Agriculture Committee on April 20th, 2021

[Erin Gowriluk]

No, we don't have any indication, at this point right now, about what to expect, Mr. MacGregor, for the portion of the rebate.

Of course, naturally we have some concerns about some additional administrative costs that may be associated with the rebate. That's why, even despite last night's announcement in budget 2021, we still remain in favour of a full exemption. Details on that rebate are still, I understand, forthcoming.

No, we had not been in talks with government on that.

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

It seems to me that, if we're looking for streamlined policy that's the easiest to understand, just make this definitional change to what a qualifying farm fuel is in the first place and stop the tax from being collected at the first step, rather than going through a complicated process that's reliant on what the Department of Finance feels is appropriate. It just seems to me that doing this would be the better of both worlds.

There's not a lot of time in these two and a half minutes, Mr. Chair, so I'll end it there and thank our first round witnesses for appearing today.

Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. MacGregor.

That will end our first round.

I really want to thank the Canadian Federation of Agriculture, Mr. Keith Currie—although you came in late, and probably nobody noticed that, but that's good and thanks for being here—and Mr. Frank Annau, director of environment and science policy.

To the Grain Growers of Canada, and Erin Gowriluk, executive director, and Jonothan Hodson, director, thank you for being here.

I'd like to thank Christian Overbeek, the President of the Producteurs de grains du Québec, for being here, and for his comments.

With that, we shall suspend for a few minutes so we can change the panel. We'll be right back as soon as we can. Thank you.

[The Chair, Liberal, Pat Finnigan]

I would like to welcome our second panel. From the Canadian Cattlemen's Association, we have Mr. Bob Lowe, president, and Fawn Jackson, the director of policy and international relations.

I'd like to welcome the Équiterre representatives, Mr. Marc-André Viau, Director, Government Relations, and Mr. Émile Boisseau-Bouvier, Analyst, Climate Policy and Ecological Transition.

I'd also like to welcome Ms. Karen Ross, the Director of Farmers for Climate Solutions.

We'll begin with the testimony.

[The Chair, Liberal, Pat Finnigan]

We will begin with Canadian Cattlemen's Association.

You have five minutes for your opening statement. Please go ahead.

[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.

[The Chair, Liberal, Pat Finnigan]

Thank you very much, Mr. Lowe.

Mr. Viau, you have the floor for five minutes.

[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.

[Émile Boisseau-Bouvier, Analyst, Climate Policy and Ecological Transition, Équiterre]

Thank you, Mr. Viau.

According to information received by the federal government, the average cost per farm of pollution pricing for grain drying varies from $210 to $774, depending on the province. Based on the data, this is equivalent to 0.05% to 0.38% of net operating costs for a medium-sized farm. These percentages are not very high and should enable us to find solutions quickly, particularly in view of yesterday's announcement about financing for more energy-efficient grain dryers.

Let's look in more detail at the costs for provinces affected by the bill. In 2019, Alberta estimated that carbon pollution pricing for grain drying would cost farms in the province 16¢ per acre, or $210 for an average-sized farm. Saskatchewan estimated it at 51¢ per acre of wheat. Manitoba estimated costs of $311-$467 per farm, or between 23¢ and 33¢ per acre. In Ontario, grain producers estimated this cost at just over $750 per average sized farm of approximately 400 acres, or at approximately 0.44% of operating costs.

To conclude, Mr. Chair, although the bill is presented as a plan to help farmers, it is really creating conditions that will tend to keep farming activity dependent on fossil fuels.

In view of yesterday's budget announcement, it would be in the interests of the farming sector, its farmers and its workers, for your committee to quickly look into alternatives to grain drying with fossil fuels so that the government can receive good advice as it implements the program.

We'll be happy to answer any questions you may have.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Boisseau-Bouvier.

I just would like to welcome Ms. McCrimmon as the replacement for Mr. Blois.

We are glad to have you here, Ms. McCrimmon.

We will now continue with Ms. Karen Ross of Farmers for Climate Solutions.

Ms. Ross, you have the floor for five minutes.

[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.

[The Chair, Liberal, Pat Finnigan]

Thank you very much, Ms. Ross. We'll now go to questions, starting with Mr. Lawrence for six minutes.

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

Thank you very much.

My first question will be for the Canadian Cattlemen's Association.

You described in your testimony how the carbon tax will have a negative impact per head. Could you expand on what that impact will be?

[Fawn Jackson, Director, Policy and International Relations, Canadian Cattlemen's Association]

I'm going to take the questions. The ones that I can't answer, I'll pass on to Bob.

The Western University study found that at $40 per tonne, there would be a $25 per-head impact at the feedlot and $11 at the cow-calf level, which results in a $63-million impact on our industry. That's even when there are exemptions for agriculture.

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

When this carbon price goes into place, there's the direct payment and then there are all the inputs. Do all of your competitors also have to pay carbon tax?

[Fawn Jackson]

No. Currently our competitors do not. I know that some are looking at it.

There's probably more research to do there, but it's certainly very concerning. We export 50% of what we produce. Our point is that we should not back farmers into a corner where they don't have any other option for what to do with this tool. It's important to look at other tools.

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

In your experience in dealing with your members, do most of them feel strongly about the environment? If given the economically viable option, would they choose the more environmentally sensitive one, free of government taxation?

[Fawn Jackson]

Yes, absolutely. It's always heartwarming to see the absolute dedication of Canadian farmers and ranchers, particularly those beef producers who have grasslands and have come to appreciate them over the generations and really protect them—absolutely.

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

I'll change witnesses.

For the gentleman from Équiterre, have you spoken to any western grain farmers?

[Marc-André Viau]

I'll take the question.

We are speaking with farmers in all parts of the country about several of our plans.

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

Okay, because you know what? I've spoken to many grain farmers across this country, and I would like to know what you would say to some of them who are in danger of losing their farms because of the cost of the carbon tax. There are no viable alternatives right now. They don't exist.

I've spoken to them. They all want to fight climate change, but they don't want to lose their farms. What would you say to them?

[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.

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

Yes, but.... Excuse me. I am out of time. I don't mean to be rude, but we get about equal time to answer and ask questions.

There is no other alternative. The idea behind the greenhouse gas pollution act is, where there are elastic markets, to encourage people to go to greener solutions. In many places that may work, but here, there are no viable solutions. By not giving farmers this exemption, you're literally pushing some farmers into bankruptcy. What would you say to those farmers, sir?

[Marc-André Viau]

As I mentioned, we are aware of this reality. That's why we're saying that the solution being considered by the government in the budget, which will probably go through before this bill is passed, is a more viable solution in our view because it continues to put a price on carbon. It means that we can reduce our greenhouse gas emissions, and move towards a transition, while at the same time compensating farmers.

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

Yes, but sir, that's just a consultation that will occur and may result in something next year. We don't even know whether that will ever occur or not. There may be a different government. Candidly, hopefully there will be.

Why will you not give farmers this small break? Farmers are teetering on the edge. Give them the break.