Finance Committee on Oct. 16th, 2006

[The Chair, Conservative, Brian Pallister]

We are back. We'll continue with our pre-budget consultations. We welcome our guests, our witnesses, for this afternoon. Thank you very much for taking the time to be with our committee. As you know, we have limited time to devote to each presentation because of the large number of presentations we are hearing, but we do thank you for submitting your briefs, which you did forward to us earlier. I would remind you that we have five minutes only for presentations, of course, to allow time for questions and exchange with committee members.

I will give you a visual indication when you have a minute remaining--or less. I encourage you to observe these little hand cues. I will cut you off at five minutes, of course.

Thank you all for being here. We will begin with the Canadian Council of Professional Engineers. Marie Lemay, welcome, and proceed. Five minutes are for you.

[Marie Lemay, Chief Executive Officer, Canadian Council of Professional Engineers]

Thank you very much, Mr. Chairman. Good afternoon. I'd like to thank you for the invitation to appear once again before the House of Commons finance committee.

My name is Marie Lemay and I am the Chief Executive Officer of the Canadian Council of Professional Engineers.

The CCP and its constituent members, the provincial and territorial regulators of the practice of engineering in Canada, represent over 160,000 engineers throughout Canada. We welcome your choice of themes for this year's consultation: Canada's place in a competitive world.

There are two words that I will say often during my presentation, and I urge you to remember them when making your recommendation to the minister. These words are “long term”.

My remarks today will focus primarily on infrastructure issues, but before doing so, I want to mention two other issues where we've also worked closely with the government. I will not discuss them in detail, but I will be pleased to answer questions, if you have any, after my presentation.

I want to move now to the first issue.

Canada's ability to compete globally depends on the availability of skilled professionals. In recent years, in terms of number, self-identified engineers have formed the largest group of immigrants coming to Canada. In recent years, governments have come under increasing political pressure to ease the settlement process for these newcomers and find ways to improve the assessment of their credentials.

The engineering profession has already introduced measures aimed at streamlining the assessment of foreign credentials without compromising public safety or lowering professional standards. We look forward to continuing our work with the government on this very important issue. There needs to be long-term support from the government on this issue. It is not an easy issue to address, but it is a very important one. If we are to succeed, we all need to be committed for the long run. We are, and we sure hope the government is.

I now turn to the second issue, changes in climate and extreme weather events. Innovative approaches are needed to deal with these new realities, and the engineering profession has been at the forefront of developing solutions. The CCP appreciates the support that we have received from the government for shared initiatives on climate change, such as the Public Infrastructure Engineering Vulnerability Committee, and we look forward to continuing our work with the government on these issues, which will also require long-term commitments.

I will now turn to the issue of infrastructure renewal. Canada's infrastructure--our highway system, water system, sewers, and bridges--is vital to our quality of life, public health, and economic prosperity. It is also ultimately a question of public safety and public protection. Yet there are increasing signs that our infrastructure is deteriorating rapidly. We need to change our approach to infrastructure. We need to change what I call the infrastructure culture in Canada. We have to make a conscious decision to increase our efforts to reinvest in existing infrastructure stock and maximize our investment. This means adopting a long-term, holistic approach, as well as implementing life cycle management guidelines for infrastructure.

The cost of infrastructure should automatically include the cost of building it and the cost of maintaining it until the end of its serviceable lifespan.

In recent years, governments in Canada have made considerable strides in allocating new money for Canada's public infrastructure. In the 2006 budget, for example, the federal government provided substantial new funding for public infrastructure over the next four years.

We welcome, in particular, the emphasis on a long-term approach to infrastructure planning, as outlined in the 2006 federal budget.

Long-term plans for strategic infrastructure investment cannot be developed in isolation. Government policy and regulatory or legislative decisions need to have input from the infrastructure practitioners. Governments also need support from the public in implementing new infrastructure policies. Indeed, there is an urgent need to educate Canadians on the importance of infrastructure maintenance and on the crucial need to reinvest in existing roads, sewers, and waters, upon which they rely daily.

