Bill C-206 (Historical)

An Act to amend the Greenhouse Gas Pollution Pricing Act (qualifying farming fuel)

This enactment amends the Greenhouse Gas Pollution Pricing Act to extend the exemption for qualifying farming fuel to marketable natural gas and propane.

[Tom L. Green, Senior Climate Policy Advisor, David Suzuki Foundation]

Thank you for the opportunity to appear before you again. It's always good to be here at this committee.

Bill C-234, like Bill C-206 before it, proposes amendments to the Greenhouse Gas Pollution Pricing Act.

First, I want to begin with reiterating some reasons why Canada's pollution pricing system is so important. I also note that since I last spoke, Bill C-8 recycles revenue from the four backstop provinces to farmers.

I'm speaking to you today from Vancouver, where we are constantly reminded of how the combustion of fossil fuels is accelerating climate change—from wildfire smoke, to a heat dome that killed over 500 people, to atmospheric rivers that destroyed critical infrastructure. Obviously, farmers are being affected by all of these trends.

We are concerned and disappointed that some politicians are spreading misinformation about pollution pricing and misrepresenting the impacts of this key climate policy, even taking advantage of price increases in world oil and gas markets caused by Russia's unjust war of aggression on Ukraine to advance misleading arguments. We have even heard statements in the House recently suggesting that the carbon price is ineffective.

When it comes to affordability concerns, let's remember that 90% of the revenue collected through the federal fuel charge is returned to households in provinces where the backstop applies. Most households actually were served more from the climate action incentive than they paid. Second, provinces have the option of designing their own pollution pricing schemes and deciding how to recycle revenue to households and businesses. They can also address competitiveness concerns.

The commissioner of the environment and sustainable development audited Canada's approach to carbon pricing, and a report was tabled last spring. It stated that there was broad consensus among expert international bodies such as the World Bank, the OECD and the IMF that carbon pricing is critical to reducing greenhouse gas emissions. They also stated that carbon pricing is broadly recognized as one of the most efficient policy approaches to reducing greenhouse gas emissions.

We note with concern that some politicians are saying that pricing pollution is not working, despite the fact that it is one of the most effective policies to reduce emissions. In B.C., we have had a price on carbon for a longer time period, and the benefits are already accruing, with a 19% reduction in transportation sector emissions.

We agree that it's important to get pollution pricing right, and there's room for improvement in both implementation and complementary measures to address disproportionate burden where these occur, but that's not what Bill C-234 proposes. Instead, it would set Canada on a slippery slope of sector-by-sector and interest-by-interest exemptions that risk fundamentally undermining the GGPPA as an economy-wide measure. Each sector can be advancing similar arguments as those being made before the committee today. If all of those arguments were heeded, pollution pricing would be eviscerated.

Furthermore, Bill C-8 ensured that proceeds from the carbon levy on fuels used on farms in backstop provinces are now returned to farmers in a manner that doesn't undermine the incentive to abate pollution. If the current bill passes, farmers will get a duplicate of pollution pricing relief.

One argument being advanced in favour of Bill C-234 is that there are no available fossil-free technologies for grain drying or heating agricultural buildings, so pollution should not be priced until such technologies are available. However, this causes a chicken-and-egg problem, because there is less incentive for firms to innovate and offer lower- or zero-carbon solutions if there is no predictable financial incentive to reduce emissions. Furthermore, such technologies are already appearing on the market, such as heat pump dryers or ways of heating buildings.

To help the agricultural sector, Agriculture and Agri-Food Canada launched the agricultural clean technology program in 2021.

I had the opportunity to testify before you a year ago, and I refer you to my remarks explaining why the exemption is fraught and a slippery slope to undermining carbon pricing. I also reiterate that, like Bill C-206, Bill C-234 would entail a new fossil fuel subsidy at a time when Canada has committed to reduce these emissions.

The David Suzuki Foundation urges the committee to reject Bill C-234 and turn their attention to better ways in which the federal and provincial governments can support farmers in the transition to net zero. There are other solutions that merit your attention. For instance, we have recently published a major study modelling on expanding clean electricity supply across Canada and the pivotal importance of electrification so as to swap out fossil fuels across the economy. We suggest the committee could, for instance, investigate how farms can have sufficient access to a supply of affordable, zero-emissions electricity.

