Carbon tax estimates uncertain

The price of carbon taxes for agriculture in Canada isn’t publicly known, despite farmers and agricultural industry players’ needs for that information. It appears the federal government had more estimates than it has readily shared in the past few years and it still isn’t easy to find some of the important costs that farmers will ultimately carry.

Attempts to discover the actual costs that producers will have to cover have proved challenging and failed to provide much insight into the larger costs for grain and oilseed producers of carbon taxation: fertilizer and rail transportation.

There have been at least three government reports that deal with the carbon tax’s effect on agriculture. There may be more, but none answer those critical questions.

After an access to information-based inquiry, The Western Producer found one-year-old redacted estimates that appeared to have spelled out the costs and break down those for eastern and western Canada and by producer type.

This showed that federal officials have known since 2017 how much a $10 and $50 per-tonne carbon price will cost producers, down to the specific type and region of each farm. This was found in a report to a deputy minister of agriculture. This report, titled AAFC’s Updated Analysis on the Potential Impacts Of Carbon Pricing On The Primary Agriculture Sector, may have contained transportation and fertilizer costs, however the numbers were redacted.

The analysis examined the impact of “carbon pricing at $50 per-tonne by province and farm-type with information on net operating income in addition to operating costs,” the report said in the background section of the document. As well, the background section included information on a previous analysis performed by Agriculture Canada.

“This analysis examined the operating cost associated with these carbon prices on the average farm in (eastern and western) Canada without taking into account any cost relief measure,” the report says.

Most of the “Key Points” section of the report was blacked out.

For example: “Increases in average net operating expenses would range from (redacted) and (redacted). The decline in average net operating incomes ranges from (redacted) across the provinces.”

In an email response to The Western Producer about the report’s contents Agriculture Canada said another report published in July, 2018 called Financial Impacts of Carbon Pricing on Canadian Farms with the information has been made available by request.

“In fact, this analysis has been developed to inform farmers and industry stakeholders. It has been shared with stakeholders, media and parliamentarians,” the Agriculture Canada email read.

Through an access to information and privacy request, the Blacklock’s Reporter (an Ottawa-based newsletter) had access to the document. Other than a single reference in the Ottawa newsletter there is little indication that the information has been made more widely accessible.

The report dealt with electrical energy, heating and field fuel costs.

Another report has been cited by Conservative MP John Barlow that uses an analysis completed by the Office of the Parliamentary Budget Officer (PBO) to describe what the carbon tax will cost farmers.

The PBO provided a note to the Senate agriculture committee on Nov. 29, 2017, examining the overall emissions from specific types of farms in different farming regions. It calculated a $25 per-tonne carbon price on these emissions.

That PBO report calculates what a carbon tax would do to farms if it were applied to agricultural activities. However, agriculture is mostly exempt from the tax.

Canadian farmers will not be charged a carbon tax for emissions from their farming operations, such as methane from cattle or nitrous oxide from cropland.

The budget office note is available online here.

Canadian Federation of Agriculture vice-president Norm Hall said the organization has not seen a detailed report that prices the carbon tax on specific types of farms in specific regions.

“We’ve seen different numbers they’ve released, and some of them are gross numbers, which are total cost of everything, including the organic emissions and so on,” Hall said.

“Others are just fuel costs.”

He said Environment Canada has stated that the average Canadian farm, not broken down by type or region, is going to incur approximately $300 in direct costs from the carbon tax.

“(However), nowhere have I seen anything where they include indirect cost, such as any tax on fuel used by railroads, or commercial trucks bringing fertilizer in or taking grain out, or what it’s going to cost the fertilizer industry, or the chemical industry, or anything like that,” Hall said.

A presentation also published in July, 2018, titled Agriculture and Climate Change Policy (PDF format), was provided to The Western Producer by Agriculture Canada. It looks at the financial impacts of carbon pricing on Canadian farms.

Graphs in the presentation show less than a 0.5 percent increase in net operation expense and a less than 0.5 percent loss in net operating income for the average farm on the Prairies as a result of a $50 per tonne carbon tax.

The analysis takes into consideration energy imports that are relevant to the agriculture sector, such as machinery fuel, electricity and heating fuel (natural gas, light oil, and propane).

However, the analysis does not take into consideration the impact of carbon pricing on inputs such as transportation, fertilizer and commercial feed.

“Electricity, machinery fuel and heating fuel accounted for an average of 7.8 percent of operating expenses in Canadian farms (in 2016),” the presentation said.

The Pan-Canadian Framework on Clean Growth and Climate Change (PCF) exempts gasoline and diesel fuel used in agriculture.

Exactly how the carbon tax will affect the 92.2 percent of farm gross operating expenses that are outside of this Agriculture Canada analysis provided to The Western Producer remains unclear.

This year, the federal fuel charge will be levied at $20 per tonne of carbon emissions and then increase by $10 per tonne each year until 2022, when it will reach $50 per tonne.

“Farmers are making their budgets, and this is going to affect them because it’s supposed to start April 1,” Hall said.

“It’s going to hit us this year, and it’s all going to be new costs. We have no idea if it’s going to be $300, or $3,000, or $15,000. It would be nice to have an idea.”

Interestingly, documents provided in the same Western Producer access to information request also show that in December 2017, Agriculture Canada officials provided a report titled Climate Action In The Agriculture Sector to Chris Forbes, federal deputy minister of agriculture. It concludes that there is little farmers can do to reduce emissions without reducing production.

“(It) highlights the main areas where efforts are made in the agriculture sector to contribute to the PCF (Pan-Canadian Framework),” the report says.

That report also states that total agriculture emissions, such as from livestock, crops and on-farm fuel use, have been relatively stable since the mid-1990s, despite significant growth in production over the same period, indicating decoupling between emissions and production.

“Between 1997 and 2015, the emission intensity of Canadian agriculture production per dollar of agriculture gross domestic product (index = 2007$) has declined by 47 percent,” the report states.

It also said that some greenhouse gas reductions are achievable through better placement and timing for fertilizer, better conversion of feed into meat or milk and better crop rotations and land management.

However, the Agriculture Canada analysis also shows that further reduction in greenhouse gas intensity by the agriculture sector will be very difficult to achieve.

“Using current technologies, significant reductions would only be possible by scaling back production, which is not a practical, realistic scenario given increasing global food demand and growth expectations from the Canadian agriculture sector,” the Agriculture Canada analysis said.

Hall said it will also be difficult for producers to pass the extra cost of the carbon tax onto consumers of their products, something the government resists acknowledging.

“In a one-on-one, they (government officials) will say, ‘yeah, we understand that,’ but you are not seeing it in any of their releases,” he said.

About the author


Stories from our other publications