Finance Committee on Nov. 3rd, 2011

[The Chair, Conservative, James Rajotte]

I call this meeting to order. Colleagues and our guests, please take your seats.

This is the 27th meeting of the Standing Committee on Finance. Pursuant to Standing Order 83.1, we are continuing our pre-budget consultations for 2011.

We have a number of organizations here. I want to thank you all for being with us this morning. We have the Canadian Association of Petroleum Producers, the Canadian Cattlemen's Association, the Canadian Vintners Association, CANARIE Inc., the Cement Association of Canada, Green Budget Coalition, and Sustainable Prosperity.

You will each have up to a maximum of five minutes for an opening statement. We will begin with the Canadian Association of Petroleum Producers.

[David Collyer, President, Canadian Association of Petroleum Producers]

Thanks very much, Mr. Chairman.

Good morning to the members of the committee. I'm very pleased to have an opportunity to appear before you. My name is Dave Collyer. I'm the president of the Canadian Association of Petroleum Producers.

We have a single recommendation for consideration in the next federal budget that I'd like to briefly review with you today. The details are obviously in our more comprehensive submission.

We have abundant natural gas resources in Canada, and we have an opportunity to continue to contribute in a substantive way to employment and revenue growth in the country and to a lower-carbon energy future by optimizing the use of those resources. However, the reality is we have some very challenging near-term market conditions for the natural gas industry, largely driven by the evolution of shale gas and the significant increase in U.S. supply of shale gas. This has had an impact on the available market for western Canadian gas. As an indicator of that, since 2005 Canadian production of natural gas is down by about 20%, and U.S. production is up by 25%.

I would be the first to acknowledge there is a variety of conditions that are impacting the natural gas business, and there are some things that producers need to do to address those challenges. One important competitive factor is that the U.S. tax system encourages U.S. domestic production of natural gas through, in our view, a much more attractive tax deductibility for development expenditures related to natural gas than is afforded to comparable activity in Canada.

Our specific proposal is as follows: we propose that the federal government allow Canadian natural gas development and completion costs to be deducted at a 50% straight-line rate for a time-limited 24-month period. This proposal, by our estimate, would produce about 12,000 new jobs across the country and almost $1 billion in incremental capital investment over three years, and requires no direct funding from the federal government.

We've appeared before this committee before with similar proposals. We've appreciated very much the support of some members of the committee for the proposal we've brought forward. That proposal has not found its way into the budget to date. We believe it continues to have significant merit, and frankly that's why we are back to talk about it again today.

With the limited time available, I would like to very briefly directly address five objections to this proposal that we've heard from some quarters in previous submissions.

The first objection is that we should be prepared to let the market work. We fully understand that producers have to adapt to changes in market conditions. However, our view is that it should not preclude targeted and focused action—by both industry and government—to sustain the competitiveness of the industry.

The second objection is that the oil and gas industry is already subsidized, and that action on federal taxes is therefore not warranted. Let me be really clear: in our view, this is not a subsidy. In fact, it's comparable to tax treatment that has been afforded and extended to other industries, specifically manufacturers and exporters.

On the subject of subsidies for the oil and gas sector, which is an issue that has come up previously, I would commend to you—and we can provide this to the committee if you wish—a recent paper by the University of Calgary's Jack Mintz, who's widely recognized as an authority on this subject. In that paper, it very clearly states that the oil and gas sector in Canada is not, in fact, subsidized at all. I again would commend that paper to you.

The third objection is that two years is too short of a window for action, and that the industry will be back requesting an extension to this tax treatment at some point in time. We would say that two years is, in fact, a significant opportunity to get some momentum on new market development, whether that be domestic or export. The decision as to whether this tax treatment is extended—if it is afforded—is obviously completely that of the committee and the government at that point in time.

The fourth point—I'll wrap up here in just a moment—is that the federal government's focus is on reducing overall tax rates and eliminating deductions for specific individual sectors. We understand and appreciate that's the focus of government. However, as I mentioned earlier, this type of treatment has been afforded and continues to be afforded to other sectors that are facing temporary economic challenges.

