Finance Committee on Sept. 21st, 2022

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

What's happening in the United States right now is that there is a certain amount of demand that is changing as individuals in the market make their own choices, but we are seeing a very intentional, structured change in the market down south under the Biden administration.

What does it mean for Canada to not be making similar kinds of investments? What does it mean to allow the U.S., for the foreseeable future, to begin restructuring its own economy and its own supply chains toward a lower-emission economy, and not to have Canada show up at the table or mobilize businesses and workers in order to participate in that restructuring? What does that mean for the future of Canada's economy?

[Seth Klein]

Well, it would mean trouble. I do think they are now on the cusp of moving quite a lot faster than we are.

In fairness, I don't want to say that the federal government is doing nothing, but I would highlight a difference in approach in what we're seeing from the Biden administration and what we've seen in our own.

The flagship policy that we currently have remains the carbon price. I'm in favour of carbon pricing, to be clear, but it's not the end-all and be-all, and the approach that Canada has taken to tackling this crisis is to try to incentivize our way to victory. We send price signals, we offer rebates and we encourage and cajole. What we don't do is require, and what we aren't doing is spending what it takes to win at the scale required, and we're not creating brash new institutions like this transfer or new Crown enterprises that would mass-produce electric heat pumps or electric buses or what have you.

In contrast, you're seeing the Biden administration start to spend what it takes to win by an order of magnitude more than we are and directly investing in wind, electric and so on.

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

Before my time is elapsed, one thing that has come up recently is that the federal government has not yet acted on the metrics, let's say, that were required in their signature climate legislation to date, their sustainability act. I'm wondering how a new federal transfer might be able to motivate better metrics, better reporting and better accountability at all levels of government in order to ensure that Canada meets the moment in respect to the climate crisis.

[Seth Klein]

What I'm proposing with the transfer is only one piece of what has to be part of a package. It's not the end-all and be-all. I actually think the carbon budgeting idea that I offered in answer to a previous question is another important means of achieving that accountability.

The transfer is simply about making sure that we spend what it takes to win and that the money gets where it needs to go. So much of the federal government spending on climate infrastructure right now is tied up in the Canada Infrastructure Bank, which just adds years and complication to the process—instead of, for example, the kind of fleet-of-foot spending that we saw all parties unite behind in the first year of the pandemic.

The federal government is spending on climate, but they're not spending what it takes to win. It's sometimes hard to get at these numbers. My former colleagues at the Canadian Centre for Policy Alternatives have done a good job with this, and if you generously tally up all of the funding that we've had to date and annualize it, it comes in generously at about $12 billion a year. Now, that sounds like a lot of money, but it's about 0.4% of GDP. Sir Nicholas Stern has proposed that governments spend about 2% of GDP on the climate emergency, which in Canada's case would be about $56 billion. We're not spending a little less than we should; we're spending less by about a fourfold to fivefold magnitude.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Klein.

Thank you, MP Blaikie.

Members, I'm looking at the time. We are moving into our second round of questions. We don't have enough time for a full round, so we'll do as we've done in the past. We'll break it up by party and evenly, so that there will be about three and a half minutes or so for each party. We'll start with the Conservatives.

I have MP Albas for approximately three and a half minutes.

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

Thank you.

Thank you, Mr. Klein, for coming in today.

Fiscal federalism is usually defined by understanding which functions and instruments are best centralized and which are best placed in the sphere of decentralized levels of government. I take from your book and from your presence and discussion here today that you are more on the centralizing side when it comes to transfers and to climate. Is that correct?

[Seth Klein]

No, not necessarily. I actually think that a lot of the key tools for what we need to do are in provincial hands and, to a lesser extent, municipal hands. That's the point of the transfer. For most of the climate infrastructure we need, those assets will actually be in provincial or municipal hands, but it's the federal government that has the greatest capacity to pay. I'm trying to figure out how to crack that nut with a transfer idea like this.

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

Do you believe the federal government is co-operating, consulting, and working hand in glove towards a Canadian response to climate change?

[Seth Klein]

I see signs of that, yes, but not at the level required. This is my point about the incentivizing approach that was taken. We're doing things without wanting to spend what it takes to win, and a lot of those provincial, municipal and indigenous governments need to see the money in order to do what we need them to do.

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

Let's switch gears. We're both from British Columbia, and it's always great to hear from someone from British Columbia. The European Commission has said that natural gas is a transitional fuel. In the United States, according to the Energy Information Administration, they've been able to pull about 100 gigawatts of energy away from coal by displacing it with natural gas.

