Agriculture Committee on May 4th, 2021

[The Chair, Liberal, Pat Finnigan]

I call this meeting to order.

Welcome to meeting number 30 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 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 (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. As you are aware, the webcast will always show the person speaking rather than the entirety of the committee.

I would like to take this opportunity to remind all participants in this meeting that screenshots and taking photos of your screen are not permitted.

To ensure an orderly meeting, I would like to outline a few rules to follow.

Before speaking, please wait until I recognize you by name. If you're on the video conference, please click on the microphone icon to unmute yourself. The microphones of participants in the room will be controlled as normal by the proceedings and verification officer. Remember that all comments by members and witnesses must be directed through the chair. When you aren't speaking, your microphone should be on mute.

Before welcoming our witnesses, I'd like to remind members that amendments for Bill C-206 must be sent to the clerk before Friday, May 7 at 5 p.m.

I'd now like to welcome our witnesses. From the Department of Agriculture and Agri-Food, we have Mr. Warren Goodlet, director general, research and analysis directorate, strategic policy branch.

Welcome, Mr. Goodlet.

Also from the department, we have Matt Parry, director general, policy development and analysis directorate, strategic policy branch.

From the Department of Finance, we have Phil King, director general, sales tax division, tax policy branch, and Mr. Gervais Coulombe, senior director, excise, sales tax division, tax policy branch.

Welcome to both of you.

From the Department of the Environment, we have Judy Meltzer, director general, carbon markets bureau, environmental protection branch.

I understand that there will be just one opening statement for all departments, and it will be for five minutes.

For whoever wants to do the opening statement, the floor is yours.

[Matt Parry, Director General, Policy Development and Analysis Directorate, Strategic Policy Branch, Department of Agriculture and Agri-Food]

Thank you, Mr. Chair.

As mentioned, my name is Matt Parry. I'm the director general of the policy development and analysis directorate at Agriculture and Agri-Food Canada.

Thank you for the opportunity to be here today to talk about Bill C-206 and the government's initiatives related to carbon pollution pricing in the agriculture sector.

I'll start by noting that climate change is one of the greatest challenges of our time. Addressing it requires engagement from all parts of Canadian society, and Canada's farmers and ranchers are a part of the climate solution.

Agriculture and Agri-Food Canada is actively engaged on many fronts to support the agriculture sector in reducing emissions, from scientific research to direct support for farmers across the country. We are working to develop solutions that are effective and efficient and that ensure farmers can grow their businesses while reducing emissions.

Greenhouse gas emissions from Canada's agriculture sector have been relatively stable since 2005. According to Canada's national inventory report for 2021, greenhouse gas emissions from the agriculture sector in Canada were approximately 73 megatonnes of carbon dioxide equivalent in 2019, the last year for which data is available.

Most of these emissions—about 60 megatonnes—are from biological emissions from livestock and crop production. The remaining 13.6 megatonnes are from on-farm fuel use, which includes fuel for machinery such as tractors and combines, as well as heating sources. These emissions have remained relatively stable since 2005.

Of the fuel emissions, about 10 megatonnes are from on-farm transportation like gasoline and diesel, which are currently exempt from pollution pricing. About 3.6 megatonnes are from stationary combustion, including grain drying and barn heating operations, which are not exempt.

Based on how the carbon pollution price is structured, this means approximately five per cent of greenhouse gas emissions from agricultural production are currently covered by pollution pricing.

Carbon pollution pricing is considered the most efficient means to drive innovation and energy efficiency in order to reduce emissions. Since 2019, every province and territory in Canada has had a price on pollution. Provinces and territories can design their own systems, aligned with minimum national standards, or opt for the federal system. The federal carbon pollution pricing system has been specifically designed to account for the agriculture sector's unique circumstances.

The government announced in February 2021 that it would commit to new rebates for on-farm fuel use such as grain drying, in order to support food producers and encourage new investments in clean technology.

As announced in the budget, the government intends to return a portion of the proceeds from the federal fuel charge directly to farmers.

This will apply to farmers in Alberta, Saskatchewan, Manitoba and Ontario, the provinces where the federal fuel charge applies. It is estimated that farmers in those jurisdictions will receive $100 million in the first year, and this figure is expected to increase as the price on pollution rises. Further details will be provided by the government later in 2021.

Also announced in budget 2021, $50 million of the recently announced $165-million agricultural clean technology program will focus on grain-drying technologies, and $10 million will focus on powering farms with clean energy.

