July 20th, 2017
(check against delivery)
Good afternoon, everyone.
My thanks to the Canadian Club of Regina for providing me the opportunity to be here today.
From national security and human rights to cyberspace, from policing and prison reform to fighting wildfires – there’s a lot on the public agenda these days for the Minister of Public Safety. But instead of “talking shop”, I promised to talk today about the environment and the economy – so that’s what I will do.
First, on the economy – I’m happy to report some very good signs of progress over the past year and a half.
As a relatively “new” government – 20 months in – we firmly believe that Canada’s biggest national economic problem over recent years has been a growth rate that is just too slow.
Through most of the 1990’s and well into the first decade of this new century, our country was able to count on average annual economic growth of 3% per year, or better. That growth was the key to our prosperity. But it stalled in 2008. And ever since, Canada has been limping along with meagre growth, averaging only about 1.5% per year.
That’s simply not good enough to generate the jobs, the incomes and the economic confidence necessary to meet the needs of Canada’s middle-class and all those working so hard just to get to the middle-class.
In such circumstances, a policy of austerity would not be unhelpful. So instead, we’ve implemented pro-active measures designed to drive greater growth, namely:
- a middle-class tax cut AND a more generous monthly family benefit for raising kids – to increase disposable incomes and thus the spending power of regular consumers; plus
- investments in higher education, skills, science, innovation, trade, and especially infrastructure.
Such a policy begs two questions. First is it affordable?
The answer is “yes” because Canada’s federal debt ratio – that is, the size of our debt compared to the size of our economy – is currently the best in the G-7 and among the very best in the western world. Since the early 1990’s, we’ve more than cut it in half. And that’s a key indicator of economic sustainability.
Looking ahead, our very good debt ratio is projected to remain flat over the coming five years, and then decline even further thereafter. So yes, our plan IS “within our means”.
Secondly – is the plan working?
And here, the latest numbers are really encouraging, as confirmed in favourable report cards recently from both the International Monetary Fund and the Bank of Canada.
Close to 400,000 net new jobs have been generated over the past 20 months. Mostly full-time jobs. And Canada’s economic growth rate is now back ABOVE 3% again on an annualized basis – DOUBLE the average of the past 10 years.
No one is celebrating just yet. A lot more progress still needs to be made for Canada’s middle-class, and for various sectors and regions. But so far, so good.
And with respect to the environment – I’d like to offer some perspective on an issue that the governments of Canada and Saskatchewan need to find a way to work on, carefully and thoughtfully together, and that’s the delicate intersection between the economy and the environment, especially Climate Change and the pollution that comes from carbon emissions.
There are five key points to register:
- First, Climate Change is real. It has done damage already, including here in Saskatchewan. It will do much more unless we are serious about addressing it. There’s never a “good” time to do so, but time is running short. Further delay will make the solutions more difficult.
- Secondly, our comprehensive national policy framework on Climate Change and economic growth – which has the support of every provincial and territorial government (except Saskatchewan and Manitoba) – includes the principle of carbon pricing, but also A WHOLE LOT MORE THAN THAT which must be weighed TOGETHER as a complete package when the framework is judged.
- Third, flexibility is a key principle which enables each province to tailor the various elements of the framework to suit their circumstances, including federal funding for innovation and infrastructure, and significant exemptions for particular sectors important to Saskatchewan like farming and small oil and gas operations.
- Fourth, the revenue that comes directly from carbon pricing must go to the people of the province in which it is raised – not to Ottawa – and depending on decisions made in Saskatchewan, that revenue could empower the province to REDUCE many existing provincial taxes quite significantly – to promote investment, jobs, innovation and growth.
- And fifth, putting a price on carbon pollution is the key to something very important to Saskatchewan, and that’s getting pipelines approved – so our resources can reach global markets and get global prices, while Saskatchewan companies like Evraz Steel are busy making the pipe.
