Finance Committee on May 7th, 2018

[Dr. Andrew Leach]

Part of the idea of the price on carbon is enabling entrepreneurship, and this is a story we see every day in Alberta. I have students in my classes every year whose family success story is related to something you'd never read about in the news. It's figuring out a better valve, a better coiled tube insulation, some technical solution in our oil and gas sector, our electricity sector, or our technology sector that creates an opportunity for them. Instead of a large government deciding it knows what's best for this refinery, for this oil sands operation, etc., carbon pricing puts out the market for these clean technical solutions and tells them to figure it out, and if they do there's a giant market here for them to do that. So rather than having it be a big government solution it's a small market solution.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Following your testimony just now—and this is relating to testimony that we've heard from other witnesses—some will say that British Columbia's price on pollution has not reduced emissions at all. I know you've researched this question along with other academic experts and environmental economists. What does the evidence say about the performance of B.C.'s price on pollution?

[Dr. Andrew Leach]

I think my Ecofiscal Commission colleague highlighted that in his opening, but the evidence suggests that B.C.'s emissions would be 5% to 15% higher than they are, had it not been for the imposition of the carbon tax and the associated revenue recycling policy. B.C. has benefited from economic growth partly because of its low tax environment. Some of that has offset the aggregate emissions gains that would have come from simply imposing a carbon tax and doing nothing with the dollars, but that's a good thing; that's what we want; we want economic growth, but the emissions are lower than they otherwise would have been by a significant margin.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

My question goes to Mr. Ribaux.

Quebec has decided to be a part of the carbon market, and that is a good thing.

In your opinion, and according to your research, how will that benefit the economies of Quebec and of Canada in terms of innovation?

[Sidney Ribaux]

We can say that the economy of Quebec is doing very well. If we look at the indicators, such as the employment rate, we can state that it has practically never done as well. In those conditions, I do not believe that establishing the carbon market had a negative impact on the economy. In fact, the effect is actually positive, even though the challenge for Quebec is greater, in one sense.

Actually, there has been no simple, easy reduction in Quebec because the electricity sector is completely “decarbonized”. This means that the areas we have to tackle in order to reduce greenhouse gas emissions are more difficult. I am talking about transportation and industry, to a certain extent, although, in recent years, industry has done more than its share to reduce greenhouse gas emissions. The impact is positive in the sense that we are succeeding both to reduce emissions and to maintain a healthy economy.

[The Chair, Liberal, Wayne Easter]

Thank you all.

I'm turning to Mr. Kmiec.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Thank you, Mr. Chair.

Almost half the questions here could have easily been answered if the government would stop covering up the true cost of the carbon tax to low-income Canadians. Affordability is the number one thing I always hear about, and affordability or any form of taxation is a great question, but especially the carbon tax because it punishes those at the lowest income scale. It's a tax on everything. I know Mr. Kenney and others on the Conservative side all across the country have used this terminology: It's a tax on the essentials of living, and that's what it is.

The government keeps talking about people needing to make better choices. I have an arena in Erin Woods in my riding and when the carbon tax was introduced provincially it punished the families who used the arena through higher fees, higher costs, when it came to just going out and having a day of hockey for the kids. That's the issue, and if they would stop covering it up we'd be able to have a fulsome debate on it and be able to understand the true impact it will have on every Canadian: the affordability of everyday activities, heating your home, but also just going out for a game of hockey.

The euphemism that's often used is there's a tax on everything, making better choices, but they're trying to change the behaviour of people. They don't like what people want to do, go play hockey, heat your home to a temperature that you like. That's what I hear in my riding.

Mr. Kenney, again my questions are going to go to you. Forcing the actions of people, forcing people to do what the government wants them to do, obviously you disagree with it, and obviously you've heard lots of stories from Albertans all across the province. Can you share those with the committee?

[Jason Kenney]

Mr. Chair, the attitude described by Mr. Kmiec was perfectly reflected by Alberta's premier, who in defending her carbon tax said that it will cause people to make better choices such as taking the bus. Well, there are millions of Albertans who don't live where there's any regular transit service, where taking the bus is not an option, where living normal lives and taking their kids to their hockey practices, picking up the groceries, and getting to work all require driving. In many walks of life, it requires driving a larger vehicle as well.

