then also being carbon neutral from our supply chain. And then, the other three commitments around water utilization. So, drastically reducing our consumption of water, increasing the recyclability of our products, and then in general, just being in harmony with nature. And then, you know, within Canada, we have some opportunities to be perhaps a little bit more aggressive.

So, you know, as Linda mentioned, we have a very clean energy grid or electricity grid, specifically in Ontario, where we make cars. And then we also have access to advanced technology. So, for us, you know, both with the products that we make and also our manufacturing operations, we'd like to get there a little bit sooner. And specific to our manufacturing operations—and you do highlight, you know, we're a large manufacturer in Ontario with a pretty large footprint—but we see a pathway of being carbon neutral from our manufacturing operations by about 2035. And, you know, we have an internal target of being the first Toyota operation—ideally globally, but certainly within North America—to be carbon neutral.

John Laughlin
Wow, that is phenomenal news, I think, for Canada. And my bias towards automotive sort of says that maybe the automotive industry is going to be leading the way on a lot of these sort of, this sort of revolution. Kiril, I would love to dial you into this conversation, and for you to talk about Geomega and let us know what your plans are.

Kiril Mugerman
Yeah. So, we are from a different spectrum of what was presented by the previous two speakers, because we are the facilitator. We are the company, or the type of companies, that will help them become a carbon neutral, or zero-waste company. Because, I mean, Toyota—it's great to have Scott here on the call, because Toyota was one of the first companies, I think, over 10 years ago, that they started looking at how to recycle runners. And they started putting those studies on what happens to the vehicle at the end of life, how do you collect those magnets from there, how you study them. And we got into that sector in 2017. We started looking at really recycling rares from earth magnets, which only were starting, let's say 10 years ago, when Toyota was ahead of everybody with their hybrid vehicles. But since then, we took it to a very advanced level. We've completed many tests, bench scales, pilots, and now we are moving towards the demonstration plant here in Canada, which is going to be the first of its kind to recycle rares in a clean and sustainable way. And we want to do it right here.

And, you know, Geomega’s opportunity within the cycle of, or within this environment of, trying to reach net zero doesn't stop there. Magnets is one thing, it's electric vehicles. But in 2019, we started looking at applying our technology to other mining and industrial waste streams. We all know that mining operations produce tailings, produce waste streams in various forms. But there are metals there. And those metals before were not truly considered sometimes, because there were no interesting methods to capture those metals. But today, we see sometimes those streams have critical and strategic metals, which have increased significantly in value, and you can go and capture them.

One good example is, we work with Rio Tinto on a project that we actually started with NGen a couple of years ago. And we are working on extracting the waste, while processing the waste from bauxite residues, which is the waste from aluminum production. And it's a major global problem. It's not only a situation where in Canada it exists and in another place it doesn't. No, it's everywhere. In every single country where they produce aluminium, you have a situation. This waste accumulates, and it's just sitting there. It's environmentally bad, and nobody wants it there.

But how do you go and capture the metals that are sitting in there? And when you start capturing the metal, guess what it becomes? It's not a waste anymore. And this is what exactly what you're trying to do. So, when we're talking about the net zero by 2050, we need to make sure that we figure out a way to go and convert those waste streams into product streams. And that's how the industry can evolve. So, advanced manufacturing is something that is very dear to us. And we hope to apply this, apply our technology and this principle that we're working on, to many other mining operations and industrial waste streams.

John Laughlin
This phenomenal. You know, Scott, something sort of resonated with me about the aggressive targets Toyota have. 2050 seems like a long way, you know. Future John will worry about net zero in 2050, after I've retired, you know; but it's really a problem of today. And, you know, it's great to see Toyota’s strategy looking at ESG, so, environmental, social, and corporate governance, and those objectives that have been, that are in play today. What do you see as the decisions that are being made off the back of ESG within the automotive supply chain? What positive impact is it having today in helping us get towards net zero? And that sort of thinking, you know, you're kind of the end of the value chain in many ways. And we've got, you know, players of the value chain—how does Toyota see the impact of ESG within its total value chain? Toyota being kind of one of the, in my view, one of the best vehicle manufacturers in the world to really integrate and want this value chain to mature and grow.

