THE STANDING SENATE COMMITTEE ON AGRICULTURE AND FORESTRY
EVIDENCE
OTTAWA, Thursday, May 10, 2018
The Standing Senate Committee on Agriculture and Forestry met this day at 8 a.m. to study the subject matter of those elements contained in Part 5, insofar as that Part relates to farming of Bill C-74, An Act to implement certain provisions of the budget tabled in Parliament on February 27, 2018 and other measures.
Senator Diane F. Griffin (Chair) in the chair.
[English]
The Chair: Honourable senators, welcome to this meeting of the Standing Senate Committee on Agriculture and Forestry. I am Senator Diane Griffin from Prince Edward Island and chair of the committee.
I would like to start the meeting by asking each senator to introduce themselves, starting with a deputy chair.
[Translation]
Senator Maltais: Good morning and welcome. Ghislain Maltais from Quebec.
Senator Dagenais: Jean-Guy Dagenais from Quebec.
[English]
Senator Doyle: Norman Doyle, Newfoundland and Labrador.
Senator Oh: Victor Oh, Ontario.
[Translation]
Senator Petitclerc: Chantal Petitclerc from Quebec.
[English]
Senator R. Black: Rob Black, Ontario.
[Translation]
Senator Gagné: Raymonde Gagné from Manitoba.
[English]
Senator Mercer: Terry Mercer, Nova Scotia.
The Chair: Today, we will continue our study as it relates to the subject matter of those elements of Bill C-74 contained in Part 5, insofar as that part relates to farming.
For the first panel with us this morning, we have from the Prince Edward Island Federation of Agriculture, David Mol, President. From the Agricultural Alliance of New Brunswick, we have Dwayne Perry, 2nd Vice-President, and Josée Albert, Chief Executive Officer.
Thank you, folks, for accepting our invitation to make your presentation here today. We’re looking forward to hearing from you.
We will start with Mr. Mol from Prince Edward Island.
David Mol, President, Prince Edward Island Federation of Agriculture: I am the President of the Prince Edward Island Federation of Agriculture. I am also a farmer. I have farmed for 46 years.
Thank you for inviting me and our organization to speak on behalf of the Greenhouse Gas Pollution Pricing Act. We are P.E.I.’s largest general farm organization, representing the interests of farmers across the Island. I recognize some faces around the table here, from the meeting we had in Halifax this past fall.
I’ll be upfront with you. The looming carbon pricing issue has PEIFA and its members anxious. Unlike many provincial jurisdictions you have heard from, the P.E.I. government has yet to announce a plan. It is May 10, and P.E.I. farmers are ready to hit the land. We’re still unsure how to budget for a tax that we know is coming. We are unsure of what it will be, what it will cost, what it will exclude and what it will not. We are aware that this bill serves as a backstop to be imposed if our government continues to do nothing, and that’s why we’re here today.
The province told PEIFA’s annual meeting this past January that P.E.I. continues to look at carbon tax on fuels but to date remain uncommitted to a plan. The only comfort the agriculture sector has been given by the premier was that vehicles burning marked fuel will be exempt from any tax. It is important to note, however, that on P.E.I. the only things exempt from marked fuel are tractors, combines and fishing boats. Any vehicle that uses the road on a regular basis is excluded from that. This includes vehicles transporting product from the field to storage or from storage to a local processor.
PEIFA is currently lobbying the provincial government to extend marked fuel permits to all farm-plated vehicles, but it’s unclear whether or not this message has resonated.
PEIFA is also lobbying that the exemption be extended to all fuels including propane. Propane is heavily utilized by many farmers on the Island, specifically for the purpose of roasting and extruding beans and drying grain. The Greenhouse Gas Pollution Pricing Act needs to include this request.
We echo CFA’s comments last week that applauded the federal government for exempting on-farm fuel use of gasoline and diesels, but we urge you to ensure that this extends to all fuels. I will add that the federal government urge provinces to ensure all farm-plated vehicles be allowed to utilize tax-exempt fuel.
Transportation on P.E.I. in particular is a significant cost. Carbon pricing will make this harder. Trucking and inputs will be more expensive, as the carbon price is passed on to producers.
As you’ve likely heard a dozen times, farmers are price-takers. The price trucking companies or suppliers pay will be passed on to the farmers who have no way to pass it on to their customers. We fear Canadian farmers will be put at a competitive disadvantage in a global marketplace, especially in a province such as P.E.I. that must truck the vast majority of its goods great distances to reach the market.
Despite an exemption for on-farm fuel use, this will not change our transportation costs. We have no alternative given our size, our lack of railway and our distance to markets. We are captive to trucking. This act does not address this. It needs to be examined and addressed.
The PEIFA also understands that this act will impact the processing industry and the competitiveness of that industry in a global marketplace. Over half of P.E.I. grown potatoes are processed into fries and chip stock. All of P.E.I.’s milk is processed in Charlottetown and Summerside. The vast majority of P.E.I.’s blueberries are processed in eastern P.E.I., and the vast majority of P.E.I.’s beef is processed in Borden, P.E.I. We do not want to speak for them, but I will say that without them, Island farmers will be unable to sustain a viable industry.
A real threat this committee should also keep in mind is that of regional competitiveness issues across Canada as different carbon systems come into effect. Some provinces are offering allowances, rebates or certain exemptions while others are not. We do not want to see one part of the country get ahead of another simply because of the carbon pricing structure they have in place.
Lastly, the act’s definition of a farmer is too narrow. In speaking with P.E.I.’s finance department, the PEIFA has been told that the current act’s definition is narrower than any farm-related legislation currently in place on the Island. It could potentially exclude legitimate greenhouse operations, Christmas tree farming and maple syrup operations, to name a few.
We urge you to amend the act and incorporate by reference the CRA definition of a farmer, as well as the relevant CRA interpretive guidance that goes with it. Do not leave room for confusion on that point.
The Government of Canada through the Barton report has called on the agriculture sector to reach an export target of $75 billion. Bill C-74 needs to allow us to meet that challenge by ensuring the farming community is not unduly hurt by following through with what we are asking today. I will highlight them for you:
Extend exemption to all on-farm fuels; urge provinces to allow all farm-plated vehicles to utilize tax exempt fuel; address increasing trucking costs farmers will face if exemptions or rebates are not granted; ensure competitiveness issues between regions do not occur; and incorporate by reference the CRA definition of a farmer as well as the relevant CRA interpretive guidance.
If this committee would like a recommendation beyond this bill, you should urge federal and provincial governments to assist the farming community with continued research and innovation. This includes research around carbon sequestration, renewable energy and how to reduce greenhouse gas emissions from equipment, crop inputs and livestock.
Agriculture can play a large role in reducing carbon emissions. There is opportunity here. On P.E.I., there are 575,000 hectares in production, as well as a large hecterage of forestry land, much of which is in the hands of farmers. The PEIFA would encourage the government both federally and at home to remember that agriculture has great potential to reduce carbon.
In closing, I re-emphasize to this committee that fuel is required to grow the food we enjoy in the country. We grow safe food of the highest quality that is more affordable than almost any other country in the world, with the exception of the U.S.A. To ensure the long-term food security and prosperity we currently have today, will require long-term exemptions to carbon pricing and investment in research. We need to work together on this.
Dwayne Perry, 2nd Vice-President, Agricultural Alliance of New Brunswick: Madam Chair and honourable senators, we are pleased to have the opportunity to present today on behalf of the Agricultural Alliance of New Brunswick to share our views on how the proposed bill would impact our industry.