The fifth and final objection we've heard is that the near-term fiscal cost is too high. You have to be the ultimate judges of that. Our view is that this proposal would have a significant positive impact on jobs and revenue and that it would more than pay for itself over time.

Mr. Chairman and members of the committee, let me just conclude by saying the success of the Canadian natural gas industry matters to all Canadians in terms of jobs, in terms of revenue generation, and in terms of improved environmental performance. You have an opportunity, we believe, to improve competitiveness of the industry by endorsing this proposal.

Thank you very much. I look forward to your questions.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now here from the Canadian Cattlemen's Association.

[Travis Toews, President, Canadian Cattlemen's Association]

Thank you, Mr. Chairman and honourable members. We appreciate the opportunity to present this morning.

My name is Travis Toews. I'm the president of the Canadian Cattlemen's Association. My family and I ranch west of Grande Prairie, Alberta, in the Beaverlodge area.

In 2010 farm cash receipts from cattle and calves, combined with the multiplier effect from downstream economic activity, contributed $25 billion to Canada's GDP. The cattle industry has been through several years of turmoil, but we are now moving forward with a strong recovery, and we see tremendous opportunity for the industry, based on strong demand and positive prices.

Investment in research and innovation is critical to ensure the long-term sustainability and growth of the Canadian beef industry. Research provides the science necessary to demonstrate the integrity of our animal health and food safety systems, which are increasingly important in trade negotiations. It is also integral to reducing the incidence of food safety concerns and to growing consumer demand for high-quality beef.

Our being able to compete with other protein sources globally also requires research to improve feed efficiency, increase feed and forage productivity, and ensure animal health and welfare. Continued progress requires long-term research investments to ensure that our industry can respond and adapt to new issues and opportunities that arise. However, we are very concerned that a considerable loss of research infrastructure, funding, and expertise may hamper further progress.

Federal funding for beef research in Canada has declined significantly over the last 20 years. An 18% across-the-board cut in research funding in 1995 was followed by an additional 30% decline in funding between 1995 and 2007. Ongoing cuts have seriously and negatively impacted projects, scientific expertise, and facilities. As a result, the viability of some very important research programs in areas such as beef quality, food safety, and forages are faced with death by a thousand cuts. Combined with attrition, continued funding cuts threaten the maintenance of core federal research programs and have been a deterrent in attracting new expertise into research positions of importance to the public good. These ongoing cuts contradict the clear recognition that innovation plays an important role in enhancing competitiveness.

Industry recognizes the value of research, and this recognition has led Canada's beef industry to increase its check-off allocations to research by 150% over the last several years. One of the most significant recent industry-government investments was for the development of a beef cattle science research cluster that brings together Canada's largest industry and public beef research funders to deliver priority research. I'm convinced that the beef science cluster approach will result in a very coordinated, efficient research model.

However, funding will need to be increased to ensure meaningful results, and furthermore, federal funding research must be delivered on a minimum five-year basis. Program delivery has typically resulted in a three-year funding cycle with two-year funding gaps, which are not conducive to delivering strong research programs with meaningful results.

We would make three recommendations relating to research. Number one is that investments in research need to be increased to more appropriately reflect the importance of the beef industry to the economy and the public good, and to support its sustainability and competitiveness in the future.

Number two is that government and industry need to make long-term, predictable, research funding commitments, moving beyond the current three-year fragmented funding cycle.

Number three is that we must maintain a strong research community to train new expertise. Ongoing reductions and gaps in funding are not conducive to attracting or retaining talented researchers. Capacity is critical to ensuring that scientific expertise is available to respond promptly, effectively, and strategically to issues and opportunities.

The brief we submitted to the clerk contains two more recommendations. The first is for increased investment in market development. This is another critical competitive piece for Canada's beef and other exporting industries.

Growth in U.S. exports over the last two years has been phenomenal. Some of that is due to currency exchange levels, but some is also due to the United States Department of Agriculture's investment in export promotion. A report to the Office of Management and Budget puts returns to market promotion spending at $35 per dollar invested. We in Canada need to increase our investment in trade promotion to ensure we are not displaced or outpaced by our biggest competitor for customers looking for high-quality grain-fed beef.

