Natural Resources Committee on Jan. 31st, 2022

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

With all due respect, sir, I would question the ability to suggest there are flaws with the program unless you look at all the facts. In my experience, drawing conclusions that are definitive without having all the facts is a risky proposition.

I want to thank you for doing the audit, because your role is to try to help the government improve programs like this and many others. It would seem to me that your audit has been successful from that standpoint, because the government has adopted four out of the six recommendations and partially two of the others. I would think that would draw you to conclude they are on the right track. Is that a fair comment?

[Jerry V. DeMarco]

We haven't audited the changes to the program that will be happening in intake number three.

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

I'm sorry to interrupt you, but I'm limited in time. That leads me to my next question.

You said to my colleague, Ms. Dabrusin, that you're not sure whether you're going to do an audit of the third intake. You said it's possible for there to be a third audit, but you will do it if there's a risk of problems with the third intake.

How do you know if there's a problem unless you do an audit?

[Jerry V. DeMarco]

In terms of selecting any audits we do, we carry out what we call strategic audit planning and knowledge of business accumulation. We look into matters, and then select them. We have to look at them in a prima facie way to see whether it looks like there's something there worth auditing. If there is, then we'll audit it. If we look into it and it looks like things have been corrected and there are no issues, then there's less of a reason to audit.

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

You'll do it without a deep dive. Is that a fair characterization?

[Jerry V. DeMarco]

You have to make a choice of whether to audit based on some information. We certainly don't make that decision in a cursory manner.

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

You answered a question by Mr. Angus earlier by saying that's a myopic way of looking at things. I'll leave that there.

You've made conclusions, sir, for example, that reductions may have happened in any event, but you don't know that because you haven't looked into the outcomes, have you?

[Jerry V. DeMarco]

We know that because portions of the money were to address the funding of initiatives—

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

That's a design comment, sir. That's an outcomes-based conclusion. This is my point: Unless you look at the outcomes and talk to the people involved in the process, how do you make those conclusions?

[Jerry V. DeMarco]

I've already covered that issue, which is if we go in at this time, we're going to be focusing more on design. If we wait and do a forensic audit six years from now and tell you what went wrong, probably the criticism would be, “Well, why didn't you tell us that earlier so that we could have improved the program?” We've gone in when we did, and we've used all the information we've had access to to look at the design and early implementation. That's the best—

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

This is my point. You did what you did. You might want to review that.

[The Chair, Liberal, John Aldag]

We're out of time now on this round.

For the next one we go to Mr. Simard for two minutes and 30 seconds.

Over to you, Monsieur Simard.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

I think that your conclusion is harsh. You're saying that the emissions reduction fund could boost oil and gas production and lead to increased GHGs. If so, it would become an ineffective subsidy for fossil fuels. That's my takeaway.

In terms of the third intake period, you made four recommendations. First, I wonder whether you could state in your recommendations that it might be better if there were no third intake period.

Second, do you really believe that, by applying the four criteria that you're presenting as necessary changes, we can actually reduce GHGs?

[Jerry V. DeMarco]

We're proposing six recommendations, not just four, to improve the program.

In terms of whether it's reasonable to have a third intake period, I think that the committee should ask the department on Wednesday.

I spoke about the importance of value for money. Has it changed because of the change in the price of oil since the pandemic began? That's another question that the committee can ask the department on Wednesday.

[Mario Simard, Bloc, Jonquière, QC]

I understand that this isn't your role and I don't want to put words in your mouth. I want to know whether you can do anything other than propose changes and say outright that this program should be suspended or that the third intake period shouldn't take place.

I mainly want to know whether you're allowed to make these types of recommendations.

[Jerry V. DeMarco]

There are many options. For example, you can use the polluter pays principle and say that there won't be any subsidy. In that case, you would use a regulation rather than a subsidy.

There are several options. The other witnesses should say which one they prefer, not only in terms of the third intake period for this program, but also in terms of future programs.

[Mario Simard, Bloc, Jonquière, QC]

Thank you.

[The Chair, Liberal, John Aldag]

We will now go to Mr. Angus.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you, Mr. DeMarco. I've sat on many committees and I have enormous respect for your work. I'm sort of disappointed by the attack you suffered from my Liberal colleague, as though you didn't know what you were doing.

It strikes me, when you said that you were very disappointed with the responses of the department, that it doesn't bode well. We're talking about a government's commitment to making Canada respect its international commitments, yet we see that the focus all along, as the department said, was the financial needs of big oil.

I want to ask you about your comments, though, when you said, “Canada was once a leader in the fight against climate change. However, after a series of missed opportunities, it has become the worst performer of all G7 nations since the landmark Paris Agreement on climate change was adopted in 2015.” That was the meeting at which Prime Minister Justin Trudeau said, “Canada's back.” How is it possible that after Canada came back in 2015, we are now the worst performer of all G7 nations? Can you explain that?

