Testimony at hearings into grain dryer fuel bill calls for expanding exemption, putting farmers in large emitter category
New ideas continue to come forward in the debate over whether propane and natural gas used on farms should be exempt from carbon pricing.
The Senate agriculture committee is examining C-234, which passed the House of Commons earlier this year.
Last week members heard from farmers and other stakeholders who are grappling with the idea that the price signal sent by a carbon price encourages change that benefits the environment.
The Agriculture Carbon Alliance, which represents 15 national farm organizations, spoke strongly in favour of an exemption, saying farmers could invest that money on their farms to become more efficient.
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The Ontario Agri Business Association asked for the exemption to be expanded because the majority of Ontario farmers don’t have their own drying systems.
“OABA recommends that, as part of the Senate committee’s study, you examine the potential for inclusion of farmers’ drying expenses incurred at commercial elevators,” said executive director Russell Hurst.
Hurst said commercial dryers pass the carbon tax right through to farmers, so the exemption should apply in those facilities. Bill C-234, as currently proposed, contributes to a cost-of-production imbalance, he added, since about two-thirds of the volume of corn grown in Ontario is dried at commercial facilities.
“If no amendments are made, approximately one-third of the grain-drying expenses incurred in Ontario will be carbon-tax-exempt with the remaining two-thirds not exempt,” he said.
Nicholas Rivers, associate professor of public and international affairs at the University of Ottawa, suggested a different tack.
He said while about one-quarter of emissions worldwide are covered by a carbon price, many of Canada’s trading partners don’t have one, including the United States. Other Canadian industries such as cement or steel are eligible for rebates under the large industrial emitters program.
“Like cement and steel, grains are an internationally traded commodity and there are legitimate concerns that the carbon price puts Canadian grain farmers at a disadvantage relative to their international peers,” Rivers said.
An alternative to an exemption would be to use a rebate system similar to the large emitters. Farmers would still have to pay the carbon price but would be rebated in proportion to the amount of grain produced, he said.
“Like the existing rebates for large industrial emitters, this system would continue to provide farmers with an incentive to reduce emissions from grain drying and other on-farm activities but would also ensure that Canadian grain farmers were not placed at a competitive disadvantage in international markets,” he said.
The current rebate system is ineffective, witnesses have said, because it returns only a small portion to all farmers based on expenses.
Other witnesses argued that there should be no exemption or rebate for farmers because they erode any incentive to change.
Senators noted the federal government said about 99 high-efficiency grain dryers have been purchased through its Agricultural Clean Technology Program.
“The reality is 100-odd small-scale grain elevator dryers on the scale of Canadian agriculture is a drop in the ocean type of thing,” said Hurst.
Committee chair Robert Black said commercial dryers, greenhouse operators and mushroom growers have all asked for the bill to be tweaked to offer them more support. He asked if it was worth amending the bill and risk it not passing.
Grain Growers of Canada chief executive officer Kyle Larkin said no.
“I would suggest passing this piece of legislation as-is and in the future looking towards commercial drying opportunities,” he said.
Kathryn Harrison, political science professor at the University of British Columbia, researches climate policy and is writing a book on carbon taxation. She said carbon pricing should encourage farmers to reduce emissions but that should flow through to farm equipment manufacturers and encourage them to innovate and develop low-carbon equipment. In turn, that should send a signal to consumers and investors to buy products that reflect that work.
Harrison said she understands the importance of farmers having money to invest in their operations.
“The problem is that they won’t necessarily invest in things that have social benefits rather than benefits for their own private operation. That is what the carbon price is doing. It is taking those social benefits and bringing them into the market,” she said.
Meanwhile, Parliamentary Budget Officer Yves Giroux also appeared at the committee last week to discuss the office’s latest cost estimate of the potential exemption.
Alberta senator Paula Simons said she was surprised to see where the exemption would have the most effect.
“I’m just absolutely fascinated at the difference, that this will save prairie farmers very little compared to Ontario farmers,” she said.
Nasreddine Ammar, a PBO analyst, said province size and farm type play a role in the numbers that were provided by Environment and Climate Change Canada.
Natural gas and propane represent less than one percent of operational expenditures, the office said.
British Columbia senator Yuen Pau Woo asked if there really was a cost because the tax is returned.
Giroux replied that Canadians do get about 90 percent back, but when producers pay the carbon tax, it doesn’t mean it is directly returned to them.
“It’s rebated to the citizens in that province,” he said.
However, Woo said there are programs to encourage farmers to adopt new technologies, although it is separate from the rebates based on farm size.
“My point is that because all of the funds are given back to the farm sector as a whole, to speak of a cost to the farm sector is not quite accurate,” he said.
“When people talk about the cost to them, it is true that some farmers will get back less than they spent, but in aggregate there is no net cost for the farm sector. That’s my simple point,” he said.
Giroux said Woo is correct, in aggregate, but not for individual producers.
