Finance Committee on April 9th, 2024

[Michael Hatch]

Other jurisdictions have implemented open banking. Our reality is different in Canada with how our federation works, of course. Not every national government out there has the same federal and provincial dynamics that are an ever-present reality in Canada. Financial institutions are provincially regulated, for the most part. That does impose a certain layer of complexity to it.

Yes, it's been since 2018. We've done our work and consulted heavily with the Department of Finance, the minister and her team. It's been very productive, but it's time to get it over the goal line now, I would say.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

This is related, but different.

We talk about membership to Payments Canada and the advent of real-time rail.

Could you briefly comment on the advantage that would have for your credit union members?

[Michael Hatch]

Yes, absolutely. We're supportive of the expanded membership options, as I mentioned in my opening remarks, for Payments Canada for credit unions. That's not necessarily going to be a realistic option for all provincially regulated financial institutions, but it will give a certain segment of our membership more options with regard to access to Bank of Canada liquidity facilities and other things.

Real-time rail is another important process for the sector. Like open banking, it's dragged its feet a little bit over the last number of years, and there are concerns with regard to the uncertainty of the timing of when that will be implemented. We're hoping for some further clarity next week on that in the budget and perhaps some further direction from the government on where they see that rolling out over the next couple of years.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you, Mr. Hatch.

I have about 40 seconds left.

If there are any other irritants or barriers that are preventing you from competing against the banks and providing additional choice to consumers, maybe you could provide us—

[Michael Hatch]

I'll be quick.

I'll just repeat what I said earlier about the nuance with regard to consolidation and mergers in the credit union sector. We need to be able to continue to consolidate to provide competition. It's a little bit counterintuitive. Usually, consolidation equals less competition, and that's what people assume. In our sector, again, the opposite is true, because we need to be able to continue to consolidate in order to provide competition to the large banks in the future.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Lawrence.

We now go to MP Dzerowicz.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I want to thank all the witnesses for being with us today.

I particularly want to thank you for asking our committee to move with haste to implement Bill C-59. I think it's a very important message. I think we are trying to move as quickly as we can.

Following that theme, my first question is for Mr. Cameron.

The U.S. Inflation Reduction Act was passed into law within two months of the introduction of the bill. Our bill has been in our House for twice as long.

How important is the quick passage of this bill in your decarbonization efforts as well as investments, and how important is it for Canada to remain competitive in the global market?

[Mark Cameron]

I think that's a good point. The U.S. Inflation Reduction Act was not only passed within two months, but the ITC was first talked about in budget 2021. Then it was talked about again in budget 2022. There were two rounds of draft legislation. It's been a three-year process to get this to the state it's at now.

We think it is important that it be passed this year. We have timelines to achieve emission reduction targets by 2030, and it will, frankly, be impossible if we don't have all the fiscal pieces in place.

I should say that the ITC is not the only fiscal piece that has to be in place. There are contracts for differences. There are provincial programs such as the Alberta carbon capture incentive program. We need to have that fiscal package in place this year if these projects are going to meet their 2030 timelines.

In terms of global competitiveness, this is an important piece of the puzzle. I would say that the Inflation Reduction Act and some of the incentives available in the European Union or countries such as the U.K. and Norway are much more generous than Canada's are. Even with these investment tax credits, we're still not fully competitive with our international peer jurisdictions.

This is an important piece of the puzzle, but it is not everything we need. That's not only for our sector, but I think that, if there were people here from steel or cement and others, they would say the same thing.

[Julie Dzerowicz, Liberal, Davenport, ON]

I appreciate that.

I'm hearing urgency, and I'm also hearing predictability. I think we've laid out on pages 51 and 52 our delivery timeline as well as implementation. I think we need to stay on track on that.

How do you feel about the generosity of the federal government's ITCs or credit rate compared to other provincial jurisdictions?

[Mark Cameron]

The headline rates are 50% ITC for carbon capture, 37.5% for carbon capture pipelines and, I think, 60% for direct air capture, and they are generous. They compare with what's available in other jurisdictions.

