Carbon pricing increases costs for producers, feedlot operators with limited ability to pass on costs
OTTAWA — Carbon pricing policies across Canada could add costs and affect producer competitiveness.
“Carbon taxes have the potential to impact business or management programs in unexpected ways,” Brenna Grant, research analyst with Canfax, said at the Canadian Cattlemen’s Association annual meeting in Ottawa March 21-23.
A study commissioned by the cattlemen’s association examined the impact of Canada’s carbon pricing policy on industry competitiveness.
The report, Carbon Pricing and the Canadian Beef Sector, by Brandon Schaufele of the Graburn Economics and Ivey Business School at Western University found carbon pricing increases costs for cow-calf producers and feedlot operators with limited ability to pass the added costs up or down the supply chain.
Further, each province has its own policies that create a different set of costs and rules for producers operating in different provinces.
Alberta and British Columbia have carbon taxes while Ontario and Quebec are under cap and trade systems. Alberta and B.C. also exempted farm fuel from the tax, while it is not exempt in the eastern provinces.
“The impact on producers at lower prices is significantly larger than at current price levels,” Grant said.
Agriculture Canada analyzed average input costs for all agriculture and concluded modest affects for farming from carbon levies.
It is important to add up the costs at every stage of production to get a full picture of the total costs, she said.
Energy consumption is low in most beef production units, but part of the study was to recognize that carbon prices have an effect and even a small cost increase can have a big impact on overall costs and profit.
The Alberta carbon levy of $20 per tonne adds 1.3 percent in cost of production on average. When the price of cattle declines, the tax has a greater impact.
Another concern among beef producers is competing with other countries where no similar policies are in place.
“With the carbon price, you then have the potential of importing more of a cheaper product that is priced internationally that may or may not have a lower or higher greenhouse gas emission,” said Grant.
The study recommended offering tax exemptions on such things as dyed fuels used for on‐farm activities. However, the study cautions that even with a fuel exemption, the policy will continue to erode margins in the cow-calf sector as levies increase.