Bill C-234

An Act to amend the Greenhouse Gas Pollution Pricing Act

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

[John Barlow, Conservative, Foothills, AB]

Okay. Perfect.

Just to put that in context, I think the NFU has about 3,000 members, and many of those aren't farmers. I just want to put that in the context of the groups in this panel who are saying that their members are very supportive of Bill C-234. I just want to ensure that we have this in context.

Mr. Carey and Mr. Ross, we've been hearing a lot today that if there wasn't this carbon tax on grain-drying and the heating and cooling of barns, there would never be any innovation, technological advancements or emissions reductions. Is that a fair statement?

[Jasmin Guénette, Vice-President, National Affairs, Canadian Federation of Independent Business]

Good afternoon, everyone. My name is Jasmin Guénette, and I'm the vice‑president of National Affairs of the Canadian Federation of Independent Business, the CFIB. I'd like to thank the committee for this invitation.

The Canadian Federation of Independent Business represents 95,000 members in all sectors of the economy and in all provinces. We have 6,000 members working in agriculture.

Of course, our farmers are an invaluable asset to our country. They work tirelessly to ensure we have the best food on our plates to feed our families.

We support Bill C‑234.

Farmers are currently facing skyrocketing operating costs. I am thinking, for example, of the high cost of inputs and fertilizers. In addition to these, the main cost constraints for SME owners are fuel and energy, insurance, and taxes and regulations.

Through Bill C-234, elected officials have an opportunity to help our farmers deal with rising costs and invest in the future of their farms.

For the past several months, the level of optimism among farmers has been very low. Our survey, the business barometer, shows that the agricultural sector is the least optimistic about the future. Rising costs, such as fertilizer and taxes, supply chain issues, bureaucratic and regulatory red tape, labour shortages and Internet access issues in rural and remote communities all make being a farmer very difficult.

Our farmers want to protect the environment. The land is their livelihood. Ninety per cent of our farmer members farm primarily for personal reasons, and almost two‑thirds farm for economic reasons as well.

In a recent survey we conducted of our farmer members, 82% of respondents said that the federal carbon tax had a negative impact on their business. The carbon tax reduces their financial ability to make technological investments to reduce emissions and improve the environmental performance for their farm. Our members tell us that applying the tax to propane and natural gas punishes farmers for using products where there are no widely available and affordable alternatives.

CFIB members support Bill C-234. We recommend that the committee support it as well. In doing so, you have the opportunity to send a clear message to the agricultural sector that you recognize its challenges in terms of costs and the key role it plays in Canada.

While the current federal carbon tax includes exemptions that apply to fuels used for agricultural purposes, farmers are facing major cost increases and rising prices for propane and natural gas. This bill provides exemptions for propane and natural gas used for on‑farm grain drying and barn heating, for instance. The exemptions in the bill are crucial. Bill C-234 will help support the health and growth of Canada's agricultural sector.

Thank you. It will be a pleasure for me and my colleague Ms. Taylor Brown, who is with me today, will be pleased to answer your questions.

[Scott Ross, Co-Chair, Agriculture Carbon Alliance]

Thank you.

Exemptions are, simply put, the best option. Unfortunately, the carbon price rebates for farmers contained in Bill C-8 do not adequately respond to the breadth and variety of carbon surcharges applied to farms. Bill C-234 would provide a complete exemption for essential activities that lack viable alternatives and leave the money in farmers' pockets to make timely investments in their operations.

To support farmers in these efforts, Bill C-234 seeks to amend the Greenhouse Gas Pollution Pricing Act to extend the exemption for qualifying farm fuel to marketable natural gas and propane. We view this as tidying up exemptions that should have been in place from the get-go when diesel and gasoline used on farm were exempted.

Farmers and ranchers are climate solution providers, sequestering millions of tonnes of carbon, protecting biodiversity and grasslands and utilizing the latest technologies to reduce fuel and water use. Agricultural production has increased significantly while total emissions from the sector have been relatively stable for 20 years, resulting in a decrease of GHG emission intensity of 50% from 1997 to 2017.

