Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 27 - Evidence - Meeting of April 4, 2017
OTTAWA, Tuesday, April 4, 2017
The Standing Senate Committee on Agriculture and Forestry met this day at 6:13 p.m. to study the potential impact of the effects of climate change on the agriculture, agri-food and forestry sectors.
Senator Ghislain Maltais (Chair) in the chair.
[English]
The Chair: Welcome to the guests of the Standing Senate Committee on Agriculture and Forestry. My name is Senator Ghislain Maltais from Quebec. I would like to ask the senators to introduce themselves, beginning on my left.
[Translation]
Senator Pratte: André Pratte, senator from Quebec.
[English]
Senator Woo: Yuen Pau Woo, British Columbia.
Senator Oh: Victor Oh, Ontario.
Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.
The Chair: The Senate has just adjourned and in a few minutes the other members of the committee will be coming.
Today this committee is continuing its study of the potential impact on the effects of climate change on the agriculture and agri-food and forestry sectors.
[Translation]
Today we're meeting with Brian Innes, Vice-President, Government Relations, Canola Council of Canada.
[English]
From the Canadian Canola Growers Association, Jack Froese, President; and Rick White, Chief Operating Officer.
Joining us by video conference is Chris Vervaet, Executive Director for the Canadian Oilseed Processors Association.
Every guest has a small presentation. Because we have just one hour for the meeting, can we please have short presentations and short questions from the senators.
Mr. Froese, you are beginning.
Jack Froese, President, Canadian Canola Growers Association): Good evening, and thank you for the invitation to appear.
My name is Jack Froese. I am President of the Canadian Canola Growers Association. I am a fourth generation farmer from Winkler, Manitoba, which is an hour and a half southwest of Winnipeg. I grow canola, along with corn, pulses and wheat on 5,700 acres. With me today is Rick White. He is the CEO of the Canadian Canola Growers Association.
CCGA is the national association representing 43,000 canola farmers. We are also members of the Canola Council of Canada, which is also appearing today. Together we represent a $26.7 billion industry.
Today I want to speak with you about the adaptability and resilience of farmers in the face of climate change, the impact of carbon pricing and the opportunities for the future.
Adaptability and resilience: Canola is a made-in-Canada crop. It was developed here by Canadian researchers to suit Canada's cold weather growing regions and has proven to be a successful endeavour. Canola is now seeded on about one third of all the cropland in Western Canada and is the number one crop in terms of cash receipts.
Farmers, more so than other businesses, are impacted by nature and dependent upon the environment for their successes, be it weather, weeds or insects. There are different conditions every year and each one can greatly impact our farms. Crop production can be negatively impacted by severe weather events.
Over the last decade, excess moisture has been the leading cause of crop losses in Manitoba and Saskatchewan. This uncertainty has led us to develop a proven track record of adopting modern technologies, rapidly and voluntarily, that have both economic and environmental benefits. These technologies include GM seed varieties, zero-till seeding and precision agriculture.
Thirty years ago, the military was the only organization using GPS. Today, GPS is an integral part of my operation. Technology allows me to farm with precision, applying fertilizer in more precise ways, using pesticides prudently. This cuts costs and emissions associated with fuel use and fertilizer application.
Over a 30-year period, these types of practices have reduced energy use by 43 per cent per tonne of canola production and decreased greenhouse gas emissions by 53 per cent.
When I can, I practise no-till or zero-till farming. This allows my fields to remove greenhouse gases from the atmosphere and reduces soil erosion that can lead to catastrophic events like the 1930s Dust Bowl. It also means fewer passes over the field with a tractor and, therefore, less fuel consumption.
In 1991, 30 per cent of Western Canadian farmland was seeded with no-till practices. By 2011, this number had doubled to 61 per cent. When soils are left untilled, they sequester greenhouse gases. Due to practices like no-till farming, Canadian cropland now sequesters 12 million tonnes of greenhouse gases every year. This is the equivalent of removing 2.5 million passenger cars off the road every year.
Adapting to new practices like no-till farming has allowed farmers to weather climatic uncertainty and remain competitive in a global market. Looking ahead, we will need to continue to do this in order to remain competitive, and we will. With industry and government partnerships, new practices are being explored and implemented through initiatives such as the Canadian Roundtable for Sustainable Crops, the Canadian Field Print initiative, the National Environmental Farm Plan, and the 4R fertilizer program.
But, each year, there will be new pressures, and adaptation can take time. For that, we need a solid suite of business risk management programs that help to manage risk. Current programs are under review as part of the next policy framework, and we urge governments to work with producer groups to focus on what programs would be best for the next 10 to 20 years, not to simply rely on slight modifications to existing approaches.
