Finance Committee on Nov. 3rd, 2011

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Excellent. I thought it was a good, balanced opinion. I would like to tell you too that notwithstanding I'm from northern Alberta, I actually represent 5,000 Quebeckers who work in my riding. Any investment into Alberta will go to Quebec as well; I just wanted to let you know that.

I did want to talk to Ms. Sharpe for a minute about the Jenkins report in particular, regarding commercialization of innovation.

For those people who don't know what you do...I do know because, as you are aware, I was asked to make recommendations on the green infrastructure fund and we worked for some period of time on several of them. I have to tell you, I did not realize how many times you check, double-check, triple-check, quadruple-check, and then go back and check some more things about these investments. I was very impressed with how much you go through as an organization and specifically make sure that tax dollars are invested properly.

Could you tell us a little bit more about the commercialization of innovation under the Jenkins report and what you would recommend that we as a government could do to help you? It sounds like we'd get a tremendous return on investment.

[Dr. Vicky Sharpe]

Thank you very much.

The Jenkins report highlighted a couple of things in that the model for government investment is better oriented toward direct investments. You can more directly see the returns, and SDTC is a direct investment model. There is also not sufficient emphasis on the commercialization end of our innovation in Canada. We see a lot of support for research, which is good. However, if you don't turn that into profit, then that's not feeding back into the economy or into the government's tax revenues.

Also, you need to be able to produce concrete results and to be able to measure them. There's a lot of talk about innovation, but people don't work out what they're actually doing. In that report, it is noted that there are only two entities that actually drive and have a cost-benefit model. SDTC is the only one that runs that model. Recently we just redid that for a third-party evaluator, and there is a ten times return to the government on the money it provides to us. That was recognized in the Jenkins report, where it stated that the commercialization model developed by Sustainable Development Technology Canada might be emulated.

It's a very important area, and if we just take a couple more points around the delivery of that.... If one was to put in around $500 million of precious public money into SDTC, going on our current record of mobilizing private sector dollars, we will produce in the order of $10 billion of mobilized private capital. In terms of returns to Canadians, that multiplier is in the same order. So far, we're at a times 14 leverage.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

It sounds like you should go private. It sounds like a good investment for me if I could get some money in there.

I think that's all my time, but thank you very much, and thank you for the hard work you do.

[Dr. Vicky Sharpe]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Jean.

Mr. Giguère has the floor.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you very much to the witnesses for coming here.

My first question is for the representative of the Canadian Gas Association.

You must certainly know about the Dutch disease. It goes as follows: the more you invest in oil and gas exploitation, the more the manufacturing sector suffers.

At present, of all the countries in the world, I think the Dutch disease applies the most brutally to Canada.

The Dutch, Norwegian and English governments have found a solution to this situation. They required producers to give some added value to the product they were exploiting, that is, they had to do some processing.

What is your opinion on this?

[Timothy Egan]

I'm not familiar with the specifics of the example the honourable member is talking about. We're on the distribution side of the spectrum. Our interest is in enhanced relations with customers who are using energy and a better understanding of how customers are using energy. That requires that those customers have a choice in energy services and access to as many applications of energy as possible.

Part of choice and access in this country is choice and access to technologies using fossil fuels. Fossil fuels are a significant contributor to the Canadian economy. Natural gas in particular is a source of extraordinary royalty and taxation revenue for governments across the country, which then can be used in a host of ways.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Mr. Chair, given that I have only five minutes, I cannot allow the witness to give his speech again.

I note, however, something important in your presentation. You don't talk to us at all about how to solve the Dutch disease problem, which has a harsh impact on the Canadian economy. I take note of this.

My next questions are for the representative of the Desjardins Movement.

At present, in Canada, new regions are being exploited economically. I am thinking of the Asia-Pacific Corridor, the Northwest Passage, Plan Nord in Quebec, Quebec-Atlantic offshore operations, the tar sands and potash and oil in Saskatchewan.

All these projects require new infrastructure. There's some extremely old infrastructure. A portion of the Trans-Canada Highway has been nicknamed the highway of death, in British Columbia. We have problems of access to drinking water in numerous communities.

In view of this and of the fact that some governments include only the depreciable share of these expenses so as to make investments predictable, how is it that we still regard investments in infrastructure as a government expenditure? Is the Canadian system itself not defective in its very vision?