Farmers and ranchers are stewards of the land, adopting the best environmental practices whenever possible. To be able to continue to invest in innovations, they need to remain competitive and have available working capital to do so. By adopting policies that enable them to remain competitive, producers will be able to further their investments and the sustainability of their operations, which will augment the sector's potential to further lower emissions and sequester carbon while feeding Canadians and driving our food exports.

Canada's farmers and ranchers are strong supporters of Bill C-234 and look forward to it being moved to committee stage for further discussion, debate and analysis.

Thank you.

[Dave Carey, Co-Chair, Agriculture Carbon Alliance]

Thank you for the invitation to appear today on Bill C-234.

My name is Dave Carey. I have the pleasure of serving as co-chair of the Agriculture Carbon Alliance, or ACA. I'm joined today by my fellow co-chair, Scott Ross. I will be sharing my time with him.

ACA is a first-of-its-kind coalition of 15 national farm organizations dedicated to working collaboratively on agri-environmental policy. Our membership encompasses major agriculture commodities, including seed, grains, oilseeds, pulses, cattle, sheep, pork, fruit and vegetables, dairy, forage and grasslands, and poultry. Collectively we represent more than 190,000 farm businesses.

A resilient driver of our economy, Canada's primary agriculture industry contributes more than $32 billion to our GDP, while the entire agri-food industry represents another $135 billion and provides one in nine Canadian jobs.

The ACA was established to ensure that Canadian farmers' sustainable practices are recognized through a policy environment that maintains their competitiveness, supports their livelihoods and leverages their critical role as stewards of the land. Bill C-234 is a key policy priority for our members. They have been proponents of this bill since day one.

To remain competitive and environmentally sustainable, farmers increasingly need capital to invest in innovations that drive efficiencies, reduce fuel use and implement best management practices in their operations.

Currently farmers pay a carbon price for utilizing natural gas and propane for on-farm practices that are essential to food production. These practices include grain drying, heating and cooling of livestock barns and greenhouses, feed preparation and steam flaking, and irrigation. With no viable alternatives, pricing these activities does not provide the adequate signal to lower emissions from these energy sources.

Bill C-234 allows farmers the capital to make the investments on farm that will drive energy efficiencies and support practices that will help the environment, including energy-efficient grain dryers, precision agriculture technologies, anaerobic digesters and solar panels. Investments in these technologies can cost hundreds of thousands of dollars. Where no alternative exists, carbon surcharges pull capital away from these critical investments that would augment the sector's potential to further reduce emissions.

It's over to you, Scott.

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

Thank you, Chair.

Mr. Wright, I know the NFU has written extensively about the high-input, high-output farming model, and also about the state of farm debt, which has gone up considerably over the last 20 years on Canadian farms. Ultimately, Bill C-234 is trying to tackle one small part of the price of inputs that farmers have.

I've always been amazed at the ingenuity and innovation that exists in Canadian farming activity. Do you have any examples you can share with the committee of how farmers are really leading the way in trying to reduce their input costs, because that's such a huge part of farming and it really affects their balance sheet?

Could you provide some examples, and examples of where you think the federal government should be doing more to build upon that kind of model that farmers are already leading with?

[Émile Boisseau-Bouvier]

Thank you for the question.

I want to confirm that this is indeed a fossil fuel subsidy; I want to make that clear. Removing the carbon tax as proposed in Bill C-234 will slow the arrival and implementation of sustainable alternatives because they won't be cost competitive. Consumers and farmers can have the best of intentions, but if it's just not a profitable business for them, they're not going to go with the sustainable alternatives.

Therefore, the price on carbon and the price index must be maintained to encourage consumers to make decisions that move in the right direction.

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

Thank you, Mr. Chair.

