Finance Committee on Oct. 8th, 2009

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chairman.

First I want to thank all the participants this morning for helping us in our deliberations concerning the next budget. I also want to say how useful the proposal and presentation that the Conseil canadien de la coopération et de la mutualité made to us will be. We see that the institutions that have been established to take into account the size of our country and some specific characteristics of its language situation have resulted in the creation of unique institutions that are producing concrete results for the communities. So thank you for your presentations and for being here.

By a complete coincidence, Mr. Nolet, this morning I was wearing a pin that was given to the AAER company, which you are no doubt familiar with and which is the only North American manufacturer of wind turbines. The location of that business is, in itself, revealing, since it's located in the former Hyundai car plant in Bromont. So there's a lot of symbolism in the fact that wind energy is taking the place of cars.

This situation is obviously suited to a budgetary consultation. You come here today, you tell us you had a program and funding and that you wanted it to continue. But I would like to take a little time with you this morning because this is the future. I'm not talking just about wind energy, but about the ability to understand what sustainable development is.

If we go back to the early 1960s, when Rachel Carson was writing Silent Spring, not a lot of people understood the terms she was using, such as “ecosystem”. Today, few people don't know that term. Similarly, when we talk about sustainable development, a term used for the first time in the report, Our Common Future, presented to the UN by Gro Harlem Brundtland, we're talking about the obligation to take into account economic, social and environmental aspects every time we make a decision in government. Perhaps, even today, there aren't a lot of people who understand the notions of internalizing costs and analyzing a product life cycle. These are terms applicable to sustainable development, but I'm sure that, in one generation, everyone will understand them. Cegep and university students today are learning them and using them. That's what I want us to talk about today because this is essential to determining how things will happen.

I'm asking you to think, to determine whether internalizing costs isn't the missing link in the determination of energy choices. Let me explain. The costs are social, environmental and, of course, economic. If we can burn coal with impugnity, for example, to produce electricity, without internalizing the cost to the environment for future generations, we're obviously distorting our calculations. So when people tell us that government shouldn't be involved, shouldn't make choices, influence the market, determine winners and losers in advance, it's because they haven't internalized the costs.

Don't you think that wind energy would automatically have become the market choice if all players had been forced to play on a level field under similar rules, that is to say to internalize all their costs, including environmental costs?

[Jean-François Nolet]

First, Mr. Mulcair, thank you for giving me a chance to speak on this point.

I think you're probably getting to the heart of the matter. That's why, in our presentation today, we're asking that the program be improved and extended until 2014. Why 2014? Because, as we'll see, that's when the environmental costs will be internalized for the other branches of power production in Canada, with what we know about the regulatory framework for greenhouse gases in the country. That's why, from that moment, the market mechanisms will put all energy technologies on an even footing with renewable technologies, including wind power, which will be highly competitive with carbon type or cogeneration technologies.

That said, are market mechanisms alone enough? Not entirely, in our view, because this government's objective is to achieve 90% of electrical power generation from non-emitting sources by 2020. So there are some choices to be made. We'll have to step on the gas to ensure that these sectors are up and running to reduce emissions in Canada and to ensure that all power generation in Canada emits less greenhouse gas.

Going back to the year 2014, this is the central element and this is why what we're asking for isn't endless funding, but really the threshold, the bridge making it possible to catch up with the other energy sectors in Canada.

[Thomas Mulcair, NDP, Outremont, QC]

In our pre-budget meetings, we've had the opportunity to hear from a lot of people, including representatives from the First Nations, who had specific concerns. The mapping done of wind energy sites across Canada has shown us that the most constant wind energy resources in Canada are, as chance would have it—but sometimes chance gets it right—located in the latitudes where there are the largest First Nations concentrations. In Quebec, for example, this tends to line up with the enormous reservoirs of the James Bay system, which was put in place about 30 years ago.

Have you actually worked with the First Nations across Canada? Are you making that a priority? Is that one of the concerns of the group that you represent?

[Jean-François Nolet]

At CanWEA, we work jointly with the various First Nations in the country. Last year, we organized a seminar with the First Nations and the wind industry on how to work in partnership with those communities and how to work to identify those sites, where they are, where we can also produce wind energy and put it on the grid. Transmission lines are needed to transmit that power, that enormous resource that is in the north. Depending on the latitude, you have to consider the cold and frost. So there is some research and development to be done, but it's not impossible. The partnership with the First Nations is being carried out on a regular basis in all the provinces.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Mulcair.

We'll go to Ms. Hall Findlay.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you, Mr. Chairman.

Many thanks to the witnesses for being here with us this morning. I have three questions and little time.

First, Mr. Nolet, thank you very much for your presentation. You discussed the Obama administration's program. You also said that what we're doing here in Canada is not the same thing.

