Question Period Note: Agriculture and Pollution Pricing

How has the Government considered the specificities of the agriculture sector in developing its carbon pollution pricing system?

1. Carbon pollution pricing is an important part of Canada’s plan to transition to a cleaner and more innovative economy that reduces emissions and protects our environment.

2. Farmers and farm families are important drivers of the Canadian economy. The federal carbon pollution pricing system is designed to limit its impact on the agriculture sector and reflect the realities of Canada’s agricultural industry.

3. Greenhouse gas emissions from livestock and crop production are not included in pollution pricing systems. There are exemptions for gasoline and diesel fuel used by farmers for agricultural activities. There is also a partial rebate for commercial greenhouse gas operations.

Canada’s agriculture emissions represent 10% of Canada’s greenhouse gas (GHG) emissions. Agriculture emissions have remained relatively stable for two decades and are projected to slightly increase towards 2030.

Canadian producers have made great progress in reducing GHG emissions by improving production efficiency and increasing agricultural soil carbon. For example, through improved feeding and breeding, GHG emissions declined by 15% per kilogram of beef over the past 30 years. For over 20 years, Canadian farmers, particularly in the Prairies, have increasingly substituted conventional tillage with no-till or conservation tillage seeding techniques. These practices, combined with a major reduction in summer fallow (i.e., cropland purposefully kept out of production) and an increase in perennial forage crops, have resulted in agricultural soils in Canada being a significant carbon sink since 2000.

The Agricultural Clean Technology Program is part of the Government of Canada’s suite of clean technology programs and initiatives announced in Budget 2017. This $25-million (2018-19 to 2020-21) three-year investment aims to support clean growth and innovation as Canada transitions to a lower carbon economy, and enabling the adoption of clean technologies by the agriculture, agri-food and agri-based products sector.

From 2010 to 2015, Agriculture and Agri-Food Canada (AAFC) provided $25 million over 5 years to fund the Agricultural Greenhouse Gases Program. This program was renewed in 2016 for an additional $27M over 5 years (2016–21). The program is no longer accepting applications. The objective of the Program is to enhance the understanding and adoption of agricultural technologies and practices that can be used by farmers to reduce GHGs.

Carbon Pollution Pricing

Establishing a national price on carbon pollution is a key federal commitment under the Pan-Canadian Framework on Clean Growth and Climate Change. The Federal Government has implemented a carbon pollution pricing legislation (backstop) effective January 1, 2019, in provinces and territories that choose to adopt it or that do not have a carbon pollution pricing system that meets the federal stringency requirements and carbon price benchmark of $20/tonne in 2019 rising to $50/tonne in 2022.

Currently, carbon pollution pricing systems are in place in British Columbia and Quebec. The federal carbon pollution pricing system has been applied in New Brunswick, Ontario, Manitoba, and Saskatchewan since January 1, 2019. As Alberta repealed its carbon fuel charge in June 2019, the federal backstop is being applied in this province starting on January 1, 2020. The Yukon and Nunavut have invited the Federal Government to implement carbon pollution pricing in their territories. New Brunswick will be implementing its own provincial carbon pricing system starting April 1, 2020.

On June 20, 2019, the Alberta government initiated a legal challenge against the federal government, contesting the constitutionality of the federal carbon pollution pricing system. Manitoba, Ontario and Saskatchewan, backed by New Brunswick, are also engaged in similar legal actions. On May 3, 2019, Saskatchewan’s Court of Appeal ruled that the federal carbon pollution pricing imposed on the province is constitutionally sound and falls within the legislative authority of Parliament. On June 28, Ontario’s Court of Appeal also ruled that Canada’s federal pollution pricing system is constitutional. An Ontario court ruled on October 11, 2019, that the provincial government broke the law when it repealed the province’s cap-and-trade system without consulting the population.

Impact on agriculture producers: AAFC’s work to date indicates that carbon pollution pricing, including the proposed federal backstop, is expected to have modest impact on most farmers’ net operating expenses and incomes.

Impact on agri-processors: some agri-processors emit more than the 50,000 tonnes annually and are therefore regulated under the output-based pricing system. Environment and Climate Change Canada (ECCC) has developed output-based standards for: potato and oilseed processing, ethanol production, by distillation, for use in the production of alcoholic beverages, processing of corn through wet corn mill, sugar refining, and production of citric acid.

 
Renewable Fuels and the Clean Fuel Standard:

In 2016, ECCC announced that Canada would develop a new and more ambitious Clean Fuel Standard (CFS). The CFS would address liquid, gaseous and solid fuels used across all sectors of the economy (compared to the previous regulations which addressed liquid fuels used in transportation only), and use lifecycle analysis to assess the carbon intensity of various fuels, with a view to incentivizing those that offer the deepest carbon reduction potential for the cost.

The CFS could potentially create a significant increase in demand for renewable fuels, including agriculturally-derived biofuels, as a method for regulated parties to comply with the standard through blending. However, the details of the design of the Standard, as well as what accompanying incentive and industry support programs may be made available, will influence the scope of the opportunities for agriculturally-derived fuels. Canola industry stakeholders joined renewable fuels stakeholders early in the CFS development process to advocate for design of the CFS in a way that sends a clear and direct demand signal for increased production of biofuels, including biodiesel derived from canola.

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