Carbon tax hike sparks outrage

Western Canadian Wheat Growers Association president Gunter Jochum, who farms west of Winnipeg, said the decision to boost carbon taxes will erode net farm incomes, increase freight costs and result in higher prices for farm inputs, from fertilizer and machinery to natural gas and propane that’s used to dry grain.
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Many farmers view the federal government’s new carbon plan as a penny-snatching Grinch.

Ottawa unveiled the plan last week, which is aimed at reducing greenhouse gas emissions and involves increasing carbon taxes by more than 460 percent over 10 years.

Ottawa’s plan, entitled A Healthy Environment and a Healthy Economy, was released Dec. 11.

The plan includes 64 new measures and $15 billion in new federal spending aimed at scaling back fossil fuel consumption, reducing greenhouse gas emissions and encouraging the use of greener technologies in homes, at workplaces and on Canadian roads.

The plan includes financial incentives designed to reduce Canada’s environmental footprint, such as government grants for energy efficiency upgrades to residential and commercial buildings, an additional $287 million to promote the use of zero-emission vehicles, and other measures.

It also includes a Christmas pudding in the form of expanded carbon tax rebates for Canadian families. According to some observers in some provinces, annual rebate amounts for an average family of four could exceed $3,000 by 2030.

Across the Prairies, farmer response to the Liberal plan has been anything but joyous.

“It’s disgusting,” said Western Canadian Wheat Growers Association president Gunter Jochum, who farms west of Winnipeg.

“I can’t believe that our federal government would put a crippling tax on small businesses and farmers.”

Many western grain growers are fuming at Ottawa’s surprise move to boost the federal carbon tax by an additional $15 per tonne per year between April 1, 2023 and April 1, 2030.

The federal government’s backstop rate for carbon tax is currently set at $30 a tonne and is scheduled to increase to $50 a tonne by April 1, 2022.

The additional rate hikes announced last week will see the backstop carbon tax rate jump to $170 a tonne by April 1, 2030.

“We know that Canadians understand that it can no longer be free to pollute anywhere in the country,” said Prime Minister Justin Trudeau.

Jochum said the decision to boost carbon taxes will erode net farm incomes, increase freight costs and result in higher prices for farm inputs, from fertilizer and machinery to natural gas and propane that’s used to dry grain.

In some years, the tax hike could make it cost prohibitive to dry grain that’s already being produced on thin margins, he added.

In a news release, the WCWGA said it was “shocked” that Ottawa would hike the carbon tax in the middle of a global pandemic, with no regard to bottom lines of grain farmers.

Even at its current rate of $30 per tonne, the carbon tax is already costing the average western Canadian grain farm tens of thousands of dollars a year, the organization said.

Boosting the tax to $170 a tonne is “an affront to the family farm and it’s an affront to… agriculture,” Jochum said.

The Liberal plan does include a number incentives aimed at the agriculture industry.

Agriculture-related incentives include a 10-year, $98.4 million Natural Climate Solution for Agriculture Fund and a 10-year, $361 million program aimed preserving wetland and grassland areas and boosting carbon sequestration on agricultural lands.

Details of those programs have yet to be announced.

Some observers are also hopeful that Ottawa’s Clean Fuel Standard, which will promote the use plant-based biofuels such as ethanol and biodiesel, will boost market demand for grains and oilseeds produced in the West.

But Ottawa continues to ignore the fact that Canadian farmers have been adopting green technologies for decades, Jochum said.

The vast majority of grain farmers in the West have been using environmentally friendly farming practices such as zero-till crop production for decades but have received no recognition for those efforts, he said.

“Grain farmers have been using sustainable farming technology for decades yet have been given no recognition for our carbon sequestering,” added Stephen Vandervalk, the organization’s Alberta vice-president.

“This tax increase will only hurt farmers’ income and raise the price of groceries for all Canadians.”

The federal carbon tax does not apply to gasoline and diesel fuel that’s burned in farm machinery but it does apply to other fuels including natural gas and propane that are used to heat homes, run grain dryers and keep farm buildings from freezing in the winter.

Within 10 years, the amount of carbon tax applied to a square metre of natural gas consumed in Saskatchewan will increase to more than $0.33 per square metre, up from approximately $0.06 per metre currently.

By some estimates, the amount of carbon tax collected on a metre of natural gas will be worth three times as much as the gas itself by 2030.

Based on Saskatchewan’s 2018 natural gas consumption levels, the amount of carbon tax collected in the province for residential heating could exceed $2.4 billion a year by 2030.

On Saskatchewan farms, the carbon tax will add significantly to grain drying costs, said APAS president Todd Lewis.

Depending on commodity prices, further exemptions will be required to make harvesting and drying tough grain economically feasible.

“It’s going to make it pretty difficult if there aren’t exemptions,” Lewis said.

“The profit margins on some crops are already pretty narrow some years …. We’ll certainly be pushing the federal government (for further exemptions).”

According to an APAS report released in early 2020, the $20 per tonne carbon tax introduced in 2019 increased costs on a modern 5,000 acre grain farm by $8,000 to $10,000 a year.

That cost estimate accounted for a suite of goods and services that included grain drying, transportation, heating and electricity.

“It was far from an exhaustive list of added costs and (the tax burden) was significant,” said Lewis.

At $50 per tonne, those costs would be in the range of $13,000 to $17,000 per year, the report added.

Lewis said APAS does not have an estimate for a $170 per tonne tax would cost the industry. But the tax hike “is not very good news” for the province’s farmers and ranchers, he said,

Lewis said carbon tax rebates should be rejigged to account for the fact that Saskatchewan farm families live in remote areas where public transit isn’t available.

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