Carbon pricing: Currently, the federal government has an ambitious plan to address climate change, and one aspect is carbon pricing. As each province determines how to implement a carbon price, farmers remain concerned about its impact.
We are price takers in a global marketplace. We cannot pass along any of these costs. This is of particular concern given that 90 per cent of our canola crop is exported every year. We must compete internationally with farmers who operate their businesses in an environment that will not have these additional costs.
As identified in the Pan-Canadian Framework on Clean Growth and Climate Change, the government can help our industry to meet emissions-reduction targets by researching new best practices and investing in environmental technologies. As I have already mentioned, farmers have a history of rapidly adopting new technologies that reduce their environmental footprint while protecting their profitability, and they will continue to do so. But farmers have already done a great deal to reduce their impact, and this must be recognized.
Our request is that farmers are not negatively impacted by a carbon price, that competitiveness is not compromised and that consideration is given to returning any added costs through effective carbon-offset programs or other mechanisms. Truth be told, we would rather be incentivized to help the government to achieve its climate change goals rather than taxed. Agriculture is a successful part of the Canadian economy and has a bright future, but only if we are on a level playing field with our competitors.
Opportunity for the future: The canola industry can play a role today in reducing Canada's greenhouse gas emissions. Bioenergy has been identified as a climate change solution. Canola is a low-carbon quality input for Canadian biofuel. Biofuel from canola produces 90 per cent fewer greenhouse gases than conventional diesel. Increasing the current federal mandate for biodiesel from 2 to 5 per cent would result in an immediate benefit. Using canola, such a change would reduce greenhouse gas emissions in Canada by 5.2 million tonnes a year, the equivalent of taking 1 million passenger cars off the road every year. Increasing the mandate would provide an immediate and quantifiable reduction in greenhouse gases, with very little cost to the government.
In conclusion, CCGA remains optimistic about the future for Canada's canola farmers and their ability to continue to contribute positively to Canada's environment and climate change goals and the economy. Canadian agriculture should be viewed as a strategic partner in this dialogue.
Thank you again for the opportunity to appear today and to discuss a topic of great importance to canola farmers.
The Chair: Thank you very much, Mr. Froese.
The second witness is Mr. Brian Innes. Before we continue, permit me to present the other members of this committee.
[Translation]
From Alberta, we have Senator Tardif; from Quebec, Senator Jean-Guy Dagenais; and, from Ontario, Senator Lynn Beyak.
Mr. Innes, the floor is yours.
[English]
Brian Innes, Vice-President, Government Relations, Canola Council of Canada: Good evening, senators. It is a pleasure to be here to share information about how climate change will impact the canola sector.
First, I'd like to explain a little bit about the Canola Council of Canada. It is a value-chain organization representing the canola industry and includes the 43,000 canola growers that Jack is president of. It includes the seed developers. It includes the processors that crush the seed to make oil and to make meal for livestock feed, and it includes the exporters who export canola for processing at its destination.
I'm here today with two parts of our value chain that are most affected by climate change and carbon pricing. I'd like to explain a lit bit about where our industry is going. We have a plan for the future, which is a plan for growth. It's a plan to meet the world's growing appetite for healthy oils and for protein.
Keep it Coming 2025 is our plan to increase demand for canola oil, meal and seed and to meet this demand through sustainable production and yield improvement, achieving 26 million metric tonnes of production by 2025.
In our plan, we have two pillars that are particularly relevant for tonight's discussion: sustainable supply and stable and open trade. The canola council funds and coordinates research to improve canola production and make it more sustainable. Over the last eight years, for example, our industry, in partnership with Agriculture and Agri-food Canada, has invested more than $40 million in research. This investment has made canola more profitable, more efficient, and more sustainable.
Now we're preparing for the next agricultural policy framework, with a number of priorities to adapt to a changing climate and a policy environment favouring reduced carbon emissions. For example, we want research to focus on how plants can use nitrogen fertilizer more efficiently. We want to research fertilizer practices that reduce losses and improve return on investment for our growers. We want to breed plants that sequester more carbon in the soil. These are exciting opportunities that can help our canola production to do its part to help to meet Canada's climate change goals into the future.
One thing our past research has shown is that using biodiesel from canola can reduce carbon emissions right now, as you heard Jack mention. My colleagues, both Jack and Chris, will speak to this in more detail.
Lastly, stable and open trade is an important part of our industry. We export more than 90 per cent of everything that we grow in Canada, either as seed, oil or meal. This means that we must maintain our competitiveness, as Jack outlined, with other oil and protein suppliers from other countries, or we will not be able to keep bringing the same value to Canada as we do right now. To put this into perspective, more than a quarter million Canadian jobs depend on canola. The vast majority of these jobs are supported by our ability to compete in international markets.