[Bernard Brun]

You see that we, as a cooperative movement and financial group, have taken the trouble of emphasizing infrastructure within one of our three recommendations.

It seems absolutely clear to us that a little catching-up went into infrastructure, but that there remains a lot to be done. Measures must be taken for the updating and maintenance of infrastructure under an appropriate program.

As for calculations, I leave them to the political authorities. One thing is sure, though, there has to be a plan for this.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Do I still have any time, Mr. Chair? One minute, all right. I'll try to be brief.

My next questions are for the representatives of Sustainable Development Technology Canada.

At present, you do a lot of work with small businesses. These businesses rely massively on tax credits, scientific research and experimental development.

In this type of credit, there's already a variable rate. It's 35 per cent for Canadian-Controlled Private Corporations, CCPCs, and 20 per cent for public corporations. There's even a distinction. CCPCs get refundable credits and the others get tax credits.

Could we imagine, for green businesses, that the rate might rise to 50 per cent, which would be a third rate? Could we also imagine providing enhancements for scientific research and experimental development, which are fundamental in this economic sector?

[Dr. Vicky Sharpe]

Thank you.

I believe there are different ways of providing support, and the SR and ED methodology does indeed add value. I don't know that we need to have a differential rate for clean technology on the development side. I think we have a mechanism that works. There could be other ways of looking at the procurement of product in this country—increased purchase of green technologies and creating a stronger domestic market positions us to see some of this $1 trillion international market. I'm not an expert in the SR and ED area, but I'm not sure that I would say they needed that. I think there are other ways of boosting clean technologies.

[The Chair, Conservative, James Rajotte]

We'll go now to Mr. Wallace.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair. It's an honour to be back here on Finance after being away. I appreciate the witnesses sticking around for my questions.

Some of my questions have been asked, so I'm going to focus on SDTC. I was going to ask about the Jenkins report and direct support. What percentage of your clients take advantage of SR and ED or IRAP opportunities that are available through the government?

[Dr. Vicky Sharpe]

We do see companies that have been supported by IRAP. The last time we checked, it was in the order of 25 of our 220-odd companies. We work well with them. The SR and ED number, I don't have. But there are quite a large number that will access SR and ED, something in the 70% range.

[Mike Wallace, Conservative, Burlington, ON]

The other committee I'm on, the committee on government operations and estimates, is discussing a program called the Canadian innovation commercialization program. This is a program that the Conservative government has introduced, under which we will be the first buyer of innovation through a departmental system. It's two years old. We're just starting to see this come to fruition in the form of some actual purchases.

I love the model you have. There isn't a lot of venture capital in this country—let's be frank about it. You are filling a gap, and I don't mind using taxpayers' money to do it, because you ask for it back. That is the system you have. It's not just a handout. There are guideposts that you have to meet, a business plan that you have to present, and if you don't meet the requirements, we want our money back, which is an important piece.

I think we should be emphasizing a commercialization program that we have through the office of small business. In evaluating submissions on who you'd support, is it important to have the Government of Canada or any government on that list, or does it just matter that they have a customer?

[Dr. Vicky Sharpe]

In screening our opportunities, we don't just look at the technology. We look at the strength of the team and the market opportunity. There has to be customer demand for that product—that's a key criterion.

We have not yet looked at how the government might help in a general statistical way, because the fund you created is relatively new. I can, however, say that we have been successful in introducing, and working behind the scenes with, a number of our portfolio companies, which have been picked up by this program. We see this as valuable.

There are two critical points about innovation in this country. First, we have to have more willingness in the market to take that first step and buy the product, and having the government do this through procurement is a smart way of taking this step. Second, the government is looking for ways to cut its own internal costs, and so is industry. We talk a lot about whether we are as productive as other countries in competing for export markets. By definition, these clean technologies will be increasing efficiency. They reduce waste, they reduce environmental impact, and they create value. By doing this, you are increasing the competitiveness of our domestic market, which will help us in our exports. I see this as important and complementary.

[Mike Wallace, Conservative, Burlington, ON]

Thank you.

I have one question for Mr. Barr. I guess it's a question.