Could you tell us a little, but quite quickly, about the comparison with what's happening in Europe, in the European administrations, and what we're doing here in Canada?

[Jean-François Nolet]

Some European countries, which are leaders, Germany, Denmark, Spain and others, have established a vision and are making this a priority. They have determined objectives and ways of achieving them. What does that mean? That means job creation, regional economic development and wealth creation. So that takes an overall vision, and everyone has to work to achieve the same objectives. That's what the Obama administration is doing. Within the next three years, the United States will double its renewable energy production. Canada stands in the middle of this highly competitive game in attracting investments where there are starting to be places that are distinctly more promising for investors.

That's why now is the time to act, to ensure that things will be done until 2014 so that we don't miss the boat and we can get the most out of the resource and create this development in Canada's regions and obviously reduce greenhouse gas emissions.

[Martha Hall Findlay, Liberal, Willowdale, ON]

We know that, in Denmark, government support in the initial stages helped the wind power industry not only for energy production, but also for the technology industry.

Thank you very much.

My next question is for Ms. Guay. Thank you very much for being here.

We have heard a number of presentations on research and innovation, and I first want to congratulate you in your efforts with the round table, because I think there's no disagreement that there are infrastructure requirements in this country, and with relatively scarce resources, we cannot do all that we want to do. So congratulations on moving forward on trying to make our infrastructure spending across all levels of government as efficient and effective as possible.

I've heard a number of organizations, both governmental and private, talking about the challenges of finding environmental engineers, for example, people who can work on the greening of buildings, who can work on things like wind power technology. We've also heard a number of presentations from the universities--thank you, Mr. Davidson, and congratulations on your new job--and also from colleges, from the polytechnics. There seems to be, of course, a request for funding for pure research, for applied research.

I realize I'm putting you on the spot a little bit, but to help in terms of the budget process, some advice on the focus, should it be pure research or applied research? Where, given your perspective, do you think we should be putting our focus--all in 30 seconds or less?

[Chantal Guay]

Thank you for the question.

I think they go hand in hand. In order to develop technology, to develop innovations, you need the pure research, but then you need the engineering part to bring it to life. We talk about science and technology all the time, but personally, I think we should always be talking about science, engineering, and technology, because it's the triumvirate that will make it happen and help us to be more prosperous.

I would say that we cannot really make a choice; we have to focus on the three aspects. So I will not answer on behalf of one or the other. I think it essential that they work together. That's what's going to make us competitive at the world level.

I totally agree with what was said about the U.S. I think they have seen an incredible opportunity in the clean energy and the climate change situation to seize and become more competitive at the global level. I hope Canada is going to continue in that vein as well.

[Martha Hall Findlay, Liberal, Willowdale, ON]

I like the slogan “science, engineering, and technology”. I'll just remind these fellows that it sounds pretty good.

Monsieur Lauzière, we all support charities. We all support the desire to increase volunteerism and donations from the private sector. You have a number of recommendations in your presentation, but I haven't seen a costing. Maybe I've just missed it.

We like to encourage charities, but it's also lost revenue to the government. Do you have any numbers you can attribute to that?

[Marcel Lauzière]

For our last two recommendations, there are no costs, which makes them easier.

In terms of the stretch tax credit, it is experimental, so it's hard to give you a precise number. We need numbers from Finance. But even if we were to be very ambitious about it and were looking, for example, at an increase of $200 million in the first year, moving to half a million in terms of donations, that would be a $20 million cost to government in the first year, building to $50 million in the third year. That, I have to say, would be very ambitious, because part of this whole process is also about raising the awareness of Canadians of the need to be doing this and looking at the stretch tax credit and what it means. So it is a relatively modest amount of dollars to go into this.

As I was saying earlier, it's also about creating engagement at the community level. We see it as long term, as the trends go down in terms of the culture of giving. We feel that we have to rebuild that over the years, and this is what is going to help us actually do it.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you very much, Ms. Hall Findlay.

Monsieur Roy, s'il vous plaît.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chairman.

My question is for Mr. Monk. In your presentation, you said that Canadian productivity levels were disastrous compared to those of the United States, among others. You said that the average annual productivity growth rate in Canada has only been 1%, whereas it's been more than 2.5% in the United States. The critical ingredients of productivity are human capital, physical capital and innovation. To my knowledge, the education level in Canada is higher than that in the United States. As to innovation, I'm having difficulty finding a comparison that proves that they innovate more in the United States than in Canada or Quebec. The same is true for physical capital. I find it hard to believe this kind of study.

My question is simple. How can you draw a comparison between what's going on in Quebec or Canada and what's happening in the United States and manage to say that the United States has much better performance than Canada? This kind of study raises questions in my mind. For years now, we've heard it said that Canadians and Quebeckers are less productive than Americans or than other countries. I would like a clear answer on this point. Where does the difference come from? In your opinion, what are its causes?

