Agriculture Committee on June 16th, 2022

[Ryan Turnbull, Liberal, Whitby, ON]

Thanks, Chair.

Thanks to all of our witnesses for being here for this important conversation.

Mr. Jovanovic, I'll start with you. You said in your opening remarks that a double payment could result from Bill C-234 getting passed in addition to having the rebates that have already been passed through Bill C-8. You said that this could come at a cost to households, if I'm not mistaken. I think that's what you said.

Could you clarify what you meant by that?

[Miodrag Jovanovic]

If more is being provided specifically to farming, it has to come from somewhere. Because the GGPPA legislation is such that all the proceeds received from the fuel charge is returned to the jurisdiction, in this case we know that about 90% is returned to individuals through the climate action incentive payments and the rest is used, in part, in this case, to give back to farms through this credit.

If you give more to farmers, it has to come from somewhere, so it will be coming from climate action, basically resulting in lower climate action incentive payments to families. That's what it means.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you for that clarification. That's helpful. We certainly want to avoid double payment at all cost, I'm sure.

I'll move on to another question, about understanding the real impacts of the price on pollution related to farm viability. We've heard from the farming community and stakeholders about the increasing cost to farmers and the result of the price on pollution, often referencing tens of thousands of dollars on top of the already high cost for fuel that's needed to dry grain. However, in previous testimony on Bill C-206, the Pembina Institute stated:

...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.

This is a lot less than what some stakeholders have told us. I'm not saying that I would know the difference, but I'm wondering whether we can get some clarity from you or Ms. Kim as to how much the price of pollution is really affecting farm viability. Do we know that, especially for grain drying?

Thank you.

Mr. Jovanovic, I'll go to you first.

[Miodrag Jovanovic]

What we know is that the refundable tax credit will provide for the first year about $820 per farming business. That is the average. We are returning all of the proceeds, so that would be roughly equivalent to the average fuel charge that's paid by these businesses.

There is a lot of variability around that average, as you can imagine, based on the size of the business. There is also a lot of variability based on the type of production. Again, we recognize that this is the average, but yes, it's about $820.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you for that.

I would like to go to Environment and Climate Change Canada and Mr. Moffet, if possible. With regard to potential to slow innovation and investment in the clean energy transition, do you think an exemption for farm fuels for heating, cooling and grain drying in the agricultural industry would slow the uptake of new innovations for renewable energy?

[John Moffet, Assistant Deputy Minister, Environmental Protection Branch, Department of the Environment]

I apologize. I'm not really equipped or appropriately placed to provide advice about recommended policy direction. We're available to provide commentary on the way existing policies work, or the background rationale for policy.

[Ryan Turnbull, Liberal, Whitby, ON]

Okay.

Ms. Kim, you mentioned the uptake of new innovative technologies across the agricultural industry. Do you think offering an exemption like this removes the incentive for a lot of the changes and the transition that we want to see across the agricultural industry?

[Natasha Kim]

As I mentioned in my remarks, there is suite of tools that we look at as we look toward the future and our climate objectives. I mentioned one of them, the agriculture clean technology program, which supports both research and development in this space as well as adoption on the farm.

For that I might turn to my colleague Marco who can offer a bit more detail on what we're seeing in that program.

[Marco Valicenti, Director General, Innovation Programs Directorate, Department of Agriculture and Agri-Food]

Thanks very much, Natasha.

Yes, as a reminder, in the context of the ACT, there are three main objectives. The first is the key, namely green energy and energy efficiency, where we're looking at grain drying technologies and supporting grain dryer purchases by producers, as well as for barn heating.

We are looking at new alternatives. I think biomass was mentioned earlier. We are seeing quite a few applications coming through to us for the purchase of biomass, as well as for other tools that are reducing the cost for producers, whether it's in the context of lower propane use or natural gas. We're looking at a mix of different products.

