Government Operations Committee on March 27th, 2024

[Jenica Atwin, Liberal, Fredericton, NB]

Are you saying you don't attribute any of the investments in the renewable energy sector or the new green economy to some of these policies from the federal government?

[Scott Moe]

Listen, the economy that we have in Canada is not new. It may morph and move over time, but it's our Canadian economy. It's not a new economy. We need to do everything we can to attract investment into it. The carbon tax policy promised to cap it out at $50, and it's now $170, and no one knows where it goes from now. Combined with a number of other policies, it is creating uncertainty for the investment environment, uncertainty that subnational leaders are trying to navigate through as best they can.

[Jenica Atwin, Liberal, Fredericton, NB]

What kind of windfall would the oil and gas industry experience if the carbon levy were cancelled?

[Scott Moe]

There would be no windfall. You would see a return to significant investment into some of the cleanest oil and gas produced on earth. I think that would be a good thing for the globe.

[The Chair, Conservative, Kelly McCauley]

That is our time. Actually, it's past our time.

Thank you very much, Premier Moe, for sticking around.

Colleagues, we will suspend for a few moments as we change the table and bring in Mr. Giroux and his team.

[The Chair, Conservative, Kelly McCauley]

Welcome back, everyone. We're back in session.

Mr. Giroux, Ms. Vanderwees and Ms. Giswold, welcome back to OGGO.

Do you have an opening statement, sir? The floor is yours for five minutes.

[Yves Giroux, Parliamentary Budget Officer, Office of the Parliamentary Budget Officer]

Good afternoon, Mr. Chair and members of the committee. Thank you for the invitation to appear before you today.

We're pleased to be here to discuss our report on the government's expenditure plan and main estimates for 2024-25, published on March 7, 2024. With me today are our lead analysts on the report, Jill Giswold and Kaitlyn Vanderwees.

The government's main estimates for 2024-25 outline $449.2 billion in budgetary spending authorities. Parliament's approval is required for $191.6 billion. Statutory authorities total $257.6 billion. Consistent with previous estimates, money transferred to other levels of government, individuals and other organizations account for most of the planned spending, totalling $283 billion.

Notable areas of planned spending in these main estimates include $81.1 billion for elderly benefits, $52.1 billion for the Canada health transfer and $46.5 billion for interest payments on the public debt.

The 2024‑25 main estimates reflect close to $2.3 billion in reallocations undertaken through the refocusing government spending exercise. More information on the reallocated amounts is available in the 2024‑25 departmental plans, which were tabled with the main estimates on February 24.

Since budget 2024 has not yet been tabled, the 2024‑25 main estimates obviously do not reflect new budget measures. Accordingly, the 2024‑25 budgetary authorities will rise with these anticipated funding requests in the supplementary estimates.

Ms. Vanderwees, Ms. Giswold and I would be pleased to answer any questions the committee may have about our analysis of the main estimates.

Thank you.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mr. Giroux, and thank you, by the way, for sticking around.

We'll start with Mr. Lawrence for six minutes. Go ahead, please.

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

Thank you very much, Mr. Giroux. You've been in the press almost as much as Ms. Taylor Swift has, I think, in recent days, with respect to your analysis of the carbon tax.

I do want to have a discussion of this that so we can get some clarity on your report, because I think it's been as misreported and demagogued as it has been reported.

With respect to the financial impact on the average family to which the backstop applies, in total—which includes not only the fiscal but also the economic tax, the carbon tax impact—is there more money coming into Canadians' pockets or leaving their pockets?

[Yves Giroux]

There are two elements to that question.

If one looks at the fiscal impact, which is the amount of the carbon tax paid directly and indirectly and the GST that applies on these embedded or direct carbon taxes paid minus the carbon rebate, most families are better off. We estimate that to be around 80%.

However, if we include the economic impacts of the introduction of a carbon tax, we find that these economic impacts from introducing a carbon tax will have impacts on some sectors of the economy, such as the oil and gas sector and the transportation sector, and on investment income that will be slightly lower, and then we find that most Canadian families in provinces where the federal backstop regime is in place will see a small negative impact from the carbon tax.

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

You're saying that the average Canadian family—especially if we move forward to 2030, since this government is intent on increasing the carbon tax and since the reality is that every Canadian is affected not only by the fiscal impacts but also by the economic impacts—will have more money going out of their jeans than coming into their jeans. Canadians can't just opt out of the economic impacts.

[Yves Giroux]

It's income growth that will be lower than it would otherwise have been, so that's what we refer to when we say it's a negative impact. It's not necessarily that their absolute level of income will go down, but the net impact will be a reduction compared to what it would be in a scenario in which there wouldn't be a carbon tax.

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

If the carbon tax were cancelled and everything else held equal, would Canadians be wealthier?

