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.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you.

Talking about alternatives, there are some alternatives on the horizon. Can you talk to me about the efficiency, and how the agriculture community responds to incentives, be they financial incentives to explore alternatives versus taxes or punitive measures? For example, can you talk about the efficiency of an exemption considered under Bill C-206 versus a pay and rebate program?

[Serge Buy, Chief Executive Officer, Agri-Food Innovation Council]

Thank you, Mr. Chair.

Thank you for inviting me again to appear in front of your committee. The last time I presented was in February. There was a snowstorm, and I think I reflected on the challenges of the Internet in rural regions. I am proud to say that we've had an upgrade in our region, so I should be fine on my Internet today. As well, there is no snow.

When I appeared the last time, it was to discuss processing capacity. I note that your report has come out, and I would really like to congratulate the committee on a great report that came out, with substantial recommendations. My hope is that the government will reach out to stakeholders in order to discuss implementation—stakeholders such as us.

That would be great to see, but I'm here to discuss Bill C-206, Mr. Chair.

I wanted to mention first that the intent of the draft legislation is to extend the exemption on the carbon tax to some farming operations that use propane and natural gas. As you know, reducing GHG emissions is a priority. It's a priority for Canada. It is a priority for farmers. However, when there are no viable options, farmers shouldn't be penalized for doing what they do best: feeding Canadians and contributing to our economy.

We are certainly supportive of this legislation, and we are supportive for the following reasons.

At this point, there are no viable options that are scalable to serve the whole sector. While there are some new technologies, they still need to be researched, especially in terms of how they adapt to our particular conditions in Canada.

The scalability of those new technologies is also an issue. We're simply not there yet, and we must be realistic that we will not be able to scale up those new technologies in the near future.

We've researched the issue, Mr. Chair. We've consulted our members, and there was an almost unanimous response from our members on this issue. Increasing the costs for farmers will lead to some abandoning agriculture, and this will have a negative impact on our jobs, on the trade balance and also on our food security, an issue that we should really consider specifically.

The AIC recently held a webinar on agrifood and climate change. It included international experts such as Dr. Ould-Dada, deputy director at the UN food and agriculture organization; Dr. Ringler, who is with the International Food Policy Research Institute; and Dr. Sally Rockey, a long-time senior civil servant in the U.S. and now executive director of the Foundation for Food and Agricultural Research.

They all agreed with the following statement: It is important to consider food security when implementing measures to reduce GHG emissions in agriculture, and sustained investments in research and innovation are essential to support reductions in GHG emissions in agriculture and adaptation to climate change.

We certainly agree with those two statements from our experts, and we believe that the committee should reflect on those and pass [Technical difficulty—Editor]. However, we also believe that the exemption should go to other types of farming.

The exemption right now is limited to some types of farming, and we believe that it is not fair to penalize other types of farmers, such as farmers who have barns and need heat for animals. It's not fair for them to be left aside. There are other types of farmers who also do important work and provide Canada and Canadians with an important service that is required, and we believe that they should also be considered in and supported through this legislation.

As well, Mr. Chair, we believe that the measure should be permanent. This was a topic of some discussion within our council, but ultimately the great majority of our members who responded to the survey indicated that it was important to extend the protection on a permanent basis.

The rationale for this is simple. Farmers make significant investments in material and equipment. For them to have a temporary measure will increase concerns and affect their ability to plan financially and get new machinery. As no machinery and no technology is scalable at this point to enable them, in a viable manner, to have other sources of fuel, such as clean and renewable fuel, we believe that the measure should be permanent to give them certainty—and I stress the word certainty—that there will be no changes in the near future.

Mr. Chair, there are greener alternatives, and there are various alternatives such as gasification systems, low-temperature pyrolysis, anaerobic digesters and battery-based equipment. There certainly are different alternatives, but there are several factors that work against those alternatives. I mentioned that they're often not viable. The price is simply too high and the price to scale them is not feasible.