It is a lot easier to invest in things that you can see but much more difficult to spend on things that are buried or on maintenance. But I guess that's what leadership is all about: making the right decisions--and they're not always the easy ones.

We are keenly aware of the need to maximize taxpayers' dollars in developing new, long-term approaches to infrastructure. For the past four years we've taken a leadership role in calling for the creation of a national round table on sustainable infrastructure--an independent, multi-stakeholder body that aims to facilitate decision-making on sustainable infrastructure. With an initial focus on public works, we would create a go-to place for infrastructure information and resources. It would bring together all orders of government and industry to gain an improved understanding of infrastructure gaps and could help governments address funding priorities.

[The Chair, Conservative, Brian Pallister]

There will be time for questions as we go on.

We will continue with the Association of Consulting Engineers of Canada, Claude Boivin.

[Claude Paul Boivin, President, National Office, Association of Consulting Engineers of Canada]

Our association represents the private sector engineering companies in Canada. It's a $12-billion-a-year industry that employs about 72,000 people. Our brief today is also about what is really the backbone of any national economy, and that is infrastructure.

People everywhere in the world need clean drinking water, efficient waste treatment, safe transportation, and reliable energy. The bad news, however, is that for decades this country has ignored infrastructure and underinvested in its development and renewal. Today our total accumulated infrastructure debt is well in excess of $60 billion, and this second national debt of Canada is growing by more than $2 billion a year.

A quote by John F. Kennedy says it well: “The time to repair the roof is when the sun is shining.” Certainly the sun is shining on Canada and Canada's economy, and the time has come for us to fix the proverbial leaky roof that is our infrastructure.

The good news is that governments at all levels have recognized the problem and are now committed to investing in our infrastructure. So what Canada now needs, as Marie Lemay said, is a long-term national infrastructure plan that would cover at least twenty years. It would include strategic priorities, targets, and, most importantly, long-term spending commitments from all orders of government. We simply can't invest billions and billions without a well thought through plan.

To help develop this long-term infrastructure plan effectively, Canada will need a national round table on sustainable infrastructure, to which my colleague Marie Lemay was referring in her presentation. Consequently, as an association and an industry, we strongly recommend that $1 million a year for five years be included in the next federal budget for this round table.

A related infrastructure issue is how construction design professionals like engineers are chosen. Low-priced bidding for professional engineering services, which some governments like to use, results in what are really false economies that choke innovation and ultimately negatively affect our productivity and competitiveness. But we have good news on this front. A formal group of public sector infrastructure experts, recently working under the aegis of the National Research Council of Canada, Infrastructure Canada, and the Federation of Canadian Municipalities, has just released a best practice guideline for selecting an engineer--one really developed by the public sector for the public sector.

Our recommendation in this case is very simple: that Canada adopt the InfraGuide best practice for selecting a professional consultant. This will ensure that we are investing wisely in the upfront engineering design of our infrastructure.

Our last issue is Canada's international aid program. CIDA is currently in the process of de-Canadianizing our Canadian aid. We are taking the Canadian brand off our Canadian aid programs. CIDA has also abandoned its funding of infrastructure. This comes at a time when the leaders in developing countries have clearly said to all of us that infrastructure is their single top priority.

Just to summarize, then, our association is asking for four things today: first, a long-term plan to renew Canada's infrastructure; second, the establishment of a national round table bringing together infrastructure experts; third, the selection of engineers based on skill, and finally, CIDA funding for infrastructure in poor countries.

Thank you, Mr. Chairman.

[The Chair, Conservative, Brian Pallister]

Thank you for your presentation.

The next presenter will be Chuck Szmurlo, vice-president of Enbridge.

Welcome.

[Chuck Szmurlo, Vice-President, Energy Technology and Business Development, Enbridge Inc.]

Thank you, Mr. Chairman.

Good afternoon, distinguished committee members.

On behalf of Enbridge and its 4,600 employees, I'm pleased to share with you our perspectives on Canada's place in a competitive world. The focus of my remarks will be on the key role played by clean energy technologies.

