Natural Resources Committee on March 7th, 2013

[Joan Crockatt, Conservative, Calgary Centre, AB]

So our high-tech, high-quality jobs in Canada are growing at a rate of 18% per year.

[Céline Bak]

That's in the clean technology sector; I can't say for all other IT sectors.

[Joan Crockatt, Conservative, Calgary Centre, AB]

You said that a lot of those jobs were energy related. I'm wondering how you correlate.... Has the energy sector responded by developing high-quality, high-tech jobs in clean energy?

[Céline Bak]

I think there is an opportunity in Canada for us to develop greater ties between our innovation-based industries and our established traditional industries. Obviously, as Monsieur Lavoie and Monsieur Morin spoke about earlier today, there are investments being made.

I will say that most innovation-based industries in Canada find it harder to sell at home than they do to sell abroad.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Even if their primary customers may not ultimately end up being in Canada, or only some of them, are they building on what they're learning in Canada to sell these high technologies elsewhere?

[Céline Bak]

Not enough.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Not enough.

So this is where you want more innovation to happen.

[Céline Bak]

Well, with a greater familiarity between our innovation-based smaller companies and our large established companies, I think together we could put together what you might call a power play.

These markets are still emerging, which means that you'll go to a market and work that market for three years, and then perhaps leave the export market for a period of time. It sort of depends....

I think if our big and small companies, like our large engineering firms, for example, were more familiar with our companies such as those that were discussed earlier, we would be able to do very well.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Crockatt. Your time is up.

We go now to Mr. Julian, for up to seven minutes.

Go ahead, please.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I want to thank all our witnesses who have said some very interesting things.

Ms. Bak, I will start with you.

We know that we have a record trade deficit. We have lost more than 500,000 jobs in the manufacturing sector. The situation in terms of value-added jobs is very bad in Canada. There is no doubt about that.

So I would like to know how we could implement policies to help create jobs in your industry. What is the job creation potential in clean technologies? What is the difference between our current percentage and the global market? What kind of results could we obtain by implementing policies that could really spark interest in the sector and promote it?

[Céline Bak]

Industry policies are still being developed when it comes to international financial institutions and our policies on developing markets.

Currently, about a quarter of our sector's exports end up in developing markets. Obviously, if we were to develop those markets—be it in Latin America or Asia—job potential would increase considerably.

We currently hold 1% of the global market. If we had our fair share, 2.6%—our share of international trade—our industry would generate almost three times as much revenue as it is currently generating. So there would potentially be at least twice as many jobs in the sector. We anticipate that business growth will lead to higher income per job owing to greater productivity and competitiveness.

By focusing more on emerging markets, we will have access to markets that are not necessarily visible at this time. We can do that by developing policies with regard to those markets, and by giving due attention to the fact that our competitors, in Germany and elsewhere, are investing in feasibility and financing studies through concessional investing and concessional support. Germany and Japan are very strong in that area, and Korea is also gaining ground. So that's something to think about.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I see, but we are talking about hundreds of thousands of potential jobs and the risk of Canada losing that opportunity. So that's something to think about, especially given the current size of this sector, which is lacking value added.

Thank you very much.

Mr. Lavoie, I will now go to you, since I thought your testimony on November 1, 2012 before the Standing Committee on Industry, Science and Technology was very thought-provoking. You said the following:

...this week we published a report that compared the R and D tax credits for large companies across the OECD and some other emerging markets. We found that the international competitiveness of our R and D tax credit will fall from number 13 to number 17....

We already know that we have the worst record in the industrialized world in terms of public investment in R and D, the worst record in terms of patent development, and the second worst record in terms of the number of Ph.D.s we produce. Canada in the last six years has a lamentable record on R and D.

Could you comment a little more in terms of the competitiveness of the R and D tax credit falling to number 17, and what that means in terms of the Canadian economy?

[Martin Lavoie]

That was in the context of the changes made in last year's budget to the SR and ED tax credit. That international comparison was made for the treatment of large companies. It did not include the tax credit that is offered to what we call small CCPCs, which benefit from a 35% refundable tax credit under SR and ED. The large companies only benefit from a 20% tax credit, which will now be 15%. It was in that context that we compared the competitiveness of the tax credit.

We do have some members who will use that tax credit in the clean energy sector. Some of our members, not a big group but close to probably 75 to 100 of our members in Quebec and Ontario who are in the business of wind energy and solar energy, will use that tax credit to sustain their business.

In terms of that, what it means for them, it's going to cut, of course, all their capital investments.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you for that.

Mr. Dick, thank you for your testimony as well. Much of the research being done in the biogas sector is being done in Europe. You mentioned, and I'll quote you, that we are “far behind”. You mentioned a Canadian biogas strategy.

This is now becoming.... Perhaps the title of our study should be “We're Far Behind: How Do We Catch Up?”, because certainly that's been reinforced by so many witnesses.

How do we catch up in biogas? How do we put in place a Canadian biogas strategy?

[Dennis Dick]

I suppose we need a study to see who we can best align with to mentor and collaborate with. A start, as I mentioned, would be Ontario's Biogas Association. There's a lot of help to be had from the American biogas association. We can simply look to Europe and see what they have done in those countries, especially in Germany and England. The U.K. is very aggressive on biogas these days.

We have the knowledge in these associations and industry stakeholders to put something together.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

What is the role of the federal government then in helping to catch up? We are so far behind in so many sectors, and in R and D we're really at the bottom. We're cellar-dwellers, in sports parlance.

How do we catch up in your area, and what does the federal government need to do?

[Dennis Dick]

Put together that central agency to collect that information, study the policies of other countries, and follow their lead; in fact, build on their lead. As we can see in the European countries, when the biogas production is incented on the back end, growth explodes. Industry, especially agriculture, just needs a bit of a chance, and as Canadians we'll be right in there.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Julian.

We'll go now to Mr. Hsu, for up to seven minutes.

Go ahead, please, sir.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Thank you.

Let me continue with you, Mr. Dick. I'm reading in your notes about a Canadian biogas strategy. It seems to me that this would require a lot of coordination between the provinces, since feed-in tariff is a provincial matter and a number of other facets of biogas are provincial.

Is this something the federal government should be collecting the provinces together to do? What does a Canadian strategy look like?

[Dennis Dick]

A Canadian strategy, in simple terms, would be to incent provinces' feed-in tariffs for electricity. That's their jurisdiction, but we need more than that. The feed-in tariff for electricity isn't enough, and we can see that as biogas has not taken off at all at very high levels in the last few years.

The federal government, possibly delivered through the ministries of agriculture, environment, and energy, could provide those price adders that would make it attractive for investment and development in biogas systems.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

You're saying to provide the price adders without regard to the different provincial programs and incentives for biogas, just the national price adder.

[Dennis Dick]

Correct.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Okay.

Mr. Morin, you said there was a lack of regulatory framework for plug-in electric vehicles.

[Andrew Morin]

Yes, and—

[Ted Hsu, Liberal, Kingston and the Islands, ON]

I was wondering if you could expand on that to explain what's missing and who needs to do some work.