Agriculture Committee on April 29th, 2021

[The Chair, Liberal, Pat Finnigan]

I call the meeting back to order for the second hour.

We're joined by Fred Ghatala, director of carbon and sustainability at Advanced Biofuels Canada; and Jasmin Guénette, vice-president of national affairs at the Canadian Federation of Independent Business.

Good afternoon, Mr. Guénette.

We're also joined by Virginia Labbie, a senior policy analyst for agri-business.

We'll start the presentations.

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

[Fred Ghatala, Director, Carbon and Sustainability, Advanced Biofuels Canada]

Thank you, Mr. Chair and members of the committee. It's an honour to present to you today.

My name is Fred Ghatala. I'm the director of carbon and sustainability with Advanced Biofuels Canada. We are the national voice for producers, distributors and technology developers of advanced biofuels.

Our members are global leaders. They have built and operate plants on four continents, with the capacity to produce over 15 billion litres of advanced biofuels annually. In Canada, our members currently operate seven facilities with an annual capacity of over 670 million litres. We are developing new technologies and production facilities to meet increasing demand for advanced biofuels and other non-fossil clean fuels.

In response to policies such as the clean fuel standard, the Greenhouse Gas Pollution Pricing Act and provincial measures, a recent survey of our members identified over 60 capital projects planned to 2030, with over $15 billion of capital expenditure. Economic modelling of the clean fuel standard indicates that biofuels demand could increase by twofold to threefold by 2030, supporting 20,000 jobs and generating over $10 billion in new economic output.

Canadian feedstocks are fundamental to supporting investment in new domestic advanced biofuel capacity. Canadian crop and forestry sectors have established a global leading record of performance on the sustainability of harvested products, with sound data to evidence impacts on land, air and water.

As the global demand for sustainable agricultural and forestry products and non-fossil clean fuels has expanded over the past two decades, our biomass supply systems have invested broadly in innovation to reduce greenhouse gas emissions and other environmental impacts, all while increasing overall supply with less acres. Statistics Canada data shows that, since 2000, Canada has reduced total seeded acres by 0.4% per year, an eight-million-acre reduction. Canada has the proven capacity to sustainably harvest crops, supply low-cost and low-carbon agricultural and forestry residues and adopt circular waste management solutions to support expanding clean fuel production.

We have a wealth of clean fuel supply options: conventional crops, rendered animal fats, municipal and industrial wastes, direct air capture of carbon dioxide, biocrude and even expanded lipid production within existing crops. Ensuring Canadian farm and forestry sectors are strong participants in low-carbon markets is integral to realizing the broad benefits that new policies like the clean fuel standard present.

More clean fuels produced in Canada also mean reduced import reliance on refined petroleum products and biofuels products in western and central Canada. The Canadian Fuels Association reports that in 2019 these markets relied on over 12 billion litres of imported gasoline, diesel and jet fuels. We view the proposed amendment as a recognition that agricultural producers are indeed trade-exposed and that measures are needed to enhance their competitiveness.

Further, because the carbon intensity of biofuels has dropped significantly over the past decade, we know that farmers are working hard to improve their greenhouse gas emission reductions by investing in sustainable yield improvements and enhanced on-farm practices. Simply put, farmers are a key part of the climate solution, and we support policies that allow them to continue to deliver results.

To conclude, expanding advanced biofuels use is the most affordable, immediate and effective tool to reduce emissions in the internal combustion engine vehicles that drive our economy today. In the future, we will increasingly expand use of electric vehicles and low-carbon hydrogen. However, to achieve net-zero emissions by 2050, we must address the hard-to-decarbonize transport sectors, such as the legacy vehicle fleets, long-haul transport, aviation, marine and rail that are in operation today.

The economic benefits of advanced biofuels are being realized across Canada's rural farming and forestry communities from coast to coast. For Canada to succeed in attracting investments in advanced biofuel production, innovation and supply chain and infrastructure expansion, it is critical that our domestic agriculture producers are positioned to participate.

Thank you again for the opportunity to appear today. I look forward to your questions.

[The Chair, Liberal, Pat Finnigan]

Thank you very much, Mr. Ghatala.

The representatives of the Canadian Federation of Independent Business now have five minutes to give their presentation.

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

Good afternoon, Mr. Chair and committee members.

My name is Jasmin Guénette. I'm the vice-president of national affairs at the Canadian Federation of Independent Business, or CFIB. I'm joined by my colleague, Virginia Labbie, a senior policy analyst for agri-food. I'll give my short presentation in French and my colleague will give her presentation in English.

I want you to know that we're very pleased to be here today. You have been emailed a PowerPoint presentation, which will serve as the basis for our comments.

