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THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE

EVIDENCE


OTTAWA, Thursday, May 20, 2021

The Standing Senate Committee on National Finance met by videoconference this day at 1 p.m. [ET] to study the subject matter of all of Bill C-30, An Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021 and other measures.

Senator Percy Mockler (Chair) in the chair.

[English]

The Chair: Before we begin, honourable senators, I’d like to remind senators and witnesses to please keep your microphones muted at all times, unless recognized by name by the chair.

Honourable senators and witnesses, should any technical challenges arise, particularly in relation to interpretation, please signal this to the chair or the clerk and we will work to resolve the issue. If you experience other technical challenges, please contact the ISD service desk at the technical assistance number that was provided to you.

[Translation]

The use of online platforms does not guarantee speech privacy or that eavesdropping won’t be conducted. As such, while conducting committee meetings, all participants should be aware of such limitations and restrict the possible disclosure of sensitive, private and privileged Senate information.

[English]

Participants should know to do so in a private area and to be mindful of their surroundings in any chat or conversations.

We will now begin with the official portion of our meeting as per our order of reference received by the Senate of Canada to the Finance Committee.

My name is Percy Mockler, senator from New Brunswick, and Chair of the Standing Senate Committee on National Finance. Now I would like to introduce the members of the National Finance Committee who are participating in this meeting: Senator Dagenais, Senator M. Deacon, Senator Duncan, Senator Forest, Senator Galvez, Senator Klyne, Senator Loffreda, Senator Marshall, Senator Moncion, Senator Richards and Senator Smith.

I also wish to welcome all viewers across the country who may be watching on sencanada.ca. This afternoon, we continue our study of the subject matter of Bill C-30, An Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021 and other measures, which was referred to this committee on May 4, 2021, by the Senate of Canada.

First, we welcome the following witnesses: from Canadians for Tax Fairness, the Executive Director, Mr. Toby Sanger. The second witness is from Electric Mobility Canada, President and Chief Executive Officer, Mr. Daniel Breton. Finally, from the Canadian Vehicle Manufacturers’ Association, the President and Chief Executive Officer, Mr. Brian Kingston. Welcome to all of you and thank you for accepting our invitation to appear in front of the Senate National Finance Committee on Bill C-30.

We will hear opening remarks and comments in the following order: Mr. Sanger, to be followed by Mr. Breton, with testimony to be concluded by Mr. Kingston, and then senators will be asking questions.

Mr. Sanger, the floor is yours for your comments, please.

Toby Sanger, Executive Director, Canadians for Tax Fairness: Thank you very much, chair and honourable senators, for the invitation to speak with you about Bill C-30 and the budget.

I just wanted to start out by saying that Canada and other countries around the world are facing multiple threats and crises. We, of course, have had the COVID crisis that we’re hopefully emerging from, with other health crises looming. We have an even more threatening and damaging climate crisis that we need to address in a more serious way. We have growing inequalities that threaten our democracies, our political institutions and our societies, and we may have economic and fiscal crises on the horizon as well.

These are interconnected and also connected to issues of tax fairness. For example, the pandemic has both exposed deep social inequalities and made them worse. Poorer people without sick leave, with inadequate incomes and crowded housing have suffered far worse in the pandemic and also carried it more.

Wealthy countries and individuals are more responsible for causing climate change but are also least adversely affected by it, and the ones most easily able to adapt. The poor are most affected by carbon prices but are also the least able to afford things like electric vehicles and lack the means, security and ability to make the transitions needed.

Decades of trickle-down economic policies have failed to trickle down but have also failed to stimulate sustainable growth. Instead, we have had increasing inequality and economic instability, increasing corporate concentration, monopolization and less competition, and we have seen local and main street businesses muscled out by mega-corporate giants. Even the IMF and OECD now say that we need greater equality to achieve stronger economic growth.

What does this have to do with Bill C-30 and taxation? Lots, but also not enough. It’s the largest corporations that have been most easily able to avoid paying their fair share of taxes through loopholes and international tax dodging.

We will need a lot more money to pay for the costs of the pandemic, for the recovery and for the transition to a more sustainable economy. We’re also not going to be able to make that transition unless the most vulnerable with the lowest incomes and those most affected are supported in a just transition.

There are a lot of positive measures in Bill C-30, such as the increase in the minimum wage, the extension of COVID and EI benefits, funding for child care and infrastructure and much more, but we’re also going to need much more.

For too long we have given foreign digital giants — some of the largest corporations in the world — generous tax preferences at the expense of Canadian companies and producers. We’re glad the federal government will finally apply the GST/HST to imports of digital services and goods supplied through fulfillment warehouses like Amazon. This is one important step towards levelling the digital playing field.

But the federal government should also be doing more. We’re glad to see that the federal government is committing to introduce a digital services tax on the revenues of e-commerce giants starting next year, but the proposed DST will only apply to a small number of companies. We need more fundamental international corporate tax reform, including a global minimum corporate tax rate and an allocation of the taxable profit of companies between countries in the same way we do in Canada between provinces.

We’re also glad the government is restricting the number of corporate tax loopholes and the stock option deduction loophole in this budget, but it should be completely closed instead of just partially closed. We should also follow the lead of U.S. President Joe Biden, who is planning to eliminate lower tax rates on capital gains for the wealthiest. It’s unconscionable that the wealthiest in society pay a lower rate of tax on their investment income than ordinary working people pay on their employment income.

I’m glad that the government committed in the Throne Speech to identify ways to tax extreme wealth but disappointed there wasn’t anything in this budget for that.

Many large corporations also made record profits over the past year. The study we released last week revealed that 50 of Canada’s large corporations made record profits, with a number also collecting the CEWS wage subsidy and paying low rates of tax. We should do what we did during previous wars and introduce excess profits and pandemic surtaxes.

We’re glad the government has some environmental measures in this budget and is making carbon incentive payments more visible. But the federal carbon pricing framework also needs to be significantly strengthened by ensuring that large emitters pay the full carbon price, and by applying carbon tariffs and rebates to imports and exports to countries without carbon pricing so that Canadian industry and jobs aren’t adversely affected. We also need to finally eliminate fossil fuel subsidies. It’s long overdue.

Finally, I’d like to commend the finance minister for committing to introduce a public registry of the real owners of companies. This will help to reduce money laundering, tax evasion and other criminal activities. Canada should also increase transparency and accountability in other ways, including by strengthening whistle-blower protections and requiring large multinational corporations to publish country-by-country reports of their sales, profits and taxes paid.

Thank you very much. I realize I’ve gone over my time. I appreciate your patience and I look forward to your questions. Thanks.

The Chair: Thank you, Mr. Sanger.

[Translation]

Mr. Breton, you have the floor.

Daniel Breton, President and Chief Executive Officer, Electric Mobility Canada: We would like to thank the members of the Standing Senate Committee on National Finance for their invitation.

Founded in 2006, Electric Mobility Canada is one of the world’s leading organizations in transportation electrification, a sector that includes both Canadian and multinational companies. It is the Canadian organization with the most experience and expertise in advancing discussions, regulations and projects related to transportation electrification.

[English]

Here are some facts to take into consideration, according to the Global EV Outlook 2021, published just a few weeks ago by the International Energy Agency:

Electric car registrations increased by 41% in 2020, despite the pandemic-related worldwide downturn in car sales in which global car sales dropped 16%.

According to the Bloomberg New Energy Finance EV Outlook 2020, by 2025, EVs will hit 10% of global passenger vehicle sales, rising to 28% in 2030 and 58% in 2040.

According to a newly released report by TD Economics, it is estimated that by 2050, between 312,000 and 450,000 of Canada’s current 600,000 direct and indirect jobs in oil and gas could become casualties of falling demand for fossil fuel as more countries and companies commit to net-zero greenhouse gas emissions.

According to another report called The Fast Lane, Tracking the Energy Revolution 2019, from Clean Energy Canada, there will be approximately 560,000 clean jobs by 2030 in Canada, with almost 50% of them in clean transportation.

According to a 2020 analysis by Electric Mobility Canada, a Canadian electric mobility strategy inspired by those of B.C., Quebec or California could generate up to $200 billion in sales revenue between 2021 and 2030.

In the Standing Committee on Finance report called Investing in Tomorrow: Canadian Priorities for Economic Growth and Recovery, we could see that many of our recommendations were supported for electric mobility, such as recommendations 110, 111, 136, 139, 140, 141, 142, 143, 144 and 145.

We at EMC applaud Budget 2021 for its inclusion of many important items in support of workers who need training or retraining or businesses who want to invest in the clean tech sector. However, many important items are not included in the budget, such as a Canadian electric mobility strategy that includes a ZEV, or zero-emission vehicle, supply chain strategy; an evolution of EV rebates to make sure they include used EVs and up-and-coming light-duty electric trucks such as the all-new Ford F-150 that was unveiled yesterday, which won’t be admissible for any rebate; or the details for the electric bus and school bus program from Infrastructure Canada, which for now is actually stopping sales because everyone is waiting for the program.

