Environment Committee on May 5th, 2022

[Laurel Collins, NDP, Victoria, BC]

And so—

[The Chair, Liberal, Francis Scarpaleggia]

We're out of time, Ms. Collins. I'm sorry about that.

[Laurel Collins, NDP, Victoria, BC]

Thank you so much, Mr. Chair.

[The Chair, Liberal, Francis Scarpaleggia]

We have Mr. Dreeshen for five minutes, please.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much, Mr. Chair.

The first thing I'd like to do is put on the record a letter that we all got from the Government of Saskatchewan last week. It says:

Please accept this letter, on behalf of the Government of Saskatchewan, as our province’s expert witness submission for the Standing Committee on Environment and Sustainable Development’s study of Fossil Fuel Subsidies (the Committee).

As per section 92A of The Constitution Act, the exploration, development, conservation and management of non-renewable natural resources is provincial jurisdiction. In executing this authority, the Government of Saskatchewan is, and will continue to be, a proud supporter of the oil and gas sector, which prides itself on working with industry, rights-holders, other stakeholders and Indigenous communities and peoples, to develop Saskatchewan’s natural resources and provide the world with ethical and sustainable energy products.

Again, they speak to the fact that:

The lack of any federal engagement, logical definitions and a clear scope for the Committee make it difficult to form a complete response.

I think we've heard that this morning. It continues:

Saskatchewan does not share the extreme and ever-expanding definition of subsidies that some parties do and as an order of government, we believe Saskatchewan is not bound to take actions in areas of exclusive provincial jurisdiction based on unilateral commitments made by the federal government—particularly commitments made without any prior meaningful engagement with the province.

What level of consultation has been taking place with provinces where the oil and gas industry is a critical part not only of their success but of that of this country?

[Hilary Geller]

If I could, I'll point to consultations that are ongoing in the context of significant new initiatives that the government has announced, for example, the oil and gas emissions cap—

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Excuse me, but that doesn't direct back to the question I had about the previous ones. New initiatives, it's great that they're talking about that.

I'm wondering. We hear a lot of, “This is what we're going to tell you is going to happen,” but the provinces are looking at this and saying, “I'm sorry, you're not doing that.” Maybe you want to talk about what's going to happen in the future, but these are the subsidies and these are the questions that we have for today.

Can we relate it to that first?

[Hilary Geller]

As I said earlier, most of the work that has happened so far in meeting the G20 commitment has happened on the tax side. My colleague Mr. Jovanovic could talk about what the consultation process is on the tax side. There have been oil sands subsidies, etc., that have been eliminated on the tax side.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Certainly, and I appreciate that. Coming from Alberta where, for over 20 years, we have had a carbon price on emissions, which is what developed our carbon capture, utilization and storage programs, we understand that.

I'd like to move to another point. We have had EDC come in and we've had discussions with them. The argument is that anything that is ever loaned out to an oil company or to businesses is some form of subsidy, which has been debunked by the corporation.

However, I want to use this line of reasoning. We have commitments, as a Canadian government—and we've had them for decades—to do well in other countries, to take our human rights records, to take our environmental expertise and to look at helping them. That is part of our government strategy. That is a subsidy, if you like, if you look at our international goals. That doesn't necessarily happen with other investors in other countries, but this is something that Canadians do and have done for decades.

I'm curious to know if the bit of extra help that you might get on a preferential loan and so on couldn't be considered as us doing our part to help this world.

[Hilary Geller]

In the context of the work that is ongoing right now to identify inefficient fossil fuel subsidies, I'll note that EDC is not scoped in to that work because what they do does not meet the definition of a subsidy. However, we would anticipate looking at EDC in the context of the public financing commitment, which is still at the planning stage.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you.

It is important when we look at what is happening with the relationship between Russia and China, and how all of the other countries in the world are ramping up their coal development. We constantly hear from the minister, not to worry and that he's talked to a few people who are in the EU and they're definitely onside to change things. However, that isn't the reality of what is taking place when we consider what is happening in Europe and when we consider the real actions that various countries are taking.