Are you a supporter of natural gas?

[Seth Klein]

I'm not.

First of all, let me acknowledge that you are from a riding that knows the climate emergency. I've heard you speak well on the fact that we need this federal money for climate adaptation infrastructure, and your riding needs it as much as anyone's.

There was a time, maybe 20 or 30 years ago, when one could have made a reasonable case for natural gas as a bridge fuel. But the bridge was to now. We ran out the clock. That is why organizations like the International Energy Agency and the Secretary-General of the United Nations keep saying there is no longer any room for any new fossil fuel infrastructure, and they include gas in that.

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

Okay. Well, I do believe that if we look at what's happening in Germany right now.... If a country as advanced as Germany is not able to transition towards those other things to allow their population to keep themselves warm and to fuel their industry, I think it's going to be very difficult not to utilize things like natural gas.

But we can agree to disagree. Thank you for your presence here today.

I'm just going to ask that the rest of my time go to my colleague Scot Davidson so he can ask some Ontario-based questions.

[The Chair, Liberal, Peter Fonseca]

You have 30 seconds.

[Scot Davidson, Conservative, York—Simcoe, ON]

Okay. I guess I'll just make a comment.

Thank you, Seth.

I represent the soup and salad bowl of Canada, which is the Holland Marsh. I can tell you that right now—this is how behind Canada is—half of my farmers are still burning propane. We can't even get the infrastructure in for the bridge fuel, natural gas. We can't even get people passports or get our airports organized. To talk about training thousands of workers and more government agencies and this, that and the other thing.... We are behind the curve right now.

I have more comments, but.... Thanks, Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you.

[Seth Klein]

I would just say—

[The Chair, Liberal, Peter Fonseca]

Mr. Klein, we're moving to the Liberals.

I have MP Baker for three and a half minutes.

Go ahead, please.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much, Mr. Chair.

Mr. Klein, thank you very much for being with us here today. I found this discussion very interesting.

One of the things you spoke about in your exchange with one of my colleagues early on in this hearing was the price on pollution. You have said multiple times today that you support that concept. I'm thinking, not just for the members in this room but also for my constituents and others who might be watching this at home, why is the price on pollution an important mechanism that works, in your view?

[Seth Klein]

Well, I think there's a basic principle at stake, which is that we shouldn't be able to use our shared atmosphere as a free garbage dump and that pollution should be paid for. I think it does send a signal, both at the household level and at the industry level, about how people might want to shift, and, importantly, I think it's a source of revenue for what we actually need to do.

However, I don't put as much stock in it as some people do, because I am trying to approach this crisis with a new framework pulled from that wartime story. Imagine if we had mobilized in the face of fascism by trying to encourage, by sending price signals, by offering people rebates. It would have been a different outcome, and people looking back at it would shake their heads. It's not how you prosecute a fight like this.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I hear you. I'm going back to the price on pollution because I really think it's important that we leverage your expertise on this particular topic. I'm not dismissing what you've been saying about the other element of it. I just want to make sure we benefit from your knowledge and thoughts specifically on the price on pollution, so that's why I'm coming back to this again.

Again, for those of my constituents in Etobicoke Centre who are watching or Canadians who are watching, what does the price on pollution do, and why does it help fight the climate crisis?

[Seth Klein]

Well, it is a tool that's helpful because, as the price of natural gas in our homes or the price of fuel increases, it may signal, particularly when both industry and consumers are facing a capital change of their vehicle or their furnace or whatever, that this pricing factors into it. But, again, I don't think we should overstate it.

The main thing I want to say to all of you across parties is that the climate emergency demands that we move forward. We cannot keep reprosecuting old fights. We urgently need to move forward with every tool in the tool box. I'm proposing tools that are different from carbon pricing, because those incentivizing approaches aren't going to do what we need to do.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Okay. I hear you.

I believe I have about 30 seconds left.

I have a constituent named Mr. Green, who on many occasions has spoken to me about geothermal energy. I know that we don't have a lot of time, and I know that you don't want to focus on technological solutions, but for the sake of my constituent and advocate to fight the climate crisis, Mr. Green, what would you say about the role that geothermal can play in our fight against the climate crisis?

[The Chair, Liberal, Peter Fonseca]

Please make it a very short answer.

[Seth Klein]

It absolutely plays an important role. There you go—nice and short.

[The Chair, Liberal, Peter Fonseca]

That's great. Thank you.

Thank you, MP Baker.

We are moving over to the Bloc, but MP Ste-Marie has offered up his time to MP May.

MP May, you have three-plus minutes.