I know these are hot topics – prone to misunderstanding and strong emotions. Before I venture into that minefield, let me put things into the broader context of overall Canada/Saskatchewan relations.
With our federal focus on middle-class growth, we have an overall approach to the economy that fits well with Saskatchewan’s demographics:
- our middle class tax cut helps a majority of Saskatchewan taxpayers;
- our targeted Canada Child Benefit, provides significantly more cash every month, tax free, to 9-out-of-10 families;
- and our increased investments in students, seniors and Indigenous people help large segments of Saskatchewan’s population.
We’ve also generated good results through federal-provincial agreements in which our two orders of government have worked well together. For example:
Water is always a key Saskatchewan concern. One of the first things the provincial government raised with me right after the last federal election, was their request to get control over 19 federally-built water dams across the Province. But they were concerned about legal liability. So we transferred not only the dams, but also $365 million to offset any risk and bolster Saskatchewan’s bottom-line.
We are strengthening the Canada Pension Plan, especially for middle-class Canadians who are the least prepared for a secure retirement – including a large number of Saskatchewanians. And the provincial government was a constructive player in getting a better CPP deal for the whole country.
We also concluded another new agreement with Saskatchewan – on healthcare. We’ll be injecting a further $350 million into the provincial treasury over this coming decade for better mental health and homecare – two areas of real need in Saskatchewan.
In world trade, our government has vigorously pursued Saskatchewan’s priorities in global markets – like getting more beef and pork into Asia and Latin America, preserving crucial access for our canola in China, signing a comprehensive trade deal with the European Union and a new free trade agreement with Ukraine.
We got rid of U.S. Country-of-Origin labelling. We have Saskatchewan’s support in the battle over softwood lumber. We’re on the same page with NAFTA. And we’re pushing very hard to maintain a sensible, integrated steel and pipe industry across North America – supporting Evraz here in Regina. Taken together, these efforts are worth billions of dollars to western Canada.
Right here at home, we have expanded federal support for affordable housing in Saskatchewan – $54 million MORE is coming from the Government of Canada over the next two years for housing. And during that same period, there’s also an estimated $39 million MORE for Early Learning and Child Care.
We’ve extended the existing contract for training military pilots at “15-Wing” in Moose Jaw – that’s worth tens of millions of dollars to the local economy.
To celebrate the 150th anniversary of Confederation in 2017, we’re investing more than $12 million in Saskatchewan arts, culture, community infrastructure and celebrations – through more than 200 projects all over this province.
We’ve put $150 million into world-class scientific research and innovation at the University of Saskatchewan, the University of Regina and First Nations University.
More broadly, over the past 20 months, we’ve announced some 250 federal investments to help Saskatchewan grow – now totalling close to half-a-BILLION federal dollars – for a vast array of public INFRASTRUCTURE projects (highways, bridges, transit systems, water and wastewater facilities, and much more).
And over this coming decade, a further $900 million will come into Saskatchewan from the federal government for green infrastructure, public transit, culture, recreation, and rural and northern projects, plus another $700 million for conventional municipal works.
For Saskatchewan and the West, our government has also introduced new legislation on moving grain by rail to better support farmers, including a more useful definition of what constitutes “adequate and suitable” service, greater transparency, an on-going and improved revenue cap, new tools to promote competition, and reciprocal penalties that (for the first time ever) will also apply to the railways.
And perhaps most appropriate for today’s discussion – we have approved four major new pipelines (two for oil and two for gas), to move western resources into both North American and global markets – at better prices than we’ve been able to get before.
Not counting the revival of the KeystoneXL pipeline into and across the United States (which we have always supported), the OTHER TWO major OIL pipelines that we approved last December (“TransMountain” and “Line-3”) are worth more than $11 Billion and will generate more than 22,000 jobs. The bulk of the contracts for the pipe so far are going to Evraz.
And that takes me to Climate Change – a global problem, largely the bi-product of human-made emissions of greenhouse gases which pump pollutants like carbon into the atmosphere.