Our other recommendation, Mr. Chairman, relates to reducing government spending. Currently, Canadian livestock producers must compete with ethanol manufacturers in the feed grain market. While beef is produced and sold on an open market basis and beef producers purchase grain on an open market basis, ethanol demand is supported by government mandate, is protected by tariffs against imports, and is produced with subsidies. We would like to see a sunset on all federal government mandates, subsidies, and tariffs against imports of ethanol.

Thank you, Mr. Chair. I apologize for going over.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from the Canadian Vintners Association.

Point of order, Mr. Julian, please.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Since the bells are ringing—I believe it's a half-hour bell—would it be possible to have all the witnesses complete their presentations and then, prior to questions, we go into the House and vote? Hopefully they would be willing to stay for at least one round afterwards.

[The Chair, Conservative, James Rajotte]

We're checking right now, but I'm guessing these are 30-minute bells.

[Shelly Glover, Conservative, Saint Boniface, MB]

As soon as you’re finished checking, I think let's just get on with it.

[The Chair, Conservative, James Rajotte]

Okay, so I have consent to do at least another 20 minutes. Thank you.

Mr. Bosc, please, your presentation.

[Paul Bosc, Chair, Canadian Vintners Association]

Thank you, Mr. Chair.

My name is Paul Bosc, and I am the Chair of the Canadian Vintners Association. I am also the President and boss of the Chateau des Charmes Estate Winery, located in the heart of the Niagara Peninsula.

Thank you very much for the invitation. I'm pleased to convey our priorities for the 2012 federal budget.

Our national trade association, the CVA, represents wineries from across Canada, which make up more than 90% of Canada's annual wine production. We are a young, growing industry investing in jobs and economic growth across Canada.

Today I ask the honourable members of the committee to consider three recommendations that will ensure that Canada's wine industry succeeds in a fiercely competitive global marketplace.

The first recommendation is direct-to-consumer wine delivery, also known as DTC. It remains a surprise, even a shock, to most Canadian wine consumers that it is illegal to deliver or ship wine across provincial borders due to federal legislation known as the Importation of Intoxicating Liquors Act, a law that was enacted in 1928. This federal law bans all shipments of wine across provincial borders.

Some provincial liquor boards recognize that the current legal framework is outdated, and point to the IILA as the reason they cannot adequately respond to domestic demand for Canadian wine made outside their province of control. Changing the IILA to allow Canadians to order directly from an out-of-province winery will lead to investment, jobs, and growth in Canada's wine industry.

It was not the intent, more than 80 years ago, for the IILA to discourage interprovincial trade or economic growth. Yet in 2011 Canadian winery growth is restricted. An out-of-province Canadian tourist who visits my winery cannot take our wines home with them, or order our wines directly if they are not available in their provincial liquor retail store.

Liquor boards were created as a result of the IILA, but brick and mortar retail stores cannot physically carry all Canadian wines, and currently VQA, or 100% Canadian wines, represent only 6% of total wine sales across Canada.

The CVA recommends amending the IILA by establishing the creation of a personal wine exemption that allows Canadians to order directly from an out-of-province winery. A simple amendment would impose no financial costs on the federal government, and would apply to wines that are not available at liquor board retail stores. Consumer interest and exposure to Canadian wines would stimulate new sales and tourism opportunities, and create increased opportunities for jobs, economic growth, and additional federal and provincial tax revenues.

Second is a wine excise program. Budget 2006 exempted all Canadian wineries from paying excise tax on wine produced and packaged in Canada from 100% Canadian-grown agricultural products. The excise tax benefit for 100% Canadian wine sales is estimated at $15 million per year, creating jobs and economic growth through reinvestment into new equipment, technology, vineyards, cellars, etc.