I am a seventh generation dairy producer in Perry Settlement, New Brunswick. Accompanying me today is Josée Albert, Chief Executive Officer of the Agricultural Alliance of New Brunswick.
Josée Albert, Chief Executive Officer, Agricultural Alliance of New Brunswick: We want to provide you with a few numbers to really show how agriculture is important for our province.
The alliance represents close to 900 members in the province that are primary agricultural producers of maple syrup and Christmas tree growers or fir farmers, to give a few examples. Our mission is to promote the interest, sustainability and growth of the agricultural industry in the province.
We are one of the most important economic drivers. We are second after the energy sector. In 2016, our farm cash receipts were $598 million, which represents an 11 per cent increase compared to 2012. We are one of the only industries in the province that is currently growing. Our food manufacturing sector contributed $714.3 million to the provincial GDP.
Combined agriculture and food manufacturing exports, not including seafood, were $774.3 million in 2016, which is almost $200 million more than back in 2012.
Employment in 2016 reached 5,200, which was the highest since 2010, and food manufacturing adds another 7,800.
You are more than likely aware that our provincial government introduced a New Brunswick Climate Change Act earlier this year. We were cautiously optimistic because there are still a lot of details such as regulations that need to come along with the act.
Also, we are unsure at this time of the potential ripple effects that the federal government’s backstop regulation will have on large emitters and what could potentially be passed on to our industry.
We are especially concerned at this time about the pending decision from the federal government on whether the proposed act that our provincial government wants to introduce will be sufficiently stringent to be acceptable by the federal government.
We’re very thankful that our provincial government has taken our sector into consideration by continuing the existing fuel exemption for coloured fuel such as diesel and gasoline and for the tax refund program for farm-plated vehicles. However, it is important to point out that the New Brunswick Motor Vehicle Act regulations place commercial activity restrictions on farm-plated vehicles. That means many producers still have to rely on commercial plates and are unable to get that tax refund, so that a portion of the fuel used by the agricultural industry is not tax exempt.
Our province has exempted propane, natural gas and oil. It is proposing to implement a hybrid model using a carbon levy that would be collected through gasoline and diesel fuel and reprofiling those revenues to a new climate change fund.
Industrial facilities that are emitting more than 50,000 tonnes of greenhouse gases annually would be subject to federal standards, which would include approximately 10 facilities in New Brunswick. The responsibility for delivering the output-based performance standards from these emitters would fall under Environment and Climate Change Canada.
We strongly urge you to ensure that these exemptions remain in place for all fuels under the Greenhouse Gas Pollution Pricing Act, especially in the event that the proposed measures by our provincial government are not accepted by the federal government.
At this time, as well, we are unsure how our sector will benefit from the provincial climate fund and whether it will help support initiatives such as carbon sequestration research, renewable energy, technology adaptation and research toward management practices that would continue to reduce greenhouse gas emissions.
Mr. Perry: At this time, we would like to share some key factors that could impact our sector if we are not exempt, such as transportation costs and other costs along the supply chain.
Transportation costs are one of the most significant expenses incurred by the agriculture sector. Imposing additional costs to the trucking industry will result in additional financial burdens to producers as these costs will be passed on.
The same situation will take place with agricultural input such as fertilizers. As you are aware, most producers are price-takers and are unable to recuperate these additional costs and expenses through their customers.
There are also potential impacts for the agri-food sector. The primary agriculture sector would not be where it is today if not for our food processing companies and vice versa. Additional financial burdens placed on the agri-food sector will impact the costs paid to producers for their products to enable them to remain competitive, grow their businesses and create employment. It is critical that the impact is taken into consideration during the review.
Regarding competitiveness and market demands, it is no secret that Canada is well positioned, being the fifth largest agriculture and agri-food world exporter, to meet future market demands as the world population continues to grow. However, potential additional costs to operate, such as the proposed carbon levy, will place additional barriers to remaining competitive and growing the sector.
Producers already operate with very thin margins and have to deal with multiple variable costs while trying to remain competitive and invest in their businesses. It is unclear what approach our province will take as far as implementing an offset protocol and what role our sector could play in assisting our provincial government in reaching its greenhouse gas emissions reduction goals.
Inconsistency among provinces for implementing carbon offset protocols, allowances and exemptions will also impact our competitiveness. International competitiveness will be further compromised by having inconsistencies throughout Canada and other countries.
Ms. Albert: Before concluding with our presentation today, I would like to echo some of the comments that Mr. Mol made in his presentation with regard to the proposed definition of a farmer.
As I mentioned, some of our members are Christmas tree growers and maple syrup producers. We have greenhouse operations in New Brunswick as well. From our interpretation, we definitely see a potential problem for these types of operations being excluded from the existing definition that is proposed.
We recommend, as does Mr. Mol, that the definition currently in place with the Canada Revenue Agency be integrated to keep consistency across federal departments and to eliminate any misinterpretation.
Mr. Perry: On behalf of the Agricultural Alliance of New Brunswick, we thank you for the opportunity to speak to you today.
The Chair: Thank you to both groups for your presentations.
Before we start with questions from the other senators, I have a quick one for New Brunswick. Are there many fir farmers in your province?
Ms. Albert: I believe there are only a few compared to Nova Scotia for sure. I believe we have about three to five that would be considered commercial.
The Chair: We have a long list of people who want to ask you questions.
[Translation]
Senator Maltais: Welcome, ladies and gentlemen. Thank you very much for your statements.
Mr. Mol, I’d like to speak to you about the definition of a farmer. I think you raised a very important point there. To my mind, someone who works the land is a farmer, whether he produces Christmas trees or maple syrup. Even a honey producer to my mind is a farmer, just as much as the one who grows carrots or potatoes. So to my way of thinking, if you live from the land you are a farmer. This has to be clear right from the outset.
I will ask all of my questions together, and this will allow my colleagues to ask more questions.
When it comes to transportation, Prince Edward Island is at a clear disadvantage because all of your products have to be sent either by boat or by truck. If they are sent by truck, you have to pay a fee to go across the bridge. Your competitiveness level is different from that of New Brunswick or Nova Scotia, as they can go directly to the American states without paying an additional fee to cross the bridge.
Obviously, if we add another gas tax to the transportation of agricultural products, you become less competitive. There is nothing you can do if the government decides not to grant an exemption for trucking farm products to other provinces or the United States. This is a financial challenge for you. I’d like to know how you view the consequences.
[English]
Mr. Mol: Thank you very much for the questions.
First of all, on the definition of farmers, the one subject we didn’t touch on was horse racing. There has always been a discussion on whether or not somebody raising horses for racing is a farmer. Certainly those in that profession consider themselves to be farmers since they’re feeding and raising animals. However, the end result may not come on your plate.
For those other examples that we’ve talked about, B.C. has run into somewhat the same problems. They have a lot of greenhouses. I am not familiar with the fine terms of the problem, but I was at a meeting in British Columbia at which one of their major points was that the tax on the fuel they use to heat their greenhouses would not be exempt.
I guess the CRA statute was considered to be a uniform one that’s nationally applied across the country. Whether or not it’s fair is the second argument. The first argument would be that we want uniformity in terms of a definition. Once you establish uniformity, then you can argue the fine points of whether a tax should be or shouldn’t be applied and, if it’s going to be, how you mitigate it. That ultimately is the issue.