Thank you very much. I welcome your questions.

[Branden Leslie]

With Bill C-206, in the previous Parliament, the criticism of the bill then was that it was overly broad. I believe the intention of bringing in language such as the example of heating or cooling of livestock barns is meant to actually narrow that a little so that it could be a little more specific.

I would be hesitant, unless we're very careful to make sure that we're not accidentally going back to being what was feared to be too broad in the last version of this bill.

The way it's currently written, I would view it as covering off enough from an example standpoint. I think it's important to note that.... The reason it's important for this to be there is that this is not about the heating or cooling of a house. This is not about a home on a farmyard, which generally would be split from the natural gas connection. That is not covered by this. We don't want to remove the pricing signal from that aspect of the operation. This is meant to be about the farm itself.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Okay.

I understand that one change to Bill C-234 that was not in the previous bill from the last Parliament, Bill C-206, is that the new one allows for the heating and cooling of barns or structures “including those used for raising or housing livestock”.

The language seems overly broad. What would you say to amending the bill to ensure it's clear that the heating and cooling exemption is only for buildings used for raising or housing livestock?

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

I don't know if Mr. Orb can hear the question. If not, I'll ask someone else to answer.

With respect to Bill C‑206, which we studied in the last Parliament, an exemption for farm buildings was added to the bill. Is it as essential to have an exemption for farm buildings as it is for grain drying?

[Raymond Orb, President, Saskatchewan Association of Rural Municipalities]

Thank you.

Good afternoon. My name is Ray Orb and I'm president of the Saskatchewan Association of Rural Municipalities, known as SARM. I was born and raised and I live in the small community of Cupar, northeast of Regina, with a population of 625 people.

I'd like to thank the Standing Committee on Agriculture and Agri-Food for the opportunity to share our association's thoughts as the committee studies Bill C-234, an act to amend the Greenhouse Gas Pollution Pricing Act.

Our membership is made up of Saskatchewan's rural municipal governments. SARM has been the voice of rural Saskatchewan for over 100 years. Today I will share the perspective of those we represent by sharing our thoughts on how the bill being proposed would impact our livelihood in rural Saskatchewan.

Bill C-234 picks up where Bill C-206 left off in the last Parliament before the federal election. As you know, Bill C-206 was passed by the House of Commons but not fully approved by the Senate.

As we were supportive of Bill C-206, we at SARM are supportive of Bill C-234 right now. This bill would provide much-needed economic relief for our members, freeing up the working capital they need to implement innovations on their farms.

Grain dryers are used to help dry wet grains so they can be properly stored. In recent years in Canada, the fall season has been particularly wet, creating a need to use the grain dryers. In 2020, grain dryers were running for a record amount of time, and farmers paid more than the federal government carbon tax estimate. Recent studies have shown that Saskatchewan farmers can expect to lose 8% of their total net income to the carbon tax. For a household managing a 5,000 acre grain farm in Saskatchewan, this will take the form of $8,000 to $10,000.

Our members have been very concerned about the impact of the federal carbon pricing system on unavoidable energy inputs like fuel to dry grain or heat livestock facilities. We have argued for years that producers cannot pass these additional costs along to our customers and that they further reduce our financial viability. The additional costs of carbon taxation do not help solve the problem of carbon emissions.

Saskatchewan has some of the greenest agriculture producers in the world. Most cropland is zero-till. This means that our producers use a low-disturbance direct seeding system. Not only does zero-till agriculture sink more carbon, but it also reduces soil erosion and the amount of fuel required on farms. The Saskatchewan Soil Conservation Association has been studying carbon sequestration for years, and through their research they found that Saskatchewan producers sequester 9.64 million new tonnes of carbon dioxide every year over 28 million acres.

Taxation on food production is short-sighted and not a solution. If we do not work together to find solutions, we will see even more decreases in the number of farmers and farms in Canada, and we will lose the food security we have.

In closing, on behalf of Saskatchewan's rural municipalities and rural Saskatchewan, we thank the standing committee for the opportunity to lend our voice to this important conversation. We look forward to continued dialogue as we all work together to further the best interests of all Canadians.

Thank you.