I look forward to your questions.
The Chair: Thank you very much, Mr. Innes.
Now from Winnipeg, by video conference, is Mr. Chris Vervaet of the Canadian Oilseed Processors Association.
Mr. Vervaet, welcome.
Chris Vervaet, Executive Director, Canadian Oilseed Processors Association: It's a pleasure to be here, and thank you for accommodating me by video conference this evening. I look forward to the few minutes that I have to present on why climate change and the policies around climate change are of critical importance to the oilseed processing industry in Canada.
Perhaps some background about our industry and who the Canadian Oilseed Processors Association is. COPA works in partnership with the Canola Council of Canada to represent the interests of oilseed processors in Canada. We represent the companies that own and operate 14 processing facilities in the country. These facilities process canola and soybeans grown by Canadian farmers into value-added products for food processing, which is vegetable oil, animal feed, which is the protein meal that Brian alluded to, and biofuels as well.
The oilseed processing industry in Canada has witnessed tremendous growth in investments and capacity in recent years, especially with regard to canola. It is estimated that processing canola and soybeans in Canada is now responsible for almost $9 billion in economic activity every year, and this is a threefold increase from a decade ago.
According to a recent report by the Conference Board of Canada, the oilseed milling sector has been the key driver for the food manufacturing industry's growth over the past decade.
Since 2005, approximately $2 billion has been invested in plant construction, more than doubling canola crush capacity and processing half of the canola crop grown in Canada. The industry's goal, which feeds into the Canola Council of Canada's broader strategy, is to process 14 million tonnes of canola by 2025. In order to meet this goal, significant additional investments will be required.
The investments that have been made in Canada are largely driven by domestic and global supply demand fundamentals for oilseed products but also by Canada's traditionally stable and predictable investment and regulatory environment.
I want to speak a little bit about some of the policies that are being considered with regard to climate change and in particular carbon pricing and the impact carbon pricing could have on competitiveness.
Oilseed processors acknowledge the role of government to address climate change and reduce greenhouse gas emissions through policies and regulations. We also recognize the importance of resource energy efficiency to lower costs and greenhouse gas emissions without the impetus of government policies and regulations such as carbon pricing.
Although the industry has implemented technologies to maximize efficiencies, processing remains an energy- intensive process that will be significantly impacted by placing a price on carbon. In fact, a carbon price of $50 a tonne will cost even the most modern and efficient processing facilities more than $2 million a year in additional natural gas costs alone. These costs cannot be passed through the value chain. Oilseed processors are trade intensive, operating in a highly competitive global marketplace for vegetable oils, fats, protein meals, renewable fuels and other bioproducts.
Many of the jurisdictions that oilseed processors compete with do not have carbon pricing mechanisms in place. In this regard, oilseed processors are vulnerable to the trade and commercial impacts of a carbon tax and will not be able to pass the costs on to consumers.
Similarly, processors will not be able to pass the costs on to farmers. As the industry competes with grain elevators that source canola seed for export, this seed is often destined to markets such as China where no carbon pricing mechanism exists. In the absence of cost mitigation measures to offset the costs associated with carbon pricing and address competitiveness implications, our members will need to re-think current and future capacity investments in Canada.
Our members are of the view that practical opportunities do exist for the oilseed processing sector to assist in Canada's transition to lowering greenhouse gas emissions while maintaining our global competitiveness.
I'll take the opportunity now to go through some of the different options that we feel are worth consideration with regard to mitigating any costs associated with a carbon price while at the same time maintaining our competitiveness in the global marketplace.
First is the implementation of carbon emission offsets, allowances or credits, which recognize greenhouse gas reductions from on-farm activities, industrial processing and the use of low-carbon biofuels, such as canola-based biodiesel, while at the same time encouraging reasonable emissions reductions.
Second, make carbon pricing revenue-neutral, where the government must recycle all revenue they get from pricing carbon into cutting other taxes
Third, public investments and innovation to support deployment of emerging technologies can assist industry in further optimizing the performance of existing plants.
Similar to my colleagues from the CCGA and the CCC, COPA fully supports the clean fuel standards for Canada and an increase in the threshold for renewable fuels to be increased from 2 per cent to 5 per cent.
In closing, the oilseed processing industry in Canada has witnessed tremendous growth in recent years. In order to maintain this momentum and reach our goals by 2025, Canada's policies and regulations must continue to encourage investment and trade.
We look forward to working with federal and provincial governments to identify practical policy options and opportunities for the oilseed processing sector to assist in Canada's transition to lowering greenhouse gas emissions while offsetting costs associated with carbon pricing and, again, maintaining our global competitiveness.