[Yves Giroux]

Yes, they'd experience, on average, income growth slightly faster than what will happen with a carbon tax. That's presuming that there would be nothing else that would replace a carbon tax.

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

Perfect.

I want to move on to get into some of the specifics.

On page 3 of your recent carbon tax report, in table 2, you have an average of the fiscal impact. In Alberta, you say the net cost is $2,773. In my province of Ontario, it's $1,820.

Is that to say that the average family in Alberta would lose $2,773 and the Ontario family would lose $1,820? Would that be the cost of the carbon tax to the family or the household, as you say? Is that an accurate understanding, Mr. Giroux?

[Yves Giroux]

That's compared to what it would be in a scenario in which there wouldn't be a carbon tax, so it's not necessarily “losing”, but it's lower growth or lower income growth than would otherwise be the case. In that sense, yes, you could categorize it as “losing” compared to what you would have in a scenario in which there was no carbon tax.

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

Thank you very much, Mr. Giroux.

One of the questions that have also been posed with respect to the fuel charge is this: Is that fiscal and economic cost greater than the rebate? Keeping it to the fiscal and the economic aspect, is that greater than the rebate in all the provinces where the carbon backstop applies?

[Yves Giroux]

That's the case for most income quintiles, except for those in the bottom 20% of income quintiles.

It varies by province. It depends on the specific economic fabric, income distribution and household composition, but generally speaking, yes.

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

One of the ways I've heard the carbon tax referred to is that it's sand in the gears of the Canadian economy and that it's slowing our productivity. We saw Tiff Macklem come before this committee and say that it's adding a third of inflation. Canada is facing.... As the deputy governor of the Bank of Canada said, we are facing a productivity crisis.

Do you believe that the reduction of the carbon tax would allow us to be more productive?

[Yves Giroux]

I'm not certain about that. Reducing the carbon tax or eliminating it would certainly have economic impacts, but I'm not convinced that it would do anything with respect to productivity. It's not something that we have looked at—the productivity impact, or not, of a carbon tax. I think there are many factors that come into play when determining productivity and the increases in productivity of specific sectors. I wouldn't venture that far into the analysis.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

Mr. Kusmierczyk, go ahead, please.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Thank you kindly, Mr. Chair.

Thank you, again, Mr. Giroux, for being here with us today. I always enjoy your insights and the knowledge you share with us.

When you did your analysis on carbon pricing, you said that we need to look at the broad picture. I'll continue on the theme of Saskatchewan here today.

I'm looking at a CBC report. Last year, in 2023, there were 494 fires that burned about 1.9 million hectares. The vice-president of the Saskatchewan Public Safety Agency, Steve Roberts, said that in his 25 years of experience, he's never seen anything like it. In that same article, Colin Laroque, a professor at the University of Saskatchewan, said, “We had huge fires — astronomical numbers.”

On that note, it's reported that the Insurance Bureau of Canada stated that “Climate-related weather disasters cost insurers $3.1 billion [in damage] last year.”

You've stated that your analysis doesn't consider the cost of climate change, the cost of doing nothing, which is what the Conservative members have put on the table: doing nothing to address climate change.

Explain to us why you didn't look at the cost of climate change. It boggles my mind that you wouldn't include the cost of climate change. That is so obvious to anyone who sees the fires burning.

[Yves Giroux]

That's an interesting question, and I'm glad that you're asking me that, because it's a question that gets raised very often.

My mandate is to estimate the cost of government proposals. The carbon tax is a government proposal. The cost of climate change is a relatively new area, and we have tried to estimate the cost of climate change under two scenarios: the scenario where all commitments are fully respected globally and the scenario where only actions that have been implemented are implemented—nothing more. We find that there is a cost. I don't have the numbers off the top of my head, but there will be costs of climate change over a long period of time.

There's a thing to keep in mind, though. Greenhouse gases have been emitted over decades, if not centuries, and it's a stock issue as much as it is a flow issue, so there are two issues to distinguish. Even if the world were to stop emitting greenhouse gases today, there would still be global warming because the planet, according to climate scientists, has already warmed up. If we were to stop emitting greenhouse gases, the forest fires that have presumably been attributed to climate change could continue. It's not me saying that. It's the climate scientists.

There's that issue, which one has to keep in mind. There have been climate elements and climate-related events. Climate policies will prevent things from getting worse, but the point at which we are today is where we are.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

I really appreciate your analysis and the work you and your team do; it's hard work, but with all due respect, it seems to me that you are only looking at one side of the ledger when it comes to this analysis, Mr. Giroux—

[The Chair, Conservative, Kelly McCauley]

Mr. Kusmierczyk, we lost you there for a bit. Do you mind starting at the beginning? I'll restart your time.