[Dave Carey]

I'm not a lawyer, but it's certainly.... Greenhouses already have an 80% exemption currently, so the parent legislation referred to earlier is certainly already there. I would certainly defer to the lawyers and drafters, but the intention of the bill is that it be for a building that heats or cools livestock or for greenhouses. As long as that is there, I wouldn't want to get overly prescriptive with the committee.

We did hear the CRA say on the last iteration of Bill C-206 that it was too broad and too vague. I believe the intention of this bill is actually to be more specific, recognizing that what you might call a building or something in one province might be different in another province.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you, Mr. Chair.

I want to continue on the same line of questioning.

One of the big differences between Bill C-234 and the previous bill, Bill C-206, is the addition of a new paragraph 1(1)(b.1) that defines “eligible farming machinery” as:

property used for the purpose of providing heating or cooling to a building or similar structure, including those used for raising or housing livestock;

When I first read this, it seemed to be fairly vague.

Mr. Carey, I think you mentioned earlier that you definitely want to see greenhouses and livestock mentioned. Do you think the wording could be tightened up a little bit in this particular section?

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

This is my final question.

I live in British Columbia, so this conversation that we're having is not going to really impact me, but I am curious. B.C. is not known as a major grain producer, but we do have the Peace region. I think there are roughly 380,000 acres in grain production up in the Peace region.

Bill C-206 made it to the doorstep of the Senate in the previous Parliament. If Bill C-234 goes the distance and we see this actual change to the federal legislation, what's your understanding of how that will impact provinces that don't fall under the federal...? Will it have some spinoff effects in B.C.?

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you.

I appreciate your comments on the sunset clause. That's certainly what our committee explored when we reported Bill C-206 back to the House in the previous Parliament.

You have already talked about the state of technology. We know that it's developing, and we certainly heard from a number of witnesses in the previous Parliament that it is not yet commercially viable.

There's a new addition to this bill in “property used for the purpose of providing heating or cooling to a building or similar structure, including those used for raising or housing livestock”. I understand that you may think a sunset clause on that might be viable, but what do you think about the current language of it? Do you think it's open to too much interpretation in the number of buildings that could qualify?

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

When you say we need to help farmers make the transition, I agree with you too, but wouldn't it be reasonable to allow some time for adjustment?

For example, you will recall that Bill C‑206 included a time limit provision.

What is your opinion on this issue?

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you, Mr. Chair.

I'd like to thank the witnesses for being with us.

Mr. Boisseau‑Bouvier, you said earlier that we need to keep a strong price signal to encourage the transition. We all agree with that. However, when it comes to grain drying, several witnesses said during the study of Bill C‑206 that we don't have economically viable alternatives at this time.

Are you aware of any economically viable alternatives to propane, especially for grain drying?

[Émile Boisseau-Bouvier]

One of the differences in Bill C-234, compared to Bill C-206, is the inclusion of animal housing areas. In this regard, there are solutions that already exist to get away from fossil fuels. There is an opportunity for the government to encourage those alternatives, whether it's improving the insulation and ventilation of those buildings or installing heat pumps that will make the energy system more efficient, for example. Electrical input changes can also be made. We know that our farmers often live at the end of a road, so these changes can be costly. The government can provide grants for this. These are all tools that are in the hands of the government and that make it possible to promote solutions that are sustainable and that make it possible to heat a building, for example, using renewable energy.

[Émile Boisseau-Bouvier, Climate Policy Analyst, Équiterre]

Mr. Chair, members of the Standing Committee on Agriculture and Agri-Food, good afternoon. My name is Émile Boisseau-Bouvier and I am a climate policy analyst at Équiterre.

Thank you for the opportunity to discuss Bill C‑234 with you, as I was able to do alongside my colleague on Bill C‑206.

I will first say a few words about Équiterre. We are an environmental NGO that founded the Family Farmers Network in Quebec. In addition, we currently have a technology showcase project on health, soil conservation and regenerative practices. We have participated in the consultations for the next agricultural policy framework. Finally, we are working with producers, institutional buyers and policy-makers to implement solutions to build an agriculture that is more resilient and sustainable.