These two components of the agricultural clean technology program will help farmers invest in more efficient and new technology that further reduces on-farm fuel use.

Work is currently under way to develop and launch these initiatives as soon as possible.

Through these programs, along with existing initiatives under the Canadian agricultural partnership, Agriculture and Agri-Food Canada is working with farmers and other agricultural stakeholders to reduce emissions and fight climate change.

In closing, the measures announced in budget 2021 will provide relief for farmers in backstop jurisdictions while also supporting the sector in reducing fossil fuel use through improved efficiency and new technologies. Agriculture and Agri-Food Canada is working to support farmers today, while developing and implementing policies that will help reduce emissions tomorrow.

Thank you for your time, and we look forward to any questions.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Parry.

As you know, we have only one witness for the second panel, so we'll extend this one up until 6:00 Atlantic time or 5:00 eastern time. It will give us roughly 30 minutes for our single witness in the second panel.

I'll just go down the list for the order of questions. I'll just go down it, and if I have to, I'll come back up. We have about an hour and 10 minutes to do that.

Welcome, Mr. Lawrence.

I also want to welcome you, Ms. Pauzé—

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

Mr. Chair, I just have a point of clarification.

We could do other business. We wouldn't have to extend this round. We could do the same as this round, half an hour, and there might be some other business the committee could do if there were 30 minutes left after the second panel. I think that would work better.

[The Chair, Liberal, Pat Finnigan]

Yes. We don't have any business scheduled at this stage, so after discussion with the clerk, we're just.... We're keeping the time and just going to give a bit because we have three witnesses here from three different departments. I think it will balance things out because we have only one on the last panel. I think that's how we're going to proceed.

Mr. Lawrence.

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

Before my time starts, Chair, I would gently suggest that we have three witnesses but really only one statement and only one stakeholder group in both. I think it would be more equitable to split the time. I'm actually quite looking forward to the evidence that will be provided by the Agri-Food Innovation Council in the next section. I would kindly suggest that we split the time as opposed to leaving AIC with only half an hour.

[The Chair, Liberal, Pat Finnigan]

Yes, but we have three different departments. I circulated that notice this morning and didn't hear back, so that's how we planned it with the clerk.

Mr. Blois.

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

Thank you, Mr. Chair.

Look, we have three witnesses. Notwithstanding what Mr. Lawrence said about our next witness in the next hour, I think you can use your discretion. You're very fair and usually quite good in this committee. Whether it's exactly half or whether you allow a little additional time, given the fact that the lion's share or the bulk of our witnesses are here in this panel, I'm sure Mr. Lawrence will trust your discretion.

I hope we can proceed forward. Thank you.

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

I will bow to the chair and defer to Monsieur Blois on this rare occasion here.

I'm sure you wouldn't steer me wrong, would you, gentlemen?

[The Chair, Liberal, Pat Finnigan]

I certainly appreciate that, Mr. Lawrence.

On that, you can start the round for six minutes. Go ahead, Mr. Lawrence.

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

Thank you.

This is for whichever witness wishes to respond. If it's all three, that's fine with me.

Thank you very much. I agree with you that climate change is a real, serious and pressing issue. I think that is the consensus in this panel and in this committee. That's not in doubt and not in discussion.

One issue is with regard to what the stakeholders have said to me. Stakeholder after stakeholder has said that they prefer Bill C-206 for a number of reasons. One of the primary ones is that the money is an exemption. It stays in their pocket. It's having a real financial impact. While the credit system may be better than nothing, the idea of it coming to government, coming back, and they don't have the details on it really isn't enough. If the government is so generous and they do a fantastic job with the credit, there's nothing stopping them from repealing Bill C-206 in the future, once they have this credit system up and running.

Wouldn't you want to give the farmers a break with respect to Bill C-206? If it is up to the government's discretion, they can of course repeal it if their credit system is so generous that farmers no longer require the exemption.

[Phil King, Director General, Sales Tax Division, Tax Policy Branch, Department of Finance]

I can respond directly on why, perhaps, it would be a support program rather than an exemption. There are a couple of reasons.

There are some technical issues. For example, the delivery of natural gas and propane is slightly different from the delivery of gasoline and diesel, which is exempt. It's generally piped in directly and continuously. You may have a situation where it's not just the farm operations receiving the natural gas but also the house that's being fed the natural gas. It would be difficult to distinguish and take the fuel charge off the farm operation use versus the house use when it's a single meter. There's house heating, or they might have a barbecue hooked up to the natural gas, and that would be exempt from the fuel charge. So there are some technical issues.

