Agriculture Committee on May 4th, 2021

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

Thank you so much, Mr. Chair, and thank you to our witnesses.

Mr. King, I'll maybe start with you.

In the previous exchange that you had with Mr. Blois, you expressed some doubt as to whether Bill C-206 was drafted in a way that would give the CRA clarity about its intended purpose.

When I look through the existing definitions in the Greenhouse Gas Pollution Pricing Act, it's quite clear that growing grain and harvesting fall under the definition of farming, and that the machinery used for drying it, I think, could be found under “eligible farming machinery”. It's a stationary machine; it's an industrial machine on the property.

Are you still quite sure that, even if we're just making this narrow definition as to what a qualifying farm fuel is, there will be a misconception as to what its intended purpose is?

[Phil King]

Yes, thank you, again with a caveat that it would be up to the CRA to finally determine this. Our view at the Department of Finance would be that yes, it is a bit too vague, and in fact you yourself, in your question, just mentioned that it “could”.

It talks about an industrial machine, but there's no mention of a heating machine, or thermal or heating ventilation or air conditioning type of machinery. It is somewhat vague still, so yes, I suppose we do have some doubts about that. Again, though, the final word on this would have to go to the CRA.

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

Okay. I appreciate that clarification.

With the existing greenhouse gas pollution pricing act, is it true that diesel and gasoline were mentioned under a qualifying farm fuel because currently there are no viable alternatives to those two fuels being used for the vast majority of farm equipment?

[Phil King]

I don't know that's the specific reason. I think it's probably because the bulk of the fuels used on farms are gasoline and light fuel oil or diesel—

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

Wouldn't one assume they were specifically listed because they, in fact, are the vast majority of fuels used on farms? Farmers don't really have an alternative to using diesel in their combines at present, for the horsepower and torque that is needed to do their operation.

[Phil King]

One of the considerations that would go into this is that farmers are trade-exposed. There is a limit to how much they can pass prices along, and I think that's reflected in the overall carbon-pricing regime, in which, as we heard at the beginning, the vast majority of emissions from the farming sector are not priced. It's a balancing act, and I think this was part of the consideration that went into that. My colleague, Gervais, talked about the consultations back in 2017.

Balancing those competitiveness considerations with the need to reduce GHG emissions to address the climate is why they're included, or excluded in this case, by being listed.

My colleague, Gervais, was involved in this program from the very beginning.

Do you have anything to add to my answer on that, Gervais?

[Gervais Coulombe]

Yes, for completeness, the federal carbon-pricing instrument was not created in isolation. It was part of the pan-Canadian framework for pricing carbon pollution, and from the outset it was clear that one of the models the federal government was looking at was the provincial carbon tax in British Columbia. When you look at the specificities of that carbon tax, there is indeed an exemption for certain fuels used in farm activities, including diesel and gasoline. That definitely played an important role in implementing a similar exemption as part of the federal package of instruments.

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

I'm a resident of B.C., and it's nice to see that we were able to provide that model. Thank you for your clarification on that. The crux of my question was that we have heard from farmers themselves. I agree that there are some promising technologies out there, but the feedback we've heard so far from farmers is that they're not really close to a scalable level.

The final question I have might be best answered by Mr. King. Budget 2021 mentioned there would be a return of a portion of the proceeds from the price on pollution directly to farmers. How are you going to calculate that portion? When someone says you're going to have a portion of the pie, it doesn't mean the whole pie. Can you tell us a little about the calculations that are going into play there?

[Phil King]

Yes, certainly, and it would be to reiterate an answer that I provided slightly earlier. That portion will be $100 million at a price of $40 per tonne on carbon, and as the price goes up, that $100 million will go up too.

However, that just looks at the total operating expenditures of farms in the four backstop jurisdictions. The amount they spend on natural gas and propane, and the amount of that expenditure on natural gas and propane that comes from the fuel charge, is where the $100 million, or the portion you speak to, comes from.

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

Thank you. I think that's my time, Chair.

[The Chair, Liberal, Pat Finnigan]

Yes, thank you, Mr. MacGregor.

Now for the second round for five minutes, Mr. Steinley.

[Warren Steinley, Conservative, Regina—Lewvan, SK]

Thank you very much.

Mr. King, when was the last time you were on a farm west of Manitoba?

[Phil King]

I don't recall.

[Warren Steinley, Conservative, Regina—Lewvan, SK]

That would make sense, because one of the comments you made was that sometimes you couldn't differentiate between natural gas going into a house and a grain dryer or a barn, and there is an instance where a natural gas line doesn't have its own meter that goes to a barn or a grain dryer, because many farms have different farmyards for their grain dryers and their house.

I was very surprised by that comment, because that just doesn't happen anymore. You can always tell what natural gas is going to be used for heating a home and heating a barn, drying grain or running an irrigation pump, so that was a bit surprising to me.

Mr. Parry, you've said many times that innovation is driven by carbon pricing or a price on carbon in agriculture. Do you believe that statement?

