Witnesses proposed a variety of measures that they believe would mitigate the negative impacts of lower oil prices on the Canadian economy. In particular, they discussed measures relating to taxes, regulations, public infrastructure, direct government support for certain sectors, monetary policy, and retail gasoline and global oil prices

A. Taxes

According to the Canadian Labour Congress and Canadian Manufacturers & Exporters, along with increased regulation of greenhouse gas emissions, tax incentives are needed to enhance business investment in equipment to increase production capacity in the manufacturing sector. They, along with the Canadian Vehicle Manufacturers’ Association, the Canadian Steel Producers Association and the Forest Products Association of Canada – through a background document provided to the Committee – called for a long-term extension of the temporary accelerated capital cost allowance for new investments in machinery and equipment.

While the Canadian Labour Congress thought that corporate tax rates should be increased to enable infrastructure investments by the public sector, the Canadian Steel Producers Association and the Automotive Parts Manufacturers’ Association highlighted the need to maintain low corporate tax rates to attract new business and to ensure that Canada’s manufacturing sector is internationally competitive.

In the view of the Canadian Vehicle Manufacturers’ Association, the government should create an ability for large companies to exchange unused Scientific Research and Experimental Development investment tax credits for direct funding, provided those funds would be used for new research and development projects.

RBC Financial Group requested that – to counteract the net negative effects that lower oil prices have on economic growth – the government focus on increasing productivity, especially for small- and medium-sized businesses; in its view, this goal could be achieved through tax incentives, tax reform and regulatory improvements.

B. Regulations

In highlighting the regulatory regime for oil and gas production in Canada, Encana Corporation advocated a review of legislation and regulations to ensure a balance between environmental protection and economic competitiveness. It also mentioned that, for resource development on First Nation lands, the government must play a leadership role to improve clarity and increase shared economic prosperity through the consultation process on Aboriginal and treaty rights.

Regarding a greenhouse gas emissions policy, Andrew Leach suggested that a Canadian policy should have a clear global goal that, if implemented worldwide, would achieve that goal; for example, the global goal could be a 2° Celsius reduction in temperature.

C. Public Infrastructure

The Canadian Labour Congress, Unifor, the Canadian Steel Producers Association and the Regional Municipality of Wood Buffalo made similar proposals for increased infrastructure investments by the public sector to counteract the negative economic impacts of lower oil prices; in their view, such investments would create domestic jobs, promote Canada’s environmental goals, stimulate new private sector investment and increase productivity.

The Canadian Labour Congress suggested that, in order to attain a more desirable sectoral mix and a greater share of domestically sourced output and employment, new infrastructure investments by the public sector would require government strategies relating to trade, sectoral development and domestic procurement strategies. It stated that public procurement would increase public transit, use domestic steel, and support green technology for retrofitting houses, including through the use of Canadian forest products.

D. Sectoral Support

The Canadian Vehicle Manufacturers’ Association proposed that the federal government should make the Automotive Innovation Fund permanent and review the program’s incentives with a view to attracting applications.

Encana Corporation suggested that a price of $50 per barrel of crude oil is not sustainable for Canada’s oil sector, and that the sector and the government must find ways for the sector to thrive and transition to a more realistic long-term price.

In a background document provided to the Committee, the Forest Products Association of Canada advocated continued government support of the Investments in Forest Industry Transformation Program. It also urged the government to provide additional support to FPInnovations, and to bio-energy initiatives to diversify Canada’s energy sector. Finally, it suggested that the government’s efforts to enhance workforce skills through the Canada Job Grant, the Canada Apprentice Loan, and the Flexibility and Innovation in Apprenticeship Technical Training pilot program should continue.

Canadian Manufacturers & Exporters and the Forest Products Association of Canada mentioned that the government should pursue international trade and regulatory cooperation to improve global competitiveness; one focus should be increasing the effectiveness of regulatory enforcement measures among competing jurisdictions. 

Unifor identified the need for continuing strong and proactive federal economic strategies to help sectors that it characterized as strategic; in its view, the automotive, aerospace, telecommunications equipment and tradable services, such as digital media, sectors are strategic.

In its submission to the Committee, the Canadian Renewable Fuels Association made a number of suggestions to assist the renewable fuels sector, including: an increase from 2% to 5%, by 2020, in the mandated biodiesel amount in retail diesel fuel; an exemption for cellulosic biofuels from the fuel excise tax; and the development of tax incentives, such as a tax credit or capital cost allowance, to achieve two goals: encourage the sale of fuels with higher ethanol content at retail establishments through the replacement of existing pumps, and promote new market entrants. It also advocated the creation of a biorefinery fund from the remaining funds in the Sustainable Development Technology Canada’s NextGen Biofuels Fund.

E. Monetary Policy

Unifor proposed that, like policies pursued in other industrialized countries, Canadian monetary policy action is needed to remove the link between changes in oil prices and exchange rate fluctuations; to that end, it suggested that the Bank of Canada should reconsider its decision to not intervene in foreign exchange markets. As well, it advocated government regulation of inflows of foreign capital that are caused by very high oil prices, particularly through a stronger mechanism for reviewing foreign direct investment in the oil sector when oil prices – and thus the Canada‒U.S. exchange rate – increase.

According to the C.D. Howe Institute, the Bank of Canada should be more explicit in its assessment of the recent decline in oil prices, so that the Bank’s changes to its target for the overnight interest rate and the effect of these changes on inflation could be evaluated.

F. Retail Gasoline and Global Oil Prices

The Canadian Automobile Association stated that, due to the lack of clarity about the absence of proportionality between changes in retail gas prices and changes in global oil prices, the impacts of changing oil prices on retail gas prices for consumers over time should be studied.