Finance Committee on May 19th, 2022

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you.

[The Chair, Liberal, Peter Fonseca]

Now we'll move to the Conservatives.

We welcome back MP McLean for five minutes.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you very much, Mr. Chair. It's good to see everybody again. It's a committee I miss.

I am going to get right into the questioning.

Welcome, everybody, in person and on screen.

I have the honour today of asking questions of the Business Council of Alberta and Mr. Michael Holden.

Mr. Holden, I heard your comments. Thank you for what I think are very informative and future-thinking alternatives on where we have to move in going forward here.

You talked in your comments about the investment tax credit for CCUS. Would it surprise you if I told you that we're dealing with Bill C-19, the budget implementation act, and there actually is no provision in this act for the investment tax credit?

[Michael Holden]

Thank you for the question.

I confess that I was not aware of that. In the time we had to prepare our comments, we focused on the issues that we were paying most attention to in the budget itself, rather than what was contained in Bill C-19 specifically.

[Greg McLean, Conservative, Calgary Centre, AB]

It surprised me, too, I should confess, when I first took a look at the bill, because it does seem like there's a climate emergency out there. The government keeps shouting that at the walls, yet they haven't moved forward on a carbon tax credit in over a year since I first put it on the docket as a bill in Parliament.

Now it's in the budget after more than a year of consultation, and it's not in the budget implementation act, so we're still waiting. I know that industry is still waiting to see what that looks like before they commit to actually moving forward with many projects.

You're in Alberta. You know how many projects are sitting there waiting for what happens here as we go forward. Would it also surprise you that the Canada growth fund, which you referred to, is not part of the budget implementation act?

[Michael Holden]

Thank you for the question.

My understanding with those was that each of those cases required additional consultation with industry in order to help shape the design of those programs. To answer your question, I did not know that it was not in there, but it does not overly surprise me, for the simple reason that these were programs that needed consultations with industry before the design for a specific program would be implemented.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you.

How do you foresee the Canada growth fund being different from the unspent money in the Canada Infrastructure Bank?

[Michael Holden]

That's a question that I would have to get back to you on. I don't specifically have an answer to it.

I think from our perspective what we were looking for in this budget was that, being from Alberta, the largest source of Canada's emissions and a large contributor to the economy because of our energy sector, we needed to see action from the federal government in order to help leverage the private sector investment needed to actually meet these emissions targets that the federal government has set.

Putting this kind of action on the table is an important step in the right direction. It may not be the only step that is needed, but what we do need is the investment tax credit. We do need all hands on deck. Most importantly, we need governments and the industry working together. That's the only way we're going to address the issues.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you.

One of the other witnesses talked about waiting a year before we actually implement some of the approvals we're talking about here. You mentioned the massive approval process of getting regulations through and getting projects built, which are exactly the hurdles that businesses in Alberta and across the country are facing, as the regulatory process is onerous and effectively has a lack of foresight on what the outcome will be.

Have you had any consultations with government about reforming this process, much as Germany has done in the face of the onslaught from Russia into Ukraine. They have lessened their regulatory process by 90% to get gasification facilities built in Germany. Is that something you'd like to see similarly in Canada?

[Michael Holden]

I believe we need to work as quickly as possible on this. The regulatory reforms and speeding up these approval processes are critical to meeting the ERP targets, which are only seven and a half years away.

To answer your question, we have spoken to ministers Bibeau and Wilkinson, as well as members of the PCO at the bureaucratic level in the Prime Minister's Office, about this. We have expressed those concerns and feel like we have been heard.

It's a question of whether or not the government would be able to deploy its resources towards addressing reforms of these systems in the same way that climate change itself is being viewed as an emergency. It would be very difficult for Canada to meet its 2030 targets, which are seven and a half years away, if it takes five or six years to approve a project to even start putting a dent into them.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you for speaking up so loudly for the benefits that LNG Canada would provide to the world's environmental footprint. I really appreciate that. I'm going to turn—

[The Chair, Liberal, Peter Fonseca]

That's it for your time, MP McLean. It goes fast.

We do thank our witnesses. We know we asked you to appear in very short order.

We have the Liberals up next, with MP MacDonald for five minutes, please.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you, Chair.

I'll go back to Mr. Holden and try to tag on to the low-carbon economy, and possibly reference Alberta too. I'm glad to hear you say that you recognize the fact that there will be consultations relevant to the Canada growth fund.

Are we doing enough to help carbon-intensive industries and other stakeholders with investments like the carbon growth fund? Are we on the appropriate trajectory, in your mind or your organization's mind?

[Michael Holden]

This is a challenge for which we are in danger of underestimating the amount of investment that is required. I believe there's a line in budget 2022 that states that the level of investment needed to achieve Canada's climate targets is in the range of $125 billion to $140 billion a year, which is both public and private, and that current investments are about one-tenth that level.

Some of the initiatives in this budget represent a step in the right direction, but they are a fraction of what is needed. We need to have a frank conversation and an honest discussion of the cost and the trade-offs and put everything on the table to make sure that we understand, as I said, the magnitude of the challenge and what is actually needed to get there.

[Heath MacDonald, Liberal, Malpeque, PE]

That's interesting. You read sometimes about shareholders even stepping out of oil companies now if they're not moving quickly enough. It's going to be a very interesting time for the oil and gas industry. You also see companies rebranding, and they talk about lowering their emissions.

Are companies moving fast enough? We know that there was $174 billion in revenue last year in the oil and gas sector. Are they actually moving quickly enough, in your mind, being from Alberta, or is there a lot of smoke and mirrors?