I'd like to thank the witnesses for their testimony today.

I want to begin with the statement from Mr. Boisseau-Bouvier that what's contemplated under Bill C-234 would become a de facto subsidy for the oil and gas sector. I must admit that I fail to see how the addition of a tax, and then the potential removal of that tax, becomes a subsidy. That's logic beyond my head. I just want that on the record. From what we're hearing from farmers, grain farmers in particular, they're getting cents back on the dollar that they're spending on this carbon tax on grain drying and barn heating. I wanted to start by putting that on the record.

I'd like to direct my first question to you, Mr. Wright, please.

With the greenhouse pollution pricing act of 2018, the government did grant the on-farm fuel exemption. With respect to barn heating and grain-drying fuels, do you think that was an intentional policy decision or an oversight?

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

Thank you very much, Mr. Chair.

Thank you to all of our witnesses for appearing today.

I'll start with Mr. Boisseau-Bouvier.

We are spending a lot of time talking about the bill before us, which is Bill C-234, but I want to talk about the parent act.

The statute that this bill is amending is the Greenhouse Gas Pollution Pricing Act. When that bill was originally drafted and duly passed by the Parliament of Canada in 2018, I believe, it already included definitions of a qualifying farm fuel, an eligible farming activity and eligible farming machinery.

You've been talking about how it's wrong and that Bill C-234 is heading in the wrong direction because it's sending the wrong message. Do you have an opinion on the original exemptions for farming activities that were included in the parent statute?

What is your opinion on the fact that farmers can buy diesel for their tractors and not have to pay a surcharge on it because there is no viable alternative? Do you have an opinion on the provisions that are already in the parent statute?

[Émile Boisseau-Bouvier]

If there was a mistake when the first bill on carbon pricing was drafted, it shouldn't be corrected by making another mistake by adding these exemptions that continue to favour fossil fuels. As I've said repeatedly, Canada is committed to ending fossil fuel subsidies by 2023. Right now, it is October 3, 2022. The year 2023 is coming up very quickly. For the sake of consistency, I find it difficult to see how the Canadian government could implement Bill C-234 while maintaining the promises it has been making since 2009.

[Émile Boisseau-Bouvier]

Yes, that’s exactly it. Our farmers have environmental values. We need to make it easier for them to make that their first choice so that they don't even have to ask. So we need to favour renewable energy, not fossil fuels, as Bill C-234 is proposing right now.

[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.

[Richard Lehoux, Conservative, Beauce, QC]

I understand that there is work to be done upstream, Mr. Caron, but the difficulty that we have right now is on the harvest side. Particularly in Quebec, there is an important link to make with the issue of grain drying. Bill C-234 adds certain fuels used for grain drying to the list of products exempt from the fuel charge. This is very much the focus of the bill.

I am trying to detect in your comments what may be a solution in the short term. I agree with you that land rotation could provide medium and longer-term improvements, but what are the short term solutions?

If this requested exemption is not provided soon, the fuel charge will quickly become a burden on farmers. I'm thinking of grain drying, among other things, but there's also building heating, which is far from negligible in Quebec.

[Glenn Wright, Farmer and Professional Engineer, National Farmers Union]

Thank you for inviting the National Farmers Union to provide submissions to committee here today.

My name is Glenn Wright, and I have been an active member of the National Farmers Union, or NFU, since 2017. I supported my farm with off-farm income by working first as a professional engineer for 15 years, and now as a lawyer. My wife and I operate our grain farm near Vanscoy, Saskatchewan.

NFU policy positions are developed through a democratic process of discussion and debate by members at regional and national conventions.

The harvest of 2019 on the Prairies was referred to as the “harvest from hell” because nearly all the grain taken from the fields was either tough or damp. There was significant grain spoilage for many producers, including my farm, and grain drying required far more energy than expected that fall.

