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.

[Isabelle Turcotte, Director, Federal Policy, The Pembina Institute]

Good afternoon, Mr. Chair and members of the committee. I am Isabelle Turcotte.

The Pembina Institute is a non-profit think tank, and we advocate for strong, effective policies to support the clean energy transition. We've worked a lot on carbon pricing at the national and provincial level.

Much has changed since Bill C-206 was introduced in the House in February 2020. The U.S. administration now recognizes the existential threat to our well-being and prosperity that climate change represents. The legal debate on carbon pricing has been settled, and with a new climate plan that acknowledges the most efficient way to reduce our emissions is to use pricing, the Conservative Party of Canada has ended the political debate.

This is all great news for Canadians.

The conversation on raising climate ambition is picking up momentum following the Leaders Summit on Climate on April 22. Around the world, thousands of people mobilized to make this meeting a meaningful stepping stone to COP26, including here at home, where Canadians want to see more action on climate according to a recent survey by ECCC on Canada's “nationally determined contribution”. This will require steep and sustained emissions reductions across the economy.

Agriculture accounts for 8% of Canada's emissions, at 59 megatonnes, and enteric fermentation and agricultural soils really represent the lion's share of that. I provide some data in my submission on the breakdown, for those who have the written document, but essentially the point is that the 59 megatonnes excludes combustion emissions, which represents approximately 13 megatonnes of emissions.

The climate emergency and the increasing demand for low-carbon products, including in the agricultural sector, require that we address all of these emissions.

Let's first consider combustion emissions. In the provinces where the backstop is applied, the federal fuel charge does not apply to gasoline and diesel used in tractors, trucks and other machinery used on farms, so there is a lot of relief that is supplied there to farmers. A study that was conducted in 2019 estimates that 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. These results do not include the carbon pricing rebate offered to farmers, which has increased with budget 2021. It is also worth noting that the study highlights that heating fuels and electricity represent the smallest sources of costs for farmers.

A cost-saving strategy for farmers should really focus on reducing fertilizer and lime use, as suggested by this study.

We are sensitive to the fact that farmers cannot pass on costs to consumers. We're also of the opinion that the best way to shelter farmers from the price on carbon is to reduce carbon emissions. Canadians value their farmers and the essential work that they do, and we want them to thrive.

We support measures that help farmers make investments toward that goal, and we welcome the budget 2021 announcement to return more carbon-pricing revenues to farmers and make $50 million available for the purchase of efficient grain dryers.

It is worth noting that domestic grain dryer alternatives and technological innovations are already occurring in response to the carbon pricing. For example, a Manitoba company, Triple Green Products, produces biofuelled heating, composting and dehydrating systems used in mining, agriculture, industrial and other applications.

Let's quickly consider agriculture's largest sources of emissions. These sources are not priced under the federal carbon pricing system.

Budget 2021 also puts in place measures to support non-combustion emissions reductions, including $200 million for on-farm action improving nitrogen management, increasing adoption of cover cropping and normalizing rotational grazing. There is money, as well, for wetlands and trees on farms, and moneys for clean energy and moving off of diesel.

In conclusion, to echo my colleague Karen Ross at Farmers for Climate Solutions, who presented to this committee before me, Canadian farmers want to lead on climate change. Conversations that narrowly focus on diluting the price signal that is needed to promote investment in innovation and emissions reduction do not support this ambition.

We believe that farmers and Canadians more broadly would be best served by building on the recent announcements of measures supporting farmers, and to support the innovative farmers across the country who are already reducing emissions, increasing our climate resilience and preparing for that global decarbonized economy.

Thank you.

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

Thank you very much.

Thank you for the opportunity to appear before the committee today.

Canada faces a climate emergency that is resulting in more extreme weather—from heat waves to droughts to floods. I was moved by the testimony before this committee last week from Karen Ross of Farmers for Climate Solutions on challenges that farmers face as climate change exacerbates extreme weather events.

The David Suzuki Foundation has long advocated for pricing carbon pollution, and we have played an important role in advocating for B.C.'s precedent-setting carbon tax. We also intervened before the Supreme Court of Canada in a recent reference case. The court affirmed the importance of ensuring carbon pollution is priced across the federation. The court acknowledged that climate change poses a grave threat to humanity's future and described it as “a threat of the highest order to the country, and indeed to the world.”