I'll say that we have a research and innovation stream as part of the program, where we are seeing grain drying technologies or grain drying companies coming in and looking at new technologies, not necessarily just for today, but also tomorrow.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Turnbull and Mr. Valicenti.

Mr. Perron, you now have the floor for six minutes.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you, Mr. Chair.

I want to thank the witnesses for taking the time to be here today.

Mr. Jovanovic, I am trying to understand the exemption principle in the economic and budget update implemented by Bill C‑8. I will summarize it and you can tell me if I have understood correctly.

Essentially, you will return all the monies collected from the carbon tax, but not necessarily to those who paid them. It will be prorated according to expenditures.

What are the criteria? How is it determined? It is important to know this.

You talked about a double exemption, but that confuses the matter. I am trying to understand what you said about this.

[Miodrag Jovanovic]

We calculate the total amount collected, which was $100 million for the first year. Now we have to determine how to redistribute that money, the basic principle being equitable redistribution that does not affect the price signal. It is similar to the approach used for the carbon incentive, where money is returned to families simply on a per capita basis. We do not try to determine whether a family has actually paid a lot of carbon tax.

It is a similar principle. The idea is not to provide an exact credit, which an exemption would have done. Had that been the case, the exemption would have been more effective than a credit. It is simply a different approach.

We recognize that this returns money to the sector, without affecting the price signal. On the other hand, one of the consequences is that certain farms will not receive what they paid and others will receive more.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

I am not necessarily trying to contradict you, but we have not heard from a lot of people who received more than they paid. I do not know if my colleagues know any people in that situation, but I do not know any. There could be some. That is why I am asking the question.

If Bill C‑234 were passed and there were a double exemption on a certain portion, do you think that could be changed quickly, in the economic and budget update, for instance?

[Miodrag Jovanovic]

Legislative changes would be needed to solve the problem, to ensure than there is just one approach in the system, and not both of them.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Okay.

Let us return to the principle of the research and development incentive, which would give farmers some breathing room.

I do not want to pass judgment, but if we give money to agriculture, it will mean cuts for other departments. Obviously, funding is limited. On the other hand, all the statistics I have seen and everything I have heard from people in the farming sector indicate that the level of agricultural support provided by Canada is half of what the United States provides. If you compare that with Europe, the ratio is even higher.

Is that correct? Do you have any figures on that?

[Miodrag Jovanovic]

I think the question is really for Agriculture Canada officials.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Yes.

[Natasha Kim]

Thank you, that is a good question.

Well, there are OECD studies and analyses available, for instance, that compare the level of support in various countries. I do not have the figures with me today, but I could forward them to the committee later on.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

The Union of Agricultural Producers provided the figures I mentioned. It would be very helpful to get the data. That would enable us to offer more incentives.

I am not sure who can answer my question. As to improving environmental performance, we agree with the principle of the carbon tax when there is an alternative in the short-term. In this case, it appears that there are few if any alternatives, and that they are very expensive.

Should there also be more specific financial incentives to recognize measures farmers have already taken and to encourage them to do more? We talked earlier about protected riparian strips, crop rotation and cover crops.

Does anyone have anything to add in this regard?

[Natasha Kim]

I can add something.

As I said with regard to support measures in other countries, the tools are different. They cannot always be compared. That said, to recognize good farming practices in Canada, there are possible measures. My colleagues from Environment and Climate Change Canada could talk about the possibilities of a compensation system related to new markets.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Okay.

[The Chair, Liberal, Kody Blois]

I am sorry, Mr. Perron, but your time is up.

Thank you, Ms. Kim.

Mr. MacGregor, you have the floor for six minutes.

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

Thank you, Mr. Chair.

Maybe I'll start with the Department of Finance, and Mr. Jovanovic.

Would you agree with me that one of the main purposes of the design of a price on carbon is to use that market mechanism—a price signal to incentivize a change in behaviour? Would you agree with that?

[Miodrag Jovanovic]

Yes, I agree with that.