The challenge is that there are a lot of details in the legislation that may make it hard to achieve those headline rates. If projects were delayed beyond 2030, or if we can't get equipment installed and we buy it at one rate and install it at another rate, etc., then there's development versus refurbishment. You can only claim 10% of refurbishment expenses compared to development expenses. There are a lot of details that may make it hard to achieve that 50% rate on the capital deployed.

[Julie Dzerowicz, Liberal, Davenport, ON]

I appreciate that.

Carbon capture is still a relatively new technology. Irrespective of all the points you were mentioning, we're almost inventing this whole new technology, and I think the world is going to be watching. I appreciate your comment.

Along those lines, how do you see the value of the ITC in making Canadian oil competitive on the international stage, since it lowers our emissions?

[Mark Cameron]

This is very important. Canadian oil sands really have one of the best track records on environmental performance, indigenous relations and many other fronts compared to anywhere else in the world, except on one key issue, which is emissions intensity. Canadian oil sands are highly emissions-intense, because the process is highly intense. You're not simply putting a pump in the ground and extracting oil. You have to use huge amounts of power to generate huge amounts of steam to separate the oil from the sand. That's what essentially creates the high-emissions intensity.

There are a limited number of paths to solving that. CCS is the most available one right now. However, if we want to be competitive on an emissions basis, then we have to deploy these technologies so that our Canadian crew can be....

We think oil sands could ultimately be the lowest emission source of heavy crude, not light crude, in the world with these kinds of technologies.

[Julie Dzerowicz, Liberal, Davenport, ON]

Along those lines—and I think the conversation is great with what I was hoping to ask you—how do you plan on lowering emissions through these tax credits? What is the anticipated expected emissions reduction?

[Mark Cameron]

Our current plan is we would achieve about 10 to 12 megatonnes of reductions through carbon capture. We have other emissions reduction technologies we're working on; however, through carbon capture we would achieve up to about 16 megatonnes by 2032. This would be a very significant portion of the oil and gas emissions reductions and of Canada's emissions reductions in the next 10 years.

[Julie Dzerowicz, Liberal, Davenport, ON]

We want to see the oil sands industry succeed on this, so I agree we have to get to passing this legislation as fast as possible.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Dzerowicz.

Now we'll go to MP Ste-Marie, please.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

I want to let you know that for this round I will be questioning Mr. Beaulieu from the Québec Environmental Law Centre. In the next round I will be questioning Mr. Soucis and Ms. Landry from the first panel, so they will be able to rejoin us at that time.

Thank you for being with us today, Mr. Beaulieu, and thank you as well for your presentation.

From what I understood, paragraph 236(1)(b.1) makes some positive improvements, but that provision is really incomplete. You gave a good explanation of the four limitations.

If we had more time, I would have liked to hear what you have to say about Pathways Alliance and the oil sands industry. I would have liked to know whether you believe that sector of the economy engages in greenwashing.

That being said, since I have only a little time, I would instead like to know whether you were able to hear the testimony of the officials from the Department of Innovation, Science and Economic Development who came here to answer committee members' questions, and whether you have any comments to make in that regard. You may also address other matters.

[Julien Beaulieu]

Thank you for the question.

Yes, I heard the testimony given by the officials from Innovation, Science and Economic Development Canada, or ISED. A few points were raised. They said there may be constraints associated with the division of powers that might limit Parliament's ability to regulate greenwashing. After a brief review of the case law and the various sources in the literature, I do not think there seems to be any problem associated with Parliament's jurisdiction. From the perspective of both jurisdiction and freedom of expression, there is really no problem in going further and regulating environmental representations by businesses well. There have been a number of decisions that confirm this.

The officials also suggested that greenwashing rules were a sectoral scheme that would go somewhat against the spirit of the Competition Act, which is a comprehensive act covering all sectors of the Canadian economy. My answer is that greenwashing is a practice that could arise in all sectors of the Canadian economy. Today, all businesses are having to adopt carbon neutrality targets and improve their products' environmental performances. To my mind, therefore, greenwashing is a deceptive marketing practice that could emerge in all sectors, and the Competition Act, as a law that applies to all sectors, is ideal for tackling this problem.

