Environment Committee on Nov. 6th, 2018

[Julie Dzerowicz]

That makes sense. It just helps me because I knew about the heating and I knew about the gas price, and now it makes sense that even food will be affected—I might buy locally produced food, and that might be different from buying something that comes in from South Africa or New Zealand. It all depends on the products and how they're actually brought in. That makes sense.

I want to go back to something Mr. Warawa mentioned. I think you were going through a bit of an example around how low-income people might get more money back than they've actually paid out. My understanding is that Mr. Warawa made some sort of reference that the government shouldn't go into a deficit to be able to zero in on this. My understanding is that this is not at all what's going to be happening. Maybe you can explain a bit more about how that is the case.

I think it has to do with how, if you look at the overall pool of what comes in, it includes businesses and large polluters that come back into the pool, and that's how we can actually move more money back into low-income earners.

I just wanted to see if you could maybe elaborate on that.

[Miodrag Jovanovic]

Yes. I think the first point is that the climate action incentive payment is just a mechanism to redistribute the proceeds from the carbon pricing system, which is the OBPS component and the fuel charge component. There will be a reconciliation every year to make sure that no more and no less is given back—and this is all based initially on estimate, of course. If there's any discrepancy, then adjustments will be made the following year in the climate action incentive payments, as well as in the amount allocated to the SME and MUSH funds.

There's an accounting that will support that. It will be perfectly revenue-neutral. Just to clarify, the government will not actually use other sources of funds to supplement. It will be neutral.

The other thing is why, despite its being revenue-neutral on an aggregate basis, we can still say that lower-income families will get more. It's because, again, we're giving the same amount per capita, regardless of income. By doing so, effectively, we give relatively less to higher-income individuals or families than we give to lower-income families, because higher-income families have more money and are spending more, particularly on discretionary items, which may have greater content as well. They're spending more, so they would be paying more fuel charges than lower-income families would.

By giving the same amount to these two families, you're effectively giving more than they need to lower-income families and less than they need to higher-income families to compensate for the fuel charge. That's why I said it was progressive by nature. That's the effect of it.

The point here was just to find a simple mechanism to give back the money or the proceeds from the regime to individuals, and that is the climate action incentive payment through the T1 regime.

[Julie Dzerowicz]

Great. Thank you.

Just because Mr. Gardiner hasn't received a question yet, I'm curious about this: Why is the federal government delegating the decision to price carbon gas emissions in the offshore area of Newfoundland and Labrador to the province, instead of determining a price on greenhouse gas emissions for the designated offshore area itself, as it could do under part 2 of schedule 1 of the Greenhouse Gas Pollution Pricing Act?

Do you have all that?

[A voice]

[Inaudible—Editor]

[Julie Dzerowicz]

No, you have to let him answer. I'm kidding. Anybody can answer.

[Timothy Gardiner]

I can give you the short answer. The technical answer will come from my colleague.

It was at the request of the province. It reflects their view that all aspects of the oil and gas regime, including emissions, should be regulated under the accord acts.

[Julie Dzerowicz]

Perfect.

I think I'm done.

[The Chair]

You have five seconds.

[Julie Dzerowicz]

So, thank you.

[The Chair]

Mr. Stetski, you have three minutes.

[Wayne Stetski]

I am very supportive of a price on carbon pollution as a suite of initiatives that we should have in place to deal with climate change. But I'm also interested in the effectiveness and the efficiency around that.

I was mayor of Cranbrook from 2011 to 2014. About 2013, the way the price worked there, the municipality owed about $60,000 or $70,000, in theory, to the province for our carbon costs. We were to write them a cheque. Instead of doing that, I asked them whether we could invest that $60,000 back into the community on energy efficiency and reducing carbon, and whether that would work. They said yes.

I'm interested in whether there's anything in this proposal to encourage municipalities to do the right thing, other than perhaps not to buy as much gas. Are there any other kinds of incentives here that can go back to municipalities to benefit the environment in their local communities?

[Miodrag Jovanovic]

I think that this is effectively the purpose of the funds that have been created. In addition to giving back the money to individuals, it recognizes that some of these entities may decide to take action. These funds would be there to support these actions.

[Judy Meltzer]

I would just add a bit of a broader context. While this is one important tool, there are other funds—including, for example, the low-carbon economy fund—and other types of initiatives that are there to provide that kind of support for municipalities, such as investments related to their own carbon footprint and others. There's a suite of different ways in which those incentives may be generated at the municipal level beyond the pricing mechanism itself.

[Wayne Stetski]

The taxation system can be very confusing to Canadians. Is there any information that the federal government needs to be providing to taxpayers to make sure they are maximizing their opportunity to benefit from any of these initiatives? Right now, if I go to an accountant, they may pick up on something that could benefit me that normally I wouldn't even know was there.

Is this simple enough that it will all be done automatically for Canadians?

[Miodrag Jovanovic]

The interaction with tax would be limited to claiming the climate action incentive payment, basically. The tax system is the vehicle that has been selected to give back that money. That's going to be the tax interaction with this system, with the carbon-pricing regime, in a way.

[Wayne Stetski]

Perhaps you could include small businesses in your answer as well.

[Miodrag Jovanovic]

Again, for small businesses, the approach is slightly different to the extent that there will be a fund set up to help them transition or take action.

For individuals, basically, in order to get the incentive payment, they have to file a tax return, starting in 2018. The Canada Revenue Agency will determine how best to modify the T1 return to facilitate that claim. They will also have to identify whether they are outside of a CMA to be able to claim the 10% top-up. On that basis, the CRA will be able to pay the incentive. That's going to be, again, in implicated provinces.

[The Chair]

You're out of time.

Colleagues, we have 14 minutes left for the meeting. I was going to do five, five and five.

[Mike Lake]

I'm seeing that the meeting was scheduled until 5:30, which is the normal time. Why would we be ending half an hour early?

[The Chair]

Oh, sorry, we wouldn't be. For some reason, there's a New Zealand and Australia wine tasting at 5:00 that somehow got into my mind.

[Some hon. members]

Oh, oh!

[The Chair]

We will go until 5:30, the appointed time, so we have more time than that.

Why don't we start with some five-minute rounds? We'll just move it around as I redo my math.

[William Amos, Liberal, Pontiac, QC]

On a point of order, Mr. Chair, where is that wine tasting?

[The Chair]

I'll find out. I think it's next door.

Mr. Bossio, do you want to start? We'll go with six-minute rounds to start.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

Thank you.

A common refrain we hear around the pricing mechanism is “Why are we doing this? It's not going to make a difference. It's not really going to change people's behaviour.” Can you give us an explanation as to why economists feel that a pricing mechanism is the most efficient and cost-effective way to change behaviour? Are there any examples out there that you can provide that are being used to shine a light on the fact that this does work?