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.

[Katie Ward]

Thank you for the question.

Our concern is that in our understanding Bill C-206 as it stands right now does not necessarily accommodate for barn heating the way that the budget rebate is intended to cover, and for the recategorization of heating fuels in particular. We're envisioning that there would be a fair amount of work to do in terms of amendments to make Bill C-206 as beneficial for farmers as the mechanisms that were explained in the budget as we understand them right now.

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

Thank you, Mr. Chair.

I thank the witnesses for being with us.

I will continue with Ms. Ward.

Ms. Ward, in your opening remarks, you mentioned that you support the carbon tax, but you would like to see a fuel rebate. In addition, you mentioned that Bill C-206 may no longer be needed given the new budget.

What is your organization's official position on the passage of Bill C-206?

Thank you.

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

Thank you, Ms. Rood.

My question is for Ms. Ward. Thank you for your actions in fighting climate change.

Although I too was pleased to see that the government at least acknowledged that this is an issue for farmers, it may in fact take them years, especially in a minority Parliament. It might be three or four years.

Could you not see putting this solution in place, Bill C-206, to help farmers in the interim, as some are paying thousands and thousands of dollars, even if you do believe in the government solution?

[Katie Ward, President and Farmer, National Farmers Union]

Thank you and good afternoon, Mr. Chair and members of the committee. Thank you for inviting me to present today. It's a welcome break from the lambing barn.

My name is Katie Ward and, in addition to being a sheep and hog farmer in the national capital region, I'm in my third term as president of the National Farmers Union. The NFU is Canada's only national direct membership general farm organization, representing thousands of farmers from coast to coast, engaged in all commodities across a wide range of scales—everything from market gardens to large-scale export grain operations—and utilizing a variety of practical approaches from organic and biodynamic through to regenerative and conventional.

No farm organization has thought longer and deeper about climate change and reducing agricultural emissions. The NFU has been advocating for climate change mitigation and adaptation policies for over two decades. Climate change and emissions reduction was the theme of our 2003 national convention, but our policy and educational work on the connections between agriculture and the climate crisis goes back as far as 1997.

In 2019, the NFU published a discussion paper entitled “Tackling the Farm Crisis and the Climate Crisis”, which laid out a road map for a 30% reduction in agricultural emissions alongside policies to increase net farm incomes. The NFU has called for a transformation of Canadian agriculture: a future with lower emissions, more farmers, higher net incomes, lower debt, more use of renewable energy, more young farmers and production systems based on agroecology, food sovereignty and protecting and regenerating soils, water and biodiversity.

The NFU is the only farm organization that intervened in support of the federal government in the Supreme Court challenge on the carbon levy. I bring this up to clarify that, while we do not advocate having a carbon levy on farmers and the fuels we use on our farms and ranches, we do strongly support the constitutional right of the federal government to implement strong and effective national measures to rapidly reduce greenhouse gas emissions.

In 2018, we became one of the founding members of a coalition called Farmers for Climate Solutions, which advocates for agricultural practices and policies that reduce greenhouse gas emissions from agriculture as the most effective way for farmers to avoid paying a price for emissions. In 2019, delegates at our 50th annual convention passed a policy resolution supporting a rebate on fuels such as propane and natural gas for dryers and other agricultural uses such as barn heat, because we believe that farmers face enough of a challenge to our bottom line already and that the erratic weather patterns caused by climate change, which disrupt our harvest catastrophically as happened in 2019, should not mean that farmers face financial penalty on top of the weather risks that impact our very livelihood.

I would like to thank the government for the rebate announced in last Monday's budget for the backstop provinces where the federal pricing is in effect. A simple rebate mechanism would be for farmers to document eligible or non-household use of natural gas and propane and attendant carbon levies paid and to request a refund, perhaps as part of a tax or GST filing.

In light of the budget announcement, it may be that Bill C-206 is no longer needed, especially since we understand that the budget rebate mechanism may cover barn-heating fuel usage in addition to grain-drying fuel usage and would, therefore, be more expansive than the bill under consideration here today.

I want to note, however, that we are here today to talk about removing a measure, admittedly flawed, that could reduce on-farm emissions. While it is necessary to ensure that farmers are not financially penalized while low-emissions technology catches up to the extreme weather challenges we're already facing as we grow food here in Canada, it is more necessary to introduce a suite of measures to partner with farmers, support farmers and incentivize farmers to reduce emissions so that agriculture is not increasingly seen as a high-emissions sector, while other parts of our economy are reducing their emissions on the way to our Paris targets.

