How will the federal carbon tax affect the fertilizer industry?

Canada’s fertilizer industry is trying to understand what effect a federal carbon tax will have on the sector.

Garth Whyte, president of Fertilizer Canada, which represents Canadian manufacturers, wholesalers and retailers of nitrogen, phosphate and potash fertilizer, said there are too many variables and unanswered questions.

The federal government is implementing a minimum nation-wide carbon tax starting at $10 per tonne in 2018 and increasing to $50 per tonne by 2022. It will apply where there is no provincial carbon tax in place.

Details about the new policy are scant. Whyte met with federal agriculture officials last week to get some clarity on how the proposed tax will affect the farm input sector. He was no wiser when he left.

“The federal department of agriculture hasn’t even determined what the total cost of inputs will be,” he said.

Part of the confusion is the potential myriad of policies unfolding in each of the provinces. Some provinces are contemplating the cap and trade approach, others are applying a straight tax and some are using a blended model.

Whyte is concerned that a carbon tax would make Canada’s fertilizer sector uncompetitive because there are plenty of manufacturers around the world who would not be facing similar additional costs.

“You don’t want to hurt industries that are value-added that have got billions of dollars in (investment),” he said.

Fertilizer Canada members produce more than 25 million tonnes of product annually. Nearly all of the potash is exported along with 60 percent of the nitrogen.

“By forcing us to reduce production, they’ll just offset it to China, which is coal fed,” said Whyte.

Nitrogen is the most carbon-intensive fertilizer because the main ingredient is natural gas, and the production process requires high temperatures and pressure to create ammonia.

Canadian farmers are big users of nitrogen fertilizer. It accounts for three-quarters of their annual fertilizer use, or about five million tonnes, according to Agriculture Canada.

The Agricultural Producers Association of Saskatchewan estimates a $50 per tonne carbon tax would add $2 per acre in nitrogen fertilizer costs for the average farm.

Whyte said that number did not come from Fertilizer Canada because it does not know what the additional costs will be.

However, the fertilizer association would like the federal government to adopt a carbon offset program that rewards farmers for employing the 4R nutrient stewardship program for applying the right fertilizer source at the right rate, right time and right place.

It believes such a program would reduce farm-based greenhouse gas emissions by one to two megatonnes a year in Western Canada.

The association also wants Canada’s fertilizer sector to be recognized for performing in the top quartile in the industry for energy efficiency and controlling greenhouse gas emissions.

Whyte worries the improvements made in the 1990s prompted by sky-high natural gas prices will not be recognized by the federal government if it sets a benchmark year in the mid-2000s or something along those lines.

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