Is Climate Change serious? Virtually every respected scientist around the world says it is.
Does it affect us here in Saskatchewan (where we are sadly the heaviest emitters of greenhouse gases per capita in the country)?
Yes, it does. One example is the greater frequency and severity of damaging summer storms which trigger significant flooding.
We’ve had extensive, costly floods in two of the last five years. Parts of the oilpatch were shut in. Farmland was inundated. Crops and livestock were lost. Communities were isolated. Municipal, provincial and private infrastructure was swept away.
Manitoba and Alberta have also suffered similar major flooding. The losses ran into the billions. And last fall, it was Cape Breton. This spring – Ontario, Quebec, New Brunswick, Newfoundland and British Columbia.
And in between the wet years, we’ve had droughts and wildfires. Remember the mass evacuations from northern Saskatchewan two years ago, and that beast of a wildfire that swept through Fort McMurray last year. And British Columbia right now. Again, the losses add up to billions of dollars, plus higher taxes and insurance premiums.
So yes, Climate Change is extracting a toll, which will continue to worsen if concerted action is not mustered. Doing little or nothing is not cost free – not to mention what carbon pollution means for the long term health and well-being of our children and grandchildren.
So where do we find that critical intersection between a strong economy and a cleaner environment?
Canadians truly want both – simultaneously, together. Some say that’s impossible. You have to pick one or the other – the economy OR the environment. You can’t have both.
But most Canadians respectfully disagree. In fact, in this day and age, effective economic policy and credible environmental policy go hand-in-hand. To a significant extent, the former (that is, our economic success) depends on the latter (our environmental credibility).
A classic illustration is our valuable oil and gas sector which generates good jobs and a lot of revenue, but also significant pollution in the form of carbon emissions and Climate Change. It’s odd that we tax the production of our resources, instead of the associated pollution. In other words, we penalize the good, not the bad. That seems a bit backwards.
From an economic standpoint, we naturally want to maximize our profits from selling our hydrocarbons at the best world prices. But we are blocked from the best prices because we don’t have a transportation system – that is, pipelines – to get our oil and gas into world markets.
Our existing pipeline system serves only North America. It doesn’t connect in a commercial manner to offshore exports. So we sell at a discounted North American price.
That’s why – both in Opposition and now in government – we have always supported properly approved pipelines, especially aimed at offshore exports. Even before he became Prime Minister, Justin Trudeau was making that point – in presentations in Washington, DC and Calgary, and also here in Saskatchewan.
He spoke to the Regina Chamber of Commerce in June of 2014, saying it’s a fundamental responsibility of the federal government to get our resources to world markets.
So how do we get the necessary approvals to build those pipelines to world markets? Among other things, we get them by being credible about environmental stewardship.
That means we aren’t “rip and run” developers. We apply intelligent environmental rules and procedures. Our decisions are science-based. We’re conscientious about Climate Change and preserving a clean environment for our children.
In other words, we establish our credibility by proving to our customers, and to our critics and to ourselves – and to all those who would ultimately challenge us in Court – that our development is responsible and sustainable, with declining emissions over time.
If we’re NOT strong on these issues – the legal, environmental, Indigenous and community opposition to pipelines will be insurmountable. No projects will get done.
The previous government pretty much proved that point. Through 10 years of down-playing the importance of Climate Change, they were unable to advance a single project that would actually get Canadian oil and gas into offshore export positions.
So how do we fix that? How do we attain convincing environmental credentials to build pipelines for offshore exports, and thus get world prices for Saskatchewan? The single most credible step is putting a price on carbon pollution. That’s the key that unlocks the door.
Because that “key” forms the heart of our policy, we were able to say “yes” to the TransMountain project from Edmonton to Vancouver. That means billions of investment dollars and thousands of jobs – including a very big contract for pipe recently awarded to Evraz in Regina.
Similarly, we were also able to say “yes” to Line-3 which will move Saskatchewan resources southeast across the prairies and into the United States.