Thank you very much.
The Chair: Thank you very much, Mr. Vervaet.
We'll begin questions with Senator Ogilvie from Nova Scotia.
Senator Ogilvie: Gentlemen, you've given a very concise and clear summary of one aspect of the issue. Our order of reference is to study the potential impact of the effects of climate change on the agriculture, agri-food and forestry sectors. Certainly carbon pricing is a major issue for you from a business point of view.
It's also understandable why you're heavily focused on those, because those are real. They're coming regardless of anything else. They're going to happen, and they're going to impact your industry and all industries, so I certainly understand your reason for focusing on that.
However, in the area of living organisms, there is another aspect of the effects of temperature and atmospheric gas composition changes, and that is on the actual viability of living organisms. In this case we're talking about valuable agricultural plants. Because we're all excited about carbon taxing, we have assumed that temperature will really rise over a period of time and that the projections of carbon dioxide increase are real. That's the reason you're facing all of these issues of taxation.
If you accept that they're real and that these things are essential to do — and I think reducing nitrogen fertilizer levels to the smallest possible limit and reducing pollutants is good anyway, regardless of anything else — let's suppose that even the most modest of predictions with regard to temperature increases are to occur. We know that it is the small changes in temperature that are sustained. I'm not talking about fluctuating changes that give rise to storms and climate conditions, Mr. Froese, that you referred to in your presentation. I'm talking about a definitive permanent increase in mean temperature of, let's say, 2 degrees and a permanent increase in carbon dioxide based on the projections.
What are your industries doing to anticipate the impact on pest conditions, productivity of existing plant types, weed invasions and so on that only a small degree difference in temperature with the concomitant changes in atmospheric conditions, moisture content and so on, will have? Where are we in our plans for the actual conditions of climate change?
Rick White, Chief Operating Officer, Canadian Canola Growers Association: I'll start the response at least, and maybe my colleagues can pitch in and help as well.
When you look at it from a farming perspective and focus on a stable 2-degree heating of the environment in which we farm, there is a lot of innovation and research going on with current plants, in particular canola. Canola is a very progressive crop when it comes to attracting R&D. We already have problems with petal blast of blooming plants from hot summer July days, and there is research going on now to help those plants withstand the highs of summer heat. I think that will help with the 2-degree increase, so that work is ongoing right now.
Biotechnology has benefited farming and the canola plant in particular where they can look at solutions through different structures of the plant part, such as roots. A better rooting system may be able to withstand heat better for longer periods of time. There is the petal blast issue. However, as long as we have an environment policy that is looking at the science of approving these traits going through, that will help.
But at the end of the day, when we look at what's happening here in Canada and it's not happening anywhere else, what we're competing with is our issue. We can't change the global temperature from a Canadian-only perspective. We might be talking a different story if the entire globe was considering managing this issue, but our real concern is if no one else is going to be taxing or dealing with climate change around the globe, who we compete with, all we will be left with is farms that are having to pay and be restricted in how we can compete in the global market because we will incur costs that no one else is incurring. That's the reason we keep coming back to this issue.
At the same time, we are getting ready because the environment is getting more severe out there. There is research and development going on as we speak. Thank you for the question.
Senator Ogilvie: I guess no one else wants to come in on that.
I did preface my comments by saying that I understand why you're heavily focused on the carbon tax issue. I understand that very clearly, and I know exactly what will happen if we take steps to place you in an uncompetitive position. I totally understand that, and I have my own views as to whether we should be moving as we are on that.
That is an understandable part of the issue. Everyone is talking about that competitive position, and we know what will happen if we are uniquely disadvantaged in the marketplace. So I am solidly onside. If we assume these things are real, I wanted to know what we're doing and what the changes in plant life will be.
I will not pursue it any further; you have given an answer. I am aware of a fair amount of the scientific background, but I wanted to know from your perspective what the view is.
Mr. Innes: To build on your question about what we are we doing, when I talked about the research that we invest in, that the growers invest in, that the value chain invests in and that Agriculture Canada invests in, it is looking at the very things you're identifying in terms of changing pest populations, whether it's diseases or insects that eat canola at various stages of its life.
I talked about where we're looking to go forward around nitrogen and greenhouse gases, but we're also looking at how we can better understand how pest populations emerge in order to help growers know in advance when they may be facing a pest population and how to better treat those pests. That does include weeds, but for canola, a lot of our issues are more around insects and disease. That's where we're investing as industry and in partnership with government.