Thank you very much, Mr. Chair.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Mr. Dreeshen.

Go ahead, Ms. Thompson.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you, Mr. Chair.

Thank you to the witnesses today. I'd like to begin with the Department of Finance and whoever is most suited to jump in to answer the questions.

Could you speak to government's commitment to provide tax relief to businesses that create zero-emission technologies?

[Miodrag Jovanovic]

You're probably referring to the budget 2022 commitment to eventually introduce an investment tax credit of up to 30% for clean technology. The approach here will be to start discussing and do targeted outreach with experts to determine what types of technologies would qualify for that credit.

I would note that there's already some base in the tax system in this regard. For instance, in the previous budget, we introduced a 50% corporate income tax rate reduction for Canadian manufacturers of clean technology.

We also have what we call an accelerated capital cost allowance, which essentially provides firms the ability to write off certain assets more quickly. That allows for full write-offs for investment in clean energy technology, for instance. That's what we call class 43.2. and class 43.1.

I hope this answers your question.

[Joanne Thompson, Liberal, St. John's East, NL]

It does. Thank you.

Still staying with budget 2022, could you detail the government's plan to phase out flow-through shares for oil, gas and coal activities?

[Miodrag Jovanovic]

Sure. The proposal is to essentially allow contracts like flow-through share contracts entered until, I believe, March 31 of next year, 2023, to still qualify for the flow-through treatment. However, for the flow-through agreements in relation to oil and gas and coal, any agreement that will be entered into after March 31, 2023, will no longer be eligible.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you.

This is my final question for you, sir.

Could you speak to why government has decided to deliver the climate action incentive quarterly and how that change will be made?

[Miodrag Jovanovic]

Yes. The climate action incentive payment is how the federal government returns the proceeds, so the federal fuel charge, essentially, in four provinces in Canada. About 90% of the fuel charge proceeds are being returned in these provinces through the climate action incentive payment.

Until recently, Canadians were claiming that payment through their tax returns. They received it just once a year. Now the government is moving that to quarterly benefits so that Canadians can get that payment more regularly.

That's going to start in July of this year. For the first year, it's going to cover the equivalent of six months of payments. Going forward, the payment will be provided on a quarterly basis, but always at the beginning of the quarter, so it's going to still be an advance payment, if you will.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you.

I'll turn now to the environment witnesses and whoever would like to take the question.

Could you speak to what role the commitment on inefficient fossil fuel subsidies plays in supporting Canada's 2030 emissions reduction plan and Canada's effort to cap oil and gas emissions?

I know this was referenced earlier, but just give the specifics to this question.

[Hilary Geller]

Yes, thank you.

The commitment to set emission caps, I think, is separate from the commitment on inefficient fossil fuel subsidies. There are a number of commitments that relate to the oil and gas sector in the ERP. Emission caps is one; methane is another, the clean fuel standard, etc.

At the very highest level, inefficient fossil fuel subsidies are seen to distort the market and make it less likely that the correct investments aligned with the government's vision of a net-zero future with a clean, reliable, affordable energy system will happen. At a very high level, that's the goal of the exercise.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you.

If I can ask a final question, when will government complete its peer review under the G20 process?

[The Chair, Liberal, Francis Scarpaleggia]

Answer very briefly, please. Give just a date, if you have one.

[Miodrag Jovanovic]

The objective is by the end of 2023. It's also going to be dependent on the time frame with the OECD, which is the chair of the process.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

Ms. Pauzé, you have the floor.

[Monique Pauzé, Bloc, Repentigny, QC]

Thank you, Mr. Chair.

I will now turn to representatives of the Department of the Environment.

The World Trade Organization, OECD, IMF, International Energy Agency and World Bank all have a definition of what constitutes a fossil fuel subsidy. However, at her appearance, Ms. Lavery of Export Development Canada did not appear to have a definition.

I spoke about this earlier with one of the representatives from the Department of Finance. Is there a definition in Canada that applies across the board, to all departments and Crown corporations?

I would ask you to answer the question quickly, please, because I only have two and a half minutes.