We also have to remember that our farmers compete internationally against the U.S., Russia, Brazil and other countries. We have to be careful on that—

[Neil Ellis, Liberal, Bay of Quinte, ON]

I have one quick, last question. I believe this would be for Mr. King.

If Bill C-206 passes, what message does this send to other sectors?

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

I'm asking you how could you possibly conceive of grain drying not being included in Bill C-206, when it's clearly a farming activity done on a farm with a machine. Are you saying that a grain dryer is not a machine? Are you saying that growing grain is not farming?

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you.

Thank you very much, Mr. Epp.

Mr. King, I just want to follow the line that Mr. MacGregor took earlier.

When we look at the definitions of Bill C-206, to me it's absolutely clear, in fact it's crystal clear—and that's in fact what our parliamentary lawyers have all said as well—that grain drying is included.

If we look, in fact, and we ask, what's the definition of farming, it almost certainly includes the growing of grain. What is “eligible farm activity”? That includes the operation of eligible farming machinery. What is “eligible farming machinery”? It is an industrial machine or a stationary or portable engine.

All of that fits grain drying to a T. I don't understand how you could possibly conceive that grain drying is not included in this, and I think it's just silly to say otherwise.

Mr. King?

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

Thank you, Chair. Maybe my question will be for Mr. Parry, with Agriculture and Agri-Food Canada.

I don't really have many more questions on Bill C-206 per se, but I am interested in whether or not the Government of Canada has done an analysis of the carbon sequestration potential in Canada's farms.

I know in budget 2021 there were $60 million dollars allocated over the next two years for the nature smart climate solutions fund, and that's really to protect existing wetlands and help save trees on farms. However, I'm just wondering, overall, whether we have done an in-depth analysis of Canada's agricultural soils and really what our sequestration potential is if we're really going to be depending on them to act as a carbon sink as a part of our overall fight against climate change?

I'm just wondering if you could give the committee an update on that.

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

Thank you so much, Mr. Chair, and thank you to our witnesses.

Mr. King, I'll maybe start with you.

In the previous exchange that you had with Mr. Blois, you expressed some doubt as to whether Bill C-206 was drafted in a way that would give the CRA clarity about its intended purpose.

When I look through the existing definitions in the Greenhouse Gas Pollution Pricing Act, it's quite clear that growing grain and harvesting fall under the definition of farming, and that the machinery used for drying it, I think, could be found under “eligible farming machinery”. It's a stationary machine; it's an industrial machine on the property.

Are you still quite sure that, even if we're just making this narrow definition as to what a qualifying farm fuel is, there will be a misconception as to what its intended purpose is?

[Phil King]

I can certainly give you my view as an official from the Department of Finance. I want to give you a caveat first, though, which is that the administration of the GGPPA, the Greenhouse Gas Pollution Pricing Act, is the responsibility of the Canada Revenue Agency.

Ultimately, formally and officially, it would be the CRA that would have to opine on this. However, I am happy to share my view. We designed the program. We know its intent. We drafted the legislation, so we are reasonably familiar with it.

That caveat aside, you are correct that we don't believe that Bill C-206 is specific enough or that it discusses eligible farm machinery. It just talks about the fuels involved, not the machinery that those fuels would be involved in.

[Kody Blois, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair, and thank you to our witnesses.

I'll start, perhaps, with Mr. King or someone from Environment.

When I look at the actual Bill C-206, it's relatively straightforward. It's just trying to amend the definition of qualifying farm fuel.

My understanding, when we look at the entire Greenhouse Gas Pollution Pricing Act, is that there are definitions for eligible farming activity and also eligible farming machinery that qualify, which this particular bill does not address at all. Would it be your position that the challenge, despite the noble intent from Mr. Lawrence in relation to this bill, is flawed in the sense that it doesn't actually address the activities and the machinery that are perhaps needed to capture grain drying or the heating of barns and other facilities?

