Finance Committee on April 11th, 2024

[The Chair, Liberal, Peter Fonseca]

Welcome to meeting number 136 of the House of Commons Standing Committee on Finance.

Pursuant to the order of reference of Monday, March 18, 2024, and the motion adopted on Monday, December 11, 2023, the committee is meeting to discuss Bill C-59, an act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023, and certain provisions of the budget tabled in Parliament on March 28, 2023.

Today's meeting is taking place in a hybrid format, pursuant to Standing Order 15.1. Members are attending in person in the room and remotely by using the Zoom application.

I'd like to make a few comments for the benefit of members as well as witnesses.

Although this room is equipped with a powerful audio system, feedback events can occur. These can be extremely harmful to interpreters and can cause serious injuries. The most common cause of sound feedback is an earpiece worn too close to a microphone. We therefore ask all participants to exercise a high degree of caution when handling the earpieces, especially when their microphone or their neighbour's microphone is turned on in order to prevent incidents and safeguard the hearing health of our interpreters.

I invite participants to ensure that they speak into the microphone into which their headset is plugged and to avoid manipulating the earbuds by placing them on the table away from the microphone when they are not in use.

I remind everyone that all comments should be addressed through the chair. For members in the room, if you wish to speak, please raise your hand. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as well as we can. We appreciate your patience and understanding in this regard.

I believe all witnesses appearing virtually have been tested, Mr. Clerk. It looks as though everybody is ready to go.

We welcome, from the Canadian Association of Physicians for the Environment, Dr. Leah Temper, economic and health policy program director. Joining us from LKQ Corporation is the vice-president of external affairs, Tyler Threadgill, as well as the regional vice-president of Canada and New England, Derek Willshire. From the Macdonald-Laurier Institute we have a senior fellow, Mr. Philip Cross. He is with us here today in person in the room.

With that, we're going to have some opening remarks by the witnesses. We'll start with the Canadian Association of Physicians for the Environment.

Go ahead, please, for up to five minutes.

[Dr. Leah Temper, Director, Health and Economic Policy Program, Canadian Association of Physicians for the Environment]

Thank you.

Thank you very much to the Standing Committee on Finance for inviting me to appear today as a witness.

My name is Dr. Leah Temper. I'm the health and economic policy program director at the Canadian Association of Physicians for the Environment. I also hold a Ph.D. in ecological economics, an interdisciplinary field that considers the economic system as a subsystem of the earth's ecosystem.

Today, I'm going to be speaking about greenwashing and clause 236 of Bill C-59. My colleague from the Quebec Environmental Law Center addressed you on Tuesday and outlined four recommendations from a brief we jointly submitted. These include expanding the amendment to include all business interests and entities as well as products; broadening the scope to all environmental claims; and requiring disclosure of the evidence behind any green claims to consumers, as well as disclosure of negative environmental impacts related to products and industries to address cherry-picking.

Julien did a great job, so I would therefore like to take my time today to highlight the urgency and benefits of taking bold and effective action on greenwashing through Bill C-59.

We know that greenwashing is bad for business, that it cheats consumers and that it hinders green innovation, but I'd like to stress how it's bad for all of our health and our shared environment. One example of this is the well-known case of the Volkswagen emissions scandal, which led to the largest environmental fine in Canadian competition history, when it came to public attention that the company was marketing clean diesels that emitted over 40 times more pollution than it claimed.

The company eventually paid out about $40 billion in damages globally, but there's a study in Europe that estimated the excess air pollution emitted as a result of this deception shortened 1,200 lives in Europe by 10 to 20 years each, leading to about 13,000 years of life lost. Customers in Canada were paid out, but the public who was exposed to the toxic diesel fumes and the children who suffered increased respiratory health issues were of course never compensated.

Today, we know that the vast bulk of greenwashing revolves around claims of net zero and carbon neutrality, and these empty words are undermining and derailing the necessary transition to phasing down fossil fuel use. The IPCC clearly said that disinformation from vested interests in highly polluting sectors in Canada is undermining public support for climate change and is obstructing action.

Greenwashing about false solutions to climate change runs the risk of locking us into these false solutions that are neither environmentally clean nor economically viable without ongoing government subsidies. We should learn from a recent report that highlighted how petrochemical companies marketed plastic as recyclable for decades, in order to boost “disposability profits”, when industry insiders knew from the beginning that plastics recycling was uneconomical and was not a viable way to address the plastic waste crisis.

