Finance Committee on May 7th, 2018

[Prof. Stewart Elgie]

Listen, that's a very real concern. I talk with them about that all the time. I can tell you what their answer is, and they know the answer better than I do, so I'll relay what they tell me.

The shift in capital for oil and gas is largely driven by global oil prices and the fact that the U.S. has developed low-cost oil and gas fields largely through fracking. The fundamentals of reinvestment are driven mainly by those two factors.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

I was hoping for an answer to the numbers, of how much has moved, and how many. I didn't want to—

[Prof. Stewart Elgie]

No, but there are a significant number.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Okay.

[Prof. Stewart Elgie]

It's not due to carbon pricing, is their answer.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Okay, but they've signed on to your initiative, and they are the companies that right now have laid off significant numbers of people in my riding. I have thousands of residents in my riding who are unemployed from the oil and gas industry.

I'd like to move to Mr. Cross.

We've discussed this. The government has repeatedly said that the carbon tax is going to be revenue neutral, and yet they refuse to disclose to us what the cost will be. They refuse to disclose what their own projections are for the result on emissions. They have refused to provide Canadians with the modelling that they have done. I wonder if you have done your own modelling, or if you have information in your studies that you could share on what you think the average cost to a Canadian family might be, and whether or not this tax will in fact reduce emissions.

[Philip Cross]

No, sorry, we haven't done any modelling on that. You might be asking the wrong person. I did work 36 years at Statistics Canada. As you mentioned, we have lots and lots of models. I'm not sure I believe any of them. It was the models that got us into.... For example, my skepticism towards models was reinforced and solidified by the behaviour of banks running up to the 2008 financial crisis. That was all due to models—models based on, “Oh, house prices will never fall at the same time across the United States, because that's never happened before, on record.”

I'm very skeptical about the utility of models in a lot of these questions.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Yes, and don't misunderstand from my—

[Philip Cross]

There's one final thing I'll add about models. We don't have a model of innovation. There was a suggestion here from Stewart that economists understand innovation, and if we play with the price system, add some incentives, and put some inputs in, this output will come out in technological change.

Economics does not have a theory of innovation; I'm sorry. As the one economist on this panel, let me assure you of that.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you. And that wasn't to defend modelling as a policy tool but merely to point out that if they shared whatever modelling they had, then an economist like you would be in a position to judge the quality of the modelling or the methodology they've used.

The fact is that there has been no disclosure from this government. They have steadfastly refused, including at this committee table last Thursday, where the Minister of Finance refused to answer the question repeatedly about how much this tax will cost the average family and how much it will actually reduce emissions.

[Philip Cross]

My last comment on models is that I'm not against modelling. Modelling is a great way to organize your thoughts about something and to highlight what the important assumptions are. The problem, as somebody put it, is don't believe your models.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

All right.

[The Chair, Liberal, Wayne Easter]

You're out of time.

Mr. McLeod.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chair.

I appreciate all the presenters here today.

Climate change is something that is very real in my riding. I represent the Northwest Territories. We certainly see the impacts. Yesterday the river broke on the Mackenzie, and the ice moved. I had a lot of people contact me and voice concern about how thin the ice is. The ice is about a foot and a half thick. When I was growing up as a young child, the ice was five to seven feet thick. It was a spectacular event to see the Mackenzie River break up. There was lots of thundering noise and ice pushing up the bank. You don't get that anymore. I flew over the Beaufort Sea this winter, in January, and in parts it hadn't frozen. It was still open. We've never seen that before. People in the communities are saying they're not able to go hunting. They used to be able to go 40 miles onto the ocean. Now they can barely go five.

So we're really starting to see a lot of impact. A lot of people are asking, “What can we do?” Pricing on pollution is one area we can certainly focus on, but there needs to be more. If we're going to have an impact, we certainly have to do a lot of the things at the same time.

I think somebody mentioned today that if we're going to have change, we need good planning. Many of the indigenous governments that I represent—we have seven large indigenous governments in my riding—talk about land use planning. Every one of them wants to do land use planning where we have a plan to develop the economic opportunities and where we also have, in the same plan, conservation areas.

