Agriculture Committee on Oct. 24th, 2024

[The Vice-Chair, Conservative, John Barlow]

Good morning, colleagues.

I'm sorry for the delay. We had a sound issue with one of our witnesses and wanted to make sure we had that resolved. Considering everybody rolled in a little late anyway, it worked out perfectly.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Warren and I were here early.

[The Vice-Chair, Conservative, John Barlow]

I was here. I did not mention names, but apparently we're going to name and shame. I'm not going to do that.

Colleagues, we just have the two witnesses today, so we should get three rounds in. If you run out of questions, we'll deal with that when the time comes.

In the second hour, we have some committee business to address that may or may not take the full hour. That depends on us.

Colleagues, I call this meeting to order.

Welcome to meeting 114 of the House of Commons Standing Committee on Agriculture and Agri-Food.

Today's meeting is taking place in a hybrid format. These proceedings are available on the House of Commons website.

Just so that our witnesses are aware, the webcast will show the person speaking and not the whole committee. Again, screenshots are not permitted. Please refrain from doing that.

Colleagues, you know all the rules regarding the headsets for interpretation. Keep those away from the microphones.

To our witnesses, thank you for being here with us today. You may speak in the official language of your choice. We have interpretation services available. If we have a sound issue, I will put my hand up and ask you to pause, and we'll try to get it resolved. I'm hoping we can move on fairly easily for the rest of the day, now that our sound issues have been resolved.

I'd like to introduce the witnesses we have with us today for our study on the impact of border carbon adjustments and reciprocities.

From the Food and Agriculture Organization of the United Nations, we have Monika Tothova, senior economist, markets and trade division, social and economic development work stream. From the University of Saskatchewan, we have Angela Bedard-Haughn, dean and professor, College of Agriculture and Bioresources.

You will each have five minutes for an opening statement. When you have about 30 seconds left, I'll put my hand up so you will know that your time is running out. If you're a bit over, there's no panic. We have plenty of time for you today.

Perhaps I will start with Ms. Tothova.

If you want to go ahead with your five minutes, the time is yours.

[Monika Tothova, Senior Economist, Markets and Trade Division, Social and Economic Development Work Stream, FAO, Food and Agriculture Organization of the United Nations]

Thank you, Chair.

Good morning.

I will be a bit longer than five minutes, but since there are only two witnesses, I hope that's going to be okay.

My name is Monika Tothova, and I am a senior economist in the markets and trade division of the Food and Agriculture Organization, or FAO.

The United Nations'—

[The Vice-Chair, Conservative, John Barlow]

Ms. Tothova, I'm sorry.

Do you mind raising your microphone boom a bit towards your mouth?

There you go. Thank you.

Go ahead.

[Monika Tothova]

Is it okay now? Can you hear me loud and clear?

[The Vice-Chair, Conservative, John Barlow]

Yes, you're all good. Thanks.

Go ahead.

[Monika Tothova]

The Food and Agriculture Organization of the United Nations is the UN's specialized agency leading the global efforts to eliminate hunger and malnutrition.

Thank you for inviting the FAO to appear as part of a panel of witnesses. The FAO does not prescribe policy choices for countries. Rather, it provides an inventory of evidence-based policy options and their related trade-offs and impacts. Coming from a technical specialized agency, I will focus my remarks on the impacts of border carbon adjustments and reciprocity of standards on food and agriculture.

Climate change is a truly global environmental negative externality. Its impacts are indivisibly spread around the entire planet. It affects many economic activities, including agri-food systems, which are responsible for 28% of all greenhouse gas emissions. Its potential costs are not accounted for by markets and the benefits from mitigating its impact cannot be divided and claimed by one country. Several policy incentives can help improve emissions efficiency and lower greenhouse gas emissions per unit of output.

In my statement, as I discuss different policy instruments, I am not referring to any specific country.

Carbon taxes and other such instruments, such as emission trading systems, directly tackle the failure of the market to take the social costs of climate change into account. However, at the same time, a unilateral action to impose a carbon tax on food imports may put the country implementing it at a competitive disadvantage in global markets. A carbon tax may result in a carbon leakage, which is the displacement of lower carbon footprint domestically produced food by cheaper and higher carbon footprint imports from countries that do not take similar measures to reduce emissions. This could result in income losses for domestic producers and an increase in emissions globally. This is why global negative externalities such as climate change require global solutions.