By pricing carbon, for the first time ever, we get the incentives the right way around, encouraging – in a market-based manner – cleaner operations and lower-carbon innovation. As I mentioned earlier, it’s a bit counterproductive that our society imposes significant fees and charges on good things like the clean water we want to drink or the higher incomes we want to earn, but pollution is free – no matter how damaging it is. The incentives are backwards.
In another field of fiscal policy, the Saskatchewan government recently demonstrated the validity of this “incentives principle” in its 2017 provincial budget. It cut INCOME taxes while increasing CONSUMPTION taxes. That’s an example of getting fiscal incentives the right way around. The very same principle would apply to how best to reduce pollution while maintaining a strong economy – incent the economy, not the pollution.
So we’ve been working very hard on a comprehensive, but very flexible pan-Canadian policy framework for BOTH economic growth and the fight against Climate Change – together.
That framework has earned the support of at least eight provinces and three territories spanning the full spectrum of partisan opinion from right to left. Reform Party founder Preston Manning supports the principle, as does the Conservative Leader of the Opposition in Ontario, and the Conservative Premier of Manitoba, and even the former senior policy advisor to Stephen Harper (Mark Cameron).
Support also comes from the Canadian Chamber of Commerce, the Canadian Mining Association, all the major financial institutions, the insurance industry, many municipal leaders and the top CEO’s in the oil-patch.
On the opposing side, there are some who argue that Canada should just drop the fight against Climate Change because the U.S. government says it is pulling away from the overarching Paris Climate Change Agreement.
But that process takes four years and ignores the fact that many American states, municipalities, businesses and industries are still very much engaged and committed. So is the rest of the world – all countries, except Syria and Nicaragua, are sticking with the Paris Agreement. And in June, our House of Commons voted overwhelmingly to support the Paris Climate Accord – with only a single Conservative voting against (and she was from Ontario incidentally, not Saskatchewan or Alberta).
Canada’s pan-Canadian Climate Change framework consists of several inter-related elements which, taken together, produce the desired outcomes.
The central pillar of putting a price on carbon pollution, does NOT necessarily mean a carbon “tax”. There are several different ways to do it. The exact design is for each individual province to determine, according to what will work best for them.
British Columbia chose a tax. When they started, they were all alone. It was implemented nine years ago and BC today has the strongest economy in the country. Carbon pricing has not rendered them a basket-case, nor has it destroyed their competitiveness.
Ontario and Quebec are taking a different route, choosing a market-based Cap-and-Trade approach, in collaboration with California. Alberta has a hybrid system. Other provinces are still working on their details.
But within each one, there is substantial room for flexibility to address the needs of sensitive sectors. For example, the BC tax doesn’t apply to on-farm fuels. In Alberta, they are implementing “output-based allowances”, as recommended by the private sector, to safeguard the competitiveness of industries which are emissions-intensive and dependent on trade. Ontario is using other flexible design features to accomplish the same.
So flexibility and the opportunity for complete provincial control over the design of carbon pricing are two essential features of the pan-Canadian framework. Another is that all the direct revenue from carbon pricing must remain in Saskatchewan.
With a system designed and controlled by the province, what would that new revenue empower Saskatchewan to do? The choice would be entirely up to the provincial government, but here are a few of the options:
- Saskatchewan could choose to slash its personal income taxes, or cut business taxes, or chop property taxes on farmland, homes and small businesses.
- Or it could provide offsetting assistance to people or to sectors of the economy that need some special help with their costs or their competitiveness or their energy efficiency.
- Or Saskatchewan might decide to pay down its debt, eliminate its deficit and build a genuine heritage fund.
- Or it might invest more in education, science and technology, healthcare or infrastructure.
- Or to strengthen exports, Saskatchewan could reduce provincial royalties on oil and gas and potash.