I want to remind you that CFIB is a non-partisan and non-profit organization that advocates on behalf of SMEs to governments. We have 95,000 members across the country who work in all sectors of the economy, and 6,000 of those members work in the agricultural sector.

As you know, the pandemic has been very challenging for small independent businesses. Our most recent survey shows that only 56% of SMEs have fully reopened. The situation is even more worrisome when we consider that only 29% of SMEs have normal revenues for this time of year. This isn't the time to add costs or to increase taxes for businesses that are already struggling financially. Instead, it's the time to find ways to lighten their tax burden.

We're here today to support Bill C-206. My colleague, Virginia Labbie, will provide several pieces of information that substantiate our position.

Ms. Labbie, the floor is yours.

[Virginia Labbie, Senior Policy Analyst, Agribusiness, Canadian Federation of Independent Business]

Thank you, Jasmin.

CFIB regularly surveys our farm members on issues that impact their agribusiness. It is clear that farmers care about the environment. In fact, almost 80% of farmers have taken action in the last several years to lessen their environmental impact, including 85% of those in the field crop sector.

When asked what motivates their business to implement measures to improve environmental quality, 87% of farmers said they were motivated by their own personal views.

CFIB continues to hear from farmers that the federal pricing backstop plan has already had a significant impact on their bottom line. When CFIB surveyed our farm members, 82% of respondents agreed that the federal carbon tax is negatively impacting their business.

When analyzing the data by sector, 94% of farmers in the field crop sector, and 93% in the livestock sector have been most negatively impacted. When asked to estimate how much their business expected to pay in federal carbon taxes in the first year it applied to them, farmers, on average, paid almost $14,000.

It is important to note that these costs were incurred when the federal carbon tax was set at $20 per tonne of CO2. As you know, the federal carbon tax is scheduled to rise to $170 per tonne by 2030. This amounts to an increase of more than 325% from today and a 750% increase from when this data was collected.

One of the recurring themes in the member comments in our surveys is that farmers cannot pass these additional costs on to their customers. In fact, 83% in the field crop sector said they would be able to pass on less than 10% of the federal carbon tax cost to customers. Over 78% said they would have to eat the entire cost of the federal carbon tax.

Given that most farmers are price-takers, the magnitude of these increases in federal carbon taxes will hamstring farmers' ability to compete and invest in their business and in new technology. In addition, the ripple effect throughout the agriculture sector has ratcheted up indirect costs for farmers from the carbon tax applied to farm inputs and transportation services such as railways and trucking.

It is clear that even an incremental annual increase to the price on carbon emissions is worrying to farmers. When the federal carbon tax was set to increase from $30 to $40 per tonne on April 1, almost three-quarters said it would have a significant impact on their agribusiness.

It is fair to say that farmers are deeply concerned about what these costs will escalate to by 2030. This is why it is important to provide carbon tax relief now, and why Bill C-206 is an urgently needed, positive first step in addressing this unfair burden on agriculture.

CFIB believes that a carbon tax on propane and natural gas to dry grain punishes businesses for utilizing a product for which there are no practical alternatives. In the context of the pandemic, we must look for ways to help farmers and ensure the agriculture sector is competitive and performs to its potential to help lead Canada's economic recovery.

Therefore, CFIB urges all members of Parliament to support Bill C-206.

Thank you for the opportunity to appear before your committee today and present our farm members' views on Bill C-206.

[The Chair, Liberal, Pat Finnigan]

Thank you, Ms. Labbie.

Now we'll go to our question round, and we'll start with a six-minute round with Philip Lawrence.

Go ahead, Mr. Lawrence, for six minutes.

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

Thank you, Chair. I appreciate it.

I'll start my questions with the CFIB. One of the motivations for having a carbon tax, which is laudable, is to encourage and incentivize farmers to take actions that will reduce their carbon footprint.

Given the fact that there aren't any viable alternatives, and we've had considerable testimony on that, and the precarious state that farmers are often debt-laden and price-takers, is there, in your opinion from the numbers and from talking to farmers, the possibility at least that a raise in the carbon tax to $170 per tonne could cause some farmers to go out of business, particularly small family-held farms?

[Virginia Labbie]

As you heard in my opening comments, we know that farmers on average paid about $14,000 in the first year it applied to them. I think you heard from testimony earlier today that going to $170 per tonne is a real game-changer, according to Professor Charlebois.

As we mentioned when we surveyed our members, $14,000 for the first year it applied to them, this was when the carbon tax was set at $20 per tonne. As we know, the federal carbon tax is scheduled to rise to $170 per tonne. This amounts to an increase of more than 325% from today and a 750% increase from when this data was collected.