Trade can expand the reach of climate change mitigation policies. There has been considerable interest in the potential use of border tax adjustments that could be based on the carbon footprint. Adjusting for the carbon tax means that the same rate applying to the carbon footprint of domestic products would be applied to imports. In this case, low-emitting suppliers would face a low tax and would be able to compete with domestic products, while high-emitting suppliers would face a higher tax, which would make them less competitive. In this way, trade will be shaped not only by comparative advantage, but also by the relative emissions efficiency.

A major technical challenge in determining and applying this border tax adjustment is to calculate the carbon footprint of domestic products and imports, and apply an appropriate tax on domestic products and corresponding tax adjustments on imports in order to level the playing field. Where an explicit carbon tax is applied on domestic products, it would seem relatively straightforward to apply a corresponding border tax adjustment on imports, provided that the carbon footprint that these emissions generated in producing and supplying the imports can be determined.

Problems arise in calculating these border tax adjustments when import suppliers have internalized emission costs or if the tax applied in the exporting country exceeds that applied by the importer, a case in which a tax rebate on imports would be made. In this case, it would be necessary to determine the per unit carbon tax equivalent of these measures.

The design and implementation of a carbon tax on food and agricultural products would face several challenges. There would be a need to agree on the carbon accounting mechanisms and on a carbon footprint for all food and agricultural products produced worldwide. There would also be a need to agree on a price of carbon to be able to set the tax and avoid international trade disputes.

Any approach to border tax adjustments presents the dual challenge of determining the carbon footprint in both domestic and imported products, while ensuring compliance with the rules of the international trading systems.

In closing, reducing greenhouse gas emissions in agriculture requires several actions across sectors, including the application not only of mitigation practices, but also of adaptation practices through climate-smart agriculture and policies.

Thank you, Mr. Chair, for the opportunity to comment on this topic and for your patience in allowing me a little more time. I welcome questions from the committee.

[The Vice-Chair, Conservative, John Barlow]

Thank you very much for your expert analysis on this.

We will turn to Dr. Bedard-Haughn from the University of Saskatchewan.

[Dr. Angela Bedard-Haughn, Dean and Professor, College of Agriculture and Bioresources, University of Saskatchewan]

Good morning, Mr. Chair and everyone around the table there.

I speak to you today from Treaty No. 6 territory, the traditional homeland of the Métis and the centre of the Canadian prairies.

I grew up on a mixed farm in north-central Saskatchewan, and I did my first two degrees here at the University of Saskatchewan before moving to California for my Ph.D. I returned to the University of Saskatchewan as a professor of soil science in 2006. Since 2020, I have been serving as the dean of the College of Agriculture and Bioresources.

The prospect of border carbon adjustments in agriculture and food does seem to be relatively far off, which is a good thing because I would argue that we—and, in this sense, I'm using the global “we”, Canada included—are not ready in this space. I do think that we need to tread very carefully because we are potentially messing with global food security at a time when political unrest and protectionism are adding uncertainty to an already very complex global market.

To follow on Ms. Tothova's testimony, I think one of the first things this group needs to be thinking about is why border carbon adjustments are supposedly being developed. A lot of that underlying idea is to incentivize good behaviour that will further reduce global greenhouse gas emissions or, at a minimum, to put in place pricing mechanisms that require high emitters to pay. This is good in theory, but do we know at this point if these levers will actually work when it comes to food, when it comes to a basic human necessity? In short, I would argue “not yet”.

One of our senior researchers from the University of Saskatchewan in the agricultural and resource economics department, Dr. Richard Gray, is currently in Uppsala. He's working on an economic model of the world vegetable market to determine whether border carbon adjustment policies are effective or ineffective in preventing higher prices and global deforestation. Those results are in progress and should be out early next year, in 2025.

He's also looking at the potential effect of full net ecosystem exchange on carbon accounting, both domestically and globally. What this means is accounting that takes into consideration the carbon that is actually sequestered in some of these commodities that we produce, the carbon that is sequestered in grains, pulses and oilseeds, which is subsequently exported and consumed elsewhere and which is currently not incorporated.