There is a broad range of possibilities to promote Saskatchewan’s growth, job creation, innovation, competitiveness and productivity. The only hurdle to overcome is the assumption that the status quo is as good as it gets – that nothing “better” is possible.
As I mentioned earlier, in its 2017 budget, the Saskatchewan government changed a number of provincial taxes. The net result is an increase in the overall provincial tax burden of more than $820 million per year. Over five years, that would add up to a provincial tax hike of more than $4 billion.
It’s interesting to note that a carbon price in Saskatchewan over five years would most likely amount to LESS than that. If you adopt the design techniques from other provinces that would be most advantageous to Saskatchewan – like BC’s exemption for farm fuels and Alberta’s 5-year break for small oil and gas operations – the dollar impact in Saskatchewan comes way down. But still the revenue from carbon pricing could allow Saskatchewan to roll-back a substantial portion of the provincial tax increases imposed last March. That’s just one of the options.
The second key element in the federal framework is innovation. The Government of Canada is doubling its investment in the science and technology of cleaner energy. And in our most recent budget, we announced $2.4 billion to support cleaner technology. That could include Saskatchewan’s Carbon Capture and Storage technology (CCS).
I’m happy to tell you that I was the federal Minister of Natural Resources who began supporting this important Saskatchewan science nearly 20 years ago – through the Petroleum Technology Research Centre at the University of Regina, and the Weyburn/Midale test site.
Incidentally, a price on carbon would help make CCS more attractive as a cost effective technology. And it can be sold around the world. Think of the polluted mess they’ve got on their hands in China and India. CCS could help make a significant difference there. And in the United States too.
Federal innovation investments will also promote more renewable fuels, energy efficiency, ways to cut methane, carbon sinks in farmland, wetlands, permanent cover and agro-forestry, increased use of crops that fix nitrogen, even modular nuclear power stations. The field is vast. And Saskatchewan could lead on many fronts – with strong federal support. That is part of our framework.
The Government of Canada also stands ready to work with utilities like SaskPower to build smart new electric power grids. That is, in part, what our new Infrastructure Bank could be used for – to link heavy emitters like Evraz Steel, the Co-op Refinery and Upgrader, and all the potash mines to clean hydro power (from Manitoba or the NWT). That would make a huge difference in Saskatchewan’s carbon footprint.
And speaking of infrastructure – think about large, innovative water control systems to deal with those sudden, violent summer storms that dump a year’s worth of rain in a couple of days, and do so much damage – the consequence of Climate Change.
With astute science, engineering and planning, we could develop a network of upstream water control structures – large and small – together with properly designed channels, reservoirs, wetlands and wooded areas to manage that water in a smarter, more efficient way, countering the debilitating cycles of uncontrolled floods and scorching droughts.
A good place to start might be around the Quill Lakes where a water disaster is developing before our very eyes. There’s also a lot of potential – and need – in the Assiniboine, Qu’Appelle and Souris basins. And more.
With the right vision and determination, we could better protect livelihoods and public and private infrastructure downstream, while creating upstream water-based opportunities for greater diversification, value-added economic development and recreation. Helping with all this is what our federal Green Infrastructure Fund is for. Again, it’s part of the pan-Canadian framework.
The whole package is large and it needs to hang together. Cherry-picking would defeat its effectiveness. It’s all inter-dependent, anchored in the principle of carbon pricing in which everyone participates fairly.
And to underscore my first point – a price on carbon is the key that unlocks pipeline approvals to get western oil and gas to more markets at better prices. And to support jobs in steel plants in places like Regina.
Despite $11 billion in private-sector pipeline investment and 22,000 jobs, there are many strong opponents who believe these projects should not proceed. But we can face their criticism, honestly and with conviction, asserting these projects are the right thing to do – not just economically, but also because they are rooted in the environmental integrity that comes from putting a price on pollution.
Within this framework, I hope we can find room for all governments to work successfully together. With ingenuity and goodwill, I believe we can position Saskatchewan to grow and thrive for decades to come.
Thank you for listening.