I get my HST back on certain things. HST wasn’t harmful to me because I was able to pass it on. Whatever system comes up, whether it’s an exemption or a rebate process, if industry wants to see it as an added cost and food prices go up and if it’s a uniform added cost across the country, then the industry will have to price that in place.
If that argument carries forward, then farmers will make a much larger argument about wanting to get credit back for all of those things they do above and beyond normal practices to sequester carbon and to minimize the problem.
I would prefer if the taxes were exempt, as opposed to trying to account for the fact that I kept a field in hay a second year and what’s that worth. That can be a larger question.
I’ll let Ms. Albert talk about transportation a little more. We mentioned the bridge. We used to ship a lot of potatoes by boat out of P.E.I., but that industry has disappeared. It’s all trucked now and it’s mostly containerized. It goes to Halifax or directly into the States.
Most of our potatoes that go into the States are all on trucks that have to meet U.S. weight restrictions, so we know that all tri-axle and quad trucks we see on the road are not going to the States. All the tandem axle trailers that can only gross 80,000 pounds are going to the U.S., and the trucks that are going to Ontario carrying 110,000 or 120,000 pounds. The cost is prohibitive, and that’s compounded by the fact that trucks going to the U.S. will be paying a tax on the fuel.
We need to make sure there’s a way the tax isn’t compounded when it comes back to the farmer. We may be exempt on running the truck from the field into the barn, but that doesn’t exempt the cost when it’s priced to our customer.
[Translation]
Ms. Albert: There is one point I forgot to raise in my presentation. New Brunswick farmers, on average, pay 40 per cent more to register their farm plates than they do in Ontario, Quebec, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. That is another cost for New Brunswick producers. They are not on a level playing field competitively when it comes to costs. We are also penalized regarding the maximum weight of transport vehicles. The limit is higher in Quebec than in New Brunswick. It’s impossible to maximize income when you are transporting products to other provinces. So that’s an important point that needs to be mentioned.
Senator Maltais: Why do you pay 40 per cent more for agricultural machinery as compared to other provinces? We have to give farmers a chance. We should not be penalizing them when they register their plates. The logic behind that escapes me.
Ms. Albert: Since 2012, we have worked with the provincial government in order to come to an agreement so that our costs can be made comparable to the average in the other provinces. The plates for agricultural vehicles cost $10 a year on Prince Edward Island. We understand that we aren’t going to get them at that price, but we would at least like to align with the average for other provinces.
Senator Maltais: A large part of New Brunswick is close to the border with Quebec. For transportation, you are at a disadvantage regarding the weight of vehicles.
Ms. Albert: Yes.
Senator Maltais: When those who transport your products go to Quebec, the United States, and to various regions, perhaps as far as Toronto, is it possible for them to bring back other products?
Ms. Albert: Yes, as far as I know.
Senator Maltais: Fine, thank you.
[English]
Senator Oh: Thank you, witnesses, and welcome. I think we met before in Halifax.
Do you think this implementation is too early or too quick? I sense that farmers are getting a bit worried about additional costs and international and interprovincial competitiveness. There are a lot of costs. They are not on a level playing field.
Do you think that farmers in your province may be impacted differently? Could this put farmers in one province at a disadvantage compared to farmers in another province?
Mr. Mol: on P.E.I.’s case, it’s a difficult question to answer because the province has not indicated to us what they are to do.
They were talking cap and trade. Then they were talking tax and some combination thereof. Frankly, I think the province is waiting for the federal government to impose something. Then, if it falls apart, the province will point their finger at Ottawa.
It is hard to say how it will impact. That, in particular, makes it hard for farmers to rally to a point where they are able to lobby. We don’t know what they will impose on us. If we knew, it would be easier to say what the impact would be.
As far as your inference that maybe this is coming a little too quick, this has been coming for a while. It is a case that the players have to be forced to the table. No one is going to the table willingly. I suspect the most expedient results will be that we continue on the timetable we already have.
Farmers will adapt to change. We will continue to argue if there are increased costs. In my case, as close as I could figure, given a couple of scenarios, it might cost me an additional $12,000 or $15,000. I am on about a 10 per cent margin, and that represents about 25 per cent of my net margin. Clearly, more than my Florida vacation will disappear with this tax. Something will have to be reflected in how you change.
The good part is that all these things will force us to re-evaluate how we run our operations. Whether it is farming or any other industry, probably the one positive message is that we all need to do a little navel-gazing on how we are consuming the energy of the world.
Mr. Perry: To the first part of your question, I believe it is probably a bit early, both provincially and federally. The agriculture departments are doing a lot of research into what effects farmers are having on carbon in the practices that each individual farmer does.
There have been some single-point things in that practice: A releases less carbon than practice B. However, there hasn’t been researched on whole-farm practices and audits as to how much we are releasing or storing. A surprising amount of science hasn’t been done on that, and research needs to be done.
On your second point, there needs to be an effective way. If you are to charge us for the carbon we are releasing, we also need to be credited for the carbon we are storing. Agriculture as a whole will probably be a place where a lot of carbon will be saved as opposed to emitted.
I know there are practices to say that some things I do will emit carbon, but there are a lot of areas on the farm where I am storing carbon. We have a great benefit to the rest of Canadians in storing the carbon we can, and we need to be properly credited for that.
Right now, this is simply a tax before the infrastructure and the science have been done in order for us to properly reclaim that carbon into the marketplace.
To Mr. Mol’s point, it is seen as tax revenue, but to us it is not. It is a loss of income. Every time there is an income loss from a new tax or a new policy on the download of services, it affects how many producers are in Canada.
To the gentleman earlier who asked a question about inclusion of farmers, there are not many of us left. We are the 1 per cent of 1 per cent. Every time you add something like this, there are a few less. We are quite proud that we do a great job feeding Canadians at a cheap rate, but it is getting difficult to continue to do that.
Hopefully that answers your question.
Senator Mercer: It is enlightening to hear what is going on in other provinces.
You said in your presentation that inconsistency across provinces from offset protocols, allowances and exemptions will affect your competitiveness. Then you went on to say that international competitiveness would be further compromised by having inconsistencies throughout Canada.
This is a major factor, isn’t it, in terms of exporting goods from Canada to our major market being the United States and to potential markets as we enter into new trade agreements?
Farmers are not the problem, but they end up being part of the solution. Why do we constantly say that you can’t pass your costs along to the consumer? I am a consumer. Shouldn’t I spend more for my potatoes or my blueberries?
Mr. Mol: I anticipated this question.
Senator Mercer: That is why I am here.
Mr. Mol: It was not just because of you. It is true.
In particular, you brought up the U.S. That is a prime example of why we can’t pass on our costs. If the Americans were in the same process as we were in implementing a carbon tax and their farmers were faced with comparable increases in their cost, then the answer would be yes.
We can use potatoes from P.E.I. as a prime example. As a broker, you would realize that if you are to order potatoes from Idaho and they are facing a 5 per cent increase in their costs, you will be paying more than if you were buying them from P.E.I. where they are facing a similar thing. It is a level playing field in that respect.
Our American partners are already producing food cheaper than we are. That goes to the whole issue of how their energy industry is costed out to them and so forth. The bottom line is they are our competitor. If we have an additional cost that they don’t have, it pulls us out of that competitive picture internationally.
Nationally, we have to remember that we have a large consolidation in our food retail industry. The food retail industry is pretty quick to buy from the cheapest source. That cheapest source will be wherever. It could be beef from Venezuela. It doesn’t really matter where it is. When I go to put some broccoli in a store, I am competing against California and Pennsylvania. I am not competing against New Brunswick.