Just two days ago, President Biden announced that he intended the U.S. to become the world leader in electric vehicle manufacturing. That’s why EMC fully supports the agreement of the Canadian and U.S. governments on the importance of the development of a zero-emission vehicle future and a battery strategy. However, according to the Clean Energy Canada report released this week, in which EMC participated:

 . . . despite actions taken to date, industry stakeholders felt that Canada is still a long way from having a mature battery supply chain.

The same could be said about a ZEV supply chain, for that matter.

According to a soon-to-be-released report by EMC, in 2020 China controlled 54% of the production capacity of the world’s 15 largest battery plants, followed by South Korea at 28% and Japan at 14%. This means that 96% of the battery production capacity is owned by Asian companies. That’s why, for economic, environmental and geopolitical reasons, we recommend that Canada develop its own electric mobility strategy that includes a ZEV supply chain strategy; that we have more charging infrastructure, more ZEV rebates, education and training, which is key; and finally, that we implement ZEV regulation, since voluntary measures alone won’t be enough for Canada to reach its climate change and ZEV adoption targets.

We also recommend that Canadian and American EV-related companies get priority access to our own strategic minerals and metals so that Canada doesn’t just end up exporting its natural resources where they will be transformed into finished products for electric vehicles, meaning that the added value will be outside the country; that Canadian EV products, technologies and services get access to the U.S. market; and that we address the issue of the Buy American Act to see how both countries can work together on a North American EV strategy inspired by the one in Europe.

[Translation]

That is why Electric Mobility Canada, in collaboration with other Canadian industry stakeholders, will formally announce in June the launch of an electric vehicle supply chain initiative, the Canadian ZEV Supply Chain Alliance, to help accelerate Canada’s industrial transition to transportation electrification.

If time permits, Electric Mobility Canada will make seven more detailed recommendations to accelerate economic recovery and Canadian exports through transportation electrification.

Thank you.

The Chair: Thank you, Mr. Breton.

[English]

Brian Kingston, President and Chief Executive Officer, Canadian Vehicle Manufacturers’ Association: Thank you, Mr. Chair and honourable senators, for the invitation to appear today as part of the committee’s study.

The Canadian Vehicle Manufacturers’ Association, or CVMA, is the industry association that represents Canada’s leading manufacturers of light- and heavy-duty motor vehicles. Our membership includes Ford Motor Company of Canada Ltd., General Motors of Canada Company and Stellantis, also known as FCA Canada Inc.

Our automotive industry is responsible for approximately $16 billion in economic activity, 135,000 direct jobs and over half a million indirect jobs. Last year it was Canada’s second-largest export sector, with $42.9 billion in exports.

This past year has been extremely challenging for the industry. Sales were down nearly 20% year over year. This is the largest single-year decline in decades. Now the industry continues to face challenges due to pandemic-related uncertainty and the global semiconductor shortage, which is expected to reduce vehicle production in North America by upwards of 1 million units.

Despite the challenges, though, the integrated North American industry is making significant investments into electrification, connected vehicles and autonomous driving. Automakers are investing approximately $300 billion globally into electrification alone, with some committing to electrify their fleets entirely. CVMA member companies have announced $5.7 billion in new investments in Canada over the past 10 months and much of this is dedicated to building electric vehicles.

With respect to Budget 2021, we applaud the commitment to the automotive industry and the transition to EVs. This includes funding for coordinated EV charging infrastructure codes and standards; incremental new funds for the Strategic Innovation Fund; the Net Zero Accelerator; funding for R&D to advance critical battery mineral processing; and a proposed corporate tax rate reduction for businesses that manufacture zero-emission technologies in Canada, such as EVs. We look forward to learning more about these proposals as the legislation is developed.

Further to Bill C-30, we welcome the provision to extend the 100% capital cost allowance, or CCA, write-off for business investments in certain zero-emission vehicles to a wider array of eligible automotive equipment and vehicles. We believe this extension will help businesses and fleets adopt EVs.

We also encourage the government to increase the $55,000 cap, given the growing number of electric vehicle models coming to market. For businesses and fleets to utilize the CCA, it’s important it will also apply to larger vehicles coming to market, including pickup trucks and SUVs, which businesses and fleets tend to use. We think the application process should be efficient in keeping administrative requirements to a minimum.

While these measures are encouraging, I believe we need to be more ambitious if we’re going to benefit from this transition to EVs. We need a bold, comprehensive plan to address the well-known and well-documented barriers to EV adoption, and this will only be successful if we bring all the key players to the table, including automakers, dealers, provinces and territories, the federal government, municipalities, non-profit education organizations and energy providers.

The most recent poll of Canadian attitudes towards EVs finds that we need to do much more to boost consumer demand. Consumers are still very concerned with driving range, the higher purchase price of vehicles, a lack of public charging infrastructure and the time required to charge. How do we address that? We need EV consumer purchase incentives until we reach price parity with gas-powered vehicles, we need expanded access to EV charging infrastructure and we need more on the education side of things.

Until this price parity is achieved, incentives like the federal government’s iZEV program and other consumer financial and non-financial incentives, like access to high-frequency lanes, for example, is going to be critical over the next decade to offset the higher costs faced by consumers. We recommend that the federal government broaden the iZEV program to allow larger, more expensive vehicles to be eligible given that these larger vehicles are very popular among Canadians. We think the proposed luxury tax in the budget will actively work against efforts to get more Canadians into EVs, given the higher price point of these vehicles, until we achieve price parity.

At the same time, we think Canada could be more aggressive with the expansion of EV charging infrastructure to support greater adoption. We need hundreds of thousands of new charging outlets in the coming years if we are going to address these concerns with range anxiety.

Frankly, we don’t have time to spare. We saw in the U.S. American Jobs Plan, the Biden administration has committed $100 billion to consumer incentives and $15 billion to the deployment of 500,000 new EV charging stations. We need to match that on a proportional basis if we are going to succeed in this transition.

With that, thank you so much for the time and I look forward to any questions.

The Chair: Thank you to the witnesses. We will now proceed to questions. I would like to share with senators that, in this meeting, you will have a maximum of seven minutes each for the first round. Therefore, please ask your questions directly to the witnesses, and, witnesses, respond concisely, please.

At that point in time, the clerk will make a hand signal to show that the time is over. Honourable senators, before I recognize Senator Marshall for questions, I also want to welcome Senator Pate, who has joined us for this meeting. Welcome, Senator Pate.

Senator Marshall: My first question is on the electric vehicles. The primary objective is to reduce our greenhouse gases. We keep seeming to miss our targets. There was some discussion a little while ago about reducing greenhouse gas emissions by 40 to 45% compared to 2005 and to do it by 2030.

For the electric vehicles, it’s not their sole responsibility to reduce greenhouse gases, but do you know whether your sector has actually reduced greenhouse gases? Is it possible to break apart the different sectors and sort of focus in on your area to see if you’re making any headway with regard to reducing greenhouse gases? Perhaps we can start with Mr. Breton and go with Mr. Kingston and then Mr. Sanger.

Mr. Breton: If you look at light-duty vehicles, for instance, between 1990 and 2019, greenhouse gas emissions from light-duty trucks have gone up 155% because people are making the switch from cars to light-duty trucks, including SUVs and crossovers and pickup trucks. So it’s more and more of an issue. It’s not only the case in Canada; it’s also the case in the U.S.

As Mr. Kingston was saying, if we can get more people on board with electric vehicles, whether they’re cars or light-duty trucks, it’s always a good thing.

If we look at greenhouse gas emissions, that’s one part of the issue, but the other part is air pollution. There was a 2021 report that came from Health Canada just a few weeks ago that said the economic cost of air pollution is $120 billion a year, and a significant portion of that actually comes from transportation and oil and gas. So depending on the pollutant, between 30% and 70% of the pollution comes from those two sectors together.

There is a lot that needs to be done because there are more and more electric vehicles on the road. Let’s take two examples. When you switch from a Honda Civic to a Honda CR-V, the Honda CR-V may be more fuel efficient than the former Honda CR-V, but it is still a bigger vehicle than the former Civic. So when people make the switch from a small car to a small light truck, there is actually no gain in terms of greenhouse gas emissions. That’s why we have to go electric.

Senator Marshall: Okay. Before we go to Mr. Kingston, is there any way to measure the impact your sector has on the reductions? It just seems that we keep setting targets and we keep not achieving them. Then we set new targets. And now we have the target established for 2030. I’m looking at that and saying, well, there is not a chance we’re going to achieve that because we have such a poor track record.

Is it possible to carve out your sector and say, “The other sectors couldn’t make a contribution but our sector did great. The electric vehicles did great.” Is it possible to do that?