I would argue that, before we go too far down the border carbon adjustment path, we need to make sure that we have all the data we need from experts like Dr. Gray and others who are looking at the net effects of border carbon adjustment on various markets and countries before heading down this path.

Even without the socio-economic analyses yet in hand, there are other pieces that we need to take care of here at home before moving forward with border carbon adjustment in agriculture and food.

As this committee has heard previously from Dr. Steve Webb and others, we do have data that supports Canadian agriculture as a world leader in terms of our low carbon intensity in the production of crops such as canola, wheat, peas and lentils. Perhaps this is a reason that we should be embracing the notion of border carbon adjustment. With Canada's relatively strong track record for sustainable production, we should, in theory, be beneficiaries of such a policy.

If we do implement border carbon adjustment, we also need to be sure that Canada first recognizes the value of our own practices so that any export rebates are appropriate and so that our projects are not subjected to unjust import targets in other countries because we are not giving adequate credit where due to producers and systems. If we don't appropriately value our own sustainability practices, why would we expect other countries to do so?

To do this, to get where we need to go, we do need to implement an appropriate MRV—measurement reporting and verification—framework to ensure that credit flows where credit is due. As Ms. Tothova was speaking, I was thinking about the variability not only around the world—a huge variability when we think about trying to develop a carbon footprint for different agricultural commodities—but also across Canada or even within individual provinces. Many farmers are indeed already doing incredible work on sustainability, while others still have room for improvement.

If we move towards border carbon adjustment, how do we leverage any import charges to reward sustainable practices? Equally importantly, how do we ensure that farmers who have been farming sustainably for years—those early adopters—reap the benefits of something like the border carbon adjustments, while still simultaneously encouraging them to be early adopters of new emerging technologies that we're working on?

Unfortunately, at this point, MRV—measurement, reporting and verification—in agriculture is very difficult, so coming up with that footprint is very difficult due to a high degree of variability across fields and across regions over time. This variability is associated with all aspects of measuring carbon intensity in a natural system.

This doesn't mean the challenges are insurmountable, but it does mean that we need to continue investing in the research that will help us overcome these challenges, and we need to invest in the data management frameworks that will allow us to integrate the research and come up with tools that can reduce the risk of measurement and verification error.

It's been said to this committee before that the ideal will be a harmonized approach with our major global trading partners. We need to be aligned as best we can to ensure this doesn't take us down a path to even greater trade protectionism. Yes, of course, we need to be paying attention to what's happening in the EU, the U.S. and Australia on this issue, but, at the same time, we do need to get our own house in order and get clarity on how we'll recognize our regional and sub-regional variation in sustainable management practices.

There are four main focus areas that I think we need to look at. The first is research that empowers our farmers and our producers to continue improving their sustainability, with a focus on solutions that are win-win, regardless of carbon pricing and carbon taxing. These are solutions that reduce input costs, enhance yield and improve soil health. Here in the prairies, this is why we saw widespread adoption of no-till and conservation tillage. It just made sense from all of those perspectives.

The second focus needs to be on developing baseline data sets and harmonized measurement reporting and verification protocols that enable regionally appropriate measures of carbon intensity.

Third, we need to ensure that carbon taxation and credit schemes are science-based and evidence-based, and that we understand how border carbon adjustment will affect various sectors within our overarching agriculture and food sector. This includes any risk of additional trade barriers for Canada, given that we are such an export-dependent country and already vulnerable to protectionism and trade tariffs.

Finally, I think it's important that we can use our learning to lead a better way forward for global agriculture. From a position of strength, backed by science, we can show other countries how to improve their sustainability. If border carbon adjustment does move into agriculture and food systems, we want to be sure that we are proactive versus reactive.

Thank you, and I look forward to the discussion.

[The Vice-Chair, Conservative, John Barlow]

Thanks, Ms. Bedard-Haughn. It's very good to see you again, though unfortunately not in person this time, but thank you very much for being here.

I was remiss in not welcoming a few substitutes today.

We have Ms. McPherson here from the NDP. Thank you very much for joining us.

Mr. Epp is one of the Conservatives who is joining us today.

As well, Mr. Morrissey is joining us. Thank you very much for coming.

We will now move over to the question and answer portion, and I will go to the Conservatives first.

