How can you grow and improve your farm while creating efficiencies when new technology and energy prices can be extremely costly? Carbon surcharges have the potential to affect your bottom line while also hindering your ability to make important investments into your farming operation.
In 2018, the Greenhouse Gas Pollution Pricing Act (GGPPA) came into effect. It established the framework and authority for the federal carbon pollution pricing system.
With GGPPA, a fuel charge rate is applied to 21 different fossil fuels, including natural gas and propane. For the current 2023 year, Canada’s minimum national price on carbon pollution is $65 per tonne of green house gas emissions and is planned to increase by $15 per year.
Read Also
Downturn in grain farm economics threatens to be long term
We might look back at this fall as the turning point in grain farm economics — the point where making money became really difficult.
Farmers in Alberta, Saskatchewan and Manitoba have seen some relief to these surcharges by way of the tax credit to return fuel charge proceeds introduced in December 2021. However, these rebates are based purely on eligible farming expenses. They do not cover all the carbon surcharges that farmers have actually paid since the introduction of the legislation.
When the GGPPA was first introduced, it recognized that farmers, growers and ranchers were limited in the fossil fuels they required to perform their necessary functions. The law provided an exemption for gasoline and diesel and removed the carbon pricing for these fuels.
Bill C-234 seeks to tidy up the exemptions and include natural gas and propane, which are used extensively to dry grain, run irrigation systems and heat livestock barns. Currently there are not many other viable alternatives available to farmers to effectively support these practices.
Bill C-234 was passed in the House of Commons in March 2023 and would exempt farmers from paying the fuel charge on farming operations that require the use of fossil fuels, including natural gas and propane. While it does present the potential for an overlap with the existing rebate that is offered, the government has the capacity to resolve this concern by directing the Canada Revenue Agency to not process the rebates in the provinces where an exemption exists.
Bill C-234 will let farmers keep more cash in their pockets so they can in turn invest back into their operations, potentially with a focus on new technologies.
The reality for farmers is that they are currently paying more in surcharges than they get back in refunds, and if there are more exemptions, more efforts can be put into advancing technologies, specifically with regards to grain drying. There currently appears to be limited viable fuel options for grain dryers available to farmers.
The federal government announced a $50 million funding stream for the purchase and research of more efficient grain dryers in 2021 and will soon be launched as the $15 billion Canada Growth Fund, which will also be able to help mobilize resources to tackle problems like this.
Bill C-234 includes a sunset clause that would expire after eight years from the date of royal assent, allowing the government of the day to determine if there are viable alternatives in place other than natural gas and propane for food production.
In summary, Bill C-234 attempts to establish a targeted and time-limited carbon pricing exemption for specified on-farm fuel uses and will ensure farmers have the capital needed to invest in on-farm efficiencies and sustainability improvements. Consult your trusted adviser to see how Bill C-234 will impact your operations.
Colin Miller is a chartered accountant and partner with KPMG’s tax practice in Lethbridge. Contact: colinmiller@kpmg.ca.