What our premier essentially told those people is that they should stop living their normal lives. This is a moral judgment on people who are not irresponsible. It punishes them if you tell them they have to turn the heat down at home when it's 30 below outside. I think within that is a desire for government to control people's lives. I think there's a fundamental philosophical difference here. I believe in empowering people to be more free, not empowering government to make people less free.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

The cover-up, the redacted mail that doesn't reveal all the information, is actually twofold, because in this bill also is the rebate program. The Alberta government already runs a rebate program. I've been trying for a very long time to get more information from the Canada Revenue Agency, which runs the rebate program. I've asked for the full information on how many rebates are paid, to whom they are paid, and how many non-residents of Alberta are getting this Alberta climate leadership adjustment rebate. It's order paper question Q-834. Every single time I've asked for information, I have not received it. They claimed it would be injurious to the relationship with the Alberta government.

Mr. Kenney, after you win in 2019, which is my hope and the hope of many of my constituents, will you commit to also releasing and backdating all the information on how the rebate actually worked in the province, rather than doing what they've done, which is covering up all information from the rebate down to the redacted memo that they refuse to release?

[Jason Kenney]

Yes, I absolutely will.

Thank you for the suggestion.

[The Chair, Liberal, Wayne Easter]

Mr. Saul wanted in here as well.

[Graham Saul]

I think there is a fundamental philosophical difference here. That's a fair point. What do we really know? We know that those countries around the world that are doing the most around this issue—countries like Germany and Norway—are doing perfectly well economically. So the sky doesn't fall. In fact, there's evidence that you can perform very successfully economically if you take this problem seriously.

We also know that provinces in Canada, like Quebec and British Columbia, that are trying to move forward are doing perfectly well economically and are taking steps to protect the least advantaged people in their provinces in ways that many other provinces aren't.

We also know, though, that we have a serious problem on our hands. If you actually believe in the science—and I think this is where the fundamental philosophical difference comes in—then you have to draw the conclusion that it would be reckless and irresponsible to continue on the trajectory we are on today, that it would fundamentally undermine the well-being of our children, and that it would cause potentially unprecedented harm to our economy and to future generations—not to mention the fact that the poorest people in the world, those least responsible for the problem, are the ones who will suffer first and worst if we fail to take action.

The fundamental philosophical difference we have is this: do you actually care about the problem? Do you actually care about what the science of climate change is telling us or the implications of doing nothing? If you do, then the secret is very clear. When we look at jurisdictions that are actually making progress on this issue, what do they have in common? They are trying. The jurisdictions around the world that care about this problem and are doing something about it and are actually making progress on reducing greenhouse gas emissions and ushering in the clean energy economy of the 21st century, what they ultimately have in common is that they are trying.

So if everyone around this table does truly care about this problem, if we do not suffer a philosophical divide on that question, then every party around the table has a responsibility to come forward with a plan that reflects the fact that they truly want to try to address it. In the absence of that plan, it's very difficult to come to the conclusion that we do in fact share a concern about this problem.

[The Chair, Liberal, Wayne Easter]

Thank you for those comments, Mr. Saul. We'll have to leave it there.

Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

Welcome, everyone. It's been a very informative and spirited conversation this afternoon.

I have a couple of things. I keep hearing about the economy. I know that, for the residents of my riding, the economy is the most important thing, ensuring people have a good future and a bright future for their children.

As someone who's followed the economy for over 20 years of his life—and Mr. Leach, I've read a lot of your material, along with the materials of my alma mater professor, Mark Jaccard over at Simon Fraser University—I think about where our Canadian economy is, with 85% of the provinces now operating under a pricing of carbon or some sort of mechanism. We're doing quite well, and this was affirmed last week. A.T. Kearney came out, and Canada is the number two place in the world for preference of foreign direct investments.