Last Monday's budget introduced a number of very positive programs and spending measures that the NFU and Farmers for Climate Solutions have called for, and we're grateful to see financial support for farmers and ranches to actually implement practices that will reduce farm-related GHG emissions. Assistance to transition to low-emission technology and practices on our farms means that we don't have to face the financial risk of such a transition on our own and helps to level the playing field when we're in competition internationally with farmers receiving far more agri-environmental support, such as in the EU and the U.S.

Given market demand and potential border pricing measures under discussion internationally, everyone knows that we must go further, so we need additional programs to support farmers.

I'd like to highlight for you what we are suggesting could be called a Canadian farm resilience agency, or CFRA, modelled on the prairie farm rehabilitation administration, which the federal government administered across the prairie provinces for 70 years—

[Aaron Coristine]

Good afternoon, Mr. Chair and members of the committee. Thank you for the opportunity to appear today to provide testimony on Bill C-206. My name is Aaron Coristine, and I'm the science, regulatory affairs and government relations manager at Ontario Greenhouse Vegetable Growers.

Today, I'm here to represent the broader fruit and vegetable sector as chair of the Canadian Horticultural Council's energy, environment and climate change working group.

By way of introduction, the CHC is an Ottawa-based national association representing over 14,000 fruit and vegetable growers across Canada involved in the production of over 120 different crops with $5.4 billion in farm cash receipts in 2019.

Canada's fruit and vegetable growers are committed to being a part of the climate solution while also playing a major role in food security and Canada's economic recovery.

CHC and our members have consistently and actively engaged with the federal government to ensure carbon pricing policies connect the dots between the cost of carbon pollution and desired behaviours and outcomes versus unintended impacts and overall lowered emissions. Our consistent request has been for federal leadership to ensure that carbon pricing exemptions and relief are extended to the full range of farmers, including greenhouse growers, across all main fuel types, including natural gas and propane, used in common agricultural machinery.

In short, carbon pricing policies need to better reflect the modern agricultural practices across Canada, support increased security of food production and sovereignty, and minimize competitiveness impacts across provincial boundaries and with our major international trading partners.

CHC is interested in more information on the delivery of the government's commitment in budget 2021 to return a portion of the proceeds generated from carbon pricing directly to farmers in backstop jurisdictions. With regard to concerns with other GGPPA definitions, CHC supports Bill C-206 and its expanded definition of “qualifying farming fuels” to include natural gas and propane.

Although it falls beyond the specific scope of this bill, we also believe it is critical to amend other definitions in the GGPPA to ensure Bill C-206 achieves its intended outcomes. More specifically, in the legislation “eligible farming machinery” is defined to explicitly exclude property that is used to heat or cool buildings. As a result, certain farm machinery, when used to heat and cool buildings would, regardless of the fuel type, necessitate regulatory inclusion as a “prescribed property” to attain carbon pricing relief.

[The Chair, Liberal, Pat Finnigan]

Welcome, everyone, to meeting 28 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. 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 to this meeting that screenshots or taking photos of your screen are not permitted.

To ensure this meeting runs smoothly, I would like to share some rules with you.

Before you speak, please wait for me to recognize you. If you are participating via video conference, click on the microphone to unmute it. The microphones of participants in the room will, as usual, be monitored by the proceedings and verification officer.

I remind you that all comments from members and witnesses should be directed to the chair. When you do not have the floor, please mute your microphone.

Before welcoming our witnesses, I'd like to ask the members to remain in the meeting once the second panel is over. We'll go over the press release for the processing capacity report and approve the budget for the study of Bill C-205. This will only take a couple of minutes.

Now I'd like to welcome our witnesses. We have today, for our first panel, from the Canadian Horticultural Council, Aaron Coristine, chair of the energy, environment and climate change working group; and Linda Delli Santi, chair of the greenhouse vegetable working group. From the National Farmers Union, we have Katie Ward, president and farmer.

With that, we'll start our question panel. With the first panel, we have six minutes each, and we'll start with Ms. Rood for six minutes.

I jumped over the opening statements. I'm sorry about that. Let's go back to the Canadian Horticultural Council and whoever wants to take the opening statement for five minutes.

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

Thank you, Mr Chair.

I had one final question for Mr. Viau.

Mr. Viau, we are more or less on the same wavelength. The producers don't want to depend on the government. They would rather have an exemption at the source and a transition incentive that would make for more innovations.