Mr. Breton: It is absolutely possible. Whether you’re in Quebec, B.C. or Alberta, wherever you are, greenhouse gas emissions will be lowered by going electric. We could look specifically at electric vehicles. If you take it vehicle by vehicle, you will have greenhouse gas emission reductions between 20% to 75%, depending on the vehicle and depending where you are in Canada.

No matter where you look in Canada and no matter the vehicle, there will always be lower greenhouse gas emissions. You’re absolutely right; between 2005 and 2019, over 14 years in Canada, greenhouse gas emissions decreased by only 1%, and now we have 9 years to decrease it by 39%. So there is a lot of work to be done. It’s not only transportation and electric vehicles that will do that; we will need to act in all areas across Canada.

Senator Marshall: Mr. Kingston, I’m interested in your views. I’m doubtful we will achieve that 2030 target.

Mr. Kingston: Thank you, senator. It’s a great question. With respect to light-duty vehicle emissions contributions in Canada, it’s 12% of the total. It’s not insignificant, but, of course, there are other sectors that will have to achieve significant efficiency gains if we’re going to reach those overarching targets.

Because of investments by automakers into new technologies — and I’ll address EVs in a moment, but I am talking about gas-powered efficiency things like, for example, when you stop at a light and your engine turns off. That makes your vehicle more efficient. We have seen significant gains in that space. Between 2005 and 2030, GHG emission reductions for new vehicles have gone down by fully 30%. That’s just due to technology advances in gas-powered vehicles.

To Mr. Breton’s point, though, we’ve seen the vehicle fleet grow. More people are buying vehicles. When you have a larger fleet overall, that will bring emissions up. What do we do? We have to boost EV adoption. Last year, electric vehicle sales were less than 4% of total new vehicle sales. That’s going to be a critical component.

The other piece that I didn’t mention is vehicle scrappage. We have to find a way to turn over the fleet. There are a lot of really old vehicles on the road in Canada, and many of them are higher-polluting; they’re not as efficient as new vehicles. How do we get those vehicles off the road and reduce emissions? The best way is through a scrappage program — like you’re seeing being contemplated right now by the Biden administration — to help Canadians get a new vehicle.

Senator Marshall: Mr. Sanger, you spent a lot of your opening remarks on climate change, so please proceed. Thank you.

Mr. Sanger: First of all, I just wanted to say how impressed I am with the commitment of companies like GM and other auto companies for going electric. I’m very impressed by it. I actually invested in GM at the beginning of this last year on the basis of that, and the stock has gone up, so that’s good.

One issue we also need to keep in mind is that so much of our emissions are upstream and embodied in the goods that we buy. We need to take account of that as well. Of course, direct emissions are important, but, actually, there are emissions associated with producing goods and services and, also, there are emissions for which we’re responsible through our imports. We may have an increase in emissions on a temporary basis, but over the longer term, it will be lower over the lives of the vehicles and the products.

[Translation]

Senator Forest: Thank you to the witnesses for sharing that expertise with us. My first two questions are for Mr. Sanger. On several occasions, I have noted a situation that seems to me to be totally immoral, namely where companies listed on the stock exchange receive salary subsidies and then increase their dividends and the bonuses of their senior executives.

What do you think of the fact that there are no measures in Bill C-30 to close these loopholes with regard to subsidies disguised as dividends and bonuses granted to senior managers? My second question concerns social housing.

[English]

Mr. Sanger: I’ll proceed on that one. The whole issue of stock option deductions has been quite controversial. The original idea was that it would give senior managers and executives some sort of incentive in the future of the company, and they paid half the rate of the statutory rate of tax. What has happened with stock options is they’ve often been manipulated in different ways, and a lot of companies have engaged in share buybacks, which have in effect increased the value of their own compensation by pumping up the share price and they haven’t put that money into investing in the economy. The former head of the business school at the University of Toronto wrote a book criticizing stock options and stock option deductions. A very high value of that goes to the top 1%.

We’re glad that the government moved on this, but I actually agree with people like Warren Buffet, Bill Gates and Bill Gross, who runs the biggest fund in the world, that we should be taxing different forms of income at the same rate, and that includes stock options and capital gains and other areas. I’m not sure if you were talking about that. There have also been, over the past year, some increases in dividend payments from companies that have received public subsidies, and I think that is a real concern.

[Translation]

The Chair: Mr. Breton, do you have a comment?

Mr. Breton: No, this is not my area of expertise, and I don’t want to “put my foot in my mouth,” as we say in Quebec.

[English]

The Chair: Mr. Kingston, do you have a comment?

Mr. Kingston: No. That is also not my area, so I don’t have any comments.

[Translation]

Senator Forest: Welcome, Mr. Breton. In its brief, Electric Mobility Canada suggests that we develop a Canadian strategy for the electrification of transportation. I think that’s an excellent suggestion.

You say that Canada needs a Canadian electric mobility strategy. I thought, perhaps naively, that given the massive investments by Canada, provinces and municipalities in this area, we had at least adopted a common vision to guide this sector.

What do you mean by a “Canadian electric mobility strategy” and how can this be done within a Canadian framework when provinces and municipalities also have a role to play?

Mr. Breton: We need to ensure that provinces, municipalities and businesses do not work in silos.

At present, there are programs here and there, but there is no coherent vision. Some expertise is complementary. For example, in British Columbia, there is a lot of expertise in the field of hydrogen. Ontario is the cradle of light vehicles in Canada. In Quebec, there is a lot of expertise in transportation electrification. And at Dalhousie University, in Nova Scotia, they have developed expertise in electric vehicle batteries.

If we take that into account, in addition to the fact that Canada has an extremely prolific mining sector that also wants to become increasingly involved in transportation electrification, we believe that Canada can have a federal government strategy that sets the tone. In our current discussions with the U.S. government, we need to know what our strengths and weaknesses are, and we also need to know how to work with that government.

We don’t want the United States to take our natural resources, export them to the U.S. and manufacture the finished product, so that we end up having to buy batteries, vehicles and components from elsewhere.

Senator Forest: We don’t want to go from resource region to resource country, basically.

Mr. Breton: That’s it.

Senator Forest: Who should take the lead in this consultation exercise from this point of view?

Mr. Breton: At Electric Mobility Canada, we are setting up a group to bring together actors from the mining, research, and electric mobility sectors as well as vehicle manufacturers to work with government agencies and departments. This will allow for the development of a national plan in collaboration with the private sector, the research sector, universities and governments.

Senator Forest: We are trying to work more and more with electrified light-duty trucks. Given the function of these vehicles, which are often used for commercial purposes, and given that the network of charging stations is developing quite well — even if there are not yet enough fast-charging stations — do you think that there could be a period during which we could also encourage the acquisition of hybrid vehicles, that is, vehicles that run on both electricity and conventional gasoline?

Mr. Breton: Hybrid vehicles have been on the market for almost a quarter of a century, since 1997. In most cases, this technology has been superseded. We are now at the stage of plug-in hybrids. GM and Ford are moving in that direction. So, it’s a technology that, in many ways, is already obsolete. I agree with you that we need more infrastructure across the country. If you look at British Columbia or Quebec, there’s a lot of charging infrastructure. There are other regions in Canada where there is a lack of charging structures, and we need to make sure that we accelerate their deployment, with the support of Natural Resources Canada.

Senator Forest: Thank you.

[English]

Senator Klyne: Welcome to our guests. Thank you for your opening remarks and presentations.

I want to take a couple different approaches in some areas we’ve covered already. You referenced one of them in your opening remarks, Mr. Kingston.

In Budget 2021, the government has proposed $5 billion over seven years for the Strategic Innovation Fund’s Net Zero Accelerator, which tops up funding to $8 billion total. The purpose of the fund is to rapidly expedite decarbonization projects with large emitters, scale up clean technology and accelerate Canada’s industrial transformation across all sectors. Can you provide the committee with any information about the role, if any, this Net Zero Accelerator will play in encouraging vehicle manufacturers to rapidly expedite the production of zero-emission vehicles? Will this influence manufacturers’ production plans to include more work trucks with the load capacity and torque for work? Also, where are we with more hydrogen-fuelled vehicles coming to market and the establishment of hydrogen refuelling stations?

Mr. Kingston: Thank you, senator.

With respect to the Strategic Innovation Fund and the Net Zero Accelerator, we’re very encouraged by both of those announcements and the additional funding. As I mentioned in my opening remarks, right now there’s a huge amount of investment globally going into electrification. Particularly as we come out of COVID and a huge economic and employment shock, countries around the world are competing very aggressively to attract new auto assembly investment into their countries.

We’ve been fortunate to see $5.7 billion committed to Canada by General Motors, Ford and Stellantis, but going forward there will be opportunities to win new investment. To do that, you need to have programs that signal to global automakers that we’re serious about this and that we want to be part of the supply chain and that the government, not just at the federal level but working with provinces and municipalities, is willing to help make that happen. So that program, I think, is very important. It sends a powerful signal to manufacturers.