However, the same budget increased the excise tax by 21.2% on all other wines sold in Canada, including domestically produced blended-wine products. As a result, Canadian blended-wine producers, who represent 82% of domestically produced wines sold in Canada, have paid an extra 10.8¢ per litre excise tax, representing approximately $57 million in additional excise tax payments to the federal government over the past five years. Since excise taxes are a per-unit volume tax, and 95% of Canadian blended wines retail for less than $10 per bottle, the impact has created a competitive disadvantage for value-priced Canadian blended-wine products.

To ensure the competitiveness of all wines produced in Canada, and to support both domestic blended-wine producers and Canadian grape growers, the CVA recommends the creation of a federally funded program equivalent to the excise tax paid on the Canadian wine content included in blended wines. It is estimated that the federal cost of such a program would be approximately $7 million per year, and would encourage more Canadian content in blended wines, continued growth of Canadian wine sales, reinvestment in new equipment, technology, vineyards, wine tourism, etc., and the creation of jobs and economic growth.

Finally, and very briefly, is the small-business tax deduction. Budget 2009 recognized the importance of the small-business tax deduction by increasing the income threshold from $400,000 to $500,000. Given the large capital investments of today's wineries—land, winery, equipment, etc.—the small-business tax deduction qualifying asset test often eliminates this intended benefit through a straight-line reduction of those businesses with taxable capital assets between $10 million and $15 million.

As winery and small-business costs continue to escalate, it is important to recognize that the qualifying asset test has not been adjusted to compensate for inflation since its introduction in 1994.

[The Chair, Conservative, James Rajotte]

Let's wrap up, please, very briefly.

[Paul Bosc]

We recommend that the $10-million and $15-million qualifying asset test be adjusted to reflect inflation from its original launch date of July 1, 1994, and annually thereafter.

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

Next we'll have CANARIE Incorporated.

[Jim Roche, President and Chief Executive Officer, CANARIE Inc.]

Thank you, Mr. Chair and honourable members.

My name is Jim Roche. I'm the president and CEO of CANARIE Inc. Thank you for the opportunity to speak to you about CANARIE and its importance to Canada.

CANARIE is a key element of Canada's publicly funded infrastructure in support of research, education, discovery, and innovation. It is funded by the Government of Canada through five-year mandates. The current mandate ends in March 2012, and I'm here today to request your support for a new five-year mandate and continued funding for CANARIE in the coming budget.

Increasingly, as you know, we all rely on the Internet for our daily activities, both at work and at home. Canadian researchers and scientists are no exception. What sets them apart from us, though, is that to do their work they require bandwidth thousands of times greater than what the commercial Internet can accommodate. That is why CANARIE was created in 1993, and why the federal government has continued to fund its services and programs.

With the Government of Canada's support over the past 18 years, CANARIE has built a 19,000-kilometre-long fibre optic network separate from the commercial Internet. This national backbone links to provincial and territorial research networks and stretches from coast to coast to coast. Provinces share in the cost of this infrastructure. Every federal dollar invested in the CANARIE network leverages $1.50 in matching investments from the provinces.

CANARIE connects together Canadians at all of our universities, over 100 federal and provincial labs and departments, and thousands of community colleges and K-to-12 schools. More than one million Canadians have access to this national ultra-high-speed network. It enables them to collaborate across Canada and with colleagues in 100 countries worldwide, including the United States, China, India, and Brazil.

Researchers and educators are increasingly relying on this digital infrastructure in their work. Every year we see traffic on the network increase by around 50%. This is one of the key reasons in support of continued funding for CANARIE. Over the next five years we expect demand for the network to increase eight-fold. To meet this demand, we must continue to build out the network. This is a role for the public sector.

All OECD countries and the vast majority of developed and developing nations have publicly funded research and education networks. In Canada, CANARIE works closely with private sector partners to build and manage the network. Without government support, though, the private sector would not be able to meet the unique needs of our research and education community.

The world-class infrastructure that CANARIE provides underpins the more than $3.3 billion that the Government of Canada invests annually in research through the granting councils and CFI, the Canada Foundation for Innovation. At a cost of roughly $25 million per year, CANARIE's infrastructure is essential to much of this research and increases the effectiveness of those investments. CANARIE contributes to the implementation of the Government of Canada's science and technology strategy, and is reflected in the digital economy strategy.