Similarly, oil marketed as net zero is not clean. It of course still emits tailpipe emissions and should never be marketed as environmentally friendly. We know that transport air pollution in Canada remains a major contributor to the over 850,000 children under the age of 14 in Canada who suffer from asthma.

Green claims are also different. They suffer from information asymmetry in a more significant way than other product claims because consumers do not have the tools to verify their truthfulness the same way they can verify the durability or the effectiveness of a product. This highlights the importance of the disclosure requirement we have asked for.

Of even greater concern is what Wren Montgomery, a professor at the Ivey Business School, terms “futurewashing”, which are large, unsubstantiated commitments for the future. Of course, such claims cannot be verified, and they should be considered misleading in almost all circumstances.

She and her colleagues also highlight other features of what they term “greenwashing 3.0”, including how green claims are being used by polluting industries as political strategies for maintaining corporate reputation and social licence and how such messages are being targeted at stakeholders beyond consumers and used to dispute the feasibility of stricter environmental regulations. Greenwashing 3.0 points to the urgency of broadening the testing requirements of section 236 to include all business interests and not only products, and for the need for complementary regulations to those that our trading partners have already put in place.

I will close by saying that CAPE has filed several complaints with the Competition Bureau against fossil fuel interests for deceptive advertising in the last years. However, the process in Canada is exceedingly slow, with an estimated two to three years for a complaint to be resolved. In the meantime, the deceptive ads continue to inundate our airwaves, radios, buses and computer screens. This is, of course, of concern, because the decisions we take today will define our energy systems for decades to come, and because consumer skepticism is setting in whereby soon, any green claim, no matter how genuine, will no longer be believed, seriously undermining consumer confidence. This is why I ask you to strengthen—

[The Chair, Liberal, Peter Fonseca]

Dr. Temper, you're going to have to wrap up. You'll have an opportunity for questions from members, but I do need to interrupt now.

Members, the bells are ringing and we need unanimous consent if we're going to—

[Some hon. members]

Agreed.

[The Chair, Liberal, Peter Fonseca]

We have unanimous consent to continue.

You will have to finish right now within the next 10 seconds, please.

[Dr. Leah Temper]

This is why I'm asking you to strengthen clause 236 to the best of your ability and to send a clear message that such deception, which harms us all, will no longer be tolerated.

[The Chair, Liberal, Peter Fonseca]

Thank you, Dr. Temper.

Now we're going to hear from LKQ Corporation. We are starting, I believe, with Mr. Willshire, and then Mr. Threadgill will also participate in the opening remarks.

[Derek Willshire, Regional Vice-President, Canada and New England, LKQ Corporation]

Thank you, Mr. Chair.

I would like to thank the members of the committee for having us here today.

My name is Derek Willshire and I am the regional vice-president for Canada at LKQ. With me today is my colleague Tyler Blake Threadgill, who is the vice-president of government affairs in the United States.

We are sorry not to be testifying in person, but we are very pleased to present our views on this bill, which is crucial for LKQ. We will focus exclusively on the right to repair and the flaws in the bill. Regarding the amendments, please consult our written brief.

LKQ distributes high quality parts for automotive repairs, whether manufacturers' or other parts, and also offers complete diagnostic and calibration services in Canada and the United States. LKQ processes over 900,000 end-of-life vehicles a year in North America and is the largest vehicle recycler in the world.

In this great country, our company employs 1,175 people at 37 sites. Even so, our team represents only a small fraction of the 492,000 people working in the automotive aftermarket in Canada.

The problem is simple: vehicles are becoming increasingly interconnected and complex, and it has become more difficult for independent shops' to access diagnostic data. Manufacturers' refusal to disclose that data limits consumers' choice and increases their costs. Without concrete action, small businesses will find it hard to maintain vehicles, and this will reduce competition in Canada.

We welcome the government's renewed attention to improving the Competition Act, with Bill C‑59, but major flaws remain and require your attention.

We would like to draw your attention to the importance of improving the definition of "means of diagnosis or repair" to include maintenance and calibration of components. Unlike other legislation, Bill C‑59 does not expressly require manufacturers to provide the data needed for repairs.

As well, exceptions such as protection of trade secrets could prevent access to essential repair information. The limits on the tribunal's authority to order remedies could also exclude major players in the automobile aftermarket.