Because of the international nature of how food moves, that would be my primary argument.
Senator Mercer: Of course, you don’t have the advantage of American farmers where the most important piece of equipment on the farm is the mailbox, because that is where the subsidies come in from the government. We don’t have subsidies for agriculture.
The issue of the standardization of weight restrictions on trucks is a real problem that directly affects agriculture and other commodities as well. At numerous meetings of the New England Governors and Eastern Canadian Premiers this subject continues to come up. Have you approached the premiers who attend these meetings?
I have seen them there. This subject continues to come up. They look for standardization of weight restrictions for bridges. Many of our truckers end up taking a very strange route to the market because our trucks can’t go over certain American bridges.
Have you spoken to your premiers about ensuring this is again on the agenda of the annual meeting of the New England Governors and Eastern Canadian Premiers?
Ms. Albert: Yes, we have. We have also been part of the national task force on transportation. We provided comments specific to that issue. From my understanding, they have released what was their third report and are moving on to the next phase of studying the issue further.
We also brought this to the attention of our minister of agriculture on many occasions. From my understanding, it was supposed to be put on the agenda for the next Atlantic premier meeting.
An MOU was put in place more than 10 years ago, but it never really took place, at least for Quebec and the other Atlantic provinces from my understanding. It was never recognized and didn’t really address the problem.
Senator Mercer: I think it was at a meeting in Bar Harbor, Maine, where that agreement was reached. I was an observer there.
You talked about expanding the exemption of the carbon tax on your vehicles and you talked about gas and oil, but you did not about exempting the tax on electricity. In many cases, electricity may be used to heat or cool part of your operation.
I am from Nova Scotia where we have the highest power rates in the country. We are very sensitive to that. Is it a problem on P.E.I. and in New Brunswick?
Ms. Albert: We do not have any exemptions. You are making a good point. We are currently looking at renewable energy on farms and other measures to try to offset those costs, but at this time there are no exemptions for electricity usage.
Mr. Mol: I have given this a touch of thought as well. As we all know, electricity comes from a number of different sources. The carbon footprint of electricity is a rather elusive one in some cases. It gets mixed in the grid and it is hard to determine exactly how much of an issue it is.
If we were asking for an exemption for electricity on farms, I would be hard pressed to turn it around and ask why there should a carbon tax on a product that does not emit carbon or have the potential to do so, unless you are dealing with coal-fired operations.
To me, there is a bigger question. In the Maritimes a lot of electricity is created from water or nuclear, and there is some from coal. I think you would have to divide that question up because it is probably not fair to argue that a carbon tax should be on a product that doesn’t actually produce carbon.
We are not trying to reduce the use of electricity in this scenario as opposed to trying to reduce the amount of carbon that goes out the smokestack of my tractor or the exhaust of the truck.
Senator Doyle: I don’t know if you talked about the farming industries that you represent on P.E.I. and in New Brunswick.
Do a lot of them meet the 50 kilotonnes of carbon levy for it to kick in, or are you more concerned about the extra cost of the levy and how it might have an effect on the supply chain?
What percentage of the farms that you have on P.E.I. and in New Brunswick would meet the threshold of 50 kilotonnes of carbon before the levy would kick in?
Mr. Mol: The answer is fairly simple. There is not one farming operation on P.E.I. that would exceed the 50 kilotonnes. However, the processing facility at Cavendish Farms is in that direction, although they have switched to using natural gas.
That is a subject I didn’t touch on much. We don’t have access to natural gas on P.E.I., but they bring in 16 tractor-trailer loads of natural gas a day from New Brunswick to the plant on P.E.I. That natural gas is all hauled in by trucks burning diesel fuel.
Senator Doyle: What about New Brunswick?
Ms. Albert: In New Brunswick at this time it is the same as P.E.I. There is no food processing or farms operating at that level. McCain, as an example, doesn’t fall into that category.
At this time we are more concerned about the potential impact of passing on those additional costs to the farming sector. As we progress, I would assume those targets will change, and potentially McCain and the other industries will be targeted in future years.
[Translation]
Senator Gagné: You mentioned that industrial facilities emit more than 500 kilotonnes of CO2 equivalent. You have food processing industries. Are there enterprises that produce fertilizer in your provinces?
[English]
Mr. Perry: Yes, I believe there are two in New Brunswick that process fertilizers. Both are part of a larger company. They would be the regional representation of the larger companies. I have no idea what the total company does, but the two fertilizer companies in New Brunswick are relatively small.
Senator Gagné: Would they fall under that?
Mr. Perry: No.
Senator Gagné: You said they were relatively small.
Mr. Perry: Yes.
Senator Gagné: I missed that.
How about P.E.I.?
Mr. Mol: On P.E.I. we don’t have any fertilizer companies that produce fertilizer. We have a couple of companies that distribute the product. That product is all brought in by ship from wherever the cheapest source is. It could be Russia.
It doesn’t fall under that either.
Senator Doyle: We talked about transportation yesterday in the Senate, and you have mentioned it today. Also, I’ve travelled by road on P.E.I. and in New Brunswick a great deal.
Do we need a major modernization of the road system in the Atlantic area generally? Does it have any great effect on the transportation of agricultural products? Could it be a whole lot better? Do we need to put an emphasis on that in places like New Brunswick and P.E.I., where your farming activities are very high?
Mr. Mol: The first place I would start would be Quebec. Quebec has been the bottleneck to the rest of Canada for the Maritimes. It is simply because their weight standards are different. Also their weight standards come on and go off at different times than they do in each of the other provinces. Certainly Quebec made a great effort to fix some of their bridges. We all know it was more than time because some have actually failed.
Do we start by upgrading the roads there? I don’t know, not being an expert in that at all, but are their roads as good as ours or are they more sensitive about trying to put less weight on them? The Americans have clearly set a standard to limit the number of heavy loads on their highways.
The transportation issue is a big issue. How do you come up with a universal standard when you have steel being hauled out of Hamilton and grain on gravel roads, as well as B-trains and now C-trains from Saskatchewan to railheads?
As the railway has disappeared, it has put more pressure on trucking. The trucking industry has been capable of building bigger, heavier and faster trucks, but I am not sure society has moved along with accepting that. That is probably a question on which we will have to come to some common understanding, especially as our Canadian and American economies are so intertwined.
Senator R. Black: Both of you in different ways talked about pitting primary producer against primary producer.
What recommendations could we put forward in our report to alleviate pitting farmer against farmer, whether it be in a region or across the country?
Mr. Perry: I think it would be standardization to level the playing field. Whatever the playing field will be, all of us should be allowed to compete in the same way. Whether they are exemptions and you go down that road, or they are offsets and you go down that road, we are willing to work with whatever program is chosen. We may have individual preferences, but we will work within whatever framework. We just want it to be fair for all of us.
It doesn’t matter if the carbon is emitted in B.C., New Brunswick or on Prince Edward Island, it affects climate change. We see on the farm every day practices that used to be done that can’t be done any more. That is changing.
Standardization is the easiest way so that we all know what the playing field is. Right now, some producers in different provinces are able to take advantage of offsets. In New Brunswick, I don’t believe we are. There will be 10 different climate change models across Canada, and that is not all that acceptable.