Senator Pratte: I understand you're against a carbon tax, but I'm trying to understand the possible alternatives. The government has decided to do something, so if it is a carbon tax, you're seeking an exemption from the carbon tax, if I understand correctly, or compensation, and I'm not sure what logic would apply. For instance, for the processing plants, I'm not sure what logic would apply for an exemption for the canola industry.
Would a cap-and-trade system be more acceptable? Would that be better? I'm not sure if that would work for the farms because the cap-and-trade system usually works for big industry, not at the farm level. I'm trying to get at which alternatives would work, taking for granted that the government has decided to act on this issue.
Mr. Froese: In the case of agriculture, we made these changes many years ago. As mentioned, we went from regular till to zero till to reduce the carbon footprint. We picked all the low-hanging fruit, so to speak, that could be picked. What's left is the 10 per cent, and it's very hard to remove that 10 per cent because we need fossil fuels to run our tractors and combines.
We have adapted wherever possible and are continually adapting. As farmers, we serve on advisory committees to life sciences companies. They need to know where things are going with trades and various things. They have to be ahead of the game, and we're getting to the point where we're just in time with varieties, so we're continually adapting. Our livelihood is dependent upon that.
I have to be a steward of what I possess. My children eat off of the land that we produce the crops on, and we're not going to harm our soils; we're trying to do whatever is best to keep the microbial activity and everything else in our soils.
Mr. Vervaet: When it comes to carbon pricing, just to clarify on behalf of oilseed processors, we're not necessarily against a carbon tax, per se. I think even my colleagues would agree. It is more about the fact that if a carbon tax is put in place in Canada but not in the United States or in China — these are major jurisdictions that we compete with — then we are at a competitive disadvantage.
To the second part of your question with regard to options for cost mitigation measures — and I should clarify as well. We're not looking for exemptions, either, but for something to offset some of the costs. We've been engaging with several of the provinces where there is a price of carbon in place, Ontario and now Alberta.
In Ontario, of course, we have a cap-and-trade system — and that's something that my members are actively participating in — where baselines and benchmarks are set in terms of emissions intensity, but there are also credits and allowances offered to those industries like ours that are implicated by a carbon tax from a competitiveness point of view. We find that to be a system that we can work with. We won't say it's perfect, but we find that it has so far been a system that we can work with.
Similarly, Alberta has a carbon tax, but within that tax-based system, they are also looking at establishing a carbon cap-and-trade type of system because they do recognize, like we hope every jurisdiction will, that there are competitiveness implications associated with the tax and that different trading mechanisms that provide offsets or credits really are key to providing some cost shelter to the carbon tax.
Senator Pratte: Thank you.
Senator Woo: Thank you for your testimony. I want to pick up on the carbon tax and start with Mr. Vervaet.
I understand how a carbon tax will leave Canadian exporters at a disadvantage against competitors that do not have a carbon tax, but one of the purposes of a carbon tax is to encourage what they call expenditure switching. All of you have talked about the way in which canola could possibly replace diesel, which presumably a carbon tax would encourage because it would raise the cost of diesel relative to canola as a biofuel.
Could you talk about the extent to which a carbon tax would lead to a change in the composition of your value- added product, particularly towards a biofuel, and how that would affect the profitability of the industry as a whole?
Mr. Vervaet: It is certainly one of the policy options that we are advocating in addressing some of the cost implications associated with the carbon tax. We fully support the Canola Council of Canada and the CCGA's position to advocate for a higher threshold on biodiesel inclusion in a diesel formulation. Obviously, canola oil could be a feed stock that feeds into that process and is something that we strongly encourage.
If that threshold was to increase and canola oil was to be part of that threshold increase, there would certainly be more opportunities for my members to produce more vegetable oil and sell more of it into the marketplace.
So whenever there is an opportunity, a demand for more product to be sold, that is certainly a benefit for my members and could play a role in offsetting some of the costs associated with the carbon tax in terms of more opportunities for revenue generation.
Senator Woo: But that's a regulatory approach to increasing the use of canola as a fuel by raising the threshold from 2 per cent to 4 per cent. I'm talking about a price mechanism so the carbon tax in itself changes relative prices so that producers are incentivized, because of the change in price, to turn to biofuels rather than diesel simply because relative prices have changed.
Mr. Vervaet: Thank you for that clarification. I don't have a clear response to what the price points are for a fossil fuel versus a biodiesel product or what the breaking point would be to make a wholesale switch from one to the other. Sorry, I don't have those numbers. That is certainly a possibility, but I couldn't tell you exactly when that might occur.
Mr. Innes: Perhaps I could provide some clarity.