With respect to hydrogen, right now what we’re seeing is consumers in the light-duty sector are heading more towards fully electrified battery vehicles. That’s where we’re seeing a lot of demand. However, hydrogen has a lot of promise, particularly as fleet vehicles where you can have fuelling infrastructure in a set location and vehicles can fuel and then operate in that area. The other area is heavy-duty transport, such as long-haul trucks, where you can fuel it using hydrogen and go a significant distance to another fuelling station.

It absolutely has a role to play, but on the light-duty consumer side, right now we’re seeing a push towards electrification primarily.

Senator Klyne: Thank you. My next question either Mr. Breton or Mr. Kingston can answer.

There was a reference in someone’s opening remarks about the CCA. As we know, in Part 1 (bb) of Bill C-30, the government is proposing a 100% capital cost allowance in the first year for businesses that put new and used zero-emission vehicles into service, so you gave me a good segue there, Mr. Kingston.

Mr. Kingston and Mr. Breton, what is your estimation as to the impact of this accelerated depreciation expense? Will fleet administrators be turning over their fleets for new and used zero-emission vehicles or will this be a gradual phased approach? If there is going to be a less-than-optimal uptake, are there additional incentives that should have been proposed to encourage businesses to accelerate the conversion to zero-emission vehicles? Also, does the charging network exist to support fleets of zero-emission vehicles hitting Highway 1 and the Yellowhead Highway, and highways heading up to and beyond the fifty-fifth parallel, or is the charging network primarily serving the short-haul and mid-range of Canada’s corporate centres between the forty-ninth and fifty-fifth parallels? You alluded to hydrogen maybe playing a role there.

Mr. Kingston: With respect to ACCA and fleets, yes, we absolutely welcome it, and we think it’s the right type of policy. However, there are some real challenges with business fleets that we need to overcome before we will see significant uptake.

The first is vehicle availability. For a lot of fleets, what they’re looking for is delivery trucks and pickup trucks. Those are coming. For example, GM has announced they’re going to be building the BrightDrop electric vehicle delivery truck here in Canada. We’ve got the newly electrified Ford F-150 Lightning. These are not available quite yet. We will need to have these vehicles in the market, and that will help drive the uptake.

You referenced charging infrastructure. Just like on the consumer side, we simply don’t have enough and that will be a barrier to fleet uptake until it’s built out.

The last piece is the price and the importance of incentives. The ACCA helps, but fleet managers are some of the best when it comes to calculating the total life-cycle cost of a fleet right down to the last penny. If you can’t make a compelling case on the total cost of an electrified fleet versus a gas-powered fleet, you’ll have difficulty getting uptake. We need those incentives to be in place and have them apply to the larger, more expensive vehicles.

Mr. Breton: I’ve made calculations with different fleet companies because they were interested in going to electric vehicles. Whether we’re talking light duty, medium duty or heavy duty, many of them are still used to the devil they know. For them, even though it makes financial sense, we have to educate and train people to go towards electric fleets, because it’s not a done deal. You have to get people’s butts in the vehicles so they understand how they work. That’s very important. That’s something we have to address.

I would also say that right now many fleet operators are not going electric because there is not enough availability, as Brian said. If you look at Canada Post, they’re looking for electric delivery vehicles, and they can’t find any in North America. It’s an issue. For light duty as well, it’s complicated.

Regarding infrastructure, for most duties, battery electric vehicles with good infrastructure will do the trick. But if we’re looking at heavy-duty vehicles and long haul, we’re looking more towards hydrogen.

Senator Richards: Thank you to the witnesses. My question is to Mr. Kingston and to Mr. Breton.

Is electrification a long-term or intermediate solution to our fossil fuel problem? What are the problems posed by electric vehicles that might come to light, such as the fact that there is pollution associated with electric vehicles at the source? Who will control the ability to produce and market these vehicles? Will U.S. expertise and infrastructure simply once again swallow us whole or will we be able to produce our own? I think Mr. Breton mentioned this.

If either Mr. Kingston or Mr. Breton wants to take a shot at these questions, please go ahead.

Mr. Breton: If we’re talking about the environmental impact of electric vehicles, there is an environmental impact, for sure. No vehicle has no impact, but the impact is a lot less than a comparable gas or diesel vehicle.

The great advantage is in the fact that we lose a lot fewer resources because we can reuse and recycle the batteries at the end of life. We have companies in Ontario and Quebec, for instance, Li-Cycle or Lithion, that can recycle up to 95% of the battery components at the end of life, which makes a big difference. When you burn the gas, it’s burned and that’s it. You can’t recycle anything.

Regarding expertise in the U.S. versus Canada, that’s why we’re working on the ZEV supply-chain alliance to make sure that Canada comes to the table with good arguments to say to the U.S. government, “We want to work with you, but we won’t just be your resource provider.” We have expertise in Canada that can be very valuable to a Canada-U.S. partnership, especially after what we have seen right now in China and what we are seeing right now in Europe. They have built a whole continental vision and plan for electrification. That’s why we have to come up with our own plan. Otherwise, we’ll be left in the dust.

To give you an example, there are less than 500 electric buses and school buses in Canada. There are over half a million urban buses in China. We are far behind. We have a lot of work to do to make sure we don’t get left behind.

Mr. Kingston: With respect to electric vehicles being the “silver bullet” solution to reducing GHG, I would again underline that light-duty vehicles are responsible for 12%.

Mr. Breton: It’s actually more than that, Mr. Kingston. When you consider the oil extraction, it accounts for double that.

Mr. Kingston: It’s 12% of the current light-duty fleet for our total emissions. That’s from ECCC. It’s a part of it, but to achieve net zero, this has to be an economy-wide effort to bring reductions down.

The key point with electrification, and this is because we have relatively clean electricity generation in Canada, we estimate that an EV will have a GHG footprint of up to 90% less than a gas-powered vehicle. Again, that’s assuming that the electricity you’re charging from is coming from hydroelectric or nuclear sources. So there are huge benefits there.

Mr. Breton covered recycling quite well, but just to underline that, we see there are all kinds of businesses popping up now that can either repurpose an EV battery for battery storage, or completely recycle it, pull out those critical rare earth minerals that are in it and find a way to reuse them. So there are big recycling opportunities here.

Finally, in terms of the Canadian opportunity, we already have assembly investments here in Canada, which is fantastic news, but there is a huge opportunity in the whole mines-to-mobility side of things. We have these minerals. We know we have a natural resource endowment that is world-leading. If we can put in place the right processing capacity, I think we can be viewed as one of the most secure, responsible and sustainable jurisdictions in the world for these critical minerals that will be part of the supply chain.

Senator Richards: That’s great. I hope it all comes true. But who manufactures these light vehicles and trucks at the moment?

Mr. Kingston: In Canada?

Senator Richards: Yes. Where do we get these trucks and light vehicles? Do we manufacture our own specific design, or do they come from Ford, GM and Chevy?

Mr. Kingston: Right now we have three manufacturers that will be building light-duty vehicles in Canada and that’s Ford, General Motors and FCA, or Stellantis.

Senator Richards: That’s what I was asking. I looked at electrification of cars as an intermediate solution to our problem of transportation. That’s how I look at it. Am I way off the mark here? Do you think this is going to be a long-standing solution to our problem with fossil fuels and with transportation? I know we’re looking into the future here, but I thought I’d ask.

Mr. Breton: In the future, electric vehicles are part of the solution. It cannot be the only solution, as Brian said. We have to work towards more transit, more telecommuting and more active transportation. It’s only part of the equation, but it’s a very important one. If you’re thinking that maybe in the future it’s not going to be electric vehicles and it’s going to be something else, my training is in biology, but I work with chemists, physicists and engineers, and we’re all going towards electric transportation.

Mr. Kingston: I agree with that. It’s a key piece of the transportation emissions reduction plan, and, yes, there will be other technologies, but electrification is absolutely where things are heading.

Senator Richards: Thank you very much.

Senator Smith: Thank you to the witnesses for participating today. I think I’ll try to move it over a bit to Mr. Sanger and Canadians for Tax Fairness and ask a question or two.

With respect to tax avoidance and evasion, your organization has called upon the federal government to further strengthen the CRA to tackle these issues. Canada is one of the few countries that have yet to lay claims or criminal charges, if you would, as a result of the Panama Papers and is slow in retrieving those tax dollars. This government has touted its increased funding for the CRA in this regard, but it seems we are still behind other countries.

Why are we behind so many countries in combatting tax avoidance and tax evasion? Is it the funding issues, or is it an issue of political will on the part of the government? What can you tell us?

Mr. Sanger: Thank you very much for the question. Your fellow senator, Percy Downe, has been very vocal and effective on these issues and we really appreciate that.