CANARIE helps to attract some of the world's best researchers to Canada by offering key infrastructure required to successfully undertake their work. As a result of its connections to the private sector, CANARIE also facilitates the transfer of knowledge from researchers to the marketplace. A recent study has shown that for every dollar invested in Canada there is growth of $2.85 in Canadian GDP.

Investments in CANARIE have benefited many disciplines in all parts of the country. There are hundreds of examples I could give you, but here are a few. We recently funded a connection from the University of Regina to four outlying Saskatchewan Institute of Applied Science and Technology campuses, including one in Prince Albert, to deliver nursing courses. Environment Canada's meteorology lab in Edmonton uses the CANARIE network to support the analysis and prediction of weather. At McGill University researchers are using the CANARIE network to support an international multi-site collaborative study of the human brain to find cures for diseases like Alzheimer's.

In short, by supporting research and education CANARIE is helping to deliver on the government's priorities, including innovation and productivity, to create more wealth and improve the health and wellness of Canadians. There's a very exciting future ahead for Canadian researchers and innovators. With continued support from the Government of Canada, CANARIE will continue to increase the effectiveness of federal research by meeting the expanding needs of the research community.

CANARIE is a major internationally recognized Canadian success story. The need for CANARIE remains compelling, and it is growing. As I mentioned earlier, there's a legitimate role for the federal government to invest in CANARIE, notwithstanding the difficult fiscal situation. CANARIE represents a key strategic investment in the future of Canada.

On behalf of its users and the beneficiaries of its services and programs, CANARIE seeks your support for another five-year renewal of its mandate and funding.

I'd be pleased to answer any questions from members and provide what additional information you may need to assist you in your consideration of this request.

Thank you for your time.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

Now we'll hear from the Cement Association of Canada.

[Michael McSweeney, President and Chief Executive Officer, Cement Association of Canada]

Thank you, Mr. Chairman and members. It's a real pleasure to be here today and to provide the cement industry's thoughts and perspectives on the upcoming budget measures.

Given the critical importance of our nation's infrastructure in maintaining jobs, promoting economic growth, and the growing importance of sustainable construction, cement and concrete are arguably one of Canada's most important and strategic commodities. Concrete is the most used man-made commodity, not only in Canada but around the world.

Our sector, like so many others, has been hard hit by the economic recession. Even though the economy has been slowly recovering, there is still a reduced demand for cement and concrete across Canada. During the recession our industry has experienced layoffs, prolonged shutdowns, and we're still a long way from achieving pre-recession levels of production, capacity utilization at our plants, and full employment. The continuing global economic instability and stagnation of the American economy are still directly affecting our operations in Canada.

We understand that a final decision has not been made on whether or not to engage in another round of stimulus funding from governments. But whether or not a second round is approved, I want to remind the committee members of the critical need for annual investments in our country's infrastructure. I caution the committee and the government to make a clear distinction between fiscal stimulus and the ongoing funding required for infrastructure across the country.

The federal government must continue to invest annually in the country's infrastructure at consistent and reliable levels. The recent publicity in Quebec regarding the collapsing of critical infrastructure in Montreal is a timely example and further underscores the need to maintain our investments in our country's infrastructure.

We support and applaud the government's plans to engage stakeholders and all levels of government in developing a successor program to the Building Canada plan. We also applaud the government for its commitment to introduce legislation to directly transfer $2 billion annually under the gas tax program to municipalities in support of their infrastructure needs. These are prudent and necessary steps in addressing Canada's infrastructure needs, but they're not sufficient alone to address Canada's substantial future infrastructure needs.

As part of a sustainable investment plan, all levels of government must achieve a better return on their infrastructure investments. The focus should be on total cost of ownership. The standard for government tendering, whether it's federal, provincial, or municipal, should never be based on the lowest cost wins but should reflect a policy of build it once, build it right, and build it to last. In this way, we will ensure that new projects contribute to achieving Canada's sustainable development objectives.

