Thank you.
Mr. Chairman, honourable committee members, thank you for inviting me to speak to you today. The Green Budget Coalition, as many of you know, comprises 20 of Canada's leading environmental and conservation organizations, which in turn represent over 500,000 Canadians as members, supporters, and active volunteers.
As you are well aware, Canadians are now demanding environmental progress. We--and I expect all of you too--want clean air, clean water, and effective action to reduce climate change; yet preserving Canada's environment continues to be akin to swimming against the current. We make occasional progress, and then we slip back because we have not yet aligned our economy with our environment. Too often we still view environmental progress as threatening economic health, and vice versa.
When Canada finally shifts to a healthy green economy, the pursuit of profit, cost-savings, and greater economic activity will inherently serve to preserve and restore environmental and human health. Similarly, companies who pursue environmentally friendly strategies should save money, increase profits, and gain a competitive advantage. Unfortunately, we are not there yet.
The coalition believes that to achieve a dynamic green economy we must integrate environmental values into market prices using well-designed fiscal policies, much as many OECD countries have already done.
One of the first steps to doing this, as the OECD has reiterated, is to phase out subsidies to limited energy-intensive resources such as conventional oil and natural gas. Such subsidies expedite the development and use of one-time polluting energy sources while making it less economically viable to develop low-impact renewable energy whose growth is pivotal to our environmental future.
The Green Budget Coalition believes that the accelerated capital cost allowance for the oil sands should be eliminated. It is expensive, unnecessary, and a waste of taxpayers' money.
My colleague Amy Taylor of the Pembina Institute has done substantial research on the oil sands ACCA and has submitted a more detailed brief, which the Green Budget Coalition fully supports. As she was unable to appear before you this week, I want to highlight some key points from her submission.
The oil sands currently qualify for a 100% accelerated capital cost allowance, which is much higher than the 25% provided to conventional oil and natural gas.
In 2000, the Commissioner of the Environment and Sustainable Development undertook a study of the level of federal government support for energy investments in Canada. His analysis found that the ACCA results in a significant tax concession for the oil sands. The finance department estimates that the benefit of this tax concession is between $5 million and $40 million for every $1 billion invested. This means that from 1996 to 2005, anywhere from $200 million to $1.6 billion in tax expenditures was allowed because of the oil sands ACCA.
As you can see in the bar chart included in our brief, these figures continue to escalate. The ACCA for oil sands is a very generous tax subsidy that is no longer needed. It was established to help spur capital spending and increase production from the oil sands. This it has done in spades. Between 1995 and 2002, capital spending in the oil sands increased by a staggering 1,649% and oil sands production increased by 131%. Furthermore, in the last decade technical know-how has improved, and oil prices have increased by over 200%.
The oil sands ACCA is clearly an unnecessary tax expenditure and a waste of taxpayers' money. The oil sands sector no longer needs this preferential tax treatment. It's a highly profitable sector. In fact, the oil and gas industry achieved a historical record for profits in 2005, when operating profits reached $30.3 billion, an increase of 50% over 2004.
To conclude, the Green Budget Coalition recommends that the Department of Finance eliminate the 100% accelerated capital cost allowance for the oil sands and put oil sands on a level playing field with conventional oil and natural gas. This can be done by eliminating the accelerated treatment currently granted to the oil sands within the Income Tax Act.
Thank you.