Energy is a vital component of the Canadian economy, not only as a large export-oriented industry in its own right but also in powering the balance of the economy. Enbridge operates Canada's largest natural gas distribution utility and the world's longest crude oil and liquid pipeline system. A safe and reliable energy transportation system is one of the foundations of the attractive investment climate that Canada currently enjoys.

One of the challenges facing Canada is to introduce clean energy technologies into the energy supply mix in the face of significant barriers. Market forces alone will not capture the environmental benefits in the short to medium term. This is due to the cost of replacing existing assets before their useful lives are over and the cost advantages held by incumbent technologies with up to a hundred years of development behind them. I believe that selected government policy measures are needed to speed up market entry of clean energy technologies and capture their environmental benefits.

Last week, the Prime Minister announced that his government is launching the country's first comprehensive approach to tackling air pollution and greenhouse gas emissions, including introducing Canada's clean air act in the House of Commons. I congratulate the government on this initiative and look forward to participating in the promised consultations to develop regulatory frameworks. Urban air quality is a serious national health issue, and a coordinated approach with three levels of government as well as the United States will be necessary.

Enbridge is committed to sustainable development policies, and it is actively investing in clean energy technologies, such as wind power and low-impact power generation through natural-gas-fuelled stationary fuel cells. However, I would caution parliamentarians to be realistic about the barriers to commercializing clean energy technologies.

The National Energy Board forecasts that renewable energy sources will only be 10% of Canada's energy mix by the year 2025. Many renewable energy technologies are only marginal in terms of economic viability, making it difficult for the private sector to justify investing without some form of fiscal stimulation by the government.

The wind power production incentive was a well-designed and well-understood fiscal measure that was successful in stimulating investment in wind power. Enbridge, together with our joint venture partners, has investment commitments for 271 megawatts of wind power. I believe the government should restore the wind power production incentive program to maintain a positive investment climate for wind power. A tax-driven alternative approach could be designed to provide the same economic incentive.

Canada's energy mix needs to be based upon a portfolio of energy sources. Low-impact technologies, such as stationary fuel cells, which provide power from electrochemical conversion of fuel rather than combustion, can make an important contribution. Unfortunately, fuel cells are not currently accorded the same status as traditional renewables. We recommend that the government extend the same fiscal treatment to low-impact technologies, such as stationary fuel cells, as it provides to traditional renewable energy technologies, such as wind and solar. Power generated from stationary fuel cells can make a significant near-term contribution to cleaner air in urban areas.

In his announcement last week about the clean air act, the Prime Minister stated that reliance upon regulatory measures would be the policy lever for the clean air act. I agree that a supportive regulatory framework can effect change in investment in clean technologies in the long run and that it is likely one of the most cost-effective approaches. It will be important, however, for the government to be realistic about the long-term reliance on regulatory policy measures to affect investment in clean energy technologies. A phase-in period will probably be required for the new regulations to recognize the stranded assets problems that will be created. Investors will also be faced with a cost premium often associated with new clean energy technologies.

To capture environmental benefits in the short to medium term for clean energy technologies, fiscal measures, such as the wind power production incentive, for both renewable and low-impact technologies, will be needed as complementary measures to the longer-term regulatory measures.

Thank you for the opportunity to present the views of Enbridge to your committee.

[The Chair, Conservative, Brian Pallister]

Thank you very much for your presentation, sir.

We continue with Ms. Debbie Zimmerman of the Grape Growers of Ontario.

Welcome.

[Debbie Zimmerman, Chief Executive Officer, Canadian Horticultural Council, Grape Growers of Ontario]

Thank you very much, Mr. Chairman and members of the committee.

I am the CEO of the Grape Growers of Ontario. I'm here today representing over 560 growers in Ontario and in six provinces across Canada.

I'm here to talk to you about a national replant program and a tree and tender fruit program. I will table the full documentation with the clerk as we proceed, if the committee so allows.

I'd like to talk to you today from the perspective of the Ontario Grape Growers. Before I begin, I want to make sure you understand that I will answer two of the questions I'm sure are on your mind as I proceed with this presentation.

