Why farm groups oppose carbon tax

Indirect costs, such as in transportation, are among the reasons for the sometimes fierce opposition to the carbon tax on the Prairies.  |  File photo

Agricultural groups were quick to dismiss the federal government’s announcement of a carbon tax, condemning Ottawa for imposing costs on their operations.

Farmers in Western Canada were particularly incensed. After investing in zero-tillage practices that sequester massive amounts of carbon into the soil, they are still being forced to pay a tax.

Amid the cacophony of complaint, common themes have emerged. The loudest complaints are understandably economic.

Farmers produce a homogeneous product and sell into an international market. They have zero control over the price at which to sell their output. This means that any additional costs are difficult to pass on in the supply chain.

There is no agreement on the extent of those additional costs, especially as the federal backstop (the policy that takes effect when provinces, including Saskatchewan, don’t have their own plan) has only just been implemented.

Farmers are exempt from most of the direct costs with the federal plan, but indirect costs remain. The costs associated with the carbon-intensive transportation required to get the product to market will likely be the largest, followed by increases in heating expenses and, possibly, fertilizer.

Both sides of the debate tend to bolster their arguments by pointing to British Columbia’s experience with an agricultural carbon tax. When the tax there was implemented in 2008, agricultural energy inputs such as diesel were not exempt.

It prompted concerns about the sector’s ability to remain competitive with international jurisdictions not subject to the tax — a rational, justified concern. Even though economists Nicholas Rivers and Brandon Schaufele later demonstrated that such concerns were likely overblown, the sector was permanently exempted from the tax in 2014.

However, most of Canada’s agricultural production occurs in the prairie provinces, where carbon tax opposition has been fierce.

Saskatchewan is in the midst of a lawsuit challenging the authority of the federal government to impose such a tax and several parties throughout the country have taken sides as intervenors.

Alberta, overruling the objections of its farm sector, imposed its own tax in advance of the federal announcement. In designing a custom tax policy, Alberta moved to protect its agricultural sector from the direct costs of the tax while still providing incentives to cut emissions.

This level of flexibility has been removed in the latest iteration of the federal plan. Alberta’s system is far from perfect, but does more than the federal policy to reduce agricultural emissions.

However, none of the three — B.C.’s progressive system, Alberta’s flexible system and the federal backstop plan — tax the largest source of agricultural greenhouse gas emissions. In 2016, agriculture accounted for 8.5 percent of national emissions, and of that, carbon dioxide accounted for only four percent.

Nitrous oxide (48 percent) and methane (48 percent) make up the rest. Both are potent greenhouse gases. Preventing the emission of one kilogram of nitrous oxide can be much less costly than preventing 300 kilograms of carbon dioxide.

Taxpayers benefit more from greenhouse gas reductions that cost $15 per kilogram compared to those that cost $30 per kg.

The federal policy does not facilitate this lowest possible cost arrangement.

The idea was for each province to construct a plan suited to its economy and energy generation sources, not to act as a one-size-fits-all.

For provinces with large agricultural sectors, the lowest-cost option may be in agriculture. But the political strength of the sector makes such policies difficult to envision.

Can Canada reach its climate goals without incentivizing meaningful emissions reductions in agriculture? Perhaps in the first few years of the policy, but for the most cost-effective reductions, we need agriculture to play a role.

Tristan Skolrud is an assistant professor at the University of Saskatchewan. This article first appeared on the Conversation website and was edited for length.

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