Scott MacKenzie
Sure. You know, like I said earlier, our global commitment for 2050 is everything. So, it's the products we make, it's how we make them, it's how those parts and components get to us, and it’s a lot of other things as well. And we have to really approach the problem holistically, considering everything. And that includes where we buy parts and components from, and how those things are made. It's also where we make vehicles, and it's also where we procure or build our own batteries, as an example, as we're moving through increasing rates of electrification.

On the product side, you know, that's largely going to be driven by the consumer. I think regulation is an example—and we're dealing with that in Canada today—that's going to influence consumer adoption. At the end of the day, the consumer’s going to decide what kind of car that he or she wants to buy. On the manufacturing side, we have a little bit more control, meaning we know what the challenge is. Approximately forty percent of our carbon emissions in our manufacturing operations are just getting parts and components to our plant, like over the roads. So, we're looking at different strategies, including hydrogen Class 6 and Class 8 trucks. And we've been successfully piloting those in the Port of Los Angeles, within North America, for the last few years.

So, it's going to be developing an on-road fleet of trucks. And we get, you know, two hundred trucks a day coming to us, delivering parts, and then also from our manufacturing operations. Excluding logistics, about the remaining sixty percent, about half of that, is actually space heating. And you know, we've got very large buildings in Cambridge and Woodstock; several million square feet under roof. And then there's what we call process heating, so, it's basically paint ovens. And that's going to be looking at different technologies to replace natural gas combustion with either mitigation strategies, or converting to hydrogen. So, we have a strategy around hydrogen. We're going to start using it next year in our manufacturing operations in Canada, and that will extrapolate and increase over time. But that's going to be one of the key factors for us, in terms of reducing our dependence on natural gas.

John Laughlin
That's—I’m going to pick up on one thing there, which is road transportation. And it's fantastic we're tackling that, and also looking at different technologies. And a lot of people think, you know, the battery is the solution—when there are many different potential solutions—to tackle this twenty-five percent of emissions from road transportation. Linda, I’ve heard you speak in the past about different hydrogen technologies. I wonder, what's your perspective sort of one step down in the supply chain with a diversified portfolio of products; and what do you see as sort of the opportunities in that shorter term to tackle some of these challenges?

Linda Hasenfratz
Yeah, I—number one, I'm really glad to hear Scott talking about this full lifecycle approach. So, the thinking about carbon emissions not just in one slice—like, you know, what's happening in your manufacturing facility—but what are the emissions to get things to your door. And I think that same kind of thought process needs to go into finding solutions for all of our largest areas of emissions. So, looking at the full lifetime; looking at the material extraction, the manufacturing of the vehicle, and the emissions that are associated with that. Of course, looking at the driving of the vehicle and the energy sources for that, and what I see is the carbon footprint of that. And then moving on to end of life, and some of the things that Kiril was talking about.

So, we really need to look at the whole picture. Because I feel like, too often, we look at one little slice. We think we're going to solve the planet's problems by moving to battery electric vehicles, because there's nothing coming out of the tailpipe. Correct, nothing coming out of the tailpipe. However, you are using energy, that electricity, to run that battery electric vehicle, that does come from a grid that can have varying degrees of cleanliness.

We talked earlier about Ontario being ninety-four percent clean. The US and China are only, you know, thirty-five or thirty-eight percent clean. Dramatically less clean, right? Dramatically higher levels of fossil fuel being used to create that energy. That creates emissions as well, as does the building of the different pieces of the vehicle. So, for instance, the building of the battery pack is actually enormously emittive. In fact, if you build the battery pack in a country like the US or China—where, by the way, a lot of them are built—that is sixty-two percent fossil fuel in the grid; you actually create 17 tons of CO2.