Another point that was raised by the officials relates to the government's announcement last fall that it might be going to impose disclosure obligations relating to climate risks on private enterprises. They said this would enable them to tackle the greenwashing engaged in by organizations. Climate risk disclosure obligations are a step forward, but that relates only to climate risks and environmental performance. It therefore would not address environmental effects and it would not affect generic representations by businesses. There are all sorts of claims that can amount to greenwashing that would not be covered by this kind of regulatory scheme.

Moreover, it may take a lot of time for this scheme to come into force. We have not heard many details from the government about this. I would therefore tend to say that we have a very important opportunity to strike while the iron is hot and adopt a very broad provision regarding greenwashing that takes in all environmental claims.

Contrary to what we see in relation to somewhat more controversial issues, in this case there are a number of businesses that support greater predictability and a clearer regulatory framework, precisely to avoid greenwashing accusations. Businesses want to know what they are entitled to say, what they are not entitled to say, and how to be transparent in order to avoid accusations and risks, so they are able to enjoy the fruits of their investments in innovation. It is as good for business as it is for consumers. According to a survey done by Protégez-vous, 85% of Canadians support more stringent regulations on greenwashing, so there appears to be some consensus on the subject.

Do I still have a bit of time to answer the question?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Yes, you have two minutes.

[Julien Beaulieu]

Perfect.

The officials also talked about the fact that certain types of claims were not covered by the present version of clause 236.

Clause 236 requires that when a business makes certain environmental claims it do tests. For example, if a business wants to say that an apple is carbon neutral, it has to do tests. People at the grocery store will then be able to rely on the fact that the business did a test to prove that the apple was carbon neutral.

However, the officials told us that if the business says the apple is green, that is, that it is environmentally friendly, regardless of what colour it is, or if it says that the apple is sustainable, there are no standards in the industry that regulate that claim. There is no standard that regulates the use of words like "green" or "sustainable". In fact, the commissioner of competition said, in the letter that was sent to committee members, that generic representations, like ones that use words like "green", "responsible", "sustainable", and other catch-all words, are not precise enough for people to know what they mean. Clause 236 in its present version would not apply to representations of that nature.

We believe this is a huge problem and that is why we are proposing to compel the disclosure of the tests on which environmental claims, including generic claims, are based. In practice, this means that if it says at the grocery store that an apple is responsible or sustainable, the business will have to explain how it arrived at that conclusion, by way of a label, a QR code or a link to a website. It must therefore explain how it defines the word "green" or the word "sustainable". If it cites an industry standard, it will have to name it.

That approach would therefore give consumers access to information and they would be able to understand what someone is trying to tell them when they say something is "green" or "sustainable" at the grocery store, for example. Requiring disclosure of tests or of the proof to support environmental claims would very significantly improve Bill C-59.

Essentially, what I would like you to take from my presentation is that clause 236 is a step in the right direction, but we want to make it genuinely possible for consumers to recognize greenwashing and have a good understanding of what they are being told. Businesses have to be given a clear regulatory framework. The amendments I proposed in my presentation would be essential to achieving that objective.

I think everyone here is in favour of environmental transparency, regardless of how extensive the environmental policies someone wants to propose might be. No one opposes transparency and truth, and that is essentially what we are asking for by proposing these amendments.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Beaulieu.

Thank you, Mr. Ste-Marie.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

That is very clear, Mr. Beaulieu.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Now we'll go to MP Davies, please.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chair.

Mr. Hatch, I will declare my bias from the outset. I have been a proud member of the credit union movement for over 30 years. I will situate myself there.

Bill C-59 amends the Canadian Payments Act to, among other things, expand membership in the Canadian payments association to credit union locals that are members of a credit union central.

Could you outline how this measure will impact credit unions and their members?

[Michael Hatch]

Yes.

Thanks for declaring your bias and your support of the sector. I appreciate that.

Historically, individual credit unions have not been able to be direct members of Payments Canada just through its centrals, of which there are five across Canada. This bill will amend the governing legislation of Payments Canada to allow credit unions to have direct membership. There's a cost associated with that. Not all credit unions will likely choose to bear that cost and become members of Payments Canada, but the bill allows those that choose to do that to have access to all of the services associated with membership, and, as I said earlier—subject to the discretion of the Bank of Canada, ultimately, of course—access to the Bank of Canada's standing terms on liquidity facilities and other emergency lending facilities at the Bank of Canada.