Mr. Epp, you have six minutes, please.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for being here.

I'd like to start with two basic questions. On a scale of 0 to 10 or 0 to 100, tell me where we are at. Let's start in Canada and then also go more internationally. I'll ask both of you to comment.

Just on a simple agreement and understanding of how to measure the carbon footprint, in Ontario I think we produce something like 257 different primary agricultural products. Across that spectrum, just on a broad scale, where are we at in understanding what the actual carbon footprint of each of those is?

The second question, to follow up, is this: Where are we at with regard to the level of international agreement if we measure things differently—again, pick your scale of 0 to 10 or 0 to 100, or whatever—just as a baseline to even begin to think about international trading systems on carbon border adjustments?

I'll start with Ms. Bedard-Haughn, please.

[Dr. Angela Bedard-Haughn]

Great. Thank you for that question.

With respect to how to measure the footprint, to me, there are two layers to that question. One part is how to measure it, which we know how to do, but also how to measure it in a cost-efficient manner is perhaps the second, trickier piece.

In terms of how to measure it, we are aware of the various components that need to go into that calculation. When we think about an entire life-cycle analysis, that should ultimately go into a comprehensive assessment of the carbon intensity of a particular crop. I would argue that we're further along in some of the larger, more dominant commodities, and less so in the smaller, more niche ones.

However, in terms of where the challenge lies, it's in the pieces that I raised earlier: It's with respect to the variability that is inherent in that.

I'll use the example of the work that was put out by the Global Institute for Food Security. It was very nicely rolled up at a provincial level. We could look at the carbon intensity on average across Saskatchewan or across countries based on the typical set of practices.

Now, does it matter if we have a producer over here who is implementing those practices and another over here who is not? That's the trickier question to consider if we're actually trying to use this as a mechanism whereby we incentivize different practices.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Take a shot at zero to 10.

I'm going to ask Ms. Tothova to also comment.

[Monika Tothova]

I would agree with that. We know in theory what we want to include. We have the theory for how to proceed and what should be accounted for. In many cases, particularly for smaller countries, let's say, we might not have all the data available to come up with a comprehensive number.

However, I would argue that, in fact, it is good that we are having this conversation about the carbon adjustment, about the content of the carbon and about environmental policies in general. This is one of the steps that improves framing and thinking about the topic.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

To conclude my time, I want to talk pickles, only because I think it illustrates the complexity and, potentially, the administrative nightmare.

I live near the U.S. in southwestern Ontario. Obviously, you don't plant pickles; you plant cucumbers that are pickled. However, we don't have a pickling industry left in Ontario, so pickles are grown, shipped to local green shipping yards, where they're sized and distributed to Ohio, Michigan and New York, pickled, put into jars and shipped back into Canada into our retail markets.

I'm also aware that in the EU, there's trade in cucurbits between non-EU eastern European countries and European countries, so some of the same dynamics would apply in both situations.

How would you go about administering a CBAM program on cross-border trade as it goes through the transformation process, whereby you have transportation involved along with the initial growing systems?

Dr. Bedard-Haughn can start, and then I'll go to Ms. Tothova.

[Dr. Angela Bedard-Haughn]

That's basically what I was getting at up front when I mentioned that we're not ready for this. When I was talking to Dr. Gray about this in advance of my testimony here today, we were talking about that very complexity and the fact that it is such a global marketplace. I could give you the exact same example when it comes to lentils and some of the things we export out of Saskatchewan, only to have them processed on the other side of the world and then come back to us in some sort of value-added product.

I'm acutely aware of those challenges.

When we start putting that in, who covers the cost? You incorporated that into the carbon intensity of that end-pickle product in the example you gave. There's the transportation to move those cucumbers from Ontario to wherever they're processed and then again for them to come back. At what point is that adjustment applied? Is it applied twice? At what point does this no longer make sense in terms of the economic cost of administering such a program relative to the actual benefits of it?

That would ultimately be one of my biggest concerns if part of this is meant to be incentivizing—

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you. I want to save a bit of time for for Ms. Tothova as well. I'm sorry.