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

When we look at this, we have these farmers, and I've seen their bills. They're literally for tens of thousands of dollars. Farmers are price-takers. They have very thin margins. As the family farm seems to struggle out of existence, are we just going to put it all on the farmers until we get the credit system for maybe some novel technologies? Until then, will we just wait for the farmers, or will we pass Bill C-206 and give the farmers a break right now? The government can at any time repeal it, if there's a great breakthrough in technology.

[Phil King]

I think that's a question you'd have to pose to the minister and to the government.

I can explain the policy that's being put forward in the budget and maybe talk about Bill C-206, but I couldn't answer that question. I'm sorry.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you.

This is for whichever witness wishes to respond. If it's all three, that's fine with me.

Thank you very much. I agree with you that climate change is a real, serious and pressing issue. I think that is the consensus in this panel and in this committee. That's not in doubt and not in discussion.

One issue is with regard to what the stakeholders have said to me. Stakeholder after stakeholder has said that they prefer Bill C-206 for a number of reasons. One of the primary ones is that the money is an exemption. It stays in their pocket. It's having a real financial impact. While the credit system may be better than nothing, the idea of it coming to government, coming back, and they don't have the details on it really isn't enough. If the government is so generous and they do a fantastic job with the credit, there's nothing stopping them from repealing Bill C-206 in the future, once they have this credit system up and running.

Wouldn't you want to give the farmers a break with respect to Bill C-206? If it is up to the government's discretion, they can of course repeal it if their credit system is so generous that farmers no longer require the exemption.

[Matt Parry, Director General, Policy Development and Analysis Directorate, Strategic Policy Branch, Department of Agriculture and Agri-Food]

Thank you, Mr. Chair.

As mentioned, my name is Matt Parry. I'm the director general of the policy development and analysis directorate at Agriculture and Agri-Food Canada.

Thank you for the opportunity to be here today to talk about Bill C-206 and the government's initiatives related to carbon pollution pricing in the agriculture sector.

I'll start by noting that climate change is one of the greatest challenges of our time. Addressing it requires engagement from all parts of Canadian society, and Canada's farmers and ranchers are a part of the climate solution.

Agriculture and Agri-Food Canada is actively engaged on many fronts to support the agriculture sector in reducing emissions, from scientific research to direct support for farmers across the country. We are working to develop solutions that are effective and efficient and that ensure farmers can grow their businesses while reducing emissions.

Greenhouse gas emissions from Canada's agriculture sector have been relatively stable since 2005. According to Canada's national inventory report for 2021, greenhouse gas emissions from the agriculture sector in Canada were approximately 73 megatonnes of carbon dioxide equivalent in 2019, the last year for which data is available.

Most of these emissions—about 60 megatonnes—are from biological emissions from livestock and crop production. The remaining 13.6 megatonnes are from on-farm fuel use, which includes fuel for machinery such as tractors and combines, as well as heating sources. These emissions have remained relatively stable since 2005.

Of the fuel emissions, about 10 megatonnes are from on-farm transportation like gasoline and diesel, which are currently exempt from pollution pricing. About 3.6 megatonnes are from stationary combustion, including grain drying and barn heating operations, which are not exempt.

Based on how the carbon pollution price is structured, this means approximately five per cent of greenhouse gas emissions from agricultural production are currently covered by pollution pricing.

Carbon pollution pricing is considered the most efficient means to drive innovation and energy efficiency in order to reduce emissions. Since 2019, every province and territory in Canada has had a price on pollution. Provinces and territories can design their own systems, aligned with minimum national standards, or opt for the federal system. The federal carbon pollution pricing system has been specifically designed to account for the agriculture sector's unique circumstances.

The government announced in February 2021 that it would commit to new rebates for on-farm fuel use such as grain drying, in order to support food producers and encourage new investments in clean technology.

As announced in the budget, the government intends to return a portion of the proceeds from the federal fuel charge directly to farmers.

