Environment Committee on May 5th, 2022

[Colin Carrie, Conservative, Oshawa, ON]

I know, but if we can't better define it.... The government has had seven years, Madam Geller. You can hear the frustration in my voice. I'm not frustrated with you, but it's 2022, and industry needs certainty. Ms. Collins, Ms. Pauzé and I are just trying to find out. It's been seven years, and we can't come up with a definition of what an inefficient subsidy is. You said there are ongoing consultations.

Maybe a better question would be whether you could provide to the committee the results of the consultations you've already done and whether you are perhaps able to give us an idea of the date on which you actually started the consultations. I am worried about the billions of dollars of investment that we're losing. Industry does need certainty, and I know they want to work with the government.

[Hilary Geller]

Yes. Thank you.

We can provide information on the consultations that were held in 2019, but perhaps I'll try it this way. The government, I think, can be clear on what an inefficient fossil fuel subsidy is not, and that was outlined in the G20 commitment itself, which talked about dramatic GHG reductions, renewables and clean energy. I think it's important to keep that in mind as well.

[Colin Carrie, Conservative, Oshawa, ON]

Yes, it's good to keep it in mind. Unfortunately, industry needs certainty.

As I was saying, in Ontario we are losing.... Two hundred and fifty thousand jobs in the energy sector have really traditionally relied on the oil sands and the energy sector. We do pipe. We do valves. We do computers. They're all good-quality union jobs that keep people at work, and these investments are competitive internationally.

I don't think I have much more time left, but have we ever had a WTO challenge on these inefficient subsidies? Do we have something to worry about?

[The Chair, Liberal, Francis Scarpaleggia]

Could we have a yes or no? Then we'll go to Mr. Weiler.

Have we ever had a challenge at the WTO on the definition of subsidies?

[Hilary Geller]

We would need to get confirmation from our colleagues at—

[The Chair, Liberal, Francis Scarpaleggia]

At trade...yes.

[Hilary Geller]

It's the work of the lawyers.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much.

Thank you, Mr. Chair.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Ms. Geller.

Mr. Weiler.

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

Thank you, Mr. Chair.

I'd also like to thank our witnesses for joining our committee today.

My first question is for the Department of Finance.

There was a question earlier about how we're getting rid of the flow-through shares for oil, gas and coal exploration and production this year. I am hoping you can give me an example of other tax measures that are currently in place that may be considered inefficient fossil fuel subsidies.

[Miodrag Jovanovic]

Where we stand currently is that we believe the nine measures identified using the approach we used up until recently—not presuming the outcome of the current framework analysis we're doing with ECCC—that we by now have eliminated or announced that we will eliminate, because it is still a proposal.... Those nine were identified through the tax expenditure, so in our tax system, and are considered to be supporting the production or the consumption of fossil fuels.

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

Which ones have not already been eliminated and are currently in place? Could you give us an example of one?

[Miodrag Jovanovic]

Do you mean ones that are still in the phase-out? Although the elimination has been announced, they may still be in a phase-out. Is that what you're suggesting?

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

I'm not asking about ones that are already phasing out, but the ones that are still in place that haven't been targeted for phasing out.

[Miodrag Jovanovic]

As I said, where we stand now, we think that we've phased out or announced a phase-out of all of them. If you look at our tax expenditure report, there's a specific section there that mentions the tax expenditures that are supporting the fossil fuel sector. All of them have either been already phased out or are in the process of being phased out.

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

Thank you very much.

I have a quick question for ECCC and NRCan. How does Canada's proposed CCUS tax credit compare with the level of support offered by Norway and the Netherlands?

[Hilary Geller]

I can't answer that question. I don't know if that is a finance question or for Nada.

[Nada Vrany]

I wonder if finance could answer that.

Thank you.

[Miodrag Jovanovic]

I'm not 100% sure I can give the answer to that.

What I can say is that it's a bit difficult to directly compare, because the nature of the support was different, I believe. My understanding is that, in Norway, the support was getting up to probably around two-thirds. Again, the support we are proposing is an upfront, refundable, investment tax credit that has a 50% rate of capture and 37.5% rate on transport and injection.

[The Chair, Liberal, Francis Scarpaleggia]

Ms. Pauzé, you have the floor for two minutes.

[Monique Pauzé, Bloc, Repentigny, QC]

Thank you, Mr. Chair.

I have two questions.

Can the federal government use the money saved by eliminating fossil fuel subsidies—nine was the number given earlier—to fund a just transition? Is this feasible, yes or no?

[Miodrag Jovanovic]

Eliminating a tax measure causes a reduction of tax revenues. Since these are tax measures, that money is returned directly into the consolidated fund, and any other measures that support renewable energy would be funded from the government's consolidated fund.

[Monique Pauzé, Bloc, Repentigny, QC]

So there is no—

[Miodrag Jovanovic]

There is no direct link between the two, but the answer is yes.

[Monique Pauzé, Bloc, Repentigny, QC]

All right.

I'm going back to the carbon capture and storage tax credit.

We know that after five years, the companies that use it must undergo an initial audit. Earlier, I spoke to you about transparency problems. If a company benefitted from the tax credit for five years and wasn't transparent, it could have diverted funds from the subsidy program. Are there any penalties in such a case?