Mr. Kenney and I visited the beautiful province of Alberta. I am originally from the west coast. We visited the Alberta industrial heartland. Seeing the number of investment decisions that have been made in the polypropylene and propylene businesses that IPL has announced and so forth and the number of opportunities there, we know there is just phenomenal activity going on in that area of Alberta.

I covered the oil and gas sector. I'm not asking questions; I'll get there in a second.

To Mr. Leach, the question I have is this. If you look at the empirical evidence, and you look at where industry is going.... Look at Daimler in Germany, where they're switching their entire fleet of dregs or trucks, the ones you see on the Alberta highways and on the Ontario highways, to electric. They understand.... Mr. Kenney alluded to ragging the puck. I like the analogy of knowing where the puck is going and making sure you're there. That's the analogy I use.

To Mr. Leach, innovation, yes, but we need a mechanism for pricing carbon to get at the root of the issue.

[Dr. Andrew Leach]

Agreed. I guess if you have a couple of Albertans at the table, you need a Gretzky reference.

I can say over and over that, if you want a program that does what we talked about today, which does not necessarily materially increase the size or role of government and rewards entrepreneurship, you really have a couple of choices here.

One is putting government funding toward direct funding of innovation. The other is creating a market for those innovations and letting our entrepreneurs take care of it. The economic evidence comes back over and over again that carbon pricing creates more incentives for innovation than do other policies at our disposal.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Exactly.

I'm an economist by trade. All I care about is whether Canadians are working and doing well.

What I know today is that the unemployment rate is at a 40-year low. We've created nearly 600,000 new jobs. We're introducing the Canada workers benefit. We ran on a platform of putting a price on carbon nationally, but the beautiful thing about this is that each province can decide what to do with those revenues.

I am in favour of a revenue-neutral carbon putting a price on carbon, absolutely. B.C. adopted it a very long time ago, and they've done phenomenally well.

I understand the difference between correlation and causation. I get that, but at the same time.... I do want to hear this. B.C. emissions, if you want to say bend the curve, have been bent with the introduction of a price on carbon.

Perhaps you could refer to that, please.

[Dr. Andrew Leach]

Sure.

You come back to the question of revenue neutrality, or how I prefer to think about it is, are we increasing or changing the overall size of government?

There's really one policy on the table that will allow you to both implement strong incentives for green innovation and keep the size of government the same or smaller, which is to implement a carbon price that you, then, refund through credits or lower taxes. That's certainly a policy option that's on the table.

The alternative is large government-funded subsidies, regulatory initiatives, etc., which increase the size and the role of government in solving this problem.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

I'll go to Mr. Kenney.

[Jason Kenney]

I'll just jump in really quick on that.

The theory is great; the reality is something completely different.

The NDP government in Alberta has announced that, as it increases its carbon tax from $30 to $50 a tonne to comply with this bill, there will be no incremental increase in rebates, so the supposed progressivity.... There will be no offsetting tax cuts. There have been no reductions in regulations.

In terms of the theory that you hear that there will always be rebates, there will always be proportionate tax cuts, and there will always be a reduction in regulations, the opposite is happening in the real world of Alberta today.

[Dr. Andrew Leach]

If we want to talk about practice versus theory, you brought up the specified gas emitters, which is a carbon price on large emitters where the funds are not revenue neutral. They went to a government-sponsored fund, very similar in design to the Turning the Corner plan that was proposed during your time in government, one of the many carbon pricing systems proposed during that time. That's something that does not offset other taxes. It does not reduce the size of government. In fact, it puts a quasi-governmental organization in the role of allocating funding to whichever winners it chooses.

[Jason Kenney]

I appreciate Professor Leach defending multinational oil companies. I wish he were as passionate in defending low-income Albertans who are now going to have to pay the carbon tax without the rebate he recommended.

[Dr. Andrew Leach]

That's not true at all.

[Jason Kenney]

How so?

[Dr. Andrew Leach]

[Inaudible--Editor]

[The Chair, Liberal, Wayne Easter]

Okay, guys. We have a debate in the corner again.

Mr. Sorbara, the last question.