We currently sell our canola oil into biofuel markets in the European Union and the United States, as well as here in Canada. Most of our canola that is oil used for biodiesel is in places like Europe and the United States where there is a strong market created by a stable regulatory the environment. For example, in Europe they blend anywhere between 6 and 7 per cent of their diesel fuel and it comes from mostly canola oil; in Canada we're roughly around 2 per cent. What we and other people have found around the world in biofuel markets is that mandates work because they encourage people to blend.
When you look at the fuel markets, they are less than perfectly competitive, and the regulatory approach is a proven way to achieve greenhouse gas emission reductions. We've seen both in the U.S., in the EU and here in Canada.
Senator Woo: Some people have recommended that Canada impose a border adjustment tax for carbon to deal with this challenge that you and our agricultural sector and, in fact, all our exporters are facing. If our exporters in whatever industry have to pay a carbon tax and therefore are disadvantaged, the recommendation is that we should impose a carbon tariff against imports of agricultural or other products from countries that do not have a carbon tax. Do you have a view on this?
Mr. White: Regarding setting up a tax at the border, canola is an export commodity, so we're going the other way and there wouldn't be much coming back because we grow way more than we need. In our case, I don't think that would be a good move for the industry.
[Translation]
Senator Dagenais: I want to talk about biomethanization, or the capture of methane. Three years ago, I went to Saint-Hyacinthe, which is fertile farming ground in Quebec. The federal and provincial governments provided a subsidy so the city could build a biomethanization plant. They collect agricultural products and make compost, which produces gas. The gas is used for the city and its facilities, and the surplus is sold at Gaz Métro. It benefits the city and it's a way to use methane.
In your respective provinces, have you heard anything about the construction of these types of plants? Have your respective provincial governments considered subsidizing plants that capture methane?
[English]
Mr. Vervaet: Sure, I can try to address that question.
In the province where I reside and the provinces that my members have operations in, I'm not aware of anything specific to your question.
But related to your question in terms of different technologies that could be employed at facilities to capture methane or to reduce emissions, several of my members run co-generation plants attached to their facilities and are able to produce energy onsite in combination with the burning of natural gas that they use for other parts of the process. That's just to say that, generally speaking, my members are always looking for innovative ways to reduce greenhouse gas emissions but also to reduce costs as a result of reducing those emissions and burning natural gas more efficiently.
[Translation]
Senator Dagenais: I respectfully submit this to you, because very few of these plants exist. I know the provincial government provided $14 million in subsidies, that the federal government at the time provided $11 million, and that the city covered the difference. They expanded the biomethanization plant, which collects organic waste to produce methane. It's a solution for the carbon tax. I prefer the creation of this type of plant to the imposition of carbon taxes. I humbly submit this proposal to you.
The Chair: From Alberta, Senator Tardif.
[English]
Senator Tardif: Alberta has had, for several years, a Specified Gas Emitters Regulation, or SGER. This program was put in place to compensate farmers for the carbon they sequester in the course of their farming activities so they can get some carbon offset for it. How would you rate the economic benefit to farmers of such a program?
Mr. White: It all depends on how it's priced, the benchmarks, the price of carbon and the value of the capture. Those are all manageable issues if you could come up with a model that would keep the farmer whole. In our view, farmers — especially crop farmers like canola farmers doing zero till — are not a part of this problem, but they are potentially a big part of the solution because the soils we are farming could be used and valued as carbon sinks.
It all depends on how you price that mechanism, how it will work and what the value to the farmer is. If it offsets a tax they are facing and they're kept whole in the end, that might be a workable solution. What we're looking for is to keep the farmer whole because this is a $26.5 billion industry. It is responsible for 250,000 jobs in this country. In our view, we aren't part of the problem; we are part of the solution and we want to keep that economic activity undisturbed.
There may be ways to do it, so that's why we're not saying no to all this. It depends on how you do it. If you do it right and keep farmers cost-neutral in the equation, that should be the objective, because then we can compete in the global market and continue to hire the people we do.
Senator Tardif: Would oil processors benefit from such an offset program?
Mr. Vervaet: That's a very good question. We're very involved with the Alberta provincial government, at the moment, with regard to discussions on SGER and the revolution toward the new system starting in 2018, called an output-based allocations system.
Currently, oilseed processors are not captured under SGER because our emissions footprint isn't over 100,000 tonnes CO2 equivalent per year. Not to get too technical, but just to say we're not part of that program yet. However, we do see the potential for a program like SGER, which is going to be evolving towards this output-based allocation system. That could be workable for oilseed processors.
We certainly encourage some of the things that Rick was speaking about in terms of the credits that farmers might be able to generate, with that feeding into potential credits that we need to source from our farmers. We see that as potentially being a symbiotic relationship.
Senator Beyak: Thank you, gentlemen, for your presentations.