I have a question for you. It does not necessarily represent my position. If we tax producers, we reduce their financial and investment capacity. Rather than tax them, we could allow them a temporary exemption, as allowed in Bill C-206, which would give them a little more financial leeway. We could add an incentive, such as a modernization investment program.

As you mentioned, the budget announced yesterday includes a plan to invest $50 million on dryers. That's wonderful, but it's not much for all of Canada. That's often the problem with politicians. There's a lot of fine talk, but the amounts are minimal and rapidly run out. More resources would therefore be needed.

What do you think of this option?

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

Yes, absolutely. I couldn't agree with you more.

When you look at the budgetary announcement yesterday, you see that they are announcing that $100 million in the first year. Bill C-206 has a very narrow scope; when you look at it, it really is essentially about grain drying. I guess the government is recognizing that some money has to be returned to farmers during this transition phase. When you're holding up the budgetary announcements of yesterday and Bill C-206, couldn't you plausibly argue that Bill C-206 is in fact an interim measure while we help farmers in the transition?

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

Okay.

I understand, and to some extent I'm at where you are on this. There's still hesitation about dropping the price on pollution. It's a principle almost everyone agrees with. However, we can look at the current measures and strike a better balance.

For example, the Greenhouse Gas Pollution Pricing Act currently has some exemptions, for things like fuel for tractors. Bill C-206 could include propane and natural gas, which in fact create less pollution than methods that are already exempt, and for which producers tell us that they have no economically viable alternatives.

No one is talking about eliminating the carbon tax, Quebec's carbon exchange and things like that; far from it. But might there not be an interim solution in the form of an exemption for these fuels, combined with massive investment in support of energy transition, and R and D to improve the processes?

You mentioned extending the three-phase network. Consideration could also be given to developing smaller infrastructures to deal with biomass, for use on a seasonal basis.

I'd like to know what you think about this.

[Marc-André Viau]

I'd like to remind the member that I'm not here to play politics, but to talk about this bill.

As we mentioned, we've been working with farmers to find solutions to the climate crisis and greenhouse gas emissions. If you listened closely to our comments, you would have understood that we were saying that the problem described in Bill C-206 was indeed real.

What we are saying is that the solution being put forward in this bill is not the right one. We agree with compensation. However, placing a price on carbon emissions serves a purpose, which is the need to reduce carbon pollution. That's what we understood from the Supreme Court decision, for example.

[Karen Ross, Director, Farmers for Climate Solutions]

Good afternoon, Mr. Chair and members of the committee. Thanks so much for inviting me to present today. My name is Karen Ross. I'm the director of Farmers for Climate Solutions, or FCS. We're a national coalition of farm organizations who know that agriculture must be part of the solution to climate change.

Launched in 2020, our coalition has grown quickly and includes 20 farmer-led and farmer-supporting organizations that now represent over 20,000 farmers and ranchers from coast to coast. Many of them already use farming practices that reduce emissions, increase resilience to extreme weather and improve their livelihoods. With the right government support, we can rapidly scale these kinds of practices and dramatically reduce emissions from agriculture.

FCS recognizes that putting a price on carbon pollution is essential to achieving Canada's emissions reduction commitments, and this is a fact that is now recognized by all parties in the federal Parliament, but we also understand the economic concerns behind Bill C-206. Many farmers sell in internationally determined markets, and any additional costs can make already tight margins even tighter.

Ultimately, FCS believes that the best way for farmers and ranchers to avoid the price on pollution is to produce less pollution. By transitioning away from fossil fuels, farmers will pay less tax and will be better positioned to compete in the new low-carbon economy. However, adopting practices and technologies that use lower amounts of fossil fuels comes with a lot of risk and a lot of high upfront costs, so farmers can't and shouldn't make this transition alone.

In recent history, our international competitors have dramatically scaled up investments in agri-environmental programs while Canadian farmers have been far less supported. Furthermore, many Canadian industries are receiving ample government support to re-skill and adapt for the clean economy, but agriculture has been largely left out, which means that we are not leveraging the full potential of farmers to contribute to our climate solution.

As a result, our sector's emissions have and will continue to rise unless we act now. This is why the funding announced yesterday in budget 2021 to directly support farmers to immediately adopt lower GHG practices is so heartening. The government has just made an important and unprecedented investment to support farmers to adopt practices like cover cropping, rotational grazing, improved nitrogen management, wetland and tree conservation and the adoption of low GHG machinery, which are all known to reduce emissions and build resilience.