Why put a price on carbon pollution? As Clean Prosperity explains, putting a price on carbon “sends a powerful signal across an entire economy to reduce its carbon footprint, and unlocks the zero-emissions technologies we need.”

I'd like to acknowledge that we've reached a watershed moment when we have achieved consensus across the political spectrum on the need to price carbon pollution.

However, Bill C-206 would erode the Greenhouse Gas Pollution Pricing Act. It is the wrong solution. It sends the wrong signal and is likely to create pressure from other sectors to get their own carve-outs.

We appreciate that many farmers are already working hard to mitigate emissions, use soil management practices to help store carbon and rebuild local biodiversity. To stay on course for 1.5° C of temperature change between now and 2030, we need to be reducing emissions by about 7% a year across the economy.

Bill C-206 has been presented as a way to support farmers by reducing their energy costs, particularly grain drying costs, in federal backstop jurisdictions. However, the effect of this amendment is to introduce a new, inefficient fossil fuel subsidy. In 2009, Canada and the G20 leaders agreed to phase out inefficient fossil fuel subsidies. Adding a new subsidy in 2021 is particularly problematic. According to the Parliamentary Budget Officer, this fossil fuel subsidy would cost the federal government $47 million in 2021, rising to $60 million by 2024-25.

We note that since this legislation was first proposed, budget 2021 was announced, and it specifically attends to the energy costs faced in the agricultural sector and its unique transition. It provides $10 million to help farmers adopt clean energy solutions and to begin transitioning off fossil fuels, $50 million to help farmers purchase more efficient grain dryers, and approximately $100 million of the money that farmers currently pay in carbon levies on natural gas and propane will be rebated back to farmers.

Such grants and rebates are a better solution than Bill C-206. It preserves the price signal, rewarding agricultural producers and innovators who come up with ways to reduce reliance on fossil fuels in agricultural operations. It will better position the sector to compete as climate ambition ramps up around the world. Bill C-206 may reduce energy costs in the short term, but it doesn't help position Canada's agricultural sector to the inevitable need to ratchet down fossil fuel consumption, improve energy efficiency and switch to clean energy sources.

Replacing a price on carbon with an additional fossil fuel subsidy sends precisely the wrong signal. At a time when all of Canada's main political parties have declared their support for pricing carbon pollution, it is an approach that will add to our mitigation challenge and the threat of climate change. It is also misaligned with our commitment to eliminating fossil fuel subsidies.

In conclusion, the David Suzuki Foundation urges the committee to vote against this bill, the effect of which is to create a new fossil subsidy and erode carbon pricing.

What we've seen in other sectors is that there is this idea that the technologies are not available that would reduce reliance on fossil fuel subsidies or be more energy efficient. We need the price on carbon pollution to create the incentive, and already these kinds of solutions are starting to appear across the economy.

Thank you for giving me the opportunity to speak to you today. I will be pleased to answer any questions you may have.

[The Chair, Liberal, Pat Finnigan]

Good afternoon and welcome to you all.

I would also like to welcome Mr. Regan, who is replacing Mr. Drouin.

I'll call this meeting to order.

Welcome to meeting number 29 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 the 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, regarding 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. Just so that you are aware, the webcast will always show the person speaking rather than the entirety of the committee.

I'd like to take this opportunity to remind all participants of this meeting that taking screenshots or taking photos of your screen is not permitted.

I would like to remind you of a few rules in order to ensure an orderly meeting. Please wait until I call on you before speaking. If you are participating via video conference, click on the microphone icon to unmute your microphone. As usual, the microphones of the participants who are in the room will be controlled by the proceedings and verification officer. I would also remind you that all comments from members and witnesses should be addressed through the chair. Please mute your microphone when it is not your turn to speak.

I would now like to welcome our panel of witnesses for our first hour.

Today, our first witness is no stranger to this committee.

Mr. Sylvain Charlebois, welcome.

He is a professor and the director of the agri-food analytics lab at Dalhousie University. From the David Suzuki Foundation, we have Tom L. Green, senior climate policy adviser. We also have, from the Pembina Institute, Isabelle Turcotte, director, federal policy.

We'll start with opening statements—five minutes per organization.

Mr. Charlebois, we will start with you. You have five minutes.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. MacGregor, and thank you, Mr. Ammeter.

This concludes our second panel.

I really want to thank the Canadian Canola Growers Association—Mr. Mike Ammeter and also Mr. Dave Carey—for being here today.

