Agriculture Committee on April 29th, 2021

[The Chair, Liberal, Pat Finnigan]

Good afternoon and welcome to you all.

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

I'll call this meeting to order.

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

Pursuant to the order of reference of Wednesday, February 24, 2021, and the motion adopted by the committee on March 9, 2021, the committee is resuming its study of Bill C-206, an act to amend the Greenhouse Gas Pollution Pricing Act, regarding qualifying farming fuel.

Today's meeting is taking place in a hybrid format, pursuant to the House order of January 25, 2021. Therefore, members are attending in person in the room and remotely using the Zoom application.

The proceedings will be made available via the House of Commons website. Just so that you are aware, the webcast will always show the person speaking rather than the entirety of the committee.

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

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

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

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

Mr. Sylvain Charlebois, welcome.

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

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

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

[Dr. Sylvain Charlebois, Professor, Dalhousie University, Director, Agri-Food Analytics Lab, As an Individual]

Thank you very much, Mr. Chair and dear members.

Climate change is a real problem and concerns us greatly. Everyone agrees that we need to act quickly. The carbon tax seems to provide a simple and fair solution, but for farmers, a $170-per-tonne carbon tax is a game-changer. By 2030 a typical 5,000-acre farm would have to shell out a significant sum, which could reach tens of thousands in new tax based on some estimates, and without compensation. This is enough to compromise any farm's ability to make a profit. Across the food supply chain, not all carbon taxes are created equal.

Furthermore, the impact of a $170 tax on the competitiveness of the sector will depend greatly on what happens at Canada's borders and beyond. Given the competitiveness of national and international food markets, a $170 tax per tonne imposed in Canada but not imposed in other major exporting and importing countries will undoubtedly penalize our own farmers. Producers cannot increase their prices even if production costs increase on the farm. This is quite simply price-taking economics. Unlike the food processing and distribution sectors, this economic reality afflicts production significantly. By taxing our domestic food production, importers will have a significant competitive advantage. Protecting our own farmers is imperative.

Farmers are among the best environmental stewards in the world. They earn their living mainly by having access to abundant natural resources. Environmental recklessness is just not an option for them. In fact, many Canadians are not aware of how much carbon sequestration does occur at the farm gate. In the last 30 years, we have seen more technological changes on farms in Canada than in grocery stores. This may explain why Canadians may underappreciate the progress made by farmers regarding sound environmental practices over the last generation.

One example is the fact that there is little tillage being done on the Prairies. Manitoba still tills to some extent, but that is due to the heavy clay soils that must be dried out over several years in order to facilitate seeding. An unreleased study by Dr. Stuart Smyth and Chelsea Sutherland from the University of Saskatchewan looks at carbon sequestration on the farm. Tillage practices pre-1995—pre-GM herbicide-tolerant canola—are compared with 2016 to 2019 rotation data. Continuous cropping allows for ongoing CO2 sequestration. Removing tillage has greatly reduced the amount of soil carbon that is released into the atmosphere.

Such progress is largely due to research in genetic engineering. Farmers have embraced these new technologies, allowing agriculture to reduce its carbon footprint. In lieu of being unfairly targeted, the work that farmers are doing should be celebrated and recognized. Incentives to make big changes are lacking. For example, there is no technological substitute for propane to dry out grain at harvest. We need to develop new technologies to offer environmental options to our producers.

Safeguarding our farmers' competitiveness while assuring Canada of more food autonomy will be critical, especially if our country aspires to reach our goal of becoming an agricultural powerhouse, as set by the Barton report a few years ago.

I would also like to give the committee an important message which goes beyond agriculture. You should know that consumers are facing big risks as well. Farmers are still claiming that the price of food will go up because of the carbon tax, which will be $50 per metric ton next year. This is not really true. Quebec and British Columbia have had a carbon tax since 2007 and 2008 respectively and food prices have barely budged.

If, however, the carbon tax increases to $170 a ton, it would be risky to downplay any potential effect on food affordability without conducting an in-depth evaluation.

Obviously, more research needs to be conducted, but a considerable hike in food prices is certainly possible.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Charlebois. We will now go to the next witness.

Now we will have, from the David Suzuki Foundation, Mr. Green, for up to five minutes.

Go ahead, Mr. Green.

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

Thank you very much.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Green.

We will now hear Ms. Isabelle Turcotte, from the Pembina Institute.

Madame Turcotte, the floor is yours for five minutes.

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

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

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

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

This is all great news for Canadians.

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

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

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

Let's first consider combustion emissions. In the provinces where the backstop is applied, the federal fuel charge does not apply to gasoline and diesel used in tractors, trucks and other machinery used on farms, so there is a lot of relief that is supplied there to farmers. A study that was conducted in 2019 estimates that the impact of the cost of carbon pricing in relation to grain drying, which is not exempt, ranges from 0.05% to 0.38% of net operating costs for an average farm, equivalent to $210 to $774. These results do not include the carbon pricing rebate offered to farmers, which has increased with budget 2021. It is also worth noting that the study highlights that heating fuels and electricity represent the smallest sources of costs for farmers.

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

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

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

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

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

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

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

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

Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you, Ms. Turcotte.

Now we'll go to our question round.