You’re absolutely right; Canada has not recovered or prosecuted anybody in relation to the Panama Papers leaks. We have information from CRA that they’re pursuing some of those cases, but no charges have been laid yet. There were some pretty deep cuts at CRA, particularly for the offshore and higher wealth categories, and other studies, like those of the Auditor General, found that the CRA had been more lenient in those areas.

We’re appreciative of the increased investment. We’ve heard about more increased investment, particularly in these areas. That is important. We’re going to need more in terms of enforcement, auditing and other areas. CRA has said those cases are more complex, but still, it has been over five years now.

Another aspect of this is prosecution. I don’t like arguing for more funding for lawyers, but having stronger prosecution in these areas is more important, and stronger legislation is also important.

I commend the CRA for taking some bigger cases to the Supreme Court, but the Supreme Court has ruled against them and that’s because the legislation isn’t strong enough.

Your fellow senator Percy Downe has argued that we should make it a criminal offence to hold an offshore account and not reveal it, and that could be part of the solution as well.

Senator Smith: As an association, to follow up, have you specifically outlined the steps that you feel are essential to be taken to start to make some progress in this area? Because I can remember being on the Finance Committee for the last 10 years in the Senate, and we always have this issue that we’re not doing the job well enough to make a dent. This is an important situation not only for Canadians but for people throughout the world, especially when you look at equity of wealth and distribution of wealth. What are your comments on that?

Mr. Sanger: Absolutely. One of the problems that the House Finance Committee is looking into again as well is the whole Isle of Man scheme. The promoters of that scheme, a well-known accounting company, have not been charged, and a lot of the people involved in that were settled out of court in that way.

I think the government should be more aggressive on this. It’s partly to do with our culture here in Canada. We’re not as strong against white-collar crime as the U.S., certainly. I think we could be more aggressive in these areas, as well as having strengthened penalties and legislation in a number of different areas.

Senator Smith: Here is another question for Canadians for Tax Fairness: Your organization has praised the government’s commitment to a national minimum wage of $15 an hour. While there are arguments for why this could lift people out of poverty, there are also concerns this move simply shifts the burden of social programs from government onto businesses. Businesses who are already impacted by the pandemic may respond by reducing employee hours or cutting pension or leave benefits, et cetera.

How would you respond to these concerns that a $15 minimum wage today could have adverse effects not only on people looking for work but also on the tax base?

Mr. Sanger: That’s a good question. I’m an economist; I’ve been an economist for about 30 years. The views of economists have fundamentally changed on these issues, and there have been some really detailed studies by U.S. economists, including chief advisers to the government there, who found that when minimum wages have been increased in particular areas, they really haven’t had much of an adverse impact at all, and $15 an hour is not the minimum across the country, but a lot of provinces are heading in that direction. We haven’t had a negative impact on that. I’ve found it interesting that bank economists, for instance, have supported it.

I think part of the reason is that a lot of people see that there have been major problems in terms of inequality, and it’s been difficult to raise the bottom up. Increasing inequality has, frankly, slowed down economic growth, which even the OECD and IMF have stated as well.

Senator Smith: Thank you.

[Translation]

Senator Dagenais: My first question is for Mr. Breton. I would like us to talk more specifically about electric vehicle batteries. We know that the electrification of vehicles is not the solution to all environmental problems. The construction and disposal of batteries after their useful life is a serious environmental issue that I don’t think we talk about much.

As an expert, can you give us information on the environmental impact of the construction of batteries and on the costs to be expected when they have to be disposed of? Has the government provided for an adequate framework and funding to deal with these situations that we will have to face one day?

Mr. Breton: That is an excellent question. You are absolutely right that the batteries in electric cars have an impact on the environment.

That said, the environmental impact of a vehicle should always be calculated on the basis of its full life cycle, that is, from resource extraction to vehicle manufacturing, to vehicle use, and then to the disposal and recycling of vehicle components. When comparing a given electric vehicle to an equivalent gas powered vehicle, the additional impact of the electric vehicle will be offset after 20,000 to 30,000 kilometres. This means that, beyond this mileage, the vehicle will be much less polluting, because use is the main factor in pollution. As I said earlier, there are now Canadian companies that specialize in recycling electric vehicle batteries, such as Li-Cycle Lithium-ion, and that are able to recover up to 95% of the battery components.

So not only is the impact much less for an electric vehicle, but unlike oil, which is not recyclable at all, the ore in batteries is extremely valuable and can be reused in the manufacturing of new batteries. Thus, the new batteries will have a lower ecological impact, because recycled materials will be used.

For all these reasons, transportation electrification, while not the only solution to climate change or air pollution, is certainly part of the solution. Some form of regulatory framework will be needed, because electric car batteries cost $1,000 per kilowatt hour in 2010. Now they cost $150 to $200 per kilowatt hour. That’s an 80% to 85% drop in the price of batteries per kilowatt hour, and we’re looking at another 50% to 60% drop by 2024 or 2025. Batteries will be so cheap that we will have to regulate their use to ensure that they are disposed of responsibly.

Senator Dagenais: Thank you very much, Mr. Breton. My second question is for Mr. Kingston. Many electric vehicles will cost much more to purchase than some traditional vehicles. As for the manufacturers you represent, in what proportion are electric vehicles subsidized? In how many years will the financial support of the Government of Canada, among others, no longer be necessary to manufacture electric vehicles? In my opinion, the government will not subsidize the purchase of electric vehicles for life. It could be unfair to all taxpayers to make them pay for the purchase of a car for a family.

[English]

Mr. Kingston: Thank you, senator. That is an excellent question and a great point.

Yes, with respect to incentives and subsidies, by no means do we believe they need to be in place in perpetuity. These are short-term measures to help accelerate Canadians and consumers making that jump from a gas-powered vehicle to an EV. The reason we need them now is because in the price point between a new EV and an ICE vehicle — a gas-powered, internal combustion engine vehicle — there still is a gap. That’s because the technology is still advancing.

We estimate that you will see the price of a battery get down close to parity with a gas-powered vehicle by the early 2030s. Now, these are forecasts. This could change depending on how the technology advances. But once you reach that point where a consumer walks onto a lot and they have the choice between a gas-powered vehicle and an electric vehicle, with all the same features at the exact same price point and one doesn’t require gasoline, you won’t need incentives anymore. This is meant to be a program through the transition, and by no means a permanent policy measure. It’s costly in the early days, but this is what needs to be done to make that shift happen quickly.

[Translation]

Mr. Breton: A report by the International Energy Agency, which was published just a few days ago, indicates that parity in prices will be reached around 2027.

Senator Dagenais: Mr. Sanger, the increase in the use of electric vehicles will surely have a negative impact on government revenues one day, as the government already collects a tax on the sale of gasoline. Are there any provisions in the budget statements for this, or do you think that the gas tax will eventually be replaced by an electricity tax on electric vehicle owners?

Let me summarize. At present, we know that the government collects a gasoline tax, which it often gives back to the municipalities. Must we now provide for an electricity tax? There will surely be less revenue from the gas tax.

[English]

Mr. Sanger: I wouldn’t advocate a higher tax on hydroelectricity and electricity generated through other means to replace the gas tax. It’s been positive that the federal government has taken its share of the excise tax on fuel to provide to municipalities, and there were connections there with municipalities investing that in sustainable measures and environmental measures as well. I think that’s very important.

The Chair: Thank you, Mr. Sanger.

Senator Galvez: This question is for Mr. Sanger and Mr. Breton. Things are related, and I want to thank our witnesses because they were very clear in explaining the problems and the solutions, so I appreciate that.

Mr. Sanger, whatever efforts many of the sectors are taking in reducing gas emissions, the sectors of oil and gas and transportation are increasing. That is why we have to tackle these two sectors. I’m happy that you are both with us today.

Nearly a dozen of the country’s oil titans, such as Suncor, Enbridge, CN Rail, TransCanada, Imperial Oil, Cenovus and Husky have subsidies in tax havens. Some would also name more high-profile individuals and companies in the 2017 Panama Papers.

Do you know offhand the amount of subsidies paid to the oil and gas sector? Can you describe some of the primary tax incentives provided to the oil and gas industry?

Mr. Sanger: Certainly. Thank you very much for the question and the comments, Senator Galvez.

In relation to the discussion that we have been having, I took a quick look at our greenhouse gas inventory, and as Mr. Kingston has said, the transport sector has a role to play, but the whole road transportation sector is responsible for 20% of our emissions. Transport in general is 30%. So there is a lot more that we need to do. It’s a really important area, but there is also a lot more that we need to do with other large emitters as well, and Senator Galvez raised those.

In terms of your specific question of what the fossil fuel subsidies are, that’s a very good question. The government has committed to looking into it, together with Argentina as part of the G7. It’s a bit of a moving target what the subsidies are because some of those are collected afterwards. The most recent estimate from the International Institute for Sustainable Development is there are at least $1.9 billion spent on subsidies to the fossil fuel sector in Canada. That doesn’t include a lot of the tax ones, and some of those ones are exploration, development and some forms of accelerated depreciation. There are also a number of non-tax ones as well.