My question is for the Green Budget Coalition, because I know you work with organizations that work with protected areas, but you also do a lot of planning on how we can protect what we have. Can you maybe talk a little bit about the importance of a good plan, especially a land use plan where we can do conservation planning, economic planning, protect our historic sites, take into consideration what the indigenous governments are telling us in areas that are sacred to them, and have everybody have buy-in rather than always butting heads on the issues?

[Andrew Van Iterson]

I think that's a really important issue to raise. I think we've been increasingly realizing over the years that an effective, successful protected area is not just a piece of land cut out on a map but one where we take time, engage especially indigenous knowledge and the knowledge of others who live in the area, and deal with people in terms of the job creation aspects and the cultural value in the areas.

That's partly why we made our recommendation for funding around protected areas. You need funding for the process to get started in the creation of the protected area and the long-term management. We've been particularly supportive of the indigenous guardians proposal as a way to engage the knowledge and wisdom of indigenous communities.

We're also very optimistic about the Edéhzhíe protected area in your riding that we're hoping will continue to be formalized.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, and I'm glad you mentioned Edéhzhíe, because Edéhzhíe started many many years ago, and since the actual application was submitted, we have seen two diamond mines apply and get approval. We know there's a different process for economic projects versus protecting areas.

Do you really think that the protected areas strategy is working? I know there were eight submissions in my riding, and I don't see any of them being finalized, and I've been watching for over 10 years on some of them. Is it something that we continue to pursue, or do we just park it and try something else?

[Andrew Van Iterson]

I'll admit to not being an expert on the protected area strategy. My sense is that there are very well-meaning individuals and organizations involved, and they're trying to strike the right balance among a number of different stakeholders, as you mentioned, whose interests all matter. That can be a challenging process, as the carbon pricing discussion is showing also.

[The Chair, Liberal, Wayne Easter]

A very short question, please.

[Michael McLeod, Liberal, Northwest Territories, NT]

I have one last question to Stewart regarding carbon pricing. I have a hard time trying to figure out what the actual number should be for carbon pricing, and it seems like a lot of people are taking a lot of guesses in terms of what it should be. Carbon pricing is not on its own. It's dependent on what else happens. If we're going to meet the target for the long run, in 30, 40 years, we can't put a number on it until we know what else is involved to try to reduce the carbon issues.

Is that correct?

[Prof. Stewart Elgie]

Yes. Your points about the north, I think, really hit home. I lived in Alaska for years, on the other side of the border in the north. To me, it helps to be looking forward, and if you imagine 20 years from now it's not that hard to imagine what a future low-carbon economy will look like. We will use a lot less energy in our homes, our vehicles, and our businesses, and the energy we use will be generated by low-carbon sources or fossil fuel-free sources. The world will get to that place. The challenge is accelerating our pace to get to that place. It's particularly important for folks in the north because your ability to access things like low-emission vehicles and clean energy sources is tougher. So I would say that, in addition to carbon pricing, we need things like a major investment in clean energy sources for the north, and a big part of that is infrastructure. It's really important right now. Infrastructure is going to be around for 30 years, so we need to build the infrastructure for a 2030 or a 2040 economy today.

I grew up in Toronto, and if you ever go across that Bloor Street bridge, there's a little subway line that runs right under it, and that was built before anyone had subways. Someone was thinking ahead and decided to build that subway line then, knowing that in 10 or 15 years there would be a need for subways.

We've got to make those same kinds of forward-looking decisions today so that we're actually ready for the low-carbon world that's going to come tomorrow, whether we like it or not. We talked a lot about the impact of prices, and we all feel, me too, that governments can't insulate the public from economic changes. I think your job is to prepare people for it, and help them make those transitions, and I take my hat off and admire you for your efforts to do so.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Mr. Albas and then Mr. Fergus will split six minutes.

Mr. Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Great. Thank you.

Mr. Cross, could you briefly comment on what you think the impact will be on low- to medium-income families, which Liberals claim to be helping the most, in regard to this bill.

[Philip Cross]

I think that's one of the problems with carbon taxes and sales taxes in general. They do tend to be regressive. Low- and medium-income families spend a proportionally larger share of their budget on these energy sources. So it's inevitably going to be regressive.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Are you familiar with Chi Man Yip's submission in the Journal of Environmental Economics and Management, which came out recently, on the labour market consequences of environmental taxes? Are you familiar with that?

[Philip Cross]

No, regrettably, the Journal of Environmental Economics and Management is not one of the publications I subscribe to.