I am presenting you—and I think it's probably very strange that agriculture would come here today and present you—with an opportunity where we can make money for you. This is a unique opportunity, and I'm asking you to make a real investment in agriculture in this country—one that will more than pay for itself year after year after year. A small investment will be paid back to the government through full tax revenue recovery, and the secondary benefit through economic growth will exceed the initial investment by two or three times every year, continuing forward.

From the perspective of the grape and wine industry, the ultimate goal of a national replant program is to provide an infrastructure boost for our domestic producers to assist them in competing in a global premium wine market.

In the past, government has assisted in a period of crisis, and we are there again today. In 1989, the grape acreage reduction program was the precursor to the vibrant industry we see today that has provided a solid foundation. But we need to continue to shore up that foundation.

The climate in Ontario is unpredictable and harsh.Over the weekend, we had a snowstorm just outside Fort Erie. Many of our premier vines were damaged and are no longer able to produce the quality fruit we require.

Also, there are over 1,000 acres of juice grape vines that will soon be abandoned because there is no longer a market for this industry. In fact, the contracts have been cancelled by the American processor.

By strategically replanting these areas, we can breathe new life into our grape and wine industry and begin to compete on an international stage. Ontario grape growers are going to be able to focus on planting high-quality vinifera. I don't want to take time today to give you a lesson about all the varieties we have out there. High-quality vinifera go into our wines, and there are many of them that can characterize our premium Canadian VQA wines.

Our industry maintains and looks after a detailed vine census and data-mapping system, so we know every acre of grape vine that is planted in Ontario. We can tell you exactly what variety and what block it came from. We know where it's been grown successfully and in what climate and soil conditions.

By replacing older, non-productive vines with high-quality product, we can begin to refine our industry to compete on the international stage—and we are lagging behind. We are behind other countries, such as Italy, France, Australia, and New Zealand. Similar public-private partnerships have grown extremely useful in other jurisdictions around the world.

This replant program will also allow juice grape growers in a failed industry today to transition into more productive, higher-quality, and higher-valued products. These farmers are in crisis in Ontario, and without replant they'll be forced to abandon their farms.

The documents I'm going to provide today look at the economic opportunities, and I will table additional documents with the clerk, so you will have a chance to review them.

I'm going to give you a quick opportunity to understand what I'm suggesting. The sale of each bottle of wine in Ontario generates $1.04 in tax. Over the next five years and up to the next ten years, we can generate $995 million of federal revenue that can be pumped back into our economy. We are a very high-quality, value-add industry.

I'm almost at my time limit.

I'd like to thank you, Mr. Chairman, for this opportunity. I'd be happy to discuss this as we proceed this afternoon.

[The Chair, Conservative, Brian Pallister]

We look forward to that. Thank you for your presentation.

Dina Epale, representing Action Canada for Population and Development, you have five minutes, sir.

[Dina Epale, Public Affairs Officer, Action Canada for Population and Development]

Thank you very much.

Good afternoon. My name is Dina Epale, and I'm the public affairs officer at ACPD.

We work to ensure the full implementation of the UN International Conference on Population and Development, which was held in Cairo in 1994. There were 179 countries, including Canada, that agreed to fund programs addressing the sexual and reproductive health needs of women and their families throughout the world.

ACPD works to advance reproductive and sexual rights and health at the international level, and we encourage Canada to incorporate reproductive and sexual rights and health into its foreign aid policies and programs. We also have an emerging focus on international migration and development.

I am here today to ask you to make strong recommendations to the government concerning its official development assistance and to take particular care to meet the needs of women, men, and children around the world by funding the sexual and reproductive health programs promised at the Cairo conference.

ACPD wants to commend the new government for its announcement with respect to the allocation of an additional $320 million for international aid in 2005-2006 and possible additional funding totalling $425 million over five years. We particularly want to voice our support for the announcement made by the government with respect to funding of $15.5 million over three years for the UNFPA's project to combat sexual violence in the Democratic Republic of Congo, in response to an appeal in The State of World Population 2005.