My concern is always taxes. I always want us not to have more or higher taxes, because we work to June 7 every year to pay taxes and what we get to keep after that is ours to pay our bills and live on.
Did the government consult any of your organizations before just going ahead? You obviously have great ideas. Did they ask before the carbon tax was imposed?
Mr. White: Not to my knowledge. We saw it coming during the election. It was in the platform of the elected government, so we suspected it was coming. But, no, farmers weren't really consulted because the government wasn't in place. We do know that it was an election promise, so it doesn't surprise us that it's coming.
Mr. Vervaet: It is similar for oilseed processors. We weren't directly consulted on it. Similar to Rick's comments, we knew it was coming. I think that would apply for the carbon pricing that's been put in place in the different provincial jurisdictions as well. We did know it was coming, but I will say this: Things are being implemented very quickly.
Senator Oh: My question has to do with trade. We learned that canola exports hit a record on Chinese demand only months after the trade dispute. Strong demand from China helped lift the canola exports to $845 million in January and boost the national trade surplus. Like trade disputes, carbon pricing policy is another risk for the canola farmers. What are your organizations doing to manage this risk?
Mr. White: Trade is very important to canola, and we rely on it heavily. That is why we're strong advocates and supporters of trade agreements like CETA. We wanted the TPP to come in; we're concerned about NAFTA now. So we are very active, and Brian in particular is very active, on making sure that trade is open and fair and that there are dispute resolution systems in place to make trade predictable and open to the market.
Given that, we have to make sure that we are not disadvantaged by implementing domestic policy here that increases our cost vis-à-vis our customers, because all of this good trade work and effort to open up the world markets, we will be pulling ourselves back from that and rendering ourselves less competitive.
We are a pro-trade group because we rely on exports, and we are very happy with the trade deals that have been going on. We are looking forward to a possible trade discussion with China in particular, because it's a very large market, as you alluded to. It's a valuable market to us. We just have to stabilize trade so it becomes more predictable in the future. A trade agreement of some sort could help in that regard.
Mr. Innes: To pick up on your comments, January was a record month not just for canola seed, which you referenced, but for canola more broadly — canola oil, canola meal and canola seed. In fact, it was the single largest amount we have exported in any month in our recent memory and, in fact, ever.
We're seeing that there is a lot of demand for our products in the world. We're seeing this demand as bringing value back to Canada. It is creating jobs and growth. We are doing a lot of innovation to continue to do that.
To pick up on the comments Rick made around the opportunities with China, we see them as quite substantial. If we were to have a free trade agreement with China that got rid of tariffs, for example, we could increase our exports by about $1.2 billion. This is just by getting rid of the tariffs.
We see an incredible opportunity for growth, and that translates into about 33,000 extra jobs for Canadians because of that $1.2 billion in increased exports that we would see.
We're very optimistic about the future in terms of demand, whether it is in China or Asia. More demand for healthy oil and protein really drives our industry.
Mr. Froese: Like they were saying, everything is related to trade. We export 90 per cent of what we grow, and these markets are integral to what we do. We saw, when Mr. Trudeau intervened in this canola dispute, what happens when trade can be shut down.
Anything that would penalize us in any way is going to be detrimental to the trade, but we very much support all these trade deals, particularly CETA.
Mr. Vervaet: I'll just chime in to echo the comments made by colleagues but maybe take a different approach.
Trade, of course, is absolutely essential and crucial for COPA's members, but investment is an important key for our companies that operate in Canada in terms of meeting that growth. To Rick's point, in order to take advantage of these trade agreements and to grow our industry, we need to make significant investments in Canada to reach some of our goals and continue to grow that trade.
Companies that I or we represent in Canada have the option of investing wherever they like. They have operations in the United States, South America, China and Australia. They are multinational companies that have decisions to make in terms of where they want to put their capital. If we can't be competitive here, if they can't get the return on investment that they need, investment will not take place here in Canada.
Senator Oh: Gentlemen, I recently attended a forum on Southeast Asia, the ASEAN countries on trade. Have any of you entered into the ASEAN countries, because that is an emerging market and one of the biggest markets besides India?
Mr. Innes: The Asia Pacific region offers lots of opportunities. We saw the TPP as the ideal vehicle to enter that area. Certainly ASEAN offers some opportunities as well with other countries. For both oil and protein, we see a lot of demand growth in that area.
When it comes to trade, all is good. We have some focal points on Japan and China, but ASEAN is an opportunity as well.
[Translation]
The Chair: A few minutes ago, the vice-chair of the committee arrived. He was held up at another meeting. We'll give him the opportunity to greet you and to ask you a quick question, if he wishes to do so.
