Agriculture Committee on June 16th, 2022

[Miodrag Jovanovic]

No, this is the refundable tax credit for farmers. It's based on what farmers paid. We just return that amount to farmers.

[Ted Falk, Conservative, Provencher, MB]

Is it not based on individual farms?

[Miodrag Jovanovic]

Each individual farm with expenses.... Again, the threshold is $25,000. Any farm with more than $25,000 in expenses can claim that credit at a rate of $1.47 for 2021-22, for each $1,000 of expenses.

That's a fact. That's just the way it's designed. It's based on the estimates we have, so—

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Jovanovic.

Thank you, Mr. Falk.

We're now going to turn to Ms. Taylor Roy.

I believe you and Mrs. Valdez might be splitting the time, so I'll try to signal halfway.

Whoever would like to start first may start.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thanks.

I'm actually going to give half of my time to Mr. Turnbull. He has a lot of questions he didn't get to ask. I'm fine with that.

[Ryan Turnbull, Liberal, Whitby, ON]

Thanks to my colleague.

I will go back to Mr. Jovanovic.

You talked about how maintaining the price signal was the approach taken, rather than offering an exemption. This was in response to Mr. MacGregor's questions. I guess this goes back to my earlier question posed to Mr. Moffet. He didn't really give me a response. Maybe I'll pose it to you.

If we exempt farmers, doesn't that disrupt the whole market mechanism of the price on pollution? What, then, is the incentive to actually change practices and adopt new renewable energy sources on farms? Isn't that a concern you would share?

[Miodrag Jovanovic]

Yes, the result would be no more price signal in that particular sector of the economy. The result would be that most, if not all, of the emissions would not be covered by any carbon pricing.

[Ryan Turnbull, Liberal, Whitby, ON]

Wouldn't we expect, then, GHG emissions to increase, as a result of the price signal being removed?

[Miodrag Jovanovic]

I'm not sure I can answer that directly. Yes, it would, conceptually, but it depends on the evolution of technologies. It's difficult to say yes or no, in this case—not understanding what the future will look like. Clearly, what it would do is remove that incentive to act sooner, for sure.

[Ryan Turnbull, Liberal, Whitby, ON]

Removing the incentive to act sooner would slow down the progress we're trying to make in energy transition. The adoption of different practices, especially in relation to heating barns and greenhouses, as well as grain drying, would all be affected. This approach would slow the progress down.

Is that your sentiment?

[Miodrag Jovanovic]

It's all in the relative price of things. If technologies become available, but they're a bit expensive, and if there's no carbon price at all, you're going to wait longer, because you're going to wait until prices decrease. If there's a carbon price, that creates an incentive, because you already have a cost not to act. It pushes you toward acting sooner.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you very much.

I'll hand the time over to Mrs. Valdez.

[Rechie Valdez, Liberal, Mississauga—Streetsville, ON]

Thank you.

I appreciate the witnesses being here today.

These questions are for the Department of Agriculture.

How would the introduction of Bill C-234 affect our current goals and progress in meeting our emissions targets and having a greener economy?

[Natasha Kim]

Thank you for the question.

I should perhaps start by noting that the Greenhouse Gas Pollution Pricing Act, as mentioned in the opening remarks, actually has a fairly limited application on farm in terms of the emissions, because, as I'm sure the committee is aware, most agriculture emissions do come from biological sources or from fertilizer, in fact. So when we look at on-farm full fuel use, that's about 13.4 megatonnes based on the latest estimates, which is about 20% of agriculture emissions in total.

In terms of the application of the exemption, that would reduce the application of the price signal, as my colleague Miodrag was just speaking about.

[Rechie Valdez, Liberal, Mississauga—Streetsville, ON]

Thank you.

In 2021 the government announced the $550 million that would be directed toward Canada's agriculture sector to meet our emissions targets and capture new opportunities in the green economy. Can you share any updates on this or any outcomes from this effort?

[Natasha Kim]

I apologize. Can you repeat which program you were talking about?

[Rechie Valdez, Liberal, Mississauga—Streetsville, ON]

Sure. It was announced in 2021. It's the $550 million that will be directed to our agriculture sector.

[Natasha Kim]

In 2021 we did launch a couple of new programs that were about $550 million. There was $200 million for agricultural climate solutions—the on-farm climate action fund. This is to support farmers in the adoption of what we call “beneficial management practices” that can help reduce their emissions, but also often increase resilience to climate change on farm as well.

There's also a stream of that program called “the living labs”, which is a network of living farms on which we work with producers and our scientists to test some of those practices on farm.

[The Chair, Liberal, Kody Blois]

Thank you, Ms. Kim. I apologize, but that's time. I even gave you a few extra seconds.

Thank you, Ms. Valdez.

Mr. Perron, you have two and a half minutes.

Mr. Perron, you now have two and a half minutes.

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

Thank you very much.

Mr. Jovanovic, do you think the tractor fuel exemption in the first version of the carbon tax slowed down the transition?

[Miodrag Jovanovic]

As I said before, initially we copied the model used in British Columbia. The approach sought to reduce the overall impact on the sector...

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

I have to interrupt you because I just have two and a half minutes of speaking time.

That decision was made because there were no short-term alternatives. According to the testimony we are hearing, there are no solutions for grain drying in the short term either.

So why was grain drying not included in the first version of the exemptions? I am trying to understand the logic behind it.

[Miodrag Jovanovic]

I do not think the logic was that straightforward.

Perhaps my colleague Mr. Coulombe can elaborate on that.

[Gervais Coulombe, Senior Director, Excise Taxation and Legislation, Sales Tax Division, Tax Policy Branch, Department of Finance]

Thank you, Mr. Jovanovic.

The Greenhouse Gas Pollution Pricing Act was developed between 2015 and 2018. We followed the basic model of British Columbia's carbon tax. We also looked at what the other provinces and territories in Canada that had carbon pricing were doing.

To my knowledge, a portion of the fuel emissions used in Quebec, related to the cap-and-trade system, can be included. There is no mechanism to remove a portion attributable to agriculture. The federal exemption for eligible farm machinery was already more generous than certain systems and was also as generous as the one in British Columbia. There was a sense of justice...

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

I would just like to ask you a question quickly, Mr. Coulombe.