[Richard Monk]

Thank you for the question, Mr. Roy.

The why is more difficult, of course. We do know from studies initiated by the government that there is an issue with productivity in Canada. We know, for example, that the government's Competition Policy Review Panel issued a report in 2008 indicating that the productivity growth has led to astonishing and highly unsatisfactory outcomes. So we know the outcomes, and in our view, increasing expenditures for human capital, physical capital, and innovation would assist in increasing that productivity and making Canada more competitive in the global economy.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

You are suggesting a solution. You are telling us that we have to invest in human and physical capital, as well as in innovation. However, to solve a problem, you first have to determine its cause. That is why I have reservations about this kind of study.

[Richard Monk]

We know studies show that investment in human capital, physical capital, and innovation, which we call creativity, will eventually lead to increased productivity that will eventually lead to a higher standard of living for Canadians. In this paper, we're recommending more investment, in particular in innovation, which will create productivity, which will end up with a higher standard of living for Canadians.

The bottom-line answer is that we have to invest more in innovation.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

You are not just talking about investments in innovation: you are also talking about investment in human capital. In your opinion, we are not investing enough in the education system, for example. We are not encouraging people enough to go further in their learning.

[Richard Monk]

We've made three points, effectively. We would like more investment in ICT training, more investment in the SR and ED refundable portions for larger corporations, and more investment in issues with respect to combatting piracy. We're saying that investment in training and ICT would lead to improved productivity.

[The Chair, Conservative, James Rajotte]

I'm going to take the next Conservative spot, and I want to clarify something with ACAHO, Mr. Kitts.

You talked about the knowledge infrastructure fund and that your members are not included as eligible yet. This committee was in Edmonton, at the University of Alberta, and Dr. Tyrrell showed us around his labs, which are directly connected to the University of Alberta Hospital. He indicated that it was partially funded through...I believe he said the knowledge infrastructure fund and the infrastructure stimulus fund. I'm sure you're aware of what I'm talking about.

He's a world-class researcher for hepatitis. Could you clarify that he did not receive any funding through these funds?

[Dr. Jack Kitts]

I'll ask Glenn Brimacombe to answer that, because he's more aware of the national scene.

[Glenn Brimacombe, President and Chief Executive Officer, Association of Canadian Academic Healthcare Organizations]

Thank you, Mr. Chair.

In Alberta the distribution of health research dollars is a little different in comparison to the university. When it comes to the University of Alberta, there's a larger share of the research embedded within the university. In Dr. Tyrrell's case, the money allocated to him for the infrastructure would be through the university in which his research is housed.

It's different in most other provinces, where Dr. Kitts mentioned there's an 80:20 relationship; it's 50:50 in Alberta.

[The Chair, Conservative, James Rajotte]

So it is possible to do that if the province and the institutions are amenable.

[Glenn Brimacombe]

If it's under the structure of the university, which in that case is more of an outlier than the current circumstance across the rest of the country.

[The Chair, Conservative, James Rajotte]

Okay, I appreciate that clarification.

I want to ask Mr. Davidson a question.

I very much appreciated your presentation. As you know, I've been interested in this area for a long time, especially in my past role on the industry committee. I love that you tell stories. I think that is exactly what researchers need to do, especially to relate to parliamentarians and Canadians in terms of the kind of good research we're doing in this country.

I want to ask a question with respect to your first recommendation. I have a family member who is a diabetes researcher and who bends my ear regularly on the issues you presented. His argument over the past number of years is that past governments and our government have invested significantly in infrastructure through CFI, through the knowledge infrastructure program. They've invested in the Canada research chairs and the president of the Canada research chairs program in the past.

If we are to maintain or increase our standing in the world community on research, the focus in the next budget needs to be on the human resource side, specifically on the granting council side. This is certainly his argument, that we've built a tremendous amount of capacity, but that going forward, if there are additional resources the focus should be less on infrastructure and more on the human resource side through the granting councils. This is exactly what you've recommended.

I want you to expand on that for this committee.

[Paul Davidson]

You're getting good advice from family members.

In building a knowledge economy there are different elements that need to be funded properly, and there's a certain logic to the sequencing. Yes, I completely agree that the priority is direct funding for research, particularly to the granting councils. I'd observe that over the years, by a number of new initiatives, like CFI or other instruments that have been created, the basic research granting councils are one of the most effective ways of getting the talent moving on research.

I would also say that within the research envelope—we've talked about front-end loading—the need to double the amounts that the granting councils could advance would be a primary ask. Associated with that is the need to fund post-doctorate positions, because there's a gap in the career path of Canadian academics. And of course it's no surprise to this committee that the issue of institutional costs, indirect costs, continues to be a concern for our members.

I recognize there's a sequence to what needs to be done, and this year we're putting our emphasis on doubling the support to the granting councils.