We'll start off with a six-minute round of questions by Monsieur Lehoux.

Mr. Lehoux, you have six minutes.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you, Chair. I will be sharing my time with Mr. Philip Lawrence.

My question is for Mr. Charlebois.

Mr. Charlebois, you began by stating that farmers are doing a good job of protecting the environment, thanks to various soil tillage practices. They have made huge strides.

Do you know if there are other ways of drying grain that do not necessarily use propane or natural gas, especially in Quebec?

[Dr. Sylvain Charlebois]

Thank you for your question, Mr. Lehoux.

There aren't really any other options. Actually, there are a few, but they cost more and they are not as efficient.

We have to understand that farmers don't control market rules. Many people do not understand how vulnerable farmers are and that they are at the mercy of the markets.

A carbon tax increase could prevent producers from being more competitive and could even lead to some farms going under. Several farms have already gone belly-up. The tax could increase the rate of farm bankruptcies over the next few years.

[Richard Lehoux, Conservative, Beauce, QC]

You've stated that the $50 tax will climb up to $170, which is a pretty big jump. Businesses could find themselves in dire straits when it comes to competitiveness and export capacity.

[Dr. Sylvain Charlebois]

Absolutely. I saw no problem with a $50 tax, because that amount had been recommended on the basis of case studies. By imposing a $170 tax, the government is clearly showing its commitment, which is great, but it also has to take into account the policy's effects on our farms.

[Richard Lehoux, Conservative, Beauce, QC]

Mr. Charlebois, we know that hydroelectricity could be a useful resource in Quebec, but not at the rate that producers currently pay.

Should we be doing research on alternative energy sources?

[Dr. Sylvain Charlebois]

While I was preparing for today's meeting, I realized that we do not know enough about the effects of the carbon tax on agri-food sectors from farmgate to table.

I spoke earlier about food prices. Not much research has been done and we don't necessarily understand the effects on agricultural production either.

You are right, more research is essential.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you, Mr. Charlebois.

I will now give the rest of my time to Mr. Lawrence.

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

Thanks very much.

Thank you all for being here, and thank you for your testimony.

Mr. Charlebois, you didn't get through your initial comments, and I'd like to give you a bit of time to do so, if there's anything you want to say to the committee right now.

[Dr. Sylvain Charlebois]

Thank you, Mr. Lawrence. I provided the main points I wanted to provide. The last part of my opening remarks was very much about the consumer. I've been very concerned about the affordability of food.

It's been argued several times now in the media and elsewhere that the carbon tax would have a huge impact on food prices over time. My answer to that is that I don't know. We don't know for sure. As I said to Mr. Lehoux, at $50 there's one discussion, and at $170 there's a totally different conversation. I think this warrants a thorough evaluation of how the carbon tax could impact food affordability for Canadians over time.

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

I'll go over to you, Mr. Green. Thank you for fighting climate change. We all appreciate that.

My concern is with respect to other technologies. You seemed to gloss over that. One was mentioned in some of the testimony, but we only have one.

Do you know of any technology right now that is feasible and that could be adopted by all farmers within the next three years?

[Tom L. Green]

First of all, we know that there are inefficient and more efficient grain dryers, and already farmers are investing in the more efficient ones.

We did a study called “Zeroing in on Emissions”. We looked across the economy at studies on how we can decarbonize as a result of carbon prices. What we're talking about in grain drying is a low-temperature heat, compared with the very high-temperature heat that industrial processing may need. That's a perfect application for heat pumps.

There are some heat pump dryers that are already available on the market. I did some reading on this to look into this very question. By having a price signal, this will be incentivized. Different approaches will be developed and—

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

What I don't—

[Tom L. Green]

What I recommend to the committee is to design an approach such as rebates. It is a much more effective way to address this problem.

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

I don't disagree with you that there could be innovation in the future. The problem is that it's not in the market currently—or if it is, it's a very small portion—and to adopt it would take years.

You mentioned the rebates, but that has only been proposed in a Liberal budget. There's no legislation. That could take years. We're still waiting for pharmacare and child care, among other things. This is decades in the making.

Are you aware, yes or no, of any technology that could be adopted?

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Lawrence. Unfortunately you're out of time.

We'll move to our next member.

Ms. Bessette, you have six minutes.

[Lyne Bessette, Liberal, Brome—Missisquoi, QC]

Thank you, Mr. Chair.

I would like to thank the witnesses for being here with us today.

My first question goes to Mr. Green, from the David Suzuki Foundation.

Mr. Green, can you please tell us about the effects that climate change will have on the Canadian agriculture sector over the next few decades?

[Tom L. Green]

Thank you for the question, Ms. Bessette.

We know that Canada is particularly vulnerable to the effects of climate change and that the effects here will be double those felt on average overall. We are witnessing more extreme events, like the floods in Quebec and the forest fires in Fort McMurray and in my own province, British Columbia, as well as increasing periods of drought.

Farmers and all of society will suffer. Costs will go up each year if we do not take more measures to eliminate our greenhouse gas emissions.

[Lyne Bessette, Liberal, Brome—Missisquoi, QC]

Thank you.

Am I right in saying that in the long term, carbon pricing and reducing greenhouse gas emissions will have positive repercussions on the agriculture sector?