There's also the issue of the price signal. At the very least, with the ex post relief, you're maintaining the price signal. It still presents an incentive for farmers to find more efficient, greener, lower GHG-emitting ways of engaging in their farm operations. The ultimate objective, really, is to have nobody pay this fuel charge. It's the change in behaviour via technology. Where farmers can't do this, well, they're getting the money back, so there is financial support for them.

Those are the two main reasons it's been chosen—

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

Thank you very much.

Also, what has come across in the testimony.... The Agri-food Innovation Council, the group we're going to hear in the next panel, put together a great report demonstrating that while there are some technologies, they are just in their novel phase and are not able to be widespread. The price signal really goes nowhere.

I would also call out the government for being hypocrites in this matter. It just recently came to light in a National Post article that they're giving DuPont a huge exemption for hydrofluorocarbons, which are said to be a thousand times worse than carbon dioxide. While this billion-dollar international company is getting an exemption, we won't give an exemption to farmers. I would think that this price signal would apply to billion-dollar corporations in addition to farmers. Is that not true?

[Phil King]

I think that's a question you'd have to pose to the minister and to the government.

I can explain the policy that's being put forward in the budget and maybe talk about Bill C-206, but I couldn't answer that question. I'm sorry.

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

With respect to that elasticity of the market, though, are you aware right now of any viable technologies that farmers could massively change to, to avoid using propane and natural gas, particularly in grain drying but also for other uses on the farm?

[Phil King]

I might have to turn to my colleagues at Agriculture and Environment to see if they may be aware of those.

[Matt Parry]

There are technologies under development that are emerging, which I think hold some promise in this area. I believe that the committee, in its previous deliberations, referred to Triple Green as an example of that.

I think our understanding is that this is new technology and it's not yet at a stage where it is being widely adopted.

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

Exactly. It will take time for the credit system to evolve, and then that credit system could be used to fund. Would you agree with me that it would be reasonable that it would be at least five, if not 10 years before any type of massive change could be done for grain drying? In the meantime, the farmers will be picking up the entire cost.

[Matt Parry]

It's an interesting question. I'm afraid I don't have the expertise in terms of the duration you refer to, but certainly some time would be involved. I can endeavour to speak with my colleagues to see if I can get further information on that.

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

When we look at this, we have these farmers, and I've seen their bills. They're literally for tens of thousands of dollars. Farmers are price-takers. They have very thin margins. As the family farm seems to struggle out of existence, are we just going to put it all on the farmers until we get the credit system for maybe some novel technologies? Until then, will we just wait for the farmers, or will we pass Bill C-206 and give the farmers a break right now? The government can at any time repeal it, if there's a great breakthrough in technology.

[The Chair, Liberal, Pat Finnigan]

Sorry, Mr. Lawrence, but time is up. Perhaps they can answer your question later on.

We'll move to the second member, Mr. Blois, for six minutes.

Go ahead.

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

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

I'll start, perhaps, with Mr. King or someone from Environment.

When I look at the actual Bill C-206, it's relatively straightforward. It's just trying to amend the definition of qualifying farm fuel.

My understanding, when we look at the entire Greenhouse Gas Pollution Pricing Act, is that there are definitions for eligible farming activity and also eligible farming machinery that qualify, which this particular bill does not address at all. Would it be your position that the challenge, despite the noble intent from Mr. Lawrence in relation to this bill, is flawed in the sense that it doesn't actually address the activities and the machinery that are perhaps needed to capture grain drying or the heating of barns and other facilities?

[Phil King]

I can certainly give you my view as an official from the Department of Finance. I want to give you a caveat first, though, which is that the administration of the GGPPA, the Greenhouse Gas Pollution Pricing Act, is the responsibility of the Canada Revenue Agency.

Ultimately, formally and officially, it would be the CRA that would have to opine on this. However, I am happy to share my view. We designed the program. We know its intent. We drafted the legislation, so we are reasonably familiar with it.

That caveat aside, you are correct that we don't believe that Bill C-206 is specific enough or that it discusses eligible farm machinery. It just talks about the fuels involved, not the machinery that those fuels would be involved in.

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

If this were to pass, then, basically it would just open up the eligible types of fuel that can be used under the existing activities and machinery that are already deemed eligible under the act by the Government of Canada to date?

[Phil King]

That's our view, yes. If you had a combine harvester that ran on propane or natural gas, then it would be relieved of the fuel. However, it's too vague. We don't think it's specific enough with regard to heating or grain-drying equipment.