[English]
Senator Mercer: I apologize for being late. I was in another meeting, but I didn't want to miss the opportunity to come and say hello and also pose a question.
I understand you're against a carbon tax, but can you explain to me how we're going to deal with climate change and the situation the world finds itself in? If it's not a carbon tax, what is it?
Mr. White: Instead of using a carbon tax or a penalty system, the big stick, maybe there are ways to offer carrots and incent proper behaviour. Farmers are already automatically incented to capture carbon, minimize their inputs, such as diesel fuel, chemical sprays, fertilizers, et cetera, and not till their soil because it costs too much to do that. So there is already a lot of automatic incentive to not emit any more carbon than they possibly can.
Maybe more consideration can be given to incentives to move behaviour for certain industries in a certain way versus a broad-based carbon tax, which is a penalty and causes us competitive issues when we're trying to export stuff.
Mr. Froese: As I mentioned before, we changed our practices in Western Canada some 15 years ago and went to zero till and eliminated two or three passes over the field. Greenhouse gas is eliminated to a big extent, and we are making the same kind of innovations wherever possible.
In the case of fertilizers, they're costly and we're not going to use any more than we need. I know many producers soil test their fields and have their recommendations. Now the 4R fertility program is kicking into effect where you put the right amount in the right place at the right time and the right kind of fertilizer, so you're not going to be using more than you absolutely have to.
The same can be said of the various seeds. We're seeing biotechnology dramatically change everything. We think that in the very near future we're going to see plants that will double their energy or the photosynthesis of the plant, and that will sequester twice as much carbon as previously.
Also, we're hoping that, through these same technologies, some plants that will have some nitrogen fixation similar to what's happening in some of the pulses. If we can get some of those things happening in canola or other crops, there will be significant advantages to doing this.
Senator Mercer: It seems to me that agriculture is not the major problem, but it does become part of the major solution, which is unfortunate, which catches you. It's a Catch-22 situation for agriculture, and I appreciate that. No one does a better job than farmers in working with the environment and trying to make it work properly, because you see the consequences every day.
Don't misinterpret my question. I'm just looking for answers. If you come up with an answer or someone in your organizations has a bright idea, send it along. We'd love to hear it.
Mr. Froese: The unfortunate part for us is we are faced with these costs in a multitude of places, first on our farm and then the transportation to the elevation system, then the train system taking it to the port and then ocean freight. We're going to be caught with these costs and we cannot pass them on.
Senator Mercer: That's the other issue. One of the problems with Canadians, and with all people in Western civilization, is they pay too little for their food products and they don't realize that. They complain when prices go up, but when you look at what's going on in the world, it's a bargain.
Mr. Innes: You asked about solutions. Agriculture can provide the type of solutions that Rick and Jack talked about, but agriculture can also be a solution when it comes to biofuels, and that's what we also want to share with you today. It's a ready solution that can be adapted into the current vehicle fleet that uses diesel fuel to reduce carbon emissions by 90 per cent compared to fossil diesel.
We have seen how this is a solution that uses a crop that we grow in Canada, that we have ample supply of, that can be used readily in our transportation system right now to achieve tangible greenhouse gas emission reductions.
We understand the government has a goal, and we can be a big part of getting there. If you look, for example, at the projection that the government has to reduce greenhouse gas emissions in the transportation sector, going from 2 to 5 per cent gets you 17 per cent of the way there to reducing those emissions required in the transportation sector. So canola biodiesel can be a significant part of the government's solution to reduce carbon emissions, as well some of the ideas my colleagues have shared across the broader landscape.
[Translation]
The Chair: You know that, here, farmers are considered guardians of the cropland. It's extremely important for Canadians and for the whole world.
Mr. Froese, I believe you're a farmer. Is the no-till canola production method unique in Canada or is it also used in the United States, Europe, China or elsewhere? Is it a unique technology in Canada?
[English]
Mr. Froese: It is employed in other countries, Australia particularly. I don't know how widely it's adopted, but I know Canada is really in the forefront of the adaptation to it.
[Translation]
The Chair: How long can you harvest crops without tilling? Indefinitely?
[English]
Mr. Froese: Indefinitely. They seed the crop with a no-till air seeder, and they pass over it with a herbicide. The next thing is straight combining, and then they repeat the process, so the soil never gets disturbed.
The Chair: Thank you, Mr. Innes, Mr. Froese, Mr. White and Mr. Vervaet for appearing at our committee.
[Translation]
If you have other items of interest for us, don't hesitate to send them to the clerk of the committee. We'll be happy to include them in our report.
Thank you for making the effort to be here. I wish you all a safe trip home, in the rain!
(The meeting was adjourned.)