This investment directly responds to FCS's pre-budget recommendation and is precisely the type of support needed to help our sector address the urgency of climate change while making smart business decisions.

The budget also includes a carbon tax rebate for farmers and support for energy efficiency retrofits of propane and natural gas dryers. Taken together, these investments reflect the fact that the government recognizes the potential for farmers to reduce emissions and is ready to support us to leverage our sector's full potential. There is more that still can be done and needs to be done, but that funding is an essential down payment for a resilient and low GHG farm future.

These investments also reflect the fact that on-farm technology to transition to a clean economy already exists. When it comes to grain drying, propane and natural gas dryers are already being retrofitted in Canada to increase efficiency. Also, alternative technologies that don't use any fossil fuels are on the Canadian market already. These alternatives all reduce energy bills for farmers and allow them to avoid some or all of the carbon tax, and their high upfront costs are now shared with the government.

The transition to low GHG agriculture is inevitable because domestic and international buyers are increasingly demanding low GHG products, and farmers won't be able to meet that market demand unless we start reducing our emissions now. That's why strong government support for innovation will benefit farmers more than exemptions to the carbon price.

In conclusion, the investments made in budget 2021 recognize that farmers need support to confront the single largest threat facing our sector, that of climate change. Those are critical investments that will jump-start emission reductions this season. They also lay a foundation for making agri-environmental support a core component of the next agricultural policy framework in 2023, which must further support farmers to compete in a clean economy of the 21st century.

The investments also provide a better path forward for reducing emissions from, and maintaining the affordability of, grain drying than does Bill C-206. Canadian farmers want to lead on climate change, and FCS is ready to support the design and implementation of these important new programs so that they are widely adopted, work for farmers and start to reduce our sector's emissions immediately.

Thanks for your time. I look forward to your questions.

[Marc-André Viau, Director, Government Relations, Équiterre]

Good afternoon, Mr. Chair and distinguished members of the Standing Committee on Agriculture and Agri-Food. My name is Marc-André Viau and I'm Équiterre's Director of Government Relations.

I'm going to share my speaking time with my colleague Émile Boisseau-Bouvier, the Climate Policy and Ecological Transition Analyst at Équiterre.

Thank you for giving us this opportunity to comment on Bill C-206.

Before addressing the subject itself, I'd like to say a few words about our organization. Équiterre is a non-governmental environmental organization that founded the Family Farmers Network in Quebec. We are currently working on a technological showcase project on health and soil conservation and on regenerative practices. We have also just published a report on soil health in collaboration with the Greenbelt Foundation. We have been working with producers, institutional buyers and decision-makers to come up with ways to build more resilient and sustainable forms of agriculture.

I'd like to say a word about our climate expertise because it's related to today's topic. We recently defended federal jurisdiction over a carbon pricing system before the Supreme Court with our colleagues from the Centre québécois du droit de l'environnement. We're pleased to see that all parties represented in the House support the carbon pricing principle.

As for Bill C-206, things have changed a lot since yesterday and, to be sure, since the bill was initially tabled. First of all, the government announced yesterday in its budget presentation that a portion of the revenues from pollution pricing would go directly to farmers in Alberta, Saskatchewan, Manitoba and Ontario beginning in 2021.These are the provinces that do not have a carbon pricing system and that have a federal safety net. An estimated that $100 million will be sent to these provinces in the first year and the amount would increase as carbon pricing rises.

Most important is the fact that the government has also announced that its priority will would be to pay a minimum of $50 million to farmers across Canada to help finance more energy-efficient grain dryers. Eventually, these investments will compensate for carbon pricing on fossil fuels because producers will be able to make a gradual transition. The announcement was very favourably received by the Canadian Federation of Agriculture and the National Farmers Union.

I'm sure you'll agree that the federal budget addresses the very real problem raised by this bill, without weakening the carbon pricing principle. We encourage parliamentarians to continue to pursue this path rather than the direction under study today. We agree that farmers need help, but we cannot agree on the systematic erosion of carbon pricing mechanisms. According to the most recent inventory, greenhouse gas emissions are still increasing. The transition needs to begin soon.

We know that farmers are experiencing growing stress because of the pandemic and a number of harmful climate events. We suggest compensation for income losses resulting from the use of fossil fuels in ways that would allow incentives for energy transition to continue. I hope that this option will be offered by the government. Bill C-206 is in my view incompatible with what the government has just proposed in its budget.