As a final point, Bill C‑59 makes the right of action available only to individuals, and this limits the effectiveness of enforcement measures. It is crucial that the ability to bring an action be extended to include actions by the commissioner of competition.

Consumers deserve a competitive market that gives them the ability to have their vehicle repaired by the repairer of their choice. While Bill C‑59 recognizes this problem, specific legislation is urgently needed to address it.

I will now give the floor to my colleague, Mr. Threadgill.

Thank you again.

[The Chair, Liberal, Peter Fonseca]

Mr. Threadgill, go ahead, please.

[Tyler Blake Threadgill, Vice-President, External Affairs, LKQ Corporation]

Thank you, Derek.

Mr. Chair and members of the committee, I'm Tyler Threadgill, vice-president of external affairs for LKQ in both Canada and the United States. I'm here today to address the pressing issue of the right to repair in the automotive sector, an important matter for Canadian consumers.

While we commend the steps taken in Bill C-59, they fall short of adequately protecting consumers' rights. We firmly believe that a legislative framework for the right to repair is needed to truly safeguard consumer interests.

Voluntary agreements like the Canadian automotive service information standard agreement have proven ineffective amidst the rapid advancements in automotive technology. As technology continues to advance at an unprecedented rate, it's imperative that legislation evolve alongside it to ensure that Canadians' rights and choices remain protected.

We firmly believe that legislation is the solution for restoring competition and preserving consumer choice within the automotive repair and service industry. This legislation should guarantee access to vehicle repair data and repair tools for independent repair shops and aftermarket parts manufacturers. OEMs must be mandated to provide decrypted data and standardized access to wireless or cloud-based repair data, while also refraining from misleading consumers about their repair options.

Additionally, the establishment of a centralized entity to oversee data transmission is essential to maintaining fairness and transparency. Drawing inspiration from the American REPAIR Act, this legislation should address the evolving technological landscape and align with government commitments to innovation and consumer protection. Failure to address these issues through decisive legislative intervention puts Canadian consumers at risk of falling prey to monopolistic practices that stifle competition, increase prices and impede innovation.

In conclusion, we ask this committee to consider our amendments to improve C-59 while recognizing the urgency of this matter and the profound impact that stand-alone legislation can have on protecting consumer rights and fostering a fair and competitive automotive repair industry in Canada.

Thank you for your attention and consideration.

Let us seize this opportunity to empower consumers and ensure a level playing field for Canadians.

We will be happy to take your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you Mr. Threadgill.

Now we go to Macdonald-Laurier Institute and Mr. Philip Cross please.

[Philip Cross, Senior Fellow, Macdonald-Laurier Institute]

Thank you.

A consensus is emerging that Canada’s weak economic growth and low productivity constitute a national crisis. It is hard to avoid that conclusion when real GDP growth in the last decade has been the slowest since the 1930s. As population growth surged, real GDP per capita slumped to levels last seen in 2014.

Bank of Canada's deputy governor Carolyn Rogers recently called Canada’s lagging productivity “an emergency”, saying that “it’s time to break the glass”.

Concern about our flagging growth is not new. A Senate committee warned in 2018 that Canada is falling behind as our competitiveness languished. Former cabinet ministers Lisa Raitt and Anne McLellan, in 2023, formed the bipartisan Coalition for a Better Future to lobby for stronger economic growth. Based on current trends, the OECD predicts Canada’s growth over the next quarter-century will be the slowest in the region.

While faltering growth is widely lamented, the diagnosis of its causes is often off base. The interaction of three variables determines growth: the supply of labour, the stock of capital and the efficiency with which they are combined and deployed—what is called total or multifactor productivity. Canada has relied too much on raising labour inputs. Raising labour inputs in the absence of more investment and productivity likely contributed to lower GDP per capita. Business investment has fallen 21% since 2014, inevitably lowering productivity.

Rogers pinpointed weak investment as the main source of Canada’s poor productivity. The U.S. demonstrates high investment and productivity are achievable in a society that rewards risk-taking and encourages disruptive innovations. U.S. business investment surged 33% since 2014, the same period over which it fell 21% in Canada.

Optimism about the potential productivity benefits of artificial intelligence has sent the U.S. stock market soaring on increased confidence. Higher productivity can simultaneously boost growth while slowing inflation.