You’re absolutely right: a lot of these larger corporations avoid paying a certain amount of tax because they have subsidiaries in tax havens. In general, I wanted to make the point that the operations of some large multinationals as well, like Amazon, for instance, pay a very low rate of tax. It undermines local communities in different ways and they are operations that involve delivery all over the place, and they are not that good for the environment. Fairer taxation of multinational corporations through international corporate tax reform or tackling tax havens in that way can be good for the environment too.

Senator Galvez: Thank you. Mr. Kingston and Mr. Breton, I used to think that the electrification of transport was a healthy, robust and resilient economy, and actually, the pandemic has shown that in spite of bankruptcies in many other sectors, your sector is very strong. I used to think that you don’t need subsidies and that you’re good, but the issue with climate change and emissions reduction is time. The clock is ticking and we need to accelerate.

Do you find it fair that, although we need to get rid of the oil and gas combustion vehicles, we keep subsidizing them? It looks to me like the right hand is doing the opposite of the left hand in the government. The government doesn’t have money to keep giving subsidies to everybody. People are complaining about our debt and inflation.

You mentioned that electric vehicles are getting cheaper and cheaper and prices will soon be lower than combustion vehicles. But how do you feel about the subsidies that are given to oil and gas and thus making permanent our dependency on combustion vehicles?

Mr. Breton: I remember back in 2012 when President Obama said oil and gas companies have received subsidies and that, in 2013, we will be celebrating 100 years of oil and gas subsidies for companies. He could not stop the oil and gas subsidies in the U.S.

It’s always interesting to me when I hear someone ask how long we should subsidize electric vehicles. If we subsidized them for one tenth of that period, I would be happy. To me, that’s a very important issue because, you’re absolutely right, we have to make the transition from fossil fuel dependency to fossil fuel independence and towards renewable and electric vehicles. It’s not just electric vehicles, but it’s also renewable energy.

To add to that, it’s very important to train and retrain employees who are now working in sectors which will be slowly going down and disappearing. We have to get to these workers to make sure they learn how to work in the electric mobility sector. As you said, it’s a growing sector. Right now, we’re in the middle of a pandemic and we have trouble finding enough qualified people to work in the electric mobility sector.

I applaud the government because, in the budget, they talked about money for training and retraining workers. We need to do a lot of that in Canada for the future of workers from Alberta and Saskatchewan and across Canada.

Mr. Kingston: Senator, you made a great point around the fact that subsidies are about helping to accelerate this transition. I am very confident that, as this technology develops, people will see the benefits of EVs, the convenience and the reduced costs, and it will become a no-brainer. However, we want this to happen more quickly than the technology is developing; that is the reason there is a role for subsidies. They’re critically important right now. They’re not necessary forever.

Senator M. Deacon: Thank you to our guests for being here, but also thank you to my colleagues. You have kept us on our toes, and I think my questions have changed after every senator has spoken. I will try to just share one or two.

Looking at our earlier zero-emission vehicle work, I would love to welcome those folks today and, if they don’t know, to make them aware of UWAFT, the University of Waterloo Alternative Fuels Team. They have a tremendous partnership between our students at the University of Waterloo and Wilfrid Laurier University who are developing and building zero-emission vehicles. It’s an incredible competition and program. I just met with them in the last couple of days. It’s so well connected with the conversation we’re having today.

I will ask a question around the measures we’ve talked about that are meant to entice Canadians and businesses to continue to opt for zero-emission vehicles. This question is for Mr. Kingston. How do we achieve the required infrastructure to make sure that a zero-emission vehicle is a realistic possibility for every Canadian who wants one?

An example we often hear — and it’s been touched on today — is the lack of electrical charging stations along major intercity and interprovincial highways and for those who are living outside the city in rural areas. What has come first in other jurisdictions which have seen a more dramatic shift to EVs? Has the uptake of electric vehicles pushed the creation of the infrastructure to support it, or did the infrastructure come first? Is it a case of, “If you build it, they will come,” or not?

Mr. Kingston: Senator, when it comes to charging infrastructure, yes, you have to build it first. That will help bring more people to make the switch to EVs. We’ve seen study after study and survey after survey. We just did our own survey of Canadian consumers. People are genuinely concerned about range and charging. On range, OEMs have done work on that. Most BEVs — battery electric vehicles — that you are seeing sold in the market have a range of 300 kilometres plus. Range is being addressed through the technology.

Having access to available charging infrastructure is key. There are a few elements to it. First, for Canadians who live in dense urban areas, particularly in apartments, condos and multi-dwelling units, they need to have access somehow, either through building codes or standards or the ability to plug in on the street, to charge their vehicle. If you can’t give them that opportunity, then an EV will not be a feasible option.

For rural Canadians who travel long distances and can’t get somewhere on a single charge, they will need access to a DC fast charger, which can charge a vehicle almost full in under an hour, depending on the vehicle.

There is a huge amount of building to be done. I referenced what the U.S. administration is doing; 500,000 charging stations have been committed by the Biden administration. We’re not even close. We’ve got to build it, and that’s how we overcome the concern that we keep seeing from consumers around EVs.

Senator M. Deacon: Thank you. I’ll direct this piece, if you don’t mind, to Mr. Breton.

Going back to the budget speech last month, Minister Freeland said that measures included in this budget would propel — a pretty strong word — a green transition and that Canada could lead or be left behind in a green economy.

Yesterday, however — again, we touched on it — a report on batteries by the think tank Clean Energy Canada said that we’re falling behind in being a leader in the green energy supply chain. They cited slow regulatory processes and a lack of investment in commercialization. They say those are symptoms of our more passive approach to economic development.

I’d like to hear your comments on this. You touched on it. Are the measures introduced in the budget a sign that we want to take this more seriously or more like window dressing?

Mr. Breton: Well, it’s far from window dressing because if we go back just a year ago, we were nowhere near what’s been announced by the federal government regarding electric mobility. A lot has been announced. Many things are very interesting, but we have a lot more work to do. As I said before, when we compare it to what’s happening in China and Europe, we still have a long way to go. Even President Biden, yesterday, admitted that, for now, China is the world leader in electric vehicles. I mentioned there are more than half a million electric buses in China, while we have less than 300 in Canada. We must have a plan. We don’t have a plan yet. We’re working on it.

That’s why people like Mr. Kingston and me and others are talking to one another to make sure we accelerate this in Canada. We have many assets, but we have to have a plan and we have to put it into full force — not in five years from now but in a year from now, at the most.

Timing is everything here. Back in 2008-09, when GM and Chrysler were in trouble, the Obama administration said they were going to help GM and Chrysler but, in return, they had to invest in electric mobility. In Canada, we still helped GM and Chrysler, but there was no incentive and no obligation for the OEMs to do anything, so we lost many years. That’s why the U.S. has developed an electric mobility industry, but it is still lagging behind the one in China. We are not yet propelling, but I think we’re on the right path.

Mr. Sanger: You’ve heard from Mr. Kingston that the main problem is a lack of charging stations, and we should have known this for some time.

In Canada, most of the electric utilities are provincially owned and/or municipally owned. This is an area of crucial importance where governments could get together and lay out charging stations across the country.

Senator Duncan: Thank you to our witnesses for their comments and the information today. I’ve been following the development of electric vehicles very closely through my work on this committee, and I have a comment and a question about the electric vehicle charging stations.

We now have 16 EV charging stations throughout our large territory but with few people in the Yukon. As a result, we have pent-up demand for the vehicles, particularly, as Mr. Breton mentioned, for light-duty and heavy-duty trucks and the Honda CR-V, which I drive myself. But looking at the car lots in the Yukon, there aren’t electric vehicles for sale. It’s an issue. We’ve created this and now we can’t get them. We’ve built it and we’re waiting for them to come.

First, what about the pricing structure for the EV stations? Mr. Sanger mentioned that the utilities are provincially owned. Are there discussions at the federal-provincial-territorial level for a common pricing structure for EV charging stations? That’s my first question. What about the pricing? How are we going to charge people? Is there a common method and common pricing structure for it?

Mr. Breton: First of all, there are discussions right now with Measurement Canada regarding the way we charge per kilowatt hour. This discussion is ongoing right now.

Regarding the price by itself, there are no discussions right now. I would like to talk about the fact that even though you have the infrastructure, you don’t have EV availability on the lots of the dealers. That’s another issue — EV supply. As we see in Nova Scotia right now, they have EV rebates but there are hardly any electric vehicles on the lots of dealerships. They’re stuck with a real problem. If you are a dealer and you want to sell electric vehicles, you can’t have any, but you have to meet sales targets put forward by the OEM. That means you have to discourage a person from buying an EV because you have to meet sales targets.