We at ACPD are very encouraged by these funding announcements and the government's apparent commitment to an increase in international aid. However, despite its efforts, Canada lags behind other countries with respect to official development assistance, or ODA. Canada is among the 22 donors countries which have repeatedly promised to devote 0.7% of their gross national product to ODA by 2015. And yet, based on the OECD's preliminary analysis, Canada's net contribution for 2005 represents some 0.3% of its gross national income, or $3.7 billion US, placing it in 14th position among the 22 donor countries.

We certainly can do much better to achieve our ODA commitments and be a real leader in this competitive world, for a number of reasons. First, Canada continues to be the only G-7 country with a record surplus in 2003, 2004, and 2005 and a forecasted surplus of $8 billion in 2006. Second, the recently tabled 2006-07 government report on plans and priorities shows that the international assistance envelope is expected to be $3.8 billion in 2006-07 and $4.1 billion in the 2007-08 budget. Third, five countries today have exceeded the UN target of 0.7% GNI to ODA.

Canada can also position itself as a real leader in the world by supporting the very recent UN General Assembly's endorsement of a new target under goal five of the MDGs, which is to achieve universal access to reproductive health care by 2015. We have the opportunity to do this by using the International Day for the Eradication of Poverty MDG rally, which happens to be tomorrow, October 17, to address concrete measures and strategies to achieve our ODA targets and MDG goals.

In conclusion, the message from ACPD is simple and consistent with most of our past recommendations to this very committee. This committee is in a position to make strong recommendations to the Canadian government to: one, stand up and keep its promise to do its fair share to meet the millennium development goals; two, stand up and make its long-standing pledge to reach 0.7% of GNI to ODA a reality; and three, stand up and build on the resolution that was adopted in Parliament in 2005 calling on the federal government to set a plan to reach 0.5% of GNI to ODA by 2010, a baseline target of reaching a goal of 0.7% GNI to ODA by 2015.

We ask members of Parliament to stand up and support the development assistance bills, Bill C-204, Bill C-243, and Bill C-293.

I thank you for your time.

[The Chair, Conservative, Brian Pallister]

Thank you for your presentation, sir.

We will conclude with a representative from the David Suzuki Foundation, Pierre Sadik.

Welcome, sir. Five minutes are for you.

[Pierre Sadik, Sustainability Specialist, David Suzuki Foundation]

Thank you, Mr. Chair, and thank you to the committee for inviting the foundation here today.

For Canadians to maintain a high quality of life with continued economic opportunity, we must increase Canada's long-term competitiveness through responsible environmental policies. We've got to stop equating environmental protection with poor economic performance in this country. As many of you may know, last month the World Economic Forum released its global competitiveness index. Canada finished 16th, a drop of three places from last year.

Recently, the David Suzuki Foundation released a report that ranks the environmental performance of the thirty member states of the OECD. Eight of the global competitiveness index's top ten finishers also finished well ahead of Canada in the OECD environmental ranking. In fact, the poorest performer of the top economic group, the U.K., still managed to finish ten spots ahead of Canada on the OECD environmental ranking.

One of the policies that these top economic performers is employing, and that Canada has not yet begun to employ, is something called ecological fiscal reform, or EFR. EFR brings environmental factors into economic policy making by introducing the true social cost of pollution and waste into the marketplace. For example, water is substantially undervalued in this country. Some municipalities don't even meter or charge for the water their constituents use. In essence, it is treated as though it is limitless. This can, as we know, lead to cyclical water shortages, and in worst-case scenarios it can lead to contaminated water, which causes serious health problems, if not worse. Pricing water as though it were worthless is an obvious example of how the market needs correcting.

Another example is our air. In Canada, it costs absolutely nothing to dump industrial waste and pollutants into the atmosphere. The few emission caps that exist are weak, and for some pollutants, such as CO₂, there is no cap whatsoever. Our air is taken for granted as a no-charge, no-fee dumping zone in a way that other waste repositories such as landfills, for example, are not. Why is that? And what are the consequences for Canada?