So, there was a study done a couple of years ago, by the IfL Institute in Germany, that actually looked at this like more holistic approach of, you know, what is the carbon cost of the manufacturing, what's the full carbon cost of driving that vehicle. Not just, you know, wheels to tailpipe, but you know, well to wheels kind of thing. And they compared a battery electric vehicle, a diesel, and an LNG. And you may be surprised to find out that—and they looked at, okay, it was one hundred thousand kilometres of driving. They were basing it on driving in Germany, which is about forty-five percent fossil fuels. Better than the US, but they assumed that the battery was built in the US in that sixty-two percent fossil fuel environment. And what they found was: battery electric vehicle, 170 grams of CO2 per kilometre of lifetime; diesel engine, 140 grams per kilometre; and LNG, 100 grams per kilometre. So, very surprizing results, right? And the whole reason was the battery, right? The battery, the amortization of the battery’s carbon footprint to build it. The answer is not to forget about battery electric vehicles—I one hundred percent believe we need to make this transition to electric vehicles—the answer is to build the battery in a region with the cleanest energy. Like Ontario, for instance, or France, or someplace that has clean energy. And of course, to prioritize investing in clean energy production, so we can change the grid over.

Now, you asked at the outset about hydrogen. And in my opinion, hydrogen is absolutely the right solution to mobility in the short term for the bigger vehicles like Scott was talking about, for the on-highway truck. But ultimately, for other classes of vehicles as well, especially the larger passenger vehicles like sedans, or pickups, or SUVs. Why do I say that? Because to me, fuel cell electric vehicles are truly clean driving, right? You can make that hydrogen from water using renewable energy, and when you run the fuel cell, it turns back into water. That's the by-product of the fuel cell’s production. So, in a way, it's like driving your vehicle on renewable energy that is temporarily stored in hydrogen.

So, to me, this is absolutely the right solution. It's something that is taking time to develop, obviously, this is another technology change. The good news is, it's going to be a reasonably easy transition from battery electric. So, we go first to hybrid, then to battery electric vehicles, then to fuel cell electric vehicles, which are still electric vehicles, right? So, it’s similar architecture, it’s just the energy source is the fuel cell instead of the battery. So, I absolutely agree with Scott. Hydrogen is the answer to the future. It is where mobility at is headed, and I think is a good solution, looking at full lifecycle analysis, which I think is really important.

John Laughlin
I breathe a sigh of relief. You know, I moved here almost four years ago. And what really struck me was the number of SUVs, large SUVs, and light trucks. How would you dig into the data? It's about seventy-five percent SUVs and light trucks. So, if you're looking at the best-selling light truck, an F150, you're looking at 100–130-kilowatt hour battery; 90 kilograms of CO2 per kilowatt hour. And so, the amount of added carbon that's going into these larger batteries, which is the North American market, because we do want that. You know, the geography is very different from, you know, where I came from; the distances we drive. You know, you can drive the length of my entire country and no one would think twice of it here. So, that's really great to hear there’s multiple solutions.

And Kiril, I want to pick up on that, on the whole lifecycle aspect. I mean, moving from a steel engine block to aluminium block was actually quite environmentally disastrous when you look at the whole lifecycle. Yes, you reduce some of the weight of the vehicle, and therefore you reduce tailpipe emissions. But the total emissions footprint was two-to-threefold worse. And so, you mentioned bauxite—I'm going to use a bit of a slang term, ‘red mud,’ which I don't know whether the audience would know, whether red mud or bauxite. It’s got a pH of 14; it’s pretty nasty stuff. If you do a little bit of Googling, you'll find some toxic lakes in China and inner Mongolia. Kiril, could you educate us, bring us up to speed on some of the work you're doing on bauxite, and even just further talking about the opportunities around rare earth? Because, again, rare earth, one kilogram of rare earth comes from a thousand kilograms of rock, and you've got to use chemicals to break down that rock. So, your perspective on that on the supply chain would be phenomenal.

Kiril Mugerman
No, absolutely. And I'll just add a little bit to what Linda was saying before. Yes, it's the transportation, and making sure it's manufactured in the right countries with a better energy source. But then, if we go another step backwards—and again, my background is mining—we want to make sure that at those mines, the processes that they're using to produce, as you just said, extract those metals using various chemicals to produce the lithium, to produce the graphite, and produce rares; that it's done in the best way possible. To have a smaller and a smaller GHG footprint. It's unbelievable if we go, the wider we look, the more we see that, okay, now we have to take this into consideration. So, those numbers that you mentioned, Linda, are quite interesting. The comparison on those studies, looking at the diesel versus, let's say, electric, versus hydrogen.