I think it's fair to say there's a significant impact on farm income, on their competitiveness. That's why we believe Bill C-206 offers the opportunity to provide some much-needed carbon tax relief moving forward.

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

Thank you very much.

While we can certainly disagree on the carbon pricing regimes, I think it's fair to say that under the current carbon pricing regimes both farmers and small business owners have been disadvantaged. It's just inequitable, regardless of the broader discussion of carbon pricing.

Would you agree with that analysis?

[Virginia Labbie]

Yes, when we analyzed a lot of the data that was out there, it appears that small businesses bear about half the direct burden of paying for the carbon tax, yet they will receive less than 7% of the rebates and incentives available.

We believe that small businesses are being asked to absorb a disproportionate amount of the increased price on carbon in order to provide households with rebate cheques that more than offset their increased carbon-related costs.

This bill is about creating fairness and addressing those inequities, and we believe it's a positive step forward in addressing the unfairness of the federal carbon tax on farmers.

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

Thank you very much.

Obviously, given that it would pose challenges to small business owners and farmers alike, I know that your organization has done a lot of work on the impact of the pandemic. Perhaps you could combine the perfect storm or the worst storm, I should say, for small business owners and farmers alike with respect to the challenges of the pandemic and an ever-rising carbon tax.

[Virginia Labbie]

I'll let Jasmin address that, please.

[Jasmin Guénette]

The pandemic, as I mentioned in my introductory remarks, has been very tough on small business. I provided some figures to highlight that.

One thing I could add to what I said is that, on average, small businesses had to take on $170,000 of COVID-related debt just to be able to weather the storm. If you look at the level of debt in the agriculture and natural resources sectors combined, the average debt is at $329,000, so it's a huge amount of debt for businesses to take on due to COVID-19.

A bill like this one would provide much-needed relief for businesses that have been hard hit by the pandemic.

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

That's perfect.

I'll switch over to you Mr. Ghatala.

In your role with respect to biofuels, do you see the farmers making a contribution to the environment, particularly contributing biofuels to our economy as opposed to using fossil fuels?

[Fred Ghatala]

Thank you for the question.

Yes, as I mentioned in the remarks, the farming community is fundamental to the tremendous growth opportunity that is before us for advanced biofuels. We estimate there's a two- to three-time increase coming, which is a Canadian opportunity to fill the demand created by the clean fuel standard, so 2.5 billion litres up to 6.5 billion litres. That's a huge opportunity.

We've seen in the past six weeks the Canadian press announce significant expansion, so we very much support any efforts that allow growers to participate to a greater degree in producing that feedstock to create more advanced biofuels for use in Canada.

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

Is that time, Mr. Chair?

[The Chair, Liberal, Pat Finnigan]

That's about it, Mr. Lawrence.

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

I will cede my last three seconds or whatever it is. Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you very much.

We'll go to our next speaker, Mr. Blois, for six minutes.

Go ahead, Mr. Blois.

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

Thank you, Mr. Chair.

I'd like to thank our witnesses here today. I'm going to start with Mr. Ghatala.

You mentioned the clean fuel standard. How has the price on pollution created opportunities for businesses such as you mentioned, small businesses and farmers, to be able to feed into the feedstock, not just under the clean fuel standard? Is that moving the metric in terms of the innovation and technology that some of the businesses that you represent are moving toward?

[Fred Ghatala]

That's right.

The Greenhouse Gas Pollution Pricing Act includes in it an exemption approach whereby renewable fuels are blended to a certain limit. In a sense, the Greenhouse Gas Pollution Pricing Act does well to exempt renewable fuels.

Growers and farmers producing feedstock for renewable fuel production to meet the clean fuel standard have the added impact and market pull from that carbon-price exemption plus demand from the clean fuel standard, so it's really important that these policies can work together. I think that's why really encouraging growers to participate in that market through a revised approach to the carbon price on farm fuel use is very consistent.

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

I want to go to Ms. Labbie with the Canadian Federation of Independent Business. Is it fair to say that your organization just writ large is against the price on pollution, Ms. Labbie?

[Virginia Labbie]

I represent farmers, and on a daily basis we reach out to our farmers on a number of issues and through various member surveys. When we talk to our members we gather—

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

Ms. Labbie, I'm sorry. I want to be direct. Is your organization against the price on pollution? I thought that the CFIB was just against it writ large, beyond agriculture. Is that fair?

[Virginia Labbie]

Our members are really concerned, as I mentioned in my statement. Our farm members are facing a significant impact, $14,000 in the first year it applied to them, and they're really concerned about—