Also Mr. Kelly from Dowler-Karn Limited, thanks for coming in today to share your thoughts on our study.

That will conclude this. I'd like the members to stick around for a few minutes so we can finish a few items of business.

We'll start with Bill C-206. The officials have been invited. They've agreed to do one opening statement for all of them—not each. We have three departments. We have agriculture, environment and I believe we have finance as the third one. They'll have one opening statement and then we can go into the questioning rounds after that.

Hopefully that's agreeable to everyone. I don't know if there are any issues with that. If not, we'll adopt that model. I don't see any opposition.

The next thing we have to do is approve the press release.

I think you've all received a copy of the press release from the processing capacity report. If it's okay with everyone, we'll approve that and we'll release it as soon as we have a tabled report. Are there any comments on the press release? Is it all good with everyone?

Okay, I don't see any comments, so I think we're all good with that.

Finally, we have to approve the budget for Bill C-205. I believe everyone has received a copy of the budget. It's pretty standard practice. The total is $3,350 for that budget. I don't know if we need a motion, but we need consensus to approve the budget.

Are we all okay with the budget? Just show your thumb or wave your hand....

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

Thank you very much.

That's the response I was expecting. So as I understand it, as an energy distributor, you will be charging your customers for the carbon tax that you have to pay.

Mr. Ammeter, how will your business or industry be impacted if Bill C-206 does not pass?

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

Thank you, Mr. Chair.

Mr. Kelly, it has been made clear that you consider having a clean fuel that is part of the solution. What would be the impact on your industry if Bill C-206 is not passed?

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

I congratulate you on that, by the way. Not all producers have reached this point.

That was precisely the point of my question. There is no alternative right now. Now, if there was investment in research and development, if there were alternatives that could be developed and there was state support to put them in place, I think you would be pleasantly surprised and would want to participate.

A witness who appeared last week told us that the fact that Bill C-206 did not set a limit on how long the exemption would last was a deficiency. He was concerned that this exemption would continue when we need to reduce greenhouse gas emissions. What are your thoughts on this? What do you think about the possibility of the exemption being limited to five or 10 years and the government committing to support you in the transition?

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Great. Thanks.

I know we are talking about Bill C-206, but, Mr. Ammeter, would you welcome partnerships with investments from the government to say, “Okay, let's look at the pain points where the carbon tax is costing you”?

Obviously, what we're trying to do is not necessarily to penalize you. We're just trying to decarbonize the economy.

Would you welcome some investments in partnerships in order to find some new technologies to try to decarbonize the agricultural sector?

[Dave Carey, Vice-President, Government and Industry Relations, Canadian Canola Growers Association]

Thank you, Mr. Chair.

The number would be based on 2018 usage rates and prices. That is the analysis we did internally.

We are now in the final stages of getting third party analysis done by the accounting firm MNP, which will be canola-specific using verified third party methodology that will look at everything. We're here talking about Bill C-206 specifically, but as soon as the price of carbon goes up, the price of freight goes up, the price of custom-haul trucking goes up and the price of everything goes up, so all of that will be accounted for.

The $18 billion is not on the back of a napkin. We stand by it, but we will have a robust report from MNP very soon that articulates all of those things.

[Dan Kelly, Chief Financial Officer, Dowler-Karn Limited]

Thank you, Mr. Chair.

I would first like to acknowledge that I'm speaking from the traditional territory of the Anishinabe, Haudenosaunee, Ojibwa and Chippewa peoples. This territory is covered by the Upper Canada treaties.

I'm here today as the chief financial officer of Dowler-Karn Limited, a third-generation, family-owned company founded in 1943. We are distributors of gasoline, diesel and propane, serving our customers in southwestern Ontario for almost 80 years, with our head office in St. Thomas, Ontario. In particular, a significant portion of our customers are farmers, from small family farms to large operations, farming cash crops, livestock or a combination of both.

I am also the past chair of the Canadian Propane Association. The CPA represents the entire supply chain for propane: extraction, refining, distribution, marketing and delivering to end-users across Canada. We represent over 400 member companies that participate in the propane industry, from large refiners to independent distributors that serve Canadian consumers.

Propane is a low carbon-intensive fuel. It generates up to 26% fewer GHGs than gasoline, and 98% less particulate matter than diesel fuel. Propane is an abundant, 100% Canadian fuel that has been energizing Canadians across the country for decades. It is clean, affordable and readily available and can provide solutions today in the discussions for Canada's clean energy future.