I'm working on a song and dance for an opening of a performing arts centre. I can understand an artist much better now than I could before I started this little process. You may see it on YouTube some day.

CBC, like any other department in the Government of Canada, has to do its share to get us back to a balanced budget. Why should CBC be any different from anybody else? If we need 5% from everybody, and they don't give us 5% back and we have to get that 5% from somewhere, do you have a suggestion for who that should be from your guild?

[Gerry Barr]

The question of proportionality, in terms of who carries what share of the burden of managing an austerity moment in a budget, is an important and interesting question. However, I think it needs to be acknowledged that CBC has, for the better part of 20 years now, been functioning very much on an austerity footing. Its responsibilities have been growing. It's been charged with responding in new and alternative platforms, working on the digital side as well as the television side. It's been doing that; it has been stepping up, but it has not been getting much more in the way of funding, as I mentioned earlier. It's been 8% over 18 years. In the same period, Canada's cultural expenditures in other areas have gone up about 73%.

So that is just to say there is a kind of balancing act.

[Mike Wallace, Conservative, Burlington, ON]

You're okay if we take money from other cultural areas, because they've gotten more money in the past, but we should keep it within the cultural envelope?

[Gerry Barr]

I'm saying I appreciate there is an issue of proportionality. In that respect, I think the edge goes to CBC, which has been funded with such austerity for the last 20 years.

[The Chair, Conservative, James Rajotte]

Okay. Thank you.

Thank you, Mr. Wallace.

I just want to follow up on a couple of points, the first with SDTC.

I appreciate the information you have, and I very much appreciate The Globe and Mail article that talks about a company that's doing a lot of good work in my riding, which is Titanium. It's doing it at the Devon Research Centre, which does research on tailings from the oil sands. I encourage everyone to read this, and I think we're going to have this translated and distributed to members, because it shows that the oil sands have always been about technology and research and development—Karl Clark said this back in the 1920s when he did his research at the Alberta Research Council. So I applaud you for doing that. I like the model, as you well know, of SDTC.

I just wanted to give you an opportunity, Dr. Sharpe, to talk about whether we should be changing the model a little bit, maybe moving it towards an EDC-type model. Is that something we should at least be considering at this committee and in the government?

[Dr. Vicky Sharpe]

Thank you very much for that question.

I would like us to have the opportunity for the model to move more explicitly to be able to obtain some returns on our success rates. As you just mentioned, Titanium is a wonderful company. It's an example. Another one is EcoSynthetix. It just did a $100 million IPO. It's our company. It's the largest IPO in five years.

So as far as the ability for us to select great companies goes, we ought to be able to have the taxpayers of this country take some of that high side and see a return.

[The Chair, Conservative, James Rajotte]

Then you could be self-financing, or even, frankly, have more revenues come in and do more projects.

[Dr. Vicky Sharpe]

It would take us to the early stage, where we still work, where there is not sufficient risk capital.

In terms of EDC, I would say that we work very closely with them. Some of our companies are now large enough to go through the stand of product offerings of EDC. We are working on a relationship in which we will provide the Canadian clean tech landscape analysis and support to EDC, and they will help us with the export markets.

[The Chair, Conservative, James Rajotte]

Thank you very much for that.

I did want to follow up. I know it's often dangerous territory for Conservatives to venture into the CBC discussion, but I'm going to do that.

Mr. Barr, in your presentation you say that the current level of funding to CBC is not sufficient to allow the public broadcaster to fully meet its broad mandate.

I confess I'm a fan of a lot of what the CBC does. I podcast a lot of their programs, the At Issue panel, The House. Rex Murphy is a treasure in our household. So I love a lot of what they do. But you also say it is an island of Canadian culture in a televised sea of American programming, which is the mainstay of our private broadcasters.

If you turn on CBC at certain hours, you get The Simpsons. They do a lot of good work, but they do an awful lot of things like showing American programming that competes directly with other broadcasters, which, in my view, does not fulfill that mandate of being uniquely Canadian.

I'd like to put that to you and get an answer from you, because it seems to me, whether it's Hockey Night in Canada or whether it's the Olympics, they do a lot of things with taxpayer money that compete directly, when instead those resources that are provided by the taxpayer should be directed towards uniquely Canadian programming, in my view.