We think that’s why a ZEV mandate, like they have in Quebec, B.C. and California and 12 other states in the U.S., is very important to ensure we have enough supply of electric vehicles all across Canada.

Back in 2011, the Government of Canada and the Government of Ontario gave $140 million to build an electric Toyota RAV4. Because there was no mandate in Ontario or in Canada, all of these Toyota RAV4s that were built with the help of Canadian taxpayers were sent to the U.S. and we could not buy them. So if we don’t have a mandate, there is no guarantee we will get all the electric vehicles built elsewhere in the world or even built in Canada because we don’t have a supply mandate.

Senator Duncan: If I might ask a follow-up to that. There is an unintended consequence when we do buy electric vehicles. What are we doing with all of the gas vehicles? What’s the plan for their disposal, recycling and end of life? I noted there was a recent initiative — I’m not sure if it was Quebec City or Montreal — to buy new electric buses. That was a news story. What happens with all the other buses? What’s the plan for disposal of the gas-powered vehicles?

Mr. Breton: It’s the same as right now for the disposal of gas vehicles when you buy another gas vehicle. They have a certain lifespan. After that, they can be recycled up to 80% or so. There is a bit of fluff there, but when we’re talking about the end of life of buses or school buses, their lifespan is normally between 12 and 16 years. These are recyclable vehicles, whether gas or electric.

Senator Duncan: Mr. Kingston mentioned the scrappage plan. Perhaps he could address that and respond, please.

Mr. Kingston: Thank you, senator. I think vehicle scrappage is a critical piece of this whole discussion. What we proposed is the government would put forward an incentive to vehicles 12 years or older, as an example. You would scrap your vehicle and it would be fully recycled, and then you would take the incentive and purchase a new vehicle. You get the benefit of getting an old high-polluting vehicle off the road and help Canadians purchase a new, more efficient vehicle. That’s a key component.

If I may comment very quickly on supply, frankly, I think it’s a debate that’s passed us at this point. For example, General Motors is committing to electrify their entire fleet. Ford has done the same thing in Europe. We have 130 models coming to Canada in 2023. We are going to have so many EVs and the future of the industry depends on selling EVs. This idea that a mandate is needed to bring vehicles to Canada is not necessary. When you look at jurisdictions that are leading in EV adoption, none of them have mandates.

Mr. Breton: Well, that’s actually false.

Senator Loffreda: Thank you to all of our witnesses for being here with us today.

My question is for Mr. Sanger of Canadians for Tax Fairness. I know your organization has called for a number of tax measures that could raise an additional $70 billion annually by closing some tax loopholes and addressing international tax dodging. So there are many worthy initiatives and thank you for that.

We all believe in equity and fairness. You mentioned tax on capital gains and investments. Have you done any research on how any tax modification would affect the small investor? There are many small investors who have investments and would be subject to any tax modification on capital gains.

Mr. Sanger: It certainly depends on the impact. The largest part of the benefit of lower taxes on capital gains do go to the top 10% for sure, absolutely. I’ve argued that we should have full taxation of capital gains but adjusted for inflation. Other countries, like the United States, have dual taxation rates so they charge a higher rate of tax for short-term investments to try to incentivize a lower rate of capital gains tax for long-term investments.

So something like a capital gain adjusted for the inflationary component would incentivize longer-term investments and not incentivize short-term investments. That’s one area.

Senator Loffreda: So your argument on modifying that tax rate is for incentivizing longer-term investments? Because I do feel, from my experience, that a lot of small investors would be subject to the increased tax if you were to fully tax capital gains. I don’t think that would be a benefit. I don’t think that would help in creating more equity and fairness.

Mr. Sanger: In fact, the data is clear that the benefits largely go to the top 10%. It’s absolutely consistent there in Canada and elsewhere. And that is just looking at one element of that. When you’ve got some of the wealthiest people in the world — and also there are a lot of wealthy individuals in Canada — an organization called Resource Movement has argued for these types of things. These are investors who have said that we should be taxing income. And, in fact, the last major tax review in Canada said “a buck is a buck is a buck,” and we should be taxing investments at those levels or taxing different forms of income at similar rates.

By having all these different rates like this — and particularly on the capital gains — it makes our tax system much more complicated in so many different ways, and it increases the opportunities for different forms of avoidance. I believe we should have a simpler tax system in which different forms of income are taxed at similar rates. That was the main conclusion of The Carter Commission Report on tax reform from the 1970s.

Senator Loffreda: Thank you, and I appreciate your response, although I feel that, once again, the small investors benefit as much as the larger investments on capital gains, and it incentivizes many to make investments. Because I always say wealth is created by the entrepreneur, and we’ve got to create that spirit also — the incentive to invest, the incentive to be an entrepreneur.

That being said, you touched briefly on corporations. I’m wondering if you did any research on the effect of increasing tax rates on corporations or increasing minimum wage, and what would be more efficient. I’m saying that because in my world when I would ask one of the executives to cut expenses, it was easy to do; we cut expenses. But to create wealth is not easy to do, nor was increasing sales easy to do.

Do you have any tax incentives that would create wealth and, at the same time, lower that gap or create more equity, create more fairness? If there were one or two — and maybe you can get back to us in writing, if you can — what tax incentives would create wealth? You’ve done a great job on distributing the wealth. I’m all for closing international tax dodging and closing the loopholes; we’re all for that. So kudos and congratulations on that. Given your level of expertise, are there any incentives we can put into practice for creating wealth?

Mr. Sanger: Just to return to some of your points there, you said we need to have more investment in different areas. There has been a lot of money out there available for investment, and we’ve had a lot of asset price inflation in a lot of different ways, and that has led to increasing instability in the economy.

In terms of measures, in terms of the impact of raising corporate tax rates, I found it interesting the Conservative government of the U.K. said it was going to increase corporate income tax rates. That’s basically an admission that all these cuts haven’t had a strong impact. It’s other cost factors and other labour factors that are more important in investment decisions.

In terms of incentives, what I’ve generally been arguing for is levelling the playing field and making sure we don’t give big tax benefits to foreign multinational corporations and allow them to avoid taxes, because it really is the biggest corporations that are most able to avoid taxes, and it’s the small- and medium-sized ones that are really missing out on that. They don’t have subsidiaries in tax havens and they’re not as adept at avoiding tax. So we need to put in place rules to make the tax system fairer in that way, and it will also make the economy more competitive and hopefully more productive from that as well.

The Chair: Honourable senators, we will have at least 10 minutes for a second round.

Senator Marshall: I have to go back to my initial question. Looking at the budget book, the government has outlined the billions of dollars they’ve put into the green economy and trying to reduce greenhouse gas emissions. It seems like we’re just continuing to do the same thing, but we’re not reducing greenhouse gas emissions or we’re not meeting our targets. It seems like it’s almost inverse: The government keeps trying to do the same thing, hoping they will have a different outcome.

Is there something somewhere that could demonstrate that some of these initiatives actually did contribute to a reduction in greenhouse gas emissions? I’m trying to see, are we fooling ourselves thinking we’re going to reduce emissions by 2030 just by doing the same thing that we’ve done the last 5 or 6 or 10 years? I see Mr. Breton is smiling, so perhaps he can take a stab at it. I’m not convinced. Please convince me or show me numbers.

Mr. Breton: If we’re talking about electric mobility, obviously to have incentives to buy electric vehicles is one part of the solution. As everyone said, we’re talking about infrastructure. That’s another part of the solution. But when we’re only talking about voluntary measures, we never achieve our targets, whatever they are. So we need regulation. If we have a regulation on greenhouse gas emissions or a regulation on EV adoption, that’s where it’s going to make the difference because people will have to meet the regulation.

To Mr. Kingston’s point, when he said that where there’s a ZEV mandate we don’t see that it’s really useful and we’re beyond that; actually, in California they have a ZEV mandate. They have had it for more than 30 years. We can do that or we can do like Norway where they’ve decided to tax gas guzzlers for up to 150% tax, which I don’t think will happen any time soon for an F-150 in North America. I think regulation is key. We don’t have a choice. We have to have regulation as much as subsidies.

[Translation]

Senator Forest: My question is for Mr. Sanger and follows on from the discussion with Senator Loffreda. I agree that we must ensure a better balance in the weight of taxation, which is becoming increasingly important. We need to look at the overall tax burden at the municipal level and the property tax burden at the provincial and federal levels.

For example, in terms of capital gain, in some cities, many small savers will buy a three-unit building and then move into one of those units and renovate it themselves. For many of these people, at the end of their lives, the capital they have accumulated represents their retirement plan.

Would it not be unfair to treat these individuals in the same way as a multinational that buys assets, adds value to them and sells them? When we talk about tax fairness, should we not distinguish these multinationals from small savers who accumulate a small amount of capital by buying an apartment building, living in it partly, renovating it and selling it at the end of their lives? How do you see this situation?