Yeah, so John, you're absolutely right. So, "bauxite residuals" is the term that we use commonly in the industry, and for the last 50 years, it was known as "red muds." They are red because of the iron content in them, and yeah, they are pH 12, 13, 14. You wouldn't necessarily want to be playing near that material. It's a big source of contamination that could seep into the soil, and back in the days, that was the situation. Then with time, they found ways to better align the pads, to make sure it's stored in such a way that it's not causing as much of the environmental risks. But guess what? We are still producing aluminium—and I don't remember when the last time was there was a year that we produced less aluminium than the year before that—our demand for aluminium is just going through the roof. And we are still using the exact same method, Bayer Process, to produce aluminium. We are not changing it, because it is the most efficient. So, guess what? That waste is going to get produced. And we are now, finally, seeing companies who are starting to build the next refineries for aluminium from bauxite. And they say, are there any other ways to make sure that there is no bauxite residue? And that's where we come into this picture.

Our process, starting from the rares recycling—which we then started applying to bauxite residues and to other opportunities—a lot of it is focused on reagents recycling. So, you know, you have to use chemicals no matter what you do, right? But it's a question of which chemicals you select, the efficiencies of those chemicals, but at the same time, can you recover them. Because if you use chemicals which are super efficient, but you cannot recover them, that's going back to the environment. The environmental footprint increases, and then to be you have to produce new chemicals to produce those new chemicals, you have more carbon footprint being produced. So, recycling of reagents is the core of everything that we are doing.

Then the next question was always for us the iron. Iron is found everywhere, whether it's within alloys or within different types of ores. Or, in the case here, bauxite—which is a mineral—is fifty, sixty percent iron, once it’s been processed and the aluminium extracted. So, this bauxite residue, this red mud, is running at fifty percent iron, which is an amazing source to use to go for iron ore production. But because of the toxicity of this material, it's so hard and it's non-touchable. We are finally able to put together a process where we are able to recover the reagents. We are able to make this material safer to handle, to the point where suddenly we can put it through our process. We can extract the iron, we can extract the rares, we can extract the other metals which are in there—there are quite a few different metals—and those metals can make it into the supply chain again. And when you do this, and if you look at the combination of all the steps, and you compare those metals that we’ll be producing to their natural primary method from various mines, this process ends up being the main objective, once we finish all the piloting, to make sure that it is negative on carbon footprint. So, it's almost like a carbon capture. It's not really a carbon capture, but we are going to be producing those metals at the end, with less carbon being released to the environment. And the exact same thing for rares recycling. It's all about finding a way to get the iron out in a clean, sustainable way, because that is the main source.

When they started recycling in China around 10 years ago, and it was just starting, guess what? They were using the simplest methods. Straight, direct, leeching, do whatever you can get the rares out. And where's all that waste going? The magnets are made from seventy percent iron; only thirty percent is rare earth. And nobody cared. It's just going, neutralized, goes in tailings, then you have a bunch of salty water that's going down to the to the water streams. It's unbelievable. And what we are going to do here on our side, it's again, it's focused on this recovery of the reagents, the recycling of those reagents, and then we are able to keep rolling our process. And at the end of the day, when it comes to rares elements recycling, China is producing them; we all know it and we cannot fight it. They are the biggest producer, and they control the market. But they are all making those products and they're shipping it to North America, they're shipping it to Europe, they're selling us their rares, they're shipping us those rares. It's our opportunity to take it and recycle it, and then those rares become ours, they become here. And it's an amazing opportunity for the world to become less dependent on the Chinese supply.

I think this more environmentally friendly, sustainable supply of critical metals is something that will we are going to see more and more, because China is not going to give away the control on the primary production anytime soon. But all those magnets they produce—and they ship it in the form of motors, wind turbines, electric vehicles, you name it—those magnets leave their countries sooner or later. And we have an opportunity with our technology to capture it. And we’ll most likely look at opportunities to licence our technologies, because more and more factories are now starting to leave China, and they want to set up opportunities in North America and in Europe. And all those opportunities are exactly where we could tie in our operations to help recycle rares, and do it in a clean and sustainable way.