Mr. Mol: To give you a small example closer to home example. On P.E.I., just like in New Brunswick, the potato industry is a large part of fuel consumption. On P.E.I., our potato trucks all use clear tax diesel from field to the farm. Some of those trucks might only see 50 or 100 miles a year on the highway. The older ones probably don’t see any. If you put a licence plate on it, the fuel has to be clear.
New Brunswick has a program where they allow farm-plated vehicles like a potato truck, for example, to get a rebate. You still have to burn clear fuel in it, but you keep a log of kilometres use for that truck and, as I understand it, at the end of the year you can submit for a rebate. Right there, that is one small item. A lot of potatoes farms have 8, 10 or 12 of these trucks. That adds up.
Standardization, as Mr. Perry said, is a good idea. You can complain about the ethics of a particular tax or whatever, but if everyone is getting hit with the same level of tax, the hurt is spread equally and, therefore, you deal with it.
Senator Oh: Regarding competitiveness, you all mentioned you were worried because the U.S. is not going ahead with a carbon tax or anything, but you will add it on.
Are the majority of your agriculture products shipped to the U.S.? Is that your main export?
Mr. Mol: I can’t speak for the New Brunswick potato sector, but I believe it is the same. About 50 per cent of our potato production on P.E.I. goes into chip stock. That 50 per cent is processed. Of that, most of it is shipped to the States by truck.
The balance, which would be either seed or fresh product, is shipped to a combination of either Ontario and the U.S. as far down as Florida. That level would probably be about 50 per cent. I suspect about 75 per cent of our potato industry goes across the border, either as raw potatoes or as frozen french fries.
In our beef sectors, it would be not so much. In our grain sector, it would also be not so much. I am thinking that the potato industry is the one that really consumes the fuel. Overall, about three-quarters of the potato industry would be affected by it in a smaller number.
I have to put in a plug for the dairy industry. As we allow more U.S. imports into Canada in terms of powdered milk, cheese byproducts and proteins, all of these will come in on trucks that aren’t paying a carbon tax, and that is further competition.
On PEI. we have an ADL processing plant. They are paying carbon tax on the cheeses and on all the products that they ship, and they do ship into the U.S. as well.
The fairness of the tax on farmers is one thing, but somehow we need to look at what is the impact of the tax on the end product, and that has to include the processing sector of farm products.
Mr. Perry: The last statement I would like to leave you with is that we have been farming on the same plot of land since before Canada was a country. At the same time as our land was deeded out, there was land given to the Elder, Grigg, Cosman and Fraisy families. They are no longer there, and we are now farming parts of the ground that was deeded out.
Every time a tax like this or a service is downloaded, it adds costs that we are not able to pass on to consumers effectively. That affects the bottom line of everyone in the farming business, and there is one less of us.
Even though I am incredibly busy at home, I came here today because last year I had a visit from a guy from Pennsylvania and his last name was Elder. He wanted to see where his great-grandparents used to farm, and that happened to be right where my new house is.
I am hoping that my trip here today helps alleviate some of the taxes we have passed on to me, my grandkids and future generations, so they don’t have to visit where I used to farm.
Whenever you are passing laws, whether it be this one or others, keep in mind this is a livelihood that we don’t do for money. We do it because we love to do it. That is the only reason we get up every day and do what we do. We like doing it. We like to feed our families. We like the autonomy of being a farmer. Any help you can give us, whether it be rebates or whatever, it would be greatly appreciated.
The Chair: We are running out of time. We have one more panel and then another committee takes over the room.
We have two people left, so I will ask you to ask one question each.
[Translation]
Senator Dagenais: Thank you to our witnesses. My question is addressed to the three witnesses. Like several other witnesses we have heard, the carbon tax plunges you into the unknown, because the federal government may have put the cart before the horse by proposing the implementation of this tax. However, it is unable to tell you what it will do with the proceeds, nor what type of compensation you will receive. I dare hope that the Minister of Agriculture of Prince Edward Island met with you to explain this tax. I see you smiling, Mr. Mol. You explained things very well. In the potato sector, when you export, you are less competitive. I’d like to hear your thoughts on this.
And since we don’t have much time, I’d like to hear you, Mr. Perry, about the fisheries sector, because there is a related processing industry that will also be affected by the carbon tax.
Mr. Mol, did your provincial Minister of Agriculture take the time to consult you?
[English]
Mr. Mol: The short answer is no.
[Translation]
Senator Dagenais: You can give a brief answer to say that no, you were not consulted. That would be quite explicit.
[English]
Mr. Mol: No, I was never consulted on the specifics of a carbon tax. We were consulted in terms of the meeting in St. John’s, Newfoundland,last July when the carbon was part of it. However, at the initial stages, there was a lot of smoke and mirrors around carbon credits.
I think carbon credits deflected the conversation on a carbon tax. I’ve heard nothing about carbon credits in the past year, and only about a carbon tax.
[Translation]
Senator Dagenais: What you are saying is that it’s easier to collect the money than it is to return it?
Mr. Mol: Exactly.
Ms. Albert: Well, I certainly can’t speak for the fisheries sector, because we don’t represent that sector in New Brunswick. However, that sector is very important for the province, and the majority of the products are harvested in the province and exported. So several of the points we discussed today will be similar in their impact on fisheries.
Senator Dagenais: Mr. Perry, I understood your message clearly. You came here to give it to us and it will appear in our report for the purpose of helping farmers. The point is not only to impose taxes, but we must also encourage production and exports. The message has been very well understood.
If you had a recommendation for us and if we could put it in our report, what would it be?
[English]
Mr. Perry: I would also agree, yes. Thank you for that point.
The Chair: I have one quick question for each of you.
What would you like to see the money collected from the carbon tax or carbon levy put to? In each of your provinces, what would you want your provincial government to do with that money, starting with Prince Edward Island?
Mr. Mol: I was hoping you would ask New Brunswick so I could think about it for a minute.
Whatever the amount might be, it could go into a process of funding an enhanced ALUS program or a program that allows farmers to buy into new technology which reduces carbon and allows us to have more efficient equipment.
I’d love to have solar panels on the roof of my barn so I could cut back on the use of my fossil fuels. I look with envy at my Ontario neighbours in the Niagara Valley region where every barn there is covered with solar panels.
The Chair: What most important thing in New Brunswick would you like to see that money go to?
Mr. Perry: Ultimately, invest it back into agriculture. If agriculture is paying for its fair share, the same as every other industry, invest it back into agriculture.
I suspect we will be an area where we are emitting less than we are storing, so help us do that. Climate change is a real problem. Allow us to be one of the industries that helps Canada meet its targets, but just imposing a tax on us isn’t going to do that.
We’re ready, willing and able to help, but we don’t need to be taxed. We need to be funded in order to help. Take the funding that is collected and put it back into agriculture to help.
The Chair: I’d like to thank our presenters today. It has been a very interesting discussion. I hate to cut us off at this point, but we have reached the time limit.
Our next panel is partially in place. With us today, we have from the Canadian Horticultural Council, Julie Paillat, National Coordinator, Greenhouse Vegetable Industry, and Mark Wales, Energy, Environment and Climate Change Working Group Member and Field Vegetable Grower. The third person who is on his way is Jan VanderHout, Board Member and Greenhouse Vegetable Grower.
Let’s start with Mr. Wales. The floor is yours.
Mark Wales, Energy, Environment and Climate Change Working Group Member and Field Vegetable Grower, Canadian Horticultural Council: Thank you for the opportunity to appear before you today to discuss the Canadian Horticultural Council’s position on carbon pricing as it relates to Part 5 of Bill C-74.