I will now give the floor to my colleague, Émile Boisseau-Bouvier.

[Bob Lowe, President, Canadian Cattlemen's Association]

Good afternoon, and thank you for the opportunity to appear before the committee on Bill C-206.

My name is Bob Lowe, and I'm the president of the Canadian Cattlemen's Association and a rancher from Alberta. With me is Fawn Jackson, director of policy and international relations with the Canadian Cattlemen's Association.

The beef industry contributes $17 billion to Canadian GDP while generating over 225,000 jobs. It is the largest Canadian conserver of the great northern plains, in which I would note is a very large store of carbon. In regard to climate pricing policies, we recommend Canada's farmers and ranchers be exempt from direct carbon taxes, but we want to make sure our policy position, shared by leading economists, isn't confused with our very real commitment to being a partner in tackling climate change.

Canada's beef industry has recently set very significant and ambitious environmental goals, such as reducing the sector's greenhouse gas footprint by 33% by 2030.

As agriculture is a trade-dependent and complex industry, it can be very difficult to correct for competitiveness and trade impacts due to carbon pricing. It is extremely unlikely that farmers and ranchers will be able to pass along the carbon tax, as we are price takers and as there are no real alternatives for farmers. Increasing the price of propane and natural gas will not decrease the use of these energy sources.

For these reasons, we have seen agriculture commonly exempted from the direct costs of carbon pricing schemes, as recommended by policy experts. It's not the right tool for the job. We do recognize that the initial act exempted most direct taxes on farmers and ranchers, and we appreciate those exemptions, but as identified by this private member's bill, it is important to cover all direct taxes, and we have examples why.

Example one is a farm that uses natural gas to heat a calving shed and a small shed for holding a couple of tractors and their work bench. On another farm, they have a steam flaker that uses propane to flake corn to improve the digestibility of the feed. The first farm will have a $6,500 annual carbon tax, while the second will have a $63,000 annual carbon tax once the carbon tax reaches the expected $170 per tonne.

These are taxes on family farms that currently operate on very small margins in an international marketplace. I point to the study that found the average long-term margins for a 200-head cow-calf operation provides an annual income of about $20,000 and that 74% to 85% of the cow-calf sector relies on off-farm income. Furthermore, a study completed by Dr. Schaufele at Western University looked at the impact on the beef sector when farm fuel is exempt and when it is not exempt. The study found that even when exempt from the fuel tax at $40 per tonne, the carbon tax has a negative $25 per animal impact at the feedlot level and a negative $11 per animal impact at the cow-calf level.

The probability of unintentionally pushing food production to other jurisdictions is very real, and with Canada having one of the lowest greenhouse gas footprints per kilo of production at 50% of the global average and being the key conserver of the grassland ecosystem, this pushing of production to other jurisdictions would have serious economic and environmental implications.

CCA strongly supports Bill C-206, however we need to ensure the act covers all areas where a direct carbon tax could impact farmers and ranchers, including heating of buildings, irrigation and machinery such as grain dryers and steam flakers. We recognize that the budget acknowledges a rebate, but to avoid additional red tape, the exemption should be straightforward and not a layer added to the already complex accounting required to operate Canadian farms and ranches.

The Government of Canada is also working on carbon pricing protocols, and we are keen to see these move forward, as it provides opportunity for agriculture to further contribute to fighting climate change. One of the biggest challenges we have in the beef sector regarding climate change is the loss of grasslands and subsequently the carbon stored in them. We must make sure that either through the offset protocols or other policy tools, the very real possibility of further grassland loss is taken into consideration and the conservation of these grasslands within the agriculture ecosystem is appropriately recognized.

Thank you, and we look forward to your questions.

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

Thank you, Chair.

I'll go back to a comparison between Bill C-206 and what was announced in the budget yesterday. The Department of Finance is estimating $100 million in the first year, and then it goes on to say that returns in future years will be based on proceeds from the price of pollution. It says that the intention is to return a portion of the proceeds. I know policy like this doesn't just occur in a vacuum.

In the lead-up to the budget, did the government, specifically the Department of Finance, ever have any consultations with you?

This is to all of the witnesses. I'll start with the Grain Growers. Did it ever have any consultation with you on developing this policy?

Did it give you any idea as to what the portion of the proceeds would be?

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

Okay.

If Bill C-206 doesn't pass, how will that prevent you from rotating your crops? You'll stop growing certain crops because they won't be cost-effective and will be used solely for rotation purposes. Is that correct?