John Laughlin
It fits so well with sort of the Canadian environmental footprint. But balancing climate action with your economic growth strategy and thinking about commercial opportunities, I love that. Because that's the only way we're going to really compete, is to sort of balance those two factors. You mentioned carbon capture. And when we talk about industrial decarbonization, there's two technologies that seem to just be the—it’s carbon capture or CCS, and hydrogen. You know, it would be a shame if I didn't ask this question. But thinking about, is that going to be the is that the common technologies we're heading towards. Is that kind of it, or are there other disruptive technologies; and could that be different for each industry? But also, what are the barriers to adopting these technologies and their impact? I'm going to pick on you, Scott, a little bit, because you've got such aggressive targets in Toyota. What are those barriers? Or, what are the opportunities we need to consider in order to make sure that those—either those technologies get adopted, or other disruptive technologies can be created?

Scott MacKenzie
Yeah, sure. So, obviously, we studied hydrogen applications in our manufacturing operations. And the challenge for us is, based on the scale of our production, we use a lot of natural gas. So, in order to displace that natural gas, you need a lot of hydrogen. And it's not something that you can bring in on trucks; it would be too expensive and largely not feasible. So, you know, you either need to make it yourself, or import it from someone who's making it for you nearby, through a pipeline or something like that.

So, you know, the cleanest way to make hydrogen—and Linda touched on this—is through, you know, electrolysis, so you're putting electricity through water and splitting it. But it's not necessarily the cheapest way to do it. And carbon capture has promise when you're, you know, making it out of natural gas. But there's actually an interesting step in the middle that some people are looking at, and that's through pyrolysis. So, it's taking natural gas and heating it to a really high temperature, and burning off a lot of the carbon in it. And the by-product of that is something called carbon black, which you can use and things like steel manufacturing. But taking natural gas as an example, applying pyrolysis, you still have some carbon at the end, but you're removing about ninety percent of it. And that's where carbon capture could come into play, you know, at the tail end, and it has less work to do. And you're not going to get a hundred percent emissions-free hydrogen, but you could be in the high nineties. And again, it's a question of perfection being the enemy of the good. That's still a pretty good outcome. And so, we're looking at many, many different scenarios. It is a challenge, but we do think there are technological solutions available that'll help us get there.

John Laughlin
Awesome. I’m just going to open it to Kiril and Linda, whether you have any additional comments on that. And just to say to the audience, hopefully there's an opportunity for you guys to be able to throw some questions in. I haven't seen it yet, but....

Linda Hasenfratz
I wouldn't mind just chiming in a little bit on the role that governments play. And it was something that Kiril said that, you know, inspires me to say that. I think that our governments play an incredibly important role in terms of what is and is not invested in your country, obviously. Because they're establishing the regulations that either enable it and encourage it and make it easy to make these investments, or they throw up barriers that stop it from happening. And I think a big part of the problem is governments like, you know, Canada and the US, and a lot of the Western world, who didn't want to mess up their backyards, is what forced the refining of a lot of what we need offshore.

So, all the stuff that Kiril was talking about, that China now has like fully cornered the market on, right? They refine ninety percent of the world's magnesium, eighty percent of the world's cobalt, seventy percent of the world's silicon—like, this is stuff we need to make aluminium, to make lightweight electric vehicles, to make batteries. You know, this is what we need, and China has fully cornered the market on it. They're not as clean in their approach to doing this work, this processing. We know that their energy grid is not clean, either. They, like the US, are about sixty-two percent fossil fuel. And we created this problem, okay? Because we didn't want it in our backyard. So, we’d better get our heads around that. Because if we don't want to have all our eggs in the China basket—which is obviously another issue—but also if we want to better control the emissions around the creation of these types of products. We need to make investments. We need to make investments like Kiril is making in recycling these products. We need to make investments in mining, we need to make investments in battery production and vehicle production in this province, in Ontario—or in Canada, more broadly, but specifically in Ontario—because of its clean energy grid.

So, our governments play a really critical role here. And the public needs to get become aware of these issues as well, right? I think most people don't know some of the data behind this, they don't understand the data behind it. They want—I think most people want to see the environment improve, I think everybody wants that. But we don't, we're not being given the data to help us make the right decisions. And Scott mentioned something right at the outset about consumers are going to drive this process, and I agree with him. But consumers are not able to drive the process if they don't have the right information to help them make informed decisions that look at the full lifecycle.