[Jerry V. DeMarco]

I can't explain it, but I can provide some context to that. I spoke about Canada being a leader. I participated in the Rio conference in 1992, and Canada was definitely a leader in pushing other industrialized nations to adopt the conventions at Rio. Canada was a leader in hosting the 1988 conference, which got climate change on the map. Those were intentions. They were good deeds, but they weren't followed up by outcomes and results.

How bad has it been? Well, since Paris, we've had an increase in emissions, and the other six G7 nations are doing better than we are since Paris. It's not just since Paris, though. Since Rio in 1992, Canada is the worst performer of the G7, so it's not just the recent past, but the whole three decades. Canada's emissions have gone up by over 20%, while most of the emissions of the G7 countries have gone down, and a couple of the countries are around the same as they were in 1990.

We're up by 20%. That's a significant outlier compared to the rest of the G7.

[Charlie Angus, NDP, Timmins—James Bay, ON]

An outlier. Thank you. I understand my time is up. Is it possible for us to get a list of the companies that receive money? It would certainly help if we could get a sense of whether they're very profitable companies. It would be helpful to have a sense of how this program played out.

[Jerry V. DeMarco]

I'll have to check into that and we'll get back to you on that, Mr. Angus.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you.

[The Chair, Liberal, John Aldag]

Thanks, everyone. That concludes our first round with the commissioner.

Thank you, Mr. DeMarco, Mr. McKenzie and Ms. Marchand, for joining us this afternoon, and for the insights you've given into the audit you've performed. With that, I believe you're able to drop off the call.

I'm just checking with our clerk to make sure we're ready with the next panel.

With this panel, we have Pierre-Olivier Pineau, professor, HEC Montreal, appearing as an individual. From the David Suzuki Foundation, we have Tom Green, senior climate policy adviser. Edmonton Global is represented by Brent Lakeman, director, hydrogen initiative. We have two representatives from Environmental Defence Canada: Julia Levin, climate and energy program manager; and Dale Marshall, manager, national climate program.

You will each have five minutes for your opening statements. I'll give you a 30-second warning, and then time to wrap it up. Don't stop mid-sentence, but bring your thoughts to a conclusion. Then we'll get into our rounds of questioning. We'll see how that unfolds as we get into it.

We will start with Monsieur Pineau, for a five-minute opening statement

Please proceed.

[Pierre-Olivier Pineau, Professor, HEC Montréal, As an Individual]

Good afternoon. I want to thank the committee for inviting me.

I'll just start by saying that, at the start of the pandemic, in May 2020, oil prices fell quite quickly to record lows. Western Canadian Select was down to $3.50 per barrel. This hurt Alberta businesses tremendously.

In the midst of the pandemic, the government wanted to help all Canadians and Canadian businesses affected. At this time, not only has the price of oil rebounded to levels not seen since 2015, but oil production in Alberta is at an all‑time high. Alberta production hit a record high in October 2021, and prices have rebounded to levels not seen since before 2015. The oil industry in Alberta is now extremely profitable again.

When assistance programs are designed, they're geared towards companies or individuals facing struggles. Clearly, the oil industry is no longer struggling. It seems that the reason for this program—it is indeed an assistance program—has just disappeared. It was there to help companies that no longer need it. Logically, we should stop helping people who don't need assistance.

Moreover, we're fighting climate change. The fact that subsidies for oil companies still exist has been repeatedly criticized. During its first election campaign, Mr. Trudeau's government even promised to end subsidies for the fossil fuel industry. This is one of the only promises regarding the natural resources sector that he hasn't kept. He has kept many other promises, but not the one concerning subsidies for the fossil fuel sector. I'm surprised that the government is still subsidizing, through this type of program, a sector for which we clearly want to reduce emissions.

Today, with the first panel, we already established the situation of greenhouse gas emissions in Canada. We know that the emissions are headed in the wrong direction. We also know that Canadian consumers are among those who pay the least for their petroleum products in the world. We have a very low level of taxation compared to other OECD countries. Nevertheless, the government is subsidizing oil companies so that they can do the things that should be done pursuant to the regulations. As Mr. DeMarco said, the regulations require them to limit their methane emissions.

This program helps companies that don't need help. This goes against economic logic. It goes against environmental logic. It goes against the well‑being of Canadians, who see their public money being misspent on programs that, as we've seen, are ineffective. There are already regulations that do the same thing.

Given all these shortcomings, I'm saddened. I hope that the government will simply eliminate this “assistance” program, a subsidy program that certainly doesn't deserve to still exist and that should be stopped very quickly.