Finance Committee on May 2nd, 2019

[The Chair, Liberal, Wayne Easter]

That's right.

[Pierre Poilievre, Conservative, Carleton, ON]

I guess we're being asked to pass legislation and then find out, after we pass it, what it does.

[The Chair, Liberal, Wayne Easter]

I don't think officials can answer on that. That's where we're at. We're at an impasse right there.

Mr. Oliphant.

[Rob Oliphant, Liberal, Don Valley West, ON]

Thank you, Mr. Chair, and thank you to all the officials for being here today.

I'm not a member of the finance committee. I've not been blessed with that.

It means that I come at it rather naively. As I'm reading this section, I see the intent is to forward the revenue directly to households most affected. My assumption is that, in that formula that was done to get the payments to households through their income tax, it was factored in that costs would proceed at several levels through the chain of expenses related to a price on pollution.

If there were costs on various organizations, whether they be large businesses, small businesses, medium-sized businesses or other enterprises, was that factored into that part of the 90%?

[Judy Meltzer]

Yes, generally speaking as with other carbon pollution pricing systems, the expectation is that the costs are passed through, and that's why you see it's very common that proceeds are returned to consumers and households, for example, in different ways in Alberta and B.C.

What I can say is that the system, and I'm just talking about the overall approach for the design of the federal system, was also designed to take into account that there are industries and sectors that for various reasons, including international competitors in the market, are more limited in their ability to pass through those costs. For that reason, we have a separate regulated trading system for those industries so that we mitigate the risks of competitiveness and carbon leakage. That is the kind of underpinning of the approach that the price signal does get passed through and that's how the approach works.

[Rob Oliphant, Liberal, Don Valley West, ON]

That's helpful for me because I was understanding that it generally passes through, because that's the way business works, and for those cases where it's determined that it would most likely not be able to be easily passed through, there is mitigation for that.

Then there are other possibilities to use some of the revenue to encourage the whole system because the whole thing is meant to tackle climate change not to produce revenue. Am I understanding that?

[Judy Meltzer]

That's correct.

The intent is not to generate revenue. The intent, as was indicated in the announcement in October and again in December, is to create an incentive for households to be able to further reduce emissions through climate action incentive payments, but also roughly 10% was identified that would be proposed to be targeted to the other affected sectors including SMEs and the municipalities, universities, schools and hospitals, etc. The idea is that those proceeds could also be invested in other ways to lower carbon footprint, to improve energy efficiency, foster further innovation, etc.

[Rob Oliphant, Liberal, Don Valley West, ON]

Thank you.

Thanks, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Mr. Poilievre.

[Pierre Poilievre, Conservative, Carleton, ON]

The whole premise of this 10% fund is that there are some businesses that are going to end up paying more in taxes that they can't pass on to their customers, yet you can't confirm that small business owners will be reimbursed for costs that they can't pass on.

I have a couple of foundation layers who came to see me in my office two weeks ago. They say the extra fuel that is going to be associated with turning the cement into concrete, pouring the foundations and moving their workers, their trucks and other assets to workplaces can not all be passed on to their customers. These two small businessmen, who employ I suspect about a dozen people, are going to have to eat those expenses.

The government claims that they shouldn't be worried because 10% of the revenue from the carbon tax will go into this special fund that will help people just like them. I've asked you, “Can you guarantee that they will get back in rebates or some other compensation as much as they pay in taxes?” So far, I haven't had anyone on this dais tell me that the answer is yes.

Can anyone tell me that my two small businessmen from my community will be fully compensated for the tax they will pay as a result of this new carbon levy?

[Samuel Millar]

The proposed provisions are not a new carbon levy. It's an authority to allow for the return of some of the proceeds that will be collected from the fuel charge in four provinces for the moment.

[Pierre Poilievre, Conservative, Carleton, ON]

When was that fuel charge instituted?

[Samuel Millar]

That came into force on April 1, 2019.

[Pierre Poilievre, Conservative, Carleton, ON]

It's now May, so it is a new carbon levy.

[Samuel Millar]

Correct. I was referring really to the provisions that are proposed in the BIA.

As we said in October, the government identified a number of particularly affected sectors, including small and medium-sized enterprises, but there are several others including municipalities, hospitals, universities and indigenous communities.

Also at that time the government published estimates of what it believes the proceeds will be and, therefore, the overall size of the payments, using this authority, if passed. What has not yet been published, and I think goes to the core of your question, is the specifics of the program design that will support the return of those proceeds to each of those sectors.

The only accurate answer to your question at the moment is that it's under development.

[Pierre Poilievre, Conservative, Carleton, ON]

When these constituents, these small business people, come into my office and say their costs are going up, They have to lay someone off or cut someone's pay, I'll say to them that some day the government is going to announce a program whereby they can fill out a form and maybe staple their receipts from gas and other expenses that have gone up and maybe someone in Finance Canada or Environment Canada will reply to them, thank them for their letter, and say they've looked over the expenses and here's a cheque.

[Samuel Millar]

I would agree that likely the best answer would be that the government is developing the specifics around how the program will be implemented.

[Pierre Poilievre, Conservative, Carleton, ON]

I realize you're in a difficult spot here. You're conveying what's in the legislation. You're not at all to blame for the situation the government has put you in, but unfortunately, you can appreciate that my constituents are the victims of it. That's why I'm asking these questions.

[The Chair, Liberal, Wayne Easter]

Can we move on?

Mr. Oliphant, do you want in?

[Rob Oliphant, Liberal, Don Valley West, ON]

Yes. I have another concern from the other side of this equation, and it may be I'm seeing the glass half full, as opposed to the glass half empty.

Is there any concern that businesses that adapt and reduce energy costs and are incentivized to address climate change by reducing their carbon footprint, their electricity consumption, all of those things, or by changing the way they do business, and they drop their costs, such that...? I don't park downtown in Toronto very often, because it's $20, so I take the subway. But if parking was $2, I would probably drive, so I have adapted my abilities.

The businesses in my riding of Don Valley West may be different from other ridings. They're really smart and they're always cutting costs and they're always looking for.... They're also socially very responsible. They're attempting very much to address the problem of climate change and pollution, so they're dropping their costs.

Is there any guarantee they won't be oversubsidized, that the government won't give them too much money because they've dropped their costs so much?

[Judy Meltzer]

As was mentioned, the details are in development, but just generally speaking, reducing emissions and increasing efficiency will lower costs. A household, for example, that reduced its carbon footprint, would be receiving that climate action incentive rebate, but there would be more savings for the regulated trading system for a large industry. If their performance exceeds the threshold, they receive surplus credit. In short, it's to say there is still that price signal and incentive. In the pricing system, the reward—

[Rob Oliphant, Liberal, Don Valley West, ON]

For the incentives, it's that both programs are incentives—

[Judy Meltzer]

That's right.

[Rob Oliphant, Liberal, Don Valley West, ON]

—and socially aware businesses and smart businesses that are going to compete in the 21st century will figure it out. You might not want to comment.

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Moving—