What I would love to see is every product that we buy having a carbon label on it. Like, every food product that we buy has a nutrition label, and it says how many calories, how many this or that—I would like to see how many kilograms of CO2 went into building this car. This particular car. Not a class of cars, this car. You know, what went into building this specific car? Because it's built in a particular place, and it's buying supply chain from particular places, and there's this very specific carbon footprint that's associated with that car itself. And I think if people saw that, then they could make a balanced decision between, okay, this is the carbon footprint of this vehicle, this is how much it costs, this is, you know, what I can manage. I want to minimize my carbon footprint, but it needs to be affordable and make good decisions. And then we get real, informed, consumer-led action that's actually going to make a difference.

And I think, as a planet, we need to get better at looking at things from a global perspective. It's no—it does not help to make our little slice of the planet clean if we're making another slice of the planet dirtier. Because we all share the same atmosphere, so we're all in it together here. It does not help for us to make Canada or the US clean if China isn't getting there as well, and India isn't getting there as well. We need to look from a global footprint so that we minimize the carbon emissions by where we're producing stuff, and we work together as a as a planet to find the right solutions. And we get the right data to people so they make the right decisions.

John Laughlin
I'm almost giddy with your passion behind this, because it's, you're speaking to true collaboration on so many levels, and governments, and industry. And in Europe, when there was the diesel scandal with Volkswagen, there was a lot of talk about, we got our education wrong with the public. It was mayors of cities that turned the automotive industry’s strategy on its head overnight by just going, well, we're setting targets, no diesel vehicles. And it was the consumer and the public that really was the glue that kind of pulled everything in a different direction. So, Kiril, I saw you come off mute as well, so I'm going to let you chime in. And I see Sal is there as well.

Kiril Mugerman
Yeah, just super briefly about the hydrogen comment that Scott brought up earlier. I think there are other opportunities to get better ways hydrogen. Like in the case of rares recycling, we were able to isolate the hydrogen and have a separate stream of hydrogen coming from the recycling process, which before there was no division at all. And in the long term for us, it just could be a more sustainable energy source—so kind of close the loop, the energy source for the plant—but we believe that there are other ways. We started evaluating where our technology could be applied to maybe processes where, right now, hydrogen is not being considered at all, but with what we are doing, hydrogen could become a by-product. So, there are other opportunities. And I think it takes a lot of innovation to come through with sustainable, economical methods. But we cannot give up. We have to keep thinking and looking for other opportunities where we can produce those metals—or molecules, because hydrogen is not really a metal—that are so important for our net-zero 2050 target.

John Laughlin
Thanks, Kiril. We're running out of time; we've got a few minutes left. I'm thinking, you know, we haven't touched on it. We've touched on, you know, the United States. Automotive, we ship eighty-one percent of our product within the North American market, and we're highly tied to the US. We've talked about China, and we've talked about how you get competitive with China. You know, any comments on Canadian carbon tax being in line with US, and whether we step out in tune with carbon tax? If we've got a different carbon tax Canada to the US, is going to economically hurt us? And, you know, the IRA, the Inflation Reduction Act, you know, is this huge—I’d just love to add, sort of throw out there any last comments about the Inflation Reduction Act, or carbon taxes, and the roles that again, government can play in order to help industry succeed.

Scott MacKenzie
I'll maybe jump in quick, John. Just, you know, we've made this point before, but we have a highly integrated automotive industry in North America, and that includes Mexico, and the United States, and Canada. And any situation, whether it's a carbon tax or anything else, we need to be careful that, even though it's well meaning, we don't create a situation where we are uncompetitive making cars relative to our two partners in the NAFTA region, the US and Mexico. So, if Canada is going to do something like that, hopefully it's in line with the other two players, because otherwise we're at a competitive disadvantage. And that's something that we need to be, you know, considerate of.