This will apply to farmers in Alberta, Saskatchewan, Manitoba and Ontario, the provinces where the federal fuel charge applies. It is estimated that farmers in those jurisdictions will receive $100 million in the first year, and this figure is expected to increase as the price on pollution rises. Further details will be provided by the government later in 2021.

Also announced in budget 2021, $50 million of the recently announced $165-million agricultural clean technology program will focus on grain-drying technologies, and $10 million will focus on powering farms with clean energy.

These two components of the agricultural clean technology program will help farmers invest in more efficient and new technology that further reduces on-farm fuel use.

Work is currently under way to develop and launch these initiatives as soon as possible.

Through these programs, along with existing initiatives under the Canadian agricultural partnership, Agriculture and Agri-Food Canada is working with farmers and other agricultural stakeholders to reduce emissions and fight climate change.

In closing, the measures announced in budget 2021 will provide relief for farmers in backstop jurisdictions while also supporting the sector in reducing fossil fuel use through improved efficiency and new technologies. Agriculture and Agri-Food Canada is working to support farmers today, while developing and implementing policies that will help reduce emissions tomorrow.

Thank you for your time, and we look forward to any questions.

[The Chair, Liberal, Pat Finnigan]

I call this meeting to order.

Welcome to meeting number 30 of the House of Commons Standing Committee on Agriculture and Agri-Food. Pursuant to the order of reference of Wednesday, February 24, 2021, and the motion adopted by committee on March 9, 2021, the committee is resuming its study of Bill C-206, an act to amend the Greenhouse Gas Pollution Pricing Act (qualifying farming fuel).

Today's meeting is taking place in a hybrid format pursuant to the House order of January 25, 2021. Therefore, members are attending in person in the room and remotely using the Zoom application. The proceedings will be made available via the House of Commons website. As you are aware, the webcast will always show the person speaking rather than the entirety of the committee.

I would like to take this opportunity to remind all participants in this meeting that screenshots and taking photos of your screen are not permitted.

To ensure an orderly meeting, I would like to outline a few rules to follow.

Before speaking, please wait until I recognize you by name. If you're on the video conference, please click on the microphone icon to unmute yourself. The microphones of participants in the room will be controlled as normal by the proceedings and verification officer. Remember that all comments by members and witnesses must be directed through the chair. When you aren't speaking, your microphone should be on mute.

Before welcoming our witnesses, I'd like to remind members that amendments for Bill C-206 must be sent to the clerk before Friday, May 7 at 5 p.m.

I'd now like to welcome our witnesses. From the Department of Agriculture and Agri-Food, we have Mr. Warren Goodlet, director general, research and analysis directorate, strategic policy branch.

Welcome, Mr. Goodlet.

Also from the department, we have Matt Parry, director general, policy development and analysis directorate, strategic policy branch.

From the Department of Finance, we have Phil King, director general, sales tax division, tax policy branch, and Mr. Gervais Coulombe, senior director, excise, sales tax division, tax policy branch.

Welcome to both of you.

From the Department of the Environment, we have Judy Meltzer, director general, carbon markets bureau, environmental protection branch.

I understand that there will be just one opening statement for all departments, and it will be for five minutes.

For whoever wants to do the opening statement, the floor is yours.

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

Thank you, Chair.

I'll pose both my questions to the CFIB.

First, Bill C-206 is a pretty narrow bill. It's not a lengthy read or anything like that. Are you satisfied with the bill in its current form or are there any amendments you think could be made to it?

Second—and this comes from my last question—you did mention farmers are very proud of the work they do in being environmental stewards of the land. I agree with you. We know the pride that farmers have and that they depend on a healthy environment to raise good crops. Have you heard any feedback from your members on how that pride translates into effective federal policy?

Do your members want to see federal incentives for better agricultural practices being rewarded for carbon sequestration? As an organization have you ever received any feedback on those fronts?