[Monika Tothova]

I like your example of the cucumbers, because I realize there is this active pickle trade between Canada and the United States. When we think conceptually, it's a fine example, talking about the products that are further processed down the value chain, but I would urge that thinking about this start from the commodities. If Canada is shipping lentils from Saskatchewan to somewhere else to be processed, what happens and what is the carbon footprint of this shipping? Ultimately, as you go along all the way to the retail level, there are many steps along the way, each of them coming with its separate set of transportation issues, etc. Therefore, perhaps it's good to start thinking about the pictures that cut off, for example. So the pickles go to Michigan, and then they are shipped back, and we stop right there, right? We are not going to consider additional distribution levels.

Again, it is something that is good to start thinking about, but I would urge we start thinking about the commodity shipments before we start talking about the specific products at the consumer level.

[The Vice-Chair, Conservative, John Barlow]

Thank you.

Thank you for your time.

Now we'll move to Ms. Murray for six minutes, please.

[Joyce Murray, Liberal, Vancouver Quadra, BC]

Thank you very much for that very interesting testimony. I think we all agree that we don't want higher carbon products to have an advantage over those of producers who have invested in lower carbon alternative processes.

Canada is not inviting border carbon adjustment, but I have two questions off the bat.

One, what's in the boundaries of what would be counted? I'm thinking about the issue of food waste. In Canada about 32% of food is lost or wasted, which could be redirected to feed people. That's based on a research project by Value Chain Management International and Second Harvest. How is food waste accounted for in this, and how can Canada's preparation, should there be a border carbon adjustment, help us incentivize practices that reduce that 30% of food that's wasted and could be redirected to feed people. In fact, 58% of all food in Canada is lost or wasted. How do we reduce that in how we set up our way of thinking about this?

I would like to get a thought about that from both of our witnesses, and thank you for your testimony.

[Dr. Angela Bedard-Haughn]

I think we were in a bit of a staring match here to see who was going to take that one up first.

I would suggest that, again, this is an area where we are not yet ready. But if we were to think about that from the perspective of how best to apply that—and I'm thinking out loud here—I suspect, then, we would have different levels we would need to be thinking about in terms of the relative risk of waste or loss. Some food products are at much greater risk of loss or wastage than others. Some store and transport easier and more readily. Others are much more vulnerable to waste. That's typically reflected in the value of those in the first place, but that would need to be accounted for in setting this up.

It does highlight one of the additional complexities that is unique to the food systems, though, as opposed to other areas where the border carbon adjustments are being contemplated. That's an excellent point.

[Monika Tothova]

Thank you for going first.

I will add to it that there is a difference between food loss and waste. One is at the producer level, the other one is more at the consumer level. That would be for a separate hearing. But when we talk about the food loss and waste, the issue is part of what we call agri-systems, agri-food systems transformation, right? It is important. By lowering the amount of food loss and waste, as you mentioned, we are improving the availability of food for additional processing for consumers, etc. It is the cross-border adjustments and the policies that are accounting for the externalities, and they are also part of the food systems transformation but from a slightly different angle. Nevertheless, the goal of both of them is to improve the functioning and the efficiency of the agri-food systems.

[Joyce Murray, Liberal, Vancouver Quadra, BC]

I think this is a question that's been asked of all of our witnesses.

I'll frame it as, what are the top three things that Canada could and should do to be as prepared as possible should border carbon adjustments come into play internationally?

[Dr. Angela Bedard-Haughn]

I can speak to that first.

As highlighted in my testimony, I think getting at some of these key questions is going to be essential.

The first way to get at that is continuing to look at the research that allows us to continue to advance our sustainability practices at every level of the value chain. In my testimony, I emphasize the importance of practices for farmers, but as was highlighted with the earlier question, this needs to be looked at all the way through the value chain. These are the win-win practices that allow us to enhance our sustainability with or without the border carbon adjustment, so that we're coming from a position of strength.

Second is making sure we have the data that we need to actually participate in this. We need to have the footprinting that Ms. Tothova was referring to, as well as the datasets and a data framework that allow us to keep track of that information.

Finally, have that understanding of the potential effects of such policies all the way through our systems, so that we're not taken aback when we get to a different stage in our food production systems and saying, “Well, we didn't quite see that one coming, did we?”, whether that's at the producer level or at the grocery level.

Those would be the three areas I think we need to make sure we are looking at carefully in advance of implementing anything in Canada.