Finance Committee on May 8th, 2018

[John Moffet]

Correct.

[Pierre Poilievre, Conservative, Carleton, ON]

Can I come back to my question?

[The Chair, Liberal, Wayne Easter]

Yes, you can come back, and we'll go to Mr. Dusseault.

But I'm just a little bit confused here, Mr. Moffet. You said that due to the increased greenhouse gases since, you used the figure 298 megatonnes.

[John Moffet]

Right. Sorry, and that was reported in February, 2016.

Mr. Poilievre asked as of today. In the last two years, emissions have gone down since February 2016, so the gap or the amount we need to reduce has also declined.

[The Chair, Liberal, Wayne Easter]

All right. Thank you.

Mr. Dusseault is next, then Mr. Poilievre, and then Mr. Kmiec.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Mr. Mercille, since we are talking about exemptions for farmers, do you have the list of other exemptions? Yesterday, one of the criticisms was that there were exemptions for a number of industries. Can you remind the committee which industries?

[Pierre Mercille]

I'm not sure I have the list. The legislation specifies the cases where the fuel charge applies, but it does not necessarily list the cases where it does not apply.

I have a little trouble talking about what is not in the bill.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

You also talked about exemption certificates.

[Pierre Mercille]

Yes. We have to know who can use them.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

You say that farmers do not have to register with the Canada Revenue Agency. Is that correct?

Who else could benefit from exemption certificates?

[Pierre Mercille]

As an example, let me refer to the typical case of a registered distributor selling fuel to another registered distributor. In that context, the second distributor could show an exemption certificate so that the first distributor does not have to pay the fuel charge. The obligation to pay the charge would then be transferred to the second registered distributor.

Furthermore, some carriers will have the right to use exemption certificates. They are mostly carriers that do a lot of interprovincial and international transportation. They will have to do a self-assessment for the fuel they use in the province.

There is also a big exception, which has been explained. The fuel charge is discussed in part 1 of the bill and a pricing regime based on performance in part 2. Companies or facilities that are subject to the regime specified in part 2 will have the right to submit exemption certificates to their suppliers. In that case, the fuel used in those facilities will be subject to the prices defined in part 2, not part 1, of the bill.

[David Turner, Tax Policy Analyst, Sales Tax Division, Tax Policy Branch, Department of Finance]

There is one other category of person that is entitled to use an exemption certificate. It's called a “registered user”. Their certificate is for the use of fuel in certain ways. There's a defined term in the legislation called “non-covered activity”. With fuels that are used in those non-covered activities by those registered persons, the person is also entitled to present an exemption certificate in respect of those activities. Those activities are fuel that is used as a raw material in industrial processes that produce another fuel, or another substance, material, or thing.

This is when fuels are used in a way so as not to attract a charge. There are also activities in there where fuel is used “as a solvent or diluent in the production or transport of crude bitumen or another substance, material or thing”. That fuel also must be used in that way, but it must not be burned essentially. It must not be put into a fuel system that produces heat or energy.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Could you tell me how the decision is made to grant certain users, particularly carriers, exemptions from the fuel charge?

[Pierre Mercille]

It must be understood that those exemptions affect one link in the chain. Fuel consumption in the province will still be subject to the fuel charge or the regime set out in part 2 of the bill.

There are distribution chains. This does not mean that they will be exempt from the charge, but rather that another person will pay for it. The person using the certificate can pay for it.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Is it for the purpose of avoiding double taxation?

[Pierre Mercille]

Yes, in a number of cases.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

In terms of the transfer of funds to the provinces, I imagine that all the data on those charges will be published in the annual report on the application of the act.

Will it be possible to find out exactly the revenue generated by carbon pricing in the designated provinces, how much money is returned, to whom and how?

I would like to know what mechanism will allow us to ensure that the revenue is in fact neutral and to find out who ultimately gets the funds.

[Philippe Giguère, Manager, Legislative Policy, Department of the Environment]

Yes, the information will be summarized in the annual report. My colleagues from the finance department can tell you more about that, but the information is also published in the public accounts. The annual report is definitely a way to ensure that the information is easily accessible and available in plain language to make it possible to understand how the legislation works.

[John Moffet]

Just for clarity's sake, the law actually requires an annual report. I think we talked about that last week.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Yes. That's right.

That's great, thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Dusseault.

Mr. Poilievre?

[Pierre Poilievre, Conservative, Carleton, ON]

Back to the question of the Paris targets, Mr. Moffet, you said that we would have to reduce our emissions by 221 megatonnes by 2030 to reach our Paris commitments. How much will the carbon tax in this budget bill reduce greenhouse gas emissions?

[John Moffet]

What we provided in the study last week is an estimate of what carbon pricing across Canada will achieve, which is 80 megatonnes to 90 megatonnes by 2022.

I have two additional points. First, repeating the points I made last week, we don't know what the contribution of this legislation will be, because we don't yet know which provinces will implement their own systems. If they implement their own systems, this system won't apply. Nonetheless, the collective contribution of carbon pricing by 2022 will be in the range of 80 to 90 megatonnes.

Second, we don't know, at this point, what the contribution of carbon pricing might be in 2030 because we don't yet know what carbon pricing will look like post-2022 in Canada.

[Pierre Poilievre, Conservative, Carleton, ON]

What do you mean “look like“?

[John Moffet]

Well, federal and provincial governments have committed to review carbon pricing. Provincial governments may change. Provincial governments may remove their pricing system, change their pricing system, add a new pricing system. The federal government may change. The federal government may change the pricing system.