In the spring of 2019, Dowler-Karn registered as a distributor under the Greenhouse Gas Pollution Pricing Act and has charged, collected and remitted the federal fuel charge since its inception on April 1, 2019. In that time, we have collected and remitted $19.8 million in respect of the federal fuel charge. In particular, we have collected and remitted approximately $1.7 million in the federal fuel charge in respect of propane that's been used in farming. These amounts come directly from the bottom line of farmers.

The original regulations in the act recognized the uniqueness of the agriculture sector and provided relief from the federal fuel charge for farm fuels, specifically exempting gasoline and diesel fuel directly used in farming. Although gasoline and diesel fuel are necessary for planting and harvesting crops, propane is just as vital to a farming operation. However, propane has not been granted the same relief as high-carbon fuels such as gasoline and diesel.

In the most recent budget, the Minister of Finance announced some relief for farmers who are incurring the costs of the federal fuel charge for propane and natural gas. Although we applaud the government for recognizing the oversight, we have concerns with the proposal for a targeted rebate program.

Rather than providing a rebate to address the issue, we believe that propane should be afforded the same treatment as gasoline and diesel. Simply extending the exemption to propane would provide the following: an equitable treatment for a low carbon-intensive fuel as afforded to those that are much more carbon-intensive; relief for all propane used in farming operations, not just for drying crops; and removing the need for bureaucracy in managing the rebate program.

Currently, we charge the federal fuel charge at the time of invoice and then remit same to CRA at the end of the following month. We are reimbursed when the farmer pays his invoice, including the federal fuel charge. Should propane be exempt from the FFC, as is the case with gasoline and diesel, there would simply be no charge on the invoice. The farmer would issue a form L402 exemption to Dowler-Karn, which we would keep on file.

Should a rebate program be instituted, we would need to invoice the farmer, charging the FFC, which they would pay to us and we would remit. At some point in the future, the farmer would then be required to submit a rebate application, which would need to be reviewed, approved and processed by CRA, which would then issue payment to the farmer for the same FFC they paid at the time of purchase. The rebate would then be subject to audit. This much bureaucracy doesn't seem necessary when an exemption would meet the same goal.

Another issue facing farmers centres around the focus on propane for grain-drying purposes only. Propane used in farming extends beyond simply grain drying, as livestock and dairy farmers use propane to keep their livestock warm in winter. In fact, Dowler-Karn sells as much propane to heat barns for livestock as we sell for grain drying. Some regions of Canada may have greater needs for propane to dry crops, but the need for heating barns is just as critical. Imagine the impact on a poultry operation with hundreds of chickens if they couldn't keep the barns warm in the dead of winter.

In addition to barn heat, propane is also used for backup power generation, protecting farm operations against power outages.

We at Dowler-Karn and the CPA support the approach prescribed in Bill C-206, and believe it is the most efficient, cost-effective and reasonable approach. We applaud the government for recognizing the need to correct the regulation, but believe an exemption for a much cleaner, cheaper fuel is the more equitable approach.

I'd now be happy to take any questions.

Thank you, Mr. Chair.

[Mike Ammeter, Chair, Canadian Canola Growers Association]

Thank you.

My name is Mike Ammeter. I'm the chair of the Canadian Canola Growers Association. I farm at Sylvan Lake, Alberta, which is an hour and a half north of Calgary. I grow canola, pulses, wheat and barley on 1,400 acres. With me today is Dave Carey, CCGA's VP of government and industry relations.

CCGA is the national organization representing Canada's 43,000 canola farmers. Canola is Canada's most widely seeded crop, generating the largest farm cash receipts of any agricultural commodity, earning Canadian farmers over $10.2 billion in 2020. Canola farmers export over 90% of our crop. The industry we support contributes 207,000 jobs and $29.9 billion to Canada's economy every year.

Canola farmers are committed to a sustainable future and have established goals to support that commitment. By 2025, they will reduce their fuel usage by 18% per bushel, increase land use efficiency by 40% per bushel, sequester an additional five million tonnes of CO2, use 4R nutrient stewardship practices on 90% of canola production acres and continue to safeguard the more than 2,000 beneficial insects that call canola fields and surrounding habitat home.

CCGA is pleased to support Bill C-206. While we were pleased to see the budget include a commitment to return part of the funds collected from the price on carbon to farmers, we view this bill as a more direct and efficient way to provide farmers with an exemption for propane and natural gas used on farm for grain drying and irrigation.