[Michael Holden]

We speak to these companies on a fairly regular basis, and there is a deep commitment, especially among the oils sands operators, to achieve net zero by 2050 and to work with the federal government on that path. We're seeing a number of significant investments in the province, many of which are related to hydrogen development and clean hydrogen in particular, and there's the possibility of investments in carbon capture once that tax credit is put in place.

The companies are doing a lot. They've done a lot to reduce their emissions intensity, which is not the same as absolute emissions reductions, I fully admit. If we look internationally at countries that have been successful at reducing emissions from heavy industry and the energy sectors they have, the most successful ones have done it when industry and governments are working together. In our case, the federal and provincial governments as well as industry all need to be involved at the table consulting with one an other and rowing the boat in the same direction.

[Heath MacDonald, Liberal, Malpeque, PE]

Yes, that's extremely important.

That leads me into my next question. At one point in time, in a previous life, I was part of the Canadian Free Trade Agreement. I can tell you that going from province to province to province, co-operation...and the impediment of regulatory barriers shouldn't happen, but it's there, obviously. It becomes a political impediment, to some extent. I'll leave it that. Thank you.

If I have a couple of minutes left, Mr. Chair, I want to move to Mr. Dachis just quickly.

I know we talk about deficits, and I want to clarify that the year-end deficit on March 31 was $113 billion. I'm not sure if the number was correctly mentioned previously.

Further to that, I want to quote Stephen Poloz here. He said:

Of the fiscal room that was on the table, only about half of it was deployed in new programs. The rest was geared towards reducing the debt-to-GDP ratio through time a little faster than it otherwise would, which I think is a bit of a success given the political situation in which we find ourselves in.

When we look at budgets, we always tend to look at expenditures very quickly and make assumptions, but we never tend to look at the revenues. We've seen growth here in the last eight months through omicron.

Mr. Dachis, is that a fair assessment that Mr. Poloz gave us as a government?

[Benjamin Dachis]

For sure. One of the things that I think about goes back to the words of Don Drummond, one of our fellows at the C.D. Howe and a former official in the government. A common reaction to the 2022 federal budget is that it's “not as bad as expected”, but what kind of an evaluation is that? We have the fear stoked by the government's own statements leading into it. You get credit for setting a low bar and then hopping over it.

When it comes to the fiscal situation, we're coming from a very bad situation where the deficits we had as our baseline were eye-popping. They're still quite large. We have to deal with these deficits now, but not just at the federal level. We have to recognize where the provincial level is going. We have provincial budgets, for example in Ontario.... This is a non-partisan comment, given the government there, but you have a government there with assumptions on health expenditures that are fanciful. We have long-term health expenses in the provinces that are going to eat Canadian taxpayers alive. We have to be thinking of this at both levels of government.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP MacDonald.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you.

[The Chair, Liberal, Peter Fonseca]

We are now moving into our third round.

Welcome to our committee, MP Muys. The floor is yours for five minutes of questions.

[Dan Muys, Flamborough—Glanbrook, CPC]

Thank you very much. It's a pleasure to be here today.

Mr. Mueller and Mr. Chartrand, you talked a bit about the job and competitiveness impacts of this proposed tax. You touched briefly in your introductory remarks on the supply chain impacts. I want to give you an opportunity to speak a bit more about that.

Normally I'm on the transport committee, and we've spent a bit of time talking about supply chains. It's having a huge impact on our economy right now, given a lot of the supply chain challenges. Maybe you can talk a bit more about how this is going to impact the supply chain downstream.

[David Chartrand]

Evidently, it's going to impact the supply chain. This tax is clearly going to affect direct manufacturers but also businesses in the supply chain. In Ontario alone, two of the largest companies in the aerospace supply chain, Safran Landing Systems and Aerotek, are also going to be impacted by regulatory changes. In eastern Canada, Stelia Aerospace, the Airbus group and Avcorp Industries; Field Aviation in the west; and smaller SMEs rely on OEMs for continuity of contracts and business. Any disruption is going to have a ripple effect, impacting jobs across the country. It's clear that the passing of this proposed tax in its current form is only going to be an obstacle to recovery in the subsector of manufacturing of parts. There will definitely be an impact.

As to how to quantify it, that's why we're asking for a study of the impact on jobs. That's why we're saying we should go more in depth on this. There's definitely going to be an impact on OEMs and the supply chain.

[Mike Mueller]

Maybe I can just chime in on that.

It's absolutely right, what David said. It is in every region of the country that we're going to see the impacts. You often think of the larger OEMs, but you have the engine makers who put their engines on those planes. You have the landing systems that David talked about. You have the repair. You have the small SMEs that are part of that supply chain.

Then you have rural British Columbia, you have Ontario and you have Quebec, obviously. Some people wouldn't think of Prince Edward Island, but Prince Edward Island has a burgeoning aerospace sector also. This is going to impact right across the country and right across the supply chain.

Again, these are good-paying jobs. There's a real opportunity here for this sector to contribute to the economic recovery of the country coming out of COVID-19. This tax needs to be rethought and relooked at, because it's going to do some real damage to the supply chain. It's going to do damage to jobs. It's going to do damage to revenue. It's going to do reputational damage internationally. There are a lot of concerns.

[Dan Muys]

Thank you for that.

I know that the other witness from the C.D. Howe Institute has departed, but if I can ask you this, because I know there's a shadow budget that's prepared, I'm wondering if any consideration is given to measuring results and whether we're getting good value for money spent.

In this budget, we saw $50 billion more in uncontrolled spending. That's going to have an impact on our competitiveness as a economy. It's driving up inflation, as has been noted. Is there enough in the budget to measure and/or what considerations should be given to measuring value for dollar?