[Matt Parry]

I would say yes. That is the—

[Warren Steinley, Conservative, Regina—Lewvan, SK]

Okay, thanks. That's perfect.

I'd ask: Can you tell me the tax that was forced on farmers that led to the innovation of zero tillage?

[Matt Parry]

A tax on farmers that led to zero tillage.... I don't believe there was a tax in that area.

[Warren Steinley, Conservative, Regina—Lewvan, SK]

Yes. That was an amazing innovation that led to great soil conservation and the ability of farmers to have better soil quality and more nutrients in the soil.

Mr. Parry, can you tell me the innovation that led to crop rotation for grazing for ranchers across Canada, and what tax led to that innovation?

[Matt Parry]

It was done through official management practices and the sharing of information among farmers. I don't believe there was a tax involved in that, so—

[Warren Steinley, Conservative, Regina—Lewvan, SK]

I agree with you 100%. I think innovation and conversations through farmers and sharing data have led to amazing innovation in the agriculture sector. I put on the record that saying—and having very senior people in the Department of Agriculture say—that innovation is brought forward in agriculture by carbon pricing is something I think many people I represent and many people I know would have a difficult time believing is the only way to get to innovation.

I think that's what this bill is about, when you talk about it. You can't get innovation. I know we talked about how there might be innovative and new technologies for grain drying. There might be, but that's five to 10 years off. The reason, Mr. Parry, you couldn't mention one is because there isn't an innovation right now that can dry 50,000 bushel bins, other than natural gas or propane. We're a long ways off of that.

This bill Mr. Lawrence is proposing is that exemption to give farmers a chance to continue to do what they do well, because there are farmers in Saskatchewan, Alberta and Manitoba who pay tens of thousands of dollars on a carbon tax because of using grain dryers and irrigation pumps.

Mr. King, you talked about irrigation. My farm still has delivery. They have a propane tank, and that propane tank is delivered by a truck into the yard, and that tank runs a motor that pumps irrigation through the pipes. It's not just a pipeline. There are still cases where propane gets delivered for on-farm use. I think Mr. Lehoux would have many people who have propane delivered to heat barns in his riding of Beauce.

Those are just a couple of things I wanted to point out. Farming is an agribusiness in Saskatchewan and western Canada, and they're very big operations. These grain dryers are solid equipment, industrial equipment, that gets used to keep people fed, not only across Canada but around the world. I believe these farmers need this exemption to make sure they can continue to provide that good service.

My final question would be: When it comes to crop rotation—and I know you guys know this very well—it is one of the great innovations in agriculture that led to keeping nutrients in the soil. Once again, I'd ask Mr. Parry: Was there a tax brought forward that induced crop rotation practices by farmers across Canada?

[Matt Parry]

I think you likely know the answer. There was no tax in that regard, but I would note that I don't think I ever said that carbon pollution pricing was the only tool, just that, in a number of circumstances, it can be efficient and effective in providing a price signal to promote innovation and the development of new technologies.

[Warren Steinley, Conservative, Regina—Lewvan, SK]

I appreciate that statement very much, and I know farmers are as innovative as they can be, because they know that their bottom line is very important. I know they do whatever they can to innovate, not only for the environment but for the bottom line and to ensure that their operation is successful now and for the next generation of farmers in Canada.

Thank you both very much for your time.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Steinley.

Now we'll go to Mr. Louis, for five minutes.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Thank you very much, Mr. Chair, and thank you to all our panellists for being here. I appreciate this.

I'm just expanding on the line of questioning by my colleagues. It's fantastic that now we can say that all the major political parties agree on the importance of the price of pollution. I'm glad that the Conservatives have changed their minds and come on board with that. I appreciate that.

I want to say that everyone on this panel, from all the parties, supports farmers. Our government is supporting farmers and the innovations that were mentioned and that they are championing.

I know we have different pillars and ways of supporting them, and we all agree on pricing pollution. The government is saying that we want to further reduce emissions as much as possible and affect the impact of climate change and continue to help farmers build resilience. We also want to support that clean technology, which will also create some jobs.

If I could direct my questions to Mr. Parry off the top, you touched briefly on some new clean technologies, which are already emerging. You specifically mentioned Triple Green using biofuels. I think that's out of Manitoba. It uses dry heat and biomass fuel. I have done some studying on that, because in my riding of Kitchener—Conestoga, there's a company called Bio-En. It uses anaerobic digesters, which take the methane from the composting and turn it into energy.

Can you expand on some of the ways we can use biomass fuel to create heat?

[Matt Parry]

I'm afraid I might have to defer on the specific question regarding biofuels, but I would make note of the investment that I mentioned earlier that was announced in the climate plan in December. It will provide $165 million over seven years for agricultural clean technologies.

Technologies like Triple Green and the firm you mentioned in your riding would very much be the focus of these types of funds in terms of advancing their development and promoting their adoption and scalability.

Again, if there is a specific question on technology, I can take that back to colleagues who work in our science and technology branch.