I am a vegetable farmer from the Port Bruce area of southern Ontario. This will be my forty-second year of putting a crop in the ground, and I’ve been a vegetable grower for 32 years of those. My main crops are hot peppers and garlic.
I’ve seen lots of weather extremes and events over 42 years. Again this morning I was soaked walking over here. Mother Nature is reminding us that she always has the last word.
By way of introduction, the Canadian Horticultural Council is an Ottawa-based, volunteer, not-for-profit national organization that represents over 14,000 fruit and vegetable growers across Canada involved in the production of over 120 different types of crops and growing; $5.25 billion in farm cash receipts, which is the foundation of an estimated produce value chain of $13.9 billion of real GDP; and over 181,600 Canadian jobs.
I’ll turn it to Ms. Paillat now to talk about the greenhouse sector.
Julie Paillat, National Coordinator, Greenhouse Vegetable Industry, Canadian Horticultural Council: In the greenhouse sector, growers contribute over $1.3 billion annually in farm cash receipts to the Canadian economy and export over $862 million, which has grown in 2017 to over $900 million. For greenhouse vegetable growers in particular, steep increased costs and extensive regulations have the potential to disrupt the sector’s growth and competitiveness.
From the introduction on the Pan-Canadian Framework on Clean Growth and Climate Change, CHC and its members have engaged with the federal government to ensure the impacts of carbon pricing on horticulture are well understood. We have responded at every opportunity, and our consistent message has been a national exemption from its national carbon pricing policy to cover all fuel used for agricultural activities, including greenhouses, thereby minimizing interprovincial competitiveness impacts.
Critical to Bill C-74, CHC asks the government to amend the definitions relating to farming to encompass all primary agricultural activities, which we will expand upon in a moment.
The chair of the CHC Greenhouse Vegetable Committee and Vegetable Working Group, Linda Delli Santi from B.C., was a witness on this subject in 2017. She has spoken not only to competitiveness issues but also to her personal experience with carbon pricing as a grower and to its impact on her decision to call it quits after nearly 30 years.
Canada’s greenhouse vegetable growers rely on natural gas for heat and as a consistent, cost-effective, sustainable and on-site source of carbon dioxide. Greenhouse facilities capture food grade CO2 as a combustion byproduct and then direct it in measured amounts to the growing crop, where it is essential to maintain productive capacity. Because greenhouse vegetable growers deliberately create CO2 for their crop fertilization, the carbon captured and assimilated by greenhouse crops needs to be recognized.
In B.C., it took five years for the government to grant a permanent grant program to commercial greenhouse growers with specific eligibility criteria to offset 80 per cent of the carbon tax costs, which are paid on natural gas and propane used for heating and CO2 production. This delay and uncertainty contributed to slowed sector growth and loss of investment.
Despite the many challenges, B.C. greenhouse growers have felt relief from the rebate program, and Alberta has since put in a model to help their producers as well.
Ontario has Canada’s largest greenhouse sector as measured by the number of farms, the acreage, farm-gate value and export value. The total additional estimated cost from a carbon tax that the Ontario greenhouse vegetable sector was expected to bear was $10 million in 2017.
Greenhouse Growers Ontario estimated that the $18 per tonne carbon price under the provincial cap and trade system is currently increasing costs by an average of $6,200 per acre. Of course, this depends upon energy efficiency and cropping cycles, but it is set to increase to $17,000 per acre by 2022, if the carbon price reaches its federally targeted mark of $50 per tonne.
Many greenhouses, including Jan VanderHout’s, who will be joining us as soon as he can, are multi-generational farms. They’re family owned and operated. They heat their greenhouses using natural gas or a combination of biomass and natural gas, with the natural gas exhaust being blown into the greenhouse to enrich the CO2 levels.
Many greenhouse growers are continually adapting and implementing new energy efficiencies such as energy curtains, upgrades to insulation on walls and insulation of third layers of poly roof cover, even before government funding becomes available.
With all the challenges our industry faces, from labour shortages to the loss of crop protection tools and a multitude of tax challenges on our businesses, the carbon tax creates additional layers of competitiveness disadvantages among growers within a single province, across Canada and on the international stage. To minimize this disadvantage, we urge the federal government to create a relief mechanism for growers that has national coverage.
Canadian agriculture is advancing every day in developing modern, sustainable technologies that aim to reduce greenhouse gas emissions across the entire farming sector. However, due to the global nature of the produce market, carbon pricing cannot be simply passed on to consumers.
Greenhouse vegetable growers have found a way to grow food sustainably for Canadians beyond the traditional field seasons and are providing high quality, safe and sustainable products that feed millions of Canadians healthy, fresh vegetables virtually year-round.
In addition, the value of greenhouse vegetable exports is the highest of all the fresh produce sectors for fruit, vegetables and potatoes in Canada, accounting for approximately 40 per cent of all fresh produce exports worth $964 million in 2017.
Greenhouse vegetable production is an essential contributor to Canada’s agricultural landscape and a key economic driver. We are asking the government to provide a national unified relief program that covers all fuel used for agricultural activities to ensure the sector’s continued competitiveness, growth and investment in Canada, and to maintain food sovereignty for Canadians.
We maintain that the federal government needs to demonstrate leadership and ensure its legislation reflects the full range of primary agricultural production beyond the diesel used by farm equipment in traditional field crops.
I will now give the floor back to my colleague.
Mr. Wales: As Ms. Paillat mentioned earlier, we have concerns with several of the key definitions in Bill C-74, including farming, eligible farming activity, eligible farming machinery, qualifying farm fuel, and combustible waste. They overlook fruits and vegetables and do not reflect the full range of farming activities and machinery used in Canadian primary agriculture.
For example, since the proposed legislation clearly indicates that eligible farming machinery does not include property that is used to heat or cool a building as prescribed by regulations, primary agriculture that relies on heat, such as greenhouses, livestock barns, grain dryers and the cooling of produce post harvest are therefore assumed ineligible despite being essential to the Canadian production of high quality food, feed and fibre. In addition, while the farming definition included fruit, it failed to mention vegetables at all.
All vegetable producers and I feel personally slighted by this oversight. We have been growing vegetables in this country for thousands of years.
This by itself creates uncertainty and inadvertently will deepen the competitive barriers already facing farmers from various sectors within Canada.
The rationale for the definitions related to farming becomes paramount for ensuring legislation does not cater to or adversely and disproportionately impact a single sector, activity, machine or type of farming.
The Canadian Horticultural Council has put forward a recommendation for the definition of primary agriculture to Employment and Social Development Canada as part of their current review, which should be considered in Bill C-74’s legislative framework. It is paramount that government departments communicate with each other, in particular within the whole of government approach.
While Agriculture and Agri-food Canada may be the in-house experts on what farming activities encompass, we are seeing Environment Canada, Employment and Social Development Canada, and Finance Canada developing work under different definitions. This is not new.
We will get you a copy of our suggested definition of primary agriculture. Farming in all its branches, among other things, includes the cultivation and tillage of the soil, dairying, the production, cultivation, growing and harvesting of any agricultural or horticultural commodities, the raising of livestock, bees, fur-bearing animals or poultry, and any practices including any forestry or lumbering operations performed by a farmer or on a farm as an incident to or in conjunction with such farming operations, including preparation for market and delivery to storage, to market or to carriers for transportation to market, and including business structures such as cooperatives to help accomplish packing, processing, storage and shipping.