[English]

Mr. Sanger: In an example like that — I’m actually a rentier in this way as well. If it’s a primary residence and they don’t have to pay capital gains, there’s an exemption for that. I haven’t argued for eliminating that exemption because that’s a real important part of a lot of Canadians’ retirement security; I agree with that. So if there’s somebody living in the residence, it isn’t necessarily subject to capital gains in that way.

[Translation]

Senator Forest: I’m sorry; perhaps I did not express myself well. When it’s a primary residence, yes, but if I buy a three-unit building and occupy one, I still have a capital gain on two-thirds of my building.

[English]

The Chair: Mr. Sanger, do you understand the question that was posed?

Mr. Sanger: Yes, if they’re separate units and you sell them separately, as people do, people have to pay capital gains. I myself sold a rental unit, and I paid capital gains. I do believe that the tax system should be fair and people shouldn’t pay a lower rate of tax on investment income than on wage income.

Senator Klyne: This question is for either or both Mr. Kingston and Mr. Breton. Can you provide the committee with your perspective about the government proposal in Budget 2021 to provide Measurement Canada with $56.1 million over five years to create a set of codes and standards for retail zero-emission charging at hydrogen and fuelling stations? Will some manufacturers and suppliers of charging stations and hydrogen refuelling equipment and retailers need to pause and assess what might come out of the codes and standards? Many are already moving ahead without these standards. Does this creation of codes and standards need to be accelerated, and what advice do you have in this regard?

Mr. Kingston: We’re very supportive of that announcement in the budget. One element that’s particularly encouraging is it is not just about codes and standards across Canada, but there’s a specific mention of coordinating on a North American basis, particularly with the U.S. This is going to be so important because, to my earlier remarks around concerns with charging infrastructure, consumers want to be able to know that no matter where they go when they pull off the highway, they’re not going to pull up and find they can’t plug in because it’s a different set of charging equipment. This will be so important.

With respect to what retailers are doing now, yes, the sooner we can advance this and have a general understanding of what the regulatory environment and the codes will be, the better it is for rolling out that charging infrastructure. But overall, we’re very supportive of that.

Senator Loffreda: My question is again for Mr. Sanger. I want to follow up quickly on what you previously discussed with respect to capital gains and a tax rate — a gain is a gain is a gain, or a revenue is a revenue is a revenue. I think Senator Forest made a good point in that the small investor that has a capital gain is taxed in the same way as a large investor that has a capital gain, if we tax capital gains equally across the board. In your opinion, how will that lessen the gap between the wealthy and the vulnerable or the less wealthy or the average small investor if we increase taxes on capital gains?

We talk about tax fairness a lot. It’s a term widely used. Do you feel Canadians are taxed fairly in general? In the U.K. when they increased the tax rate to 55%, they had to lower it to 50% because they realized there was less tax revenue. It’s easy to say we need more taxes, but I’d like to create incentives for entrepreneurs, for investment, for people coming to Canada and saying investment is rewarded. Can you give us your thoughts on that?

Mr. Sanger: Very quickly, anybody who’s invested in real estate has done pretty well recently and wouldn’t be too concerned about that. Secondly, in terms of when the U.K. increased their rate and also when Canada increased the top rate, there was a temporary blip. But after two years, that was just because of income shifting between years. So it was a very temporary measure and we’ve seen that in Canada as well.

Senator Loffreda: Are Canadians taxed fairly compared to other nations?

Mr. Sanger: Things have changed in the past number of years. In fact, the latest study that was done a few years ago found if you look at all the taxes that people pay, the top 1% paid a lower overall rate of tax. If you include sales taxes, property taxes and everything else, they paid a lower overall rate of tax than the poorest 10%.

Finally, quickly, Joe Biden has one proposal in terms of capital gains and that is increasing the rate on those with much higher incomes. That’s a potential solution in relation to some of the concerns that you’ve raised.

Senator Duncan: I don’t expect an answer now if Mr. Sanger could provide the answer in writing. The business community has previously called for tax review and tax reform. The Canadian Chamber of Commerce in their appearance before our committee on the June 2019 budget said that 450 chambers of commerce overwhelmingly supported a resolution asking for a tax review and recommended to our committee that Canada should reassess the tax system through a royal commission.

We have more than 500 pages of briefing information on this bill alone and its tax measures, and we have the new reality of a pandemic and the post-pandemic environment. Is it time for a full-scale review of Canada’s tax system? Rather than take up the time, if I could have a response in writing for the committee, I think that would probably be the best use of the committee’s time, Mr. Chair.

Mr. Sanger: I can make a quick comment on that. I think there are a number of simple fixes to the tax system. A big thing is the negotiations now taking place internationally in terms of international tax reform. The system we have in Canada is a great model internationally, and I’ve been urging the government to promote that as well.

Another big tax reform would probably take another 10 years to do. I think there are a number of reforms we can make right now, and the rest of the world is moving right now. So I don’t think we have that long to wait for 10 years of a review and royal commission.

The Chair: The last question will go to Senator Pate, but before that, there’s something that I’d like to bring to your attention, and it’s regarding the questions asked by Senator Loffreda. I would ask the three witnesses, especially Mr. Sanger, when you receive the blues and you would like to add an answer in writing — in both official languages, if possible — hopefully, you could send that to the clerk before May 26. It would permit, without a doubt, the committee being able to share additional information when tabling our report to the Senate of Canada.

Senator Pate, please ask your question, and thank you for joining our committee again.

Senator Pate: Thank you to the witnesses. My question is for Mr. Sanger, and I want to follow up on the question just asked by Senator Duncan. Your recent reports and your testimony here have highlighted the glaring inequalities that have been most revealed of late during the pandemic although they pre-existed the pandemic. You’ve called for amendments to the Income Tax Act to address the growing income inequality.

I’m curious as to any other recommendations you have for particular tax reforms that would address the inequalities experienced in particular by women, Indigenous, Black and other racialized people. Also, you’ve mentioned some of the ways you could assist SMEs. Do you have other ideas as well?

Finally, it has been recommended that the law commission that will be reinvigorated as a result of this budget — or, at least, there will be a budget for it to be reinvigorated — could look not only at some of the traditional criminal legal areas but also at tax reform. I’d be interested in your views on that. Thank you.

Mr. Sanger: That’s an excellent question. One area that we’ve also advocated for the government to do is to introduce automatic tax filing. About three dozen countries around the world already do this. Governments have moved much more towards delivering benefits through the tax system, but a lot of people don’t file their taxes, particularly a lot of vulnerable people, Indigenous Canadians, seniors, new Canadians and women. They don’t receive the benefits they are entitled to from the tax system because it’s too much of a barrier for them.

We’ve pushed for this. I actually first became familiar with this when I was in the Yukon. There was a conversion of social welfare payments to the tax system, but people weren’t receiving them. So I went to volunteer at homeless shelters and others to help people file their taxes.

These are crucially important benefits that make an incredible difference. I tabulated that it’s over $50 billion in benefits from the federal government and even more from provincial governments that are supposed to flow, which don’t flow unless people file their taxes. Last year, CRA delayed the tax deadline to enable more people to do that.

There’s a good community volunteer tax system, but it relies on volunteers. We’ve argued that the government should be doing preliminary tax forms for anybody who wants it to ensure those people get their benefits.

That answers part of your question. There are more elements to it as well, senator.

The Chair: Honourable senators, this concludes our meeting, but I have a question to ask as we conclude, and also an item of information.

As a matter of fact, I live in a little town in northwestern New Brunswick — Saint-Léonard — and for approximately 1,500 people we have 10 Tesla charging stations in this area. If you leave Quebec City and come to Edmundston in northwestern New Brunswick, and go to Fredericton on your way to Halifax, those charging stations are available on the Trans-Canada Highway.

It’s a question that was asked of me because it’s an eye-catcher for people in Saint-Léonard and northwestern New Brunswick. They see those vehicles go behind the Petro-Canada, the Irving stations and the Shell stations to do their charging, it’s quite an eye-catcher and they have visitors. That said, are the Tesla charging stations available for all electric vehicles or do other vehicles that are not Tesla products need their own chargers?

Mr. Breton: If you drive a Tesla, you can charge at a Tesla charging station or you can charge at any charging station. However, if you don’t have a Tesla, you cannot charge at Tesla fast-charging stations because they are Tesla-dedicated chargers. For the level 2 chargers, Tesla gave some money to install chargers with Parks Canada and Tesla paid for them to be chargers for Teslas and non-Teslas as well. I actually went there with my Tesla.

The Chair: Therefore, I invite all of you. In Atlantic Canada we have some chargers and we are open to additional chargers on our territory.

To the witnesses, you were very informative. Also, it was educational for me.

Honourable senators, the next meeting will be Tuesday, May 25, at 9:30 a.m. EST. Thank you very much.

(The committee adjourned.)