Thank you very much.
Let me make this very quick.
Members of the committee, thank you for the opportunity to appear as part of your pre-budget consultations. I'm here today to make a case for reducing the tax burden of the ethanol and biodiesel industry to a level that is competitive with that of other countries, most notably the United States. In addition to creating new economic opportunities by fostering the growth of the renewal fuels industry, these tax cuts would provide substantial benefits to primary agricultural producers and reduce greenhouse gas emissions in the transportation sector.
Before going any further, allow me to say a few quick words about our industry and our association. The Canadian Renewable Fuels Association represents a full-value chain for both the ethanol and biodiesel industry. Our industry is relatively new in Canada, with only 575 million litres of ethanol production today and 100 million litres of biodiesel production, but the industry is quite mature elsewhere in the world, including the United States, Brazil, and western Europe. All around the globe countries are rapidly expanding their production capacity for renewables as a way of reducing greenhouse gas emissions, expanding markets for agricultural production, and enhancing energy security.
During the last federal election the Conservative Party of Canada committed to a 5% average renewable content in gasoline and diesel fuel by 2010. This commitment was also advanced by two of the federal opposition parties and is consistent with policies of a number of provincial governments. In speaking about this commitment to increase the use of renewable fuels, the government has consistently spoken about the benefits associated with producing these renewable fuels domestically: benefits for agriculture, benefits for rural communities, benefits for the environment, and benefits for consumers.
It is relatively straightforward for the government to meet its commitment to require renewable content. Existing legislation allows for such a regulation to be implemented quite easily. However, to have the production of these fuels take place domestically in a country whose markets are integrated with a major established renewable fuels producer is more challenging.
In order to domestically produce ethanol and biodiesel needed for the 5% requirement, we require competitive tax rates for the production and sale of renewable fuels. Canadian producers cannot compete with producers in neighbouring jurisdictions that pay tax rates that are two to four times lower than those paid in Canada.
In the United States, blender tax credits for ethanol are the equivalent to 15¢ a litre, and for biodiesel they are 30¢ per litre. In addition to these blender tax credits, there are income tax programs for small producers and commodity inputs. These are not short-term initiatives to spark the growth of the U.S. industry. Rather, they are stable long-term tax policies designed to enhance energy security, reduce greenhouse gas emissions, and reduce the need for farm income support payments.
It is important to note that Canada has a number of natural advantages in its ability to produce ethanol and biodiesel. It is one of the world's largest agricultural exporters and has vast untapped pools of agricultural commodities like wheat and canola that are currently shipped abroad for processing. For example, we currently export over 70% of our wheat production for processing abroad. That's over 15 million tonnes, or enough to produce five billion litres of ethanol, twice the amount required for the government's 5% commitment.
My point is simply this. We're not looking to the government to mask some inherent inefficiency in the production of ethanol and biodiesel. We're asking the government to implement a series of tax credits that parallel successful tax policies that have existed in the United States since the 1970s.
I've tabled a series of charts that outline what these tax cuts would look like and what the associated costs are. I'd be happy in the question and answer period to go through some of the benefits as well, because I think it's important that we look not only at the costs but at the benefits as well.
Very briefly, if you look at the number of jobs and economic activity, you're talking in excess of 9,000 jobs and $1.8 billion in annual economic activity, which is really unprecedented and unparalleled in terms of the scope of what it could mean for rural Canada, and it could potentially offset some expenditures in agricultural support payments, as well as in greenhouse gas emission reduction programs.
With that, I'll move on. Thank you.