Additionally, as long as the same agricultural task is undertaken on raw and fresh products, even if it is not on Canadian fruits and vegetables, this activity should always be considered primary agriculture in the context of maintaining Canadian activity out of season.
We are asking the federal government to use this definition across departments and in Bill C-74 to ensure that modern agriculture is clearly reflected. While fruit and vegetable growers are committed to environmentally friendly production practices, they are also dependent on favourable energy costs and a stable, supportive tax regime to remain competitive and stay in business.
Farmers care. They are doing good work already without government incentives because it’s the right thing to do and because they have financial incentives to improve efficiencies on their farm.
Growers see many of the government incentives to reduce inputs as inaccessible because they have already maxed out current energy efficient tools and technologies, thus punishing early adopters. This could inadvertently cause a lag in the adoption of any new technologies, as producers will wait to see what government support will be available before making those really large investments.
For the most part, Canadian farmers are small businesses and have many layers of increased costs. Costs associated with carbon pricing are putting long-standing family farms at risk of going out of business, making outside jurisdictions much more attractive for farmers’ investments and putting the Canadian government’s goal of increasing exports to $75 billion by 2025 out of reach.
While farmers are generally highly interested in renewable energy sources and are willing to adopt wind and solar energy options, there are simply situations where no options exist that would enable the transition to alternative fuels and/or to reduce fuel consumption.
Governments must invest in incentives such as accelerated capital cost allowances, rebates, grants and cost-shared funding that encourage producers to adopt clean technology and practices.
In conclusion, the Government of Canada has asked the Canadian agricultural sector to step up and contribute to increasing agri-food exports. Canadian farmers have also been asked to reduce greenhouse gas emissions so that Canada can reach their climate change targets. These two asks have come to a head in Part 5 of Bill C-74 as it applies to farmers.
Canada’s fruit and vegetable growers feel they can be active participants in reaching both targets. However, an increasing number of challenges, regulatory barriers and layers of added cost stand in the way of achieving these lofty goals.
Specific to Part 5 of Bill C-74, the Canadian Horticultural Council urges the committee to include in its report a recommendation to exempt all agricultural activities from fuel-based carbon pricing, and to improve and update the current definitions relating to farming in order to encompass ever-evolving modern agriculture in Canada.
I would also include in that they need to have consistent offset programs across the country so that farmers doing the right thing can receive recognition for doing that.
We look forward to your questions.
[Translation]
Senator Ghislain Maltais (Deputy Chair) in the chair.
The Deputy Chair: Thank you very much for your testimony, Ms. Paillat and Mr. Wales.
Since I am replacing the chair, it’s up to me to ask the first questions.
A lot of witnesses came here before you and expressed the same concern, which is that we are unable to provide a clear definition of what is a farmer. It seems to me that in 2018, there must be a definition of the word “farmer” in both English and French dictionaries. To my eyes, a farmer is someone who cultivates the land. According to what we heard from our New Brunswick and Prince Edward Island witnesses, this is a problem with regard to taxation. They had the same reaction you had. I hope that one day we will be able to define who is a farmer and that we won’t have to wait another century.
Ms. Paillat, you referred to a labour problem, which is not unique to Ontario. This is a Canada-wide problem, especially in the agricultural sector. You also spoke about a relief program, but how does the Ontario carbon tax currently apply to agriculture?
[English]
Ms. Paillat: Sorry, which program?
[Translation]
The Deputy Chair: Ontario has adopted a carbon pricing policy. How does it apply to the agricultural sector?
[English]
Ms. Paillat: Ontario’s program of cap and trade really applies to Ontario growers also having competitive differences within growers.
The cap and trade program has three different levels. There are mandatory participants, voluntary participants, and those who do not reach the emissions of voluntary participants.
When we’re talking about the impacts of $6,200 per acre, that comes to all of those growers. Some of the participants with smaller farms, for example, are hit the hardest. That’s a big percentage of Ontario growers under, let’s say, a 30-hectare mark. I hope that answers your question.
[Translation]
The Deputy Chair: Yes, in part, but I have another question. If the federal carbon tax, which seems to be standard, is added to the Ontario provincial tax, what will be the impact on the agricultural producers you represent?
[English]
Ms. Paillat: My understanding is that the tax from the federal program applies to the backstop jurisdictions. As Ontario already has their own system, there isn’t a duplication of the tax.
The federal system would look to ensure they are meeting the standards. The federal backstop is there to ensure that across jurisdictions they’re meeting the standards. They would convert, for a cap and trade situation, standard emissions they would have to meet based on that cap.
[Translation]
The Deputy Chair: Mr. Wales, you also have a semantic problem. There is a difference made between a fruit grower and a farmer who produces vegetables. Nevertheless, to my eyes, they are both farmers. As far as I know, fruit does not grow out of the air, nor do potatoes. We are going to have to come up with a definition.
In which category are you going to place those who grow cannabis? Will they be considered fruit or vegetable producers?
[English]
Mr. Wales: That is like asking whether a tomato is a fruit or a vegetable.
Currently, producers of medical marijuana, and eventually producers of recreational marijuana are still growing a crop. In Ontario, the Ministry of Agriculture, Food and Rural Affairs has determined that it is an agricultural activity. It is still growing a plant.
I was a tobacco grower for 29 years of my life. Fundamentally, I grew a crop that someone was eventually going to set on fire and inhale the smoke. At the end of the day, what is the difference?
I want to respond to a question you asked Ms. Paillat earlier. You were wondering about the Ontario cap and trade system. The challenge in Ontario is that we have a system that requires prices to be added to the four main fuels: gasoline, diesel, natural gas and propane. That money is collected by our fuel suppliers. They then have to buy carbon credits quarterly during the year to offset the emissions they are creating from that product.
The Ontario government collected $1.9 billion last year, and they have already had at least one auction this year. We may or may not have a carbon cap and trade system after June 7 in Ontario. We are in the midst of a provincial election, and there are some opposing views on how that will play out. We may not have a system.
My understanding, as Ms. Paillat mentioned, is that the federal price on carbon is only where a province does not have a system. Come January 1 in Ontario, we may be a province with a system or we may be a province without a system. At the auctions that took place last year, the average price was about $18.30 per tonne. I don’t know what the March auction this year resulted in.
Ontario’s plan was to keep increasing the sale of credits by restricting the credits available, so that the price would go up in line with the federal government’s desire to move the price of carbon overall to $50 per tonne by some date in the 2020s.
We have a situation where agricultural producers in B.C. and Alberta, and a program in Manitoba, exempt agricultural producers for any taxes on diesel fuel. Of course, there is a special rebate situation for the greenhouse sector. Alberta producers, for well over 10 years, have had a carbon offset system. Those growers engaged in no-till practices or pasture would receive a rebate per acre for capturing carbon and retaining it in the soil.
That was promised under Ontario’s cap and trade system. We have had two years of dithering and zero action. I wouldn’t expect to see action necessarily in my lifetime, sadly. I don’t see any motivation for them to do that, and that is a problem.
[Translation]
The Deputy Chair: I wish you a long life.
There is a lot of agricultural trade between Ontario and Quebec in the fruit and vegetable sector. Quebec already has its carbon tax formula, as does Ontario. Do they even out? There is also a gas tax on transport. There is a large amount of trade between those two provinces, and one should not be at a disadvantage as compared to the other. Would it be possible for the two governments to negotiate so that everyone is on a level playing field?