Finally, like most manufacturing sectors, we've been advocating for amendments to the way the government supports research and development in Canada. Specifically, we continue to support the accelerated capital cost allowance but recognize that changes to extend the application of benefits need to be made. As you may also be aware, the Jenkins panel recently released its report on innovation, which we welcome. We believe the report is an important step forward in discussing ways to improve federal support for innovation and to assist industry with critical advancements in technology. We agree with the panel's guiding principles that programs should be transformative, flexible, and tailored to the needs of specific sectors.

We also fully support the government's scientific research and experimental development tax credit program. We believe this has been an important driver in innovation for many sectors, including the cement industry. Our multinational members can invest in research and development in any of their locations around the world. We have been fortunate to date that they have invested countless millions of dollars in research here in Canada. One of our largest members, Lafarge Canada, has its global international research centre located in Montreal. One of the reasons for this has been that the Canadian governments, both provincial and federal, support R and D.

We believe it's essential that we continue to work hand in hand to improve innovation programs and incentives so we may continue to lead the world in homegrown innovation and manufacturing.

In conclusion, I hope I've shown you that our industry produces an important and strategic commodity and is continually seeking ways to be innovative. If you think about the positive attributes of concrete, attributes like sustainability, resiliency, durability, and safety, you'll start to think like me that concrete is really smarter than you think.

Thank you very much for the opportunity today, and I look forward to any questions after the vote.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from the Green Budget Coalition, please.

[Andrew Van Iterson, Manager, Green Budget Coalition]

Mr. Chairman, honourable members, thank you for inviting the Green Budget Coalition to speak to you today.

I am joined today by Sachi Gibson from the Pembina Institute, who can take questions as well.

The Green Budget Coalition is unique in bringing together the expertise of 20 of Canada's leading environmental and conservation organizations. We collectively represent over 600,000 Canadians, including groups like Pembina, the David Suzuki Foundation, Ducks Unlimited, Nature Canada, and the Nature Conservancy of Canada.

We want to again thank the government for its progress in budget 2011: funding for home energy retrofits, for Mealy Mountains National Park, the Great Lakes, renewing funding for the clean air agenda and the chemicals management plan, and also for ending counterproductive subsidies to fossil fuels, the oil sands, and the Chrysotile Institute. Those were well noted.

To build on this progress in budget 2012, we've identified four prime investment and savings opportunities. I'll note that my presentation is a slight revision of what was in the original submission to you, but it's reflected in the preliminary recommendations document that we sent to you on September 29 and again yesterday.

Our recommendations address species at risk, freshwater resources, energy efficiency, and fossil fuel subsidies. I suspect I'm unique, in that our package of recommendations will not only create environmental and economic benefits, but will also save the government over $300 million annually.

On species at risk, one-quarter of the current funding for the species at risk program is sunsetting in March 2012. We, along with many industry and agricultural organizations, recommend renewing this $25 million, which was previously renewed in 2007. It's a relatively small amount of money that plays an important role in protecting Canada's at-risk species, a task Canada has committed to through international agreements and that maintains our responsibilities relative to international trade.

Second, fresh water is central to the health of Canadians, our communities, our economies, and our environments. Yet Canada's record in protecting Canada's freshwater resources and ecosystems lags behind other leading nations.

We're highlighting three opportunities to make progress on water: upgrading the terrible state of water and waste water infrastructure systems in first nations, Inuit, and Métis communities; addressing the gaps in monitoring Canada's water quality and quantity that were identified by the Commissioner of the Environment and Sustainable Development in his fall 2010 report; and securing the health of three of Canada's diverse aquatic ecosystems in the Great Lakes and St. Lawrence, Lake Winnipeg, and the Northwest Territories.

Thirdly, energy efficiency is the cleanest, most affordable, and fastest way to make more energy available to our economy while reducing pollution and reducing energy costs for businesses and individual Canadians across Canada. It's also an important source of sustainable employment. In budget 2012 it's time to again make a multi-year commitment to home retrofits focused on lower-income households to provide continuity and certainty to Canadians and this blossoming industry. We recommend a lower level of $250 million per year for a national green homes strategy, along with a smaller investment to kick-start the green bonds program.