As a result, at the 50th annual convention of the NFU in November 2019, NFU members passed a policy resolution that requested that the federal government provide a rebate of the carbon levy on farm fuel used for grain drying. NFU members could not understand why grain dryer fuel was not treated the same as tractor fuel in the Greenhouse Gas Pollution Pricing Act, which hereafter I will refer to as simply the pollution pricing act.

Since the passing of that NFU resolution, recent changes made by Bill C-8 introduced a tax credit to return fuel charge proceeds to farming businesses where the pollution pricing act federal backstop applies: Alberta, Saskatchewan, Manitoba and Ontario. The NFU believes that the amendments introduced by Bill C-8 were a step in the right direction, and the NFU urges the committee to be cautious with respect to further changes proposed with Bill C-234.

The NFU worries that Bill C-234 proposes to create a complete exemption for farm heating fuels, which would entirely remove the pollution pricing signal currently provided by the pollution pricing act. Pollution pricing signals are important because they encourage producers to find and implement lower-emissions practices to heat our barns and dry our grain. The current system, as modified by Bill C-8, is now striking a better balance as it retains the pollution pricing signal without threatening food production.

The problem with Bill C-234 is that a complete exemption does nothing to encourage clean technology and low-emission alternatives. The exemption proposed by Bill C-234 may have been more sensible when the pollution pricing act was first drafted, but it becomes less appropriate as clean alternatives are available.

The growing body of climate science information regarding dangerous climate change requires an urgent policy response. In the context of Canadian agriculture and Bill C-234, the following points must be considered.

Number one is that greenhouse gas pollution must be reduced as fast as possible. There are no easy, cost-free ways to accomplish this task. In our capitalist market-based economy, pollution price signals are important for all players, including farmers.

Number two is that adequate supplies of food must be maintained. The pollution pricing act reflected this and exempted most farm-used fuel from pollution pricing.

As for number three, the NFU was disappointed that farm-used grain-drying fuel was not included as farm-used fuel in the pollution pricing act. Bill C-8 has improved the situation regarding fuel used for grain drying while still providing some pricing signal to reflect the cost of ongoing pollution.

The NFU recommends that the government continue to assist farmers to transition to better practices by providing incentives for farmers to purchase more efficient grain dryers and improve livestock facilities, and that it continue using the pollution pricing act to provide price signals for farmers regarding the costs of pollution where possible.

Specifically with respect to Bill C-234, the NFU recommends that this committee amend Bill C-234 to include a sunset clause for the exemption that would treat grain-drying and barn-heating fuel as farm-used fuel. The sunset period would provide time for clean grain drying technologies to mature and provide time for farmers to retrofit farm building insulation and heating systems to decrease greenhouse gas emissions from their farms.

Subject to any questions, those are our submissions from the NFU today.

Thank you.

[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.

[The Chair, Liberal, Kody Blois]

Welcome to meeting number 29 of the Standing Committee on Agriculture and Agri-Food.

I will start with a few reminders. Today's meeting is taking place in a hybrid format. The proceedings will be made available on the House of Commons website. Just so you are aware, the webcast will always show the person speaking, rather than the entirety of the committee. Of course, screenshots or taking photos of the screen is not permitted. Finally, I ask that members who are participating in the meeting in person follow the Board of Internal Economy's health recommendations.

Today, the committee is continuing its consideration of Bill C‑234.

We have three different witnesses here for our first panel.

Joining us by video conference as an individual is Mr. Jean Caron, professor, Laval University. Welcome, Mr. Caron.

From Équiterre, Émile Boisseau-Bouvier, climate policy analyst, is also joining us by video conference.

From the National Farmers Union, we have Glenn Wright, farmer and professional engineer, joining us by video conference.

Each of our witnesses is going to have five minutes. Obviously, we have the ability for English and French. You will see the toggle at the bottom of your screen.

I'm going to allow Mr. Caron to start. You will have up to five minutes, and then we'll go to questions.

Mr. Caron, it's over to you for up to five minutes.