[English]
Mr. Wales: With the current two governments, probably. After June 7, it is hard to say whether they will be able to negotiate on anything.
I recognize that Ontario and Quebec are involved in the Western Climate Initiative, along with California, but the challenge we face is that within Canada, growers in Ontario of fresh produce have to compete against B.C. growers, Manitoba growers and Alberta growers for field product. Certainly the growers in the three western provinces have a distinct cost advantage with regard to those carbon taxes placed on all the fuels we need to use.
The challenge as a field grower is that when it is dry, I must use diesel fuel in order to irrigate. I have no option, otherwise my crop dies. I will let Mr. VanderHout talk about what he has to deal with as a greenhouse grower.
I cannot reduce my use or my crop dies. That is the simple reality. I must use fuel. I must use it to till the soil. I cannot change that. I am looking to do it as efficiently as I can, but I still have to use that fuel. If I am competing against a grower who has a distinct tax advantage, then it is a problem. I simply cannot pass that on to the buyers. The consumers and customers say what they will pay, and that is it.
Jan VanderHout, Board Member and Greenhouse Vegetable Grower, Canadian Horticultural Council: There is a lot of trade between Ontario and Quebec with trucks going back and forth all year long. To be competitive against other jurisdictions, for example America, Mexico, Central America or Honduras, it is a big challenge for greenhouse operators.
The added burden of a carbon pricing puts us at a significant disadvantage in our global trade. This is part of the reason an exemption for agriculture needs to be considered.
[Translation]
The Deputy Chair: Thank you.
[English]
Senator R. Black: Thank you very much, folks, for your great presentations and for sharing your definition of a producer farmer and for acknowledging the fact that producers are willing and able to step up to the plate and do their fair share to meet the challenges ahead of us. That is important to note.
Your comments will be on the record, and that is good to hear. Again, we’ve heard it a couple of times.
Can you tell us about the competitiveness issues of the greenhouse industry? You started to touch on the current competitiveness issues and how a new tax will add to the burden. Could a little more to the dialogue we have heard?
Mr. VanderHout: Currently, in Ontario, we have a cap and trade system in place. We are already bearing the burden of that.
This adds over $6,000 an hectare of production. I believe that was in our presentation earlier as well. This puts us at a significant disadvantage to compete with other jurisdictions and even competing inside of Canada.
Greenhouse produce coming out of B.C. does not have the added burden to the same degree as we do on carbon pricing.
Senator R. Black: That was the greenhouse industry you commented on. Do you have any other comments?
Mr. Wales: The situation exists for field growers as well. Quebec has been mentioned. We have huge issues in horticulture with minimum wage. There is already a $2 or $3 difference between Quebec and Ontario. That causes buyers to go to one province and not the other.
We face different electricity costs in a number of provinces, so it is all of those things together. Buyers will go where the produce is the cheapest. As Mr. VanderHout mentioned, we don’t even want to talk about the labour cost advantage that countries in Central America have.
We are at the mercy of the weather. At the end of the day, the weather will determine both indoor or outdoor agriculture. It will determine how much energy we have to use to heat, to cool, to take water off a field or put water on a field. We are impacted directly by those energy costs.
When several provinces don’t pay that added tax and one does, it puts us in a bind. The buyers will show no loyalty whatsoever. They will buy it the cheapest place they can get it. That is the reality we face. It is not a new reality. We have faced it for a long time. The chains show no loyalty.
Ms. Paillat: Let me add, in terms of competitiveness, the rationale B.C. and Alberta based their decision on for exemption also had to do with that need for CO2. It is something you cannot transition away for the crop needs.
When you looking at the best fuel to use, one of the best or cleanest fuels on the table is natural gas. When it is not included in the definitions, the options on the table are very limited and are not the preferred choice by most greenhouse growers.
When you are looking for a source for CO2 and natural gas is your first choice, greenhouse growers have quite a lag time between when they are planning their infrastructure and when it comes.
We already know there are certain costs for carbon, but when instability adds to an infrastructure decision delay and growers have to make a decision on where to put their dollars and where to put their investment, they are likely to find a place that is stable with their natural gas costs.
Senator Diane Griffin (Chair) in the chair.
The Chair: You will notice we have our third panellist with us now, Mr. Jan VanderHout. Thank you for being here. I understand you were having trouble reaching us, so I am glad you were able to join the panel.
Senator Oh: I visited a couple of greenhouse farms last year in Ontario. The greenhouse plants consumed fuels and at the same time some carbon was emitted.
Do you think the federal government should offer a carbon tax relief grant to greenhouse growers as in the case of British Columbia? Should the greenhouse sector have a national exemption and have it taken off completely?
Mr. VanderHout: Absolutely. It should be an agricultural exemption, though. It should not be specifically for greenhouses, but for agriculture across the board.
The dynamics of food production need to be considered. It serves the interests not only of our government but the people of Canada to have a certain degree of food sovereignty, to have food available to consume that is produced domestically.
By putting growers in Canada at a competitive disadvantage in some way will actually force them out of business eventually. Whether it forces them out or ceases their expansion, greenhouses won’t close up tomorrow because of carbon pricing. The long-term objectives of growth will not be met. As the population of Canada grows, our food needs wouldn’t be met either.
Ms. Paillat: I think Mr. VanderHout has hit the nail on the head. It comes back to the leadership of the federal government. We are seeking leadership. I realize Environment Canada’s policy position has been to let the provincial governments decide. There is potentially still some wiggle room.
That is where I will leave it. Certainly B.C. and Alberta have certainly taken that leadership, but it hasn’t happened across the board.
Mr. Wales: I agree with both the other presenters on a national exemption across the board. As a field vegetable grower, it is not only for greenhouses but for field agriculture as well, right across the board.
It is important that we produce food. We are an exporting nation. We have to deal with food sovereignty, but we are only one of six countries in the world that can export food beyond what we need. That is our place in the world. That is our role. That is for the greater good. We need to be able to do that, and we need to be able to do that in the most cost effective manner.
As far as a blanket exemption, I think B.C. and Alberta have taken the right step. They didn’t fully exempt in the case of natural gas and diesel, but they recognize those are important. The energy that agriculture must use to produce food is absolutely critical, and any kind of tax on it makes far worse the problem that we face.
In the harmonization of everything, as I mentioned earlier, the definition is key. If you can’t define what a farm is, how do you apply an exemption to it?
Senator Oh: The cucumber farmers in Ontario told me they could not compete with the U.S. because they are doing it differently from us. They will wipe them out. They have the intention of moving down south to open greenhouses there and ship the product back to Canada.
Mr. Wales: That is the sad reality.
Mr. VanderHout: One of the factors there is carbon pricing. Cap and trade is a factor for whether greenhouse growers build in Ontario, New York, Michigan, Virginia, or wherever. It is one of the factors.
The higher cost of heating here compared to Tennessee, for example, our labour costs and the availability of labour are other factors. All these things come into play. It is not simply a matter if carbon pricing is right, then everything else is good. This is one of the key pieces in maintaining the competitiveness of Canada’s greenhouse industry.
Senator Oh: The housewife and the consumer complain that inflation starts in the supermarket when the price of food goes up.
Senator Doyle: I don’t know if you mentioned the percentage of Canada’s agricultural needs supplied by greenhouse growers. Is it a significant amount of food that the greenhouse growers provide in Canada, or are we talking about miniscule amounts as it compares to the outdoors? I would imagine it is small