Of course, we also have expertise in climate issues. In recent years, we have defended federal jurisdiction over a carbon pricing system in the Supreme Court because we believe that a price signal is needed to guide individual and collective decisions.

We are also working on the issue of fossil fuel subsidies. If we are to meet our climate goals, Canada cannot continue to be the largest provider of subsidies and public support for fossil fuels in the G20.

Let's now get to the heart of the matter.

Bill C‑234 essentially replicates former Bill C‑206 with some clarifications regarding the use of fossil fuels to heat or cool a building that houses animals, or to dry grain. However, much has changed since Bill C-206 was originally introduced in February 2020.

First, since the passage of Bill C‑8, the government has been returning proceeds from the price on pollution directly to farmers in provinces that are subject to the federal safety net.

However, most importantly, Agriculture and Agri-Food Canada launched the agricultural clean technology program in 2021, which provides $50 million to help farmers purchase more efficient grain dryers and replace hydrocarbons. The program also focuses on research and innovation, particularly in the areas of green energy and energy efficiency. Ultimately, these are investments that will accelerate and facilitate producers' transition away from fossil fuels.

You will agree that Bill C-8, passed last June, addresses the very real problem raised by Bill C-234 without weakening the principle of carbon pricing. This is an approach we encourage you to pursue and enhance, rather than the one presented to us today.

We agree with providing assistance to farmers, but we cannot agree with systematizing the erosion of carbon pricing mechanisms. The transition must begin quickly.

I want to take a moment to say that we understand the farmers who are experiencing increased stress owing to increasing extreme weather events and the current economic context. We suggest that they be helped financially by promoting sustainable alternatives. This is a potential solution that, again, already exists.

I would now like to remind you of Canada's commitments on fossil fuel subsidies.

Canada made a commitment in 2009 to phase out inefficient fossil fuel subsidies. It has since consistently reiterated that commitment in various international forums. Last year, the government moved the deadline for its commitment closer to 2023 instead of 2025. The year 2023 is just around the corner.

Bill C-234, which is being considered today, proposes to exempt new fossil fuels and new activities from carbon pricing. If passed, the bill would artificially reduce the price of fossil fuels and increase their competitive advantage. In short, it would be another subsidy for fossil fuels, even as we have committed to eliminating them by next year.

In conclusion, while this bill is presented as a plan to help farmers, it instead creates conditions that are conducive to maintaining the dependence of agricultural activities on fossil fuels.

It is also a bill that, from my reading of it, would conflict with Canada's national and international commitments on fossil fuel subsidies.

Given the many advancements since 2020, it would be in the best interest of the agricultural sector, its operators and workers for this committee to quickly consider how to promote alternatives to fossil fuel grain drying and building heating. We have an opportunity to help transition the sector away from fossil fuels; this opportunity should not be missed.

Thank you for your time. I will be happy to answer your questions.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you for that clarification. That's helpful. We certainly want to avoid double payment at all cost, I'm sure.

I'll move on to another question, about understanding the real impacts of the price on pollution related to farm viability. We've heard from the farming community and stakeholders about the increasing cost to farmers and the result of the price on pollution, often referencing tens of thousands of dollars on top of the already high cost for fuel that's needed to dry grain. However, in previous testimony on Bill C-206, the Pembina Institute stated:

...the impact of the cost of carbon pricing in relation to grain drying, which is not exempt, ranges from 0.05% to 0.38% of net operating costs for an average farm, equivalent to $210 to $774.

This is a lot less than what some stakeholders have told us. I'm not saying that I would know the difference, but I'm wondering whether we can get some clarity from you or Ms. Kim as to how much the price of pollution is really affecting farm viability. Do we know that, especially for grain drying?

Thank you.

Mr. Jovanovic, I'll go to you first.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

I know from talking with Philip, in the last Parliament, about one thing that led to Bill C-206. We heard mention of the so-called “harvest from hell”—the really wet harvest that forced a lot of farmers to run their grain dryers overtime. It really ballooned their costs.

The irony, though, is that those extreme wet-weather events are going to become more and more frequent, thanks to climate change. A common refrain we hear at this committee is that farmers are on the front line of climate change.

In the time you took to draft Bill C-234, did you reach out to any of the farmers being impacted in that way and seeing increasing frequency in the use of their grain dryers?