Lagging growth in Canada is a national crisis. As our incomes fall further behind the U.S, the temptation increases for our most productive and ambitious people to emigrate. The late Michael Bliss, Canada’s leading historian of business, warned “the one sure prescription for the eventual failure of the Canadian experiment in nationality would be to create an ever-widening gap in standards of living between the two North American democracies.” Avoiding this outcome should be our national priority. One solution is to encourage not restrain the development of our natural resource sector, which is by far Canada’s leader in investment and productivity.

Distracting from our focus on growth is the controversy surrounding the recent hike to the carbon tax, which provoked its advocates to mount a last-gasp defence. Three hundred supporters signed a petition backing the tax, buttressed by numerous op-eds and media appearances. However, rather than being persuasive, advocates mostly demonstrated how little they have learned from their long-standing failure to sell the tax to Canadians.

Proponents like to say the tax is the most efficient way of reducing carbon emissions while limiting the economic losses. This ignores that technological change is even better at lowering emissions while boosting economic growth, as the U.S. has demonstrated. The credibility of carbon tax advocates was damaged when academics claimed B.C.’s small 2008 carbon tax triggered a sharp drop reduction in gasoline sales. Supporters saw this drop as evidence emissions could be slashed with a small carbon tax, an exercise of hope triumphing over experience that economists are supposed to be immune to.

Today, proponents acknowledge a carbon tax needs to be painful to meaningfully lower consumption. However, the demonstrated willingness of supporters to assert the tax had magical properties severely undermined their credibility and reputation for impartiality.

Proponents quote the Bank of Canada’s calculation that the annual carbon tax increases of $15 a tonne contribute 0.15 percentage points to inflation. This sounds trivial when inflation is running at 8%, but represents a sizable 7.5% of the bank’s 2% target. Moreover, the bank said its estimate does not include second-round effects. Arguing that the carbon tax impact is trivial is risky for advocates, since its impact on behaviour also would be limited, making the tax more an exercise in signalling than a serious attempt at lowering emissions.

Christopher Ragan, head of the Ecofiscal Commission, recently decried public debate about the tax as having degenerated into a “dumpster fire”. The reality is that an open and honest debate was never what carbon tax advocates wanted. When supporters were on the ascendant, the poor level of debate, including assertions that carbon taxes would be painless despite mountains of contrary evidence and a naive faith that governments would return all revenues to households, was ignored. Now that support for a carbon tax is waning, it is hypocritical to lament that public discussion is abysmal.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Cross.

Now we will get to members' questions. In this first round, each party will have up to six minutes to ask questions. Then we will see what time we have left for a second round.

We are starting with MP Hallan for the first six minutes.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Thank you, Chair.

Thank you, Mr. Cross, for your statement and for being here.

As you noted, the senior deputy governor of the Bank of Canada, Ms. Rogers, said that our productivity today is in a “break glass” emergency state. GDP per capita has declined in the last six quarters. In fact, the GDP per capita is lower now than it was back in 2018.

You also recently wrote about how bad productivity is. It's worse than it was back in the 1930s, when the Great Depression was happening. As you noted as well, on the GDP per person, Canada will be the absolute last in growth when it comes to productivity until 2060. You also made mention of these experts who have been pro-carbon tax, and in your recent statements, you've said how the carbon tax is one of those factors that have affected productivity issues, after eight years of the current government.

Can you expand a little more on what your message would be to those 200 experts who are pro-carbon tax? How bad is the carbon tax for the productivity issues, and what is the link between the two?

[Philip Cross]

Thank you for the question.

First, I would emphasize that productivity isn't worse than it was in the 1930s. We would be living in huts if that were the case. What I said was that GDP growth over the last decade has been the worst since the 1930s.

It's still true, what Rogers said, and I'm glad Rogers made the point. I don't think people realize how extraordinary it is for a deputy governor of the Bank of Canada to declare our productivity an emergency. Productivity is not something the Bank of Canada directly has a responsibility for. Their only mandates are to keep inflation at its target and to maintain financial stability. Obviously, the bank feels very strongly that our low productivity is a threat to keeping inflation under control.

I'll elaborate on that. For example, wage growth is 4% these days. Yesterday, in its monetary policy report, the Bank of Canada discussed how wage increases of 4% can only be non-inflationary and can only be consistent with a 2% target if you have productivity growth. We have that in the U.S. I think the U.S. demonstrates the benefits of a society where you have strong productivity growth due to high rates of investments. You can have high rates of income increases and maintain low inflation.