Fourthly, reducing fossil fuel subsidies provides a prime opportunity to simultaneously reduce the federal deficit, to build on the momentum this government has created in budgets 2007 and 2011, and to make further progress in fulfilling our commitment to the G-20 to phase out inefficient subsidies to fossil fuels over the medium term, which total over $2 billion annually.

The best next steps on this path are to end tax preferences through the Canadian exploration expense and the Canadian development expense. These were noted as subsidies for potential reform by the Deputy Minister of Finance in his March 2010 memorandum to Finance Minister Flaherty. Bringing the deductible rates under the CEE and the CDE in line with normal capital depreciation rates would save the government over $1.3 billion annually in unnecessary tax expenditures.

In conclusion, I'd like to urge you all to keep in mind the finance minister's words from September 14, that economic prosperity can't and shouldn't be separated from the health of the environment.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll hear our final presentation. Mr. Wood from Sustainable Prosperity, please.

[Alexander Wood, Senior Director, Policy and Markets, Sustainable Prosperity]

Thank you, Mr. Chair.

I wish to thank the committee for its invitation today. I expect a very interesting discussion.

For the rest of my presentation, I'll speak English, but I'd be happy to answer questions in French.

I welcome the opportunity to present Sustainable Prosperity's perspective on the 2012 federal budget.

I am the senior director of policy and markets for Sustainable Prosperity, which is an independent think tank and research network based at the University of Ottawa here in Ottawa.

The particular focus we have is the green economy and how innovation in policy and markets can help Canada achieve a stronger, greener, and more competitive economy.

We are not here with a specific ask. We are here, essentially, with a set of perspectives and recommendations for the 2012 budget based on our review and assessment of the 2011 budget. A longer description of that assessment is found in the brief we have tabled with the committee.

Our perspective and interest in this issue is based on the following assumptions. First of all, the federal budget is the most important expression of government policy on an annual basis. Second, the pursuit of a green economy is in Canada's national interest. Third, Canada's economic and environmental performance are closely linked. And fourth, smart policy can drive both economically and environmentally advantageous outcomes for Canada through things such as innovation and productivity.

Our assessment of the 2011 budget, using the promotion of a green economy for Canada as a benchmark, found the following:

First, the 2011 budget is a holding budget for the green economy. As Andrew mentioned, there is important support for existing initiatives in the budget, but no new major initiatives have been established.

Second, green economy measures in the 2011 budget are not part of an overall framework or strategy, as expressed by the government. Therefore, it is hard to establish an intent or an objective in terms of the government's overall approach to this issue. As a result, it will be difficult in the future to measure the impact of these measures that are contained and described in the 2011 budget.

Third, in the 2011 budget there is a heavy reliance on spending and regulatory measures, which by our analysis constitute 97.8% of the measures announced in that budget, without clear explanation or discussion as to why those particular instruments were chosen over, for example, tax instruments. In our view, this might involve opportunity costs in terms of the overall cost of regulation, for example, but also costs in terms of missed opportunities and induced innovation. Without a clear rationale for and explanation of these instruments and the choices that have been made, it is hard to assess the specifics of the choices that in fact are contained in that budget.

We don't want to suggest that the choices made, the measures announced, are in any way inadequate. The point we want to underline here is that without a real definition of why those choices were made and some transparency around them, it is hard to make an overall assessment.

Our recommendations for budget 2012, on the basis of that--

[Shelly Glover, Conservative, Saint Boniface, MB]

Mr. Chair, I'm so sorry to interrupt, but we have to go; otherwise we're going to miss the vote, unfortunately.

[The Chair, Conservative, James Rajotte]

I apologize, Mr. Wood. We'll come right back to you right after the vote.

[Alexander Wood]

I'll be sitting here.

[The Chair, Conservative, James Rajotte]

Okay.

Thank you.

I'll suspend the meeting.

[The Chair, Conservative, James Rajotte]

I'm going to call the meeting back to order.

Mr. Wood, I will allow you to finish your presentation, and then we'll begin with members' questions.