Atmosphere dumping negatively affects Canadians in several ways, including our competitiveness. Air pollution leaves many workers, as well as their children, sick, which reduces Canada's labour competitiveness and places a burden on our strained health care system. A smog-ridden downtown also encourages companies and citizens to relocate to the suburbs, which in turn increases transportation costs and travel times. This increases transportation distances and, in a negative feedback cycle, further diminishes the quality of our air. The solution lies in taking steps to ensure that market prices reflect the true cost of pollution and waste.

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you very much, sir.

We'll begin questions with Mr. McKay. You have seven minutes.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Pierre.

And thank you all for your submissions.

My first question is directed to both engineering presentations. I don't think there's much discussion that there is a national infrastructure deficit. Whether people put a number on it or not is a point of argument, and who knows these things?

Having listened to a number of presentations on this issue over a number of years, it seems to me most presentations just dance around the whole issue of public-private partnerships. I was wondering whether either of your organizations has a position with respect to public-private partnerships, and if so, what it is.

[Claude Paul Boivin]

Public-private partnerships are one of the solutions. They have their own challenges and problems, if you wish. As far as toll roads, we say toll roads if necessary, but not necessarily toll roads. As an association we see the need for investments in infrastructure, and I think we should be innovative in the ways we explore to finance them.

[Marie Lemay]

As far as we're concerned, it's also part of the toolbox. One of the big issues we have right now is that we don't think we're maximizing the dollars we're investing. There's a lot of duplication and a lack of coordination and sharing of best practices. PPP is a good example of the lack of information sharing.

That's one of the aspects that the round table would help fulfill, bringing together the government representatives and the industry representatives at the same table to tackle this and make recommendations.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I agree with you that it's part of the toolbox, that it's a solution.

Have you formed a view on what are the no-go zones for PPPs?

[Marie Lemay]

The short answer is no, not right now. But there's a report coming out from a working group of the round table we've created that has been working for a year. They've been looking at the financing of infrastructure. It will be really interesting to see the results; they will be published at the end of November, at the next meeting of the round table that we're hoping to formally launch.

[Claude Paul Boivin]

I would say that first we need the national round table on sustainable infrastructure to be well in place, with the necessary financing for five years, before the answers come to many of the questions you raise.

[John McKay, Liberal, Scarborough—Guildwood, ON]

You would see it as consistent with your presentation that a component of whatever funding be set aside for PPP projects.

[Marie Lemay]

Most definitely.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Okay, thank you.

To the Suzuki Foundation, you raise some intriguing ideas with respect to the air being a dumping zone for which there is no cost, really. Yet when you talk to some people, particularly with respect to the Kyoto system of credits, you get this idiotic rhetoric about selling credits to foreign countries, Canadian taxpayers paying the bills, and all that sort of nonsense.

I would be interested in hearing a further development of your idea. How would you create a cost for the abuse of air?

[Pierre Sadik]

In a nutshell, one solution would be a domestic emission trading system. No money would go offshore under such a system.

It simply means that the government introduces a modest, declining cap on the amount of pollution each sector or industry is permitted to emit into the atmosphere annually. It's a very high cap to begin with, with a long phase-in period and a slow decline, so that industry has sufficient time, in the ordinary course of capital turnover, to begin to address the requirements it sees coming down the road.

Quite simply, anyone who emits above that cap in any given year must buy credits from those who have managed to come in below the cap, who have invested in technology, as the case may be, to come in below the cap. You simply buy credits from those individuals.

That creates a powerful market incentive to begin to reduce emissions and to increase efficiencies. If you introduce technological efficiencies, you in fact stand the chance of actually making money on it, as you sell your credits to your neighbour next door.

[John McKay, Liberal, Scarborough—Guildwood, ON]

How would you prevent the perverse consequences of a well-intentioned policy whereby my polluting company buys a project in some other country, not because we're interested in the project but because we're interested in the credits?

[Pierre Sadik]

It would be a domestic emission trading system. It would be a closed-loop system. Buying offshore, be it trying to buy offshore credits or offshore facilities, would not count towards the domestic emission trading system.