Obviously, the carbon tax is one variable that's going to complicate achieving low inflation. If you have energy prices rising, that means there's going to be more pressure in other sectors of the economy to lower inflation. That's one reason why.... If you compare the behaviour of the Canadian and U.S. economies these days, the U.S. economy is ripping. It's growing, if anything, much too fast. Its GDP growth is solid. It has added 300,000 jobs in the most recent month. The only question in the U.S. these days is whether the Federal Reserve board will have to postpone cutting interest rates because of it.

If you look at Canada, our GDP growth over the last couple of quarters has essentially been zero. It would be a decline on a per capita basis. We added no jobs in the most recent month, while the U.S. was adding 300,000. You can see right away that our stock market is lagging substantially behind the U.S. market. A lot of this reflects.... Again you have to look at the fact that over the last decade, the U.S. increased business investment over 30% and ours dropped over 20%. That 50% gap is extraordinary. We have never seen something like that. This is why the Bank of Canada is saying, “break the glass”.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Yes. I wanted to get one more question in. Thank you. I don't mean to cut you off.

I want to know your thoughts on the impact of higher taxes, such as the carbon tax, and of economic uncertainty on productivity, and what that says about living standards for Canadians. How does that have an impact on the living standards of Canadians? How are they experiencing those living standards today?

[Philip Cross]

I don't know how much. I've never seen a study quantifying the impact of the carbon tax on investment. The PBO has quantified its impact on household incomes, and GDP and found it to be negative overall.

I haven't directly seen a study of investment. I think consensus in the economics profession would be that it's a wide range of variables—uncertainties about regulation and how hard it is to get projects moving forward. Obviously, some projects have just outright been nixed, including pipelines off B.C. and the TransCanada eastern pipeline, just saying outright that LNG projects on the east coast are not going ahead. It has been over and above uncertainty. There has just been an outright refusal to proceed, especially with projects in the resource sector and especially in oil and gas within that sector.

I think that has had a much more negative impact on investment in this country.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

How are Canadians experiencing—

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Hallan.

We have limited time.

I want to go to MP Weiler for his six minutes. I'm not sure if we will get all of the six minutes in. We may have to break for the vote, and I do want to have enough time when we come back so the Bloc and the NDP also have time for the witnesses.

We have MP Weiler, please.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you, Mr. Chair.

I want to thank all of our witnesses for being here today and for their testimony already.

I want to ask questions of Dr. Leah Temper. I appreciate the joint brief you submitted with the Quebec Environmental Law Centre, particularly on the subject of greenwashing, where Bill C-59 makes some important changes.

I was hoping you might be able to share with this committee what Canada can learn from how other countries have approached this issue. We wouldn't be a first mover in this space and we may be able to take some lessons about how to implement this in Canada from what they have done in other jurisdictions.

[Dr. Leah Temper]

Thank you for the question.

Yes, I'm happy to talk about examples from around the world. There is quite a lot happening.

The U.S. and of course the U.K. both have very comprehensive green guides. In the U.S. I believe they're called the Green Guides. The Federal Trade Commission has them. They outline very clearly what sorts of specific practices are deceptive in all instances. These include the use of generic claims, the sorts of practices that I mentioned—the cherry-picking issue of making claims that include only a very small portion of your business, but they're assumed to refer to the whole business.

How long do I have to answer, by the way?

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

I have six minutes for all questions and answers, so there's no rush.

[Dr. Leah Temper]

Okay, that's great, because there are lots of examples.

If we move over to Europe, they recently have two directives that attack the issue of greenwashing. One is called the “green claims directive” and the other one is called “empowering consumers for the green transition”. They've also banned a number of practices.

Of note among these is that you can no longer make any claim to carbon neutrality or to net zero using offsets in Europe, because it's clear that in many instances offsets obviously are not effective and are not permanently storing carbon, and that it's very difficult for consumers to really understand the complexity of these types of green claims.

There is also—

[The Chair, Liberal, Peter Fonseca]

I'm going to interject. I apologize, Dr. Temper and MP Weiler.

We're getting close. Do we have UC for all members to vote virtually here?

I am looking around and I see that it is okay.

[Some hon. members]

Agreed.