Linda Hasenfratz
Yeah, I mean, just to jump in, I think that again, similar to the comment I just made, that we need to look at things from a planetary perspective, certainly within North America. We need to look from a North American perspective, Scott's absolutely correct. The supply chain is very, very integrated within North America, so trying to disassemble that would not make sense. I do think that there is an energy responsible way that we can go about deciding what we make where within North America. Like, to me—again, you know, not to flog this same question—but to me, anything that is highly energy intensive should be made in Canada. Like the battery, like anything where you're melting metal or you have to heat treat metal, so, you know, gear manufacturing shafts, or all of that should happen here. We should make the highest labour content parts of the vehicle in Mexico, obviously, for the lower cost, as long as it doesn't have a high energy content as well. Everything else we should make in the US. And we should split up the vehicle production fairly, okay? Because each country wants to have some level of vehicle assembly as well. If we were able to do that, we would have the lowest cost, lowest carbon footprint vehicles built in the world, right here in North America. You know, eighty percent of the world's vehicle production and sales is outside of North America. North America is only about twenty percent of the world's market. That means we have access to eighty percent of the market globally, with the lowest cost, lowest carbon footprint vehicle. North America would be a net winner in that scenario. But we've got to get our act together as to what we do as a continent, not as individual countries.

John Laughlin
I think that is actually the perfect ending to this session. We're just on time. It's a perfect statement. One of collaboration, and one of, you know, true environmental strategy across the continent. Sal, I'm—well first of all, I'd like to thank the three speakers for such an engaging session. Empire Club team, you're phenomenal behind the scenes, like it's clockwork. I've never had such efficiency and in any panel, so thank you so much to the Empire Club. And we'll hand back over to you, Sal. Thank you very much for this session.

Sal Rabbani
Thank you. Thank you, John. I really appreciated hearing your perspectives today. I now would like to take this opportunity to move to our appreciation remarks, and introduce Pam Veermeersch, Managing Partner at Gowling WLG.

Note of Appreciation by Pam Veermeersch, Managing Partner, Gowling WLG
Thank you, Sal. On behalf of my colleagues at Gowling WLG, I'd like to take this opportunity to thank the Empire Club and the organizers of today's events for hosting such a timely, rich, and necessary discussion. I would also like to thank today's speakers, who generously lent us their time, expertise, and unique perspectives on this important topic. As today's presentation reminded us all, Canada's road to net zero is not going to be a straight line. We know that there will be major hurdles to overcome, from shifting political and economic headwinds, to the routine obstacles companies face when taking bold new ideas to market. Despite these challenges, we recognize, more than anything, Canada's decarbonization goals, audacious as they may be, serve as a resounding call to action for pioneering innovation. And as we've seen today, our friends, colleagues and clients in the advanced manufacturing and clean tech sectors are heeding this call, and truly leading the country forward in this initiative.

From my own work with this sector, I've witnessed firsthand the transformative role technology can play and will play in shaping a better future for us all. Indeed, Canada's net-zero future will require engaged collaboration between industry and a diverse range of stakeholder groups across the product lifestyle, investors, government representatives, academics, and professional service advisors, just to name a few. It’s this need to work together that underscores the true importance of events like today's, and the free exchange of ideas that it promotes. And with that, I'd like to thank everyone one more time for participating today, and I look forward to the next opportunity to connect with many of you.

Concluding Remarks by Sal Rabbani
Thank you, Pam. And thank you very much to our panellists today; John, Linda, Kiril, Scott. This was a fantastic conversation, and I really appreciated all the thoughts that were presented. I'd now like to thank again, also, our lead sponsors, MTB Transit Solutions, ZEV Clean Power, Gowling WLG, and our season sponsor Bruce Power for their support, and to everyone joining us online.

As a club of record, all of the Empire Club of Canada events are available to watch and listen to on demand and on our website. The recording of this event will be available shortly, and everyone registered will receive an email with the link. Our next event is on October 20th. Join us in person at the Royal York as we host to the Honourable Kinga Surma, Ontario's Minister of Infrastructure, to speak to the challenges faced locally and around the world by the building ecosystem participants, as it relates to major projects and market shifts. On November 10th, we have a special virtual event in honour of Remembrance Day week, “Canadian Women in War.” Dr. Wendy Cecil and Dr. Melanie Morin-Pelletier will present, from those heroic and troubled times, the extraordinary stories of Canadian women in war during the two great conflicts of the 20th century, the First and Second World Wars. Thank you for joining us today. This meeting is now adjourned.