For my farm, grain drying is important because it allows me to get my crop off the field when time is short at the end of the harvest season and the weather turns to rain and snow. Sometimes I cannot wait for my crop to dry in the field. When a crop sits in the field with excess moisture, it loses quality and volume, which in turn means I will have to sell it at a discount. If wet grain is put into storage, it can spoil in a matter of days.

In the last 15 years, my farm has experienced increased weather variability not seen since the 1960s. It has become more and more difficult to harvest my crops due to rain and snow, even at the end of the growing season. This means I have to run my natural gas grain dryer more often than not. That dryer is a piece of farming equipment that is central to my operation now. Since I purchased it, I have invested approximately $20,000 upgrading it to make it as energy efficient as possible. If there was a way for me to make my dryer more efficient yet, I would do so, but there isn't anything currently on the market that can help me reduce my drying costs.

I understand that the government's objective with the price on carbon is to change behaviour and to transition operations to an alternative fuel source. However, farmers do not have viable alternatives available to us.

Global competitiveness is critical to our industry. Canadian canola farmers are price-takers on a global market with no ability to pass additional costs on. These additional costs will impact our ability to remain competitive and will threaten the viability of our farming operations.

I appreciate the government's recent budget announcement that they will provide $50 million in funding for projects like retrofitting grain dryers. While these types of programs may be useful to farmers who have not already retrofitted their dryer, as I have done, this will not address the fact that our energy infrastructure in western Canada is carbon based. If there was a way to transition from carbon-based inputs, our industry would do so. Fuel is one of my largest input costs. To keep pace with international competitors, farmers are constantly looking to become more fuel and energy efficient, but in order to achieve the BTUs necessary to properly dry my grain, I require carbon-based energy.

There's been concern that Bill C-206 may not accomplish what it's intended to do. To ensure that it does, we recommend that fuel used in grain drying and irrigation be properly accounted for in the bill as exempt from the price on carbon.

CCGA remains optimistic about the future of Canada's canola farmers and their ability to continue to contribute positively to both a healthy environment and a healthy economy. Canadian agriculture should be viewed as a strategic partner in this dialogue. Canola farmers are committed to building on our environmental successes.

Thank you.

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

Thank you so much, Mr. Chair.

Ms. Ward, in my two and a half minutes I'm going to ask you two questions and then give you the remainder of the time to answer.

First of all, in the existing act, we already have gasoline and diesel fuel that are exempt. They are “qualifying farming fuels”. Do you have any thoughts on those two fuels because, of course, they are used quite a bit in farming activities and it seems to me that Bill C-206 is just following that precedent and then allowing natural gas and propane.

Second of all, if you can also.... I think it's important. We keep on talking about the cost of the carbon tax, and I think you just briefly answered this, but can you also just illustrate what the costs are if we don't address climate change, because I have heard at this committee in the three years that I've been sitting at it that farmers are on the front lines of climate change. Can you just give us a sense of what the economic costs of doing nothing in tackling climate change are going to be for farmers?

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

All right. Thank you.

Ms. Ward, you were saying that Bill C-206 might not be necessary if the exemptions in the budget were effective.

Wouldn't producers rather have an exemption and not be dependent on receiving a cheque from the government, which could involve delays or very cumbersome administration?

I would like to hear from you, and I would ask Mr. Coristine to respond afterwards.

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

Thank you so much, Chair.

Thank you to our witnesses for contributing to our discussion on Bill C-206 today.

I'll start with the Canadian Horticultural Council. Mr. Coristine, you mentioned a few things. You were going over the existing Greenhouse Gas Pollution Pricing Act, and you did correctly mention that the existing definition section on “eligible farming activity” goes through a few definitions there. However, when it comes down to “eligible farming machinery”, it specifically excludes “property that is used for the purpose of providing heating or cooling to a building or similar structure”.

We've already been informed that Bill C-206 is pretty narrow, and it may be beyond our ability to expand it. If C-206, as it's currently written, is not going to apply to greenhouses.... I'm worried we're using this as a proxy for a larger conversation about the carbon tax, but I really want to focus on C-206. If the bill passes, can you tell the committee, as it's currently written, by just changing the “qualifying farming fuel” definition, are there any tangible benefits that will apply to your industry?

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

What do you think of Bill C-206?? Do you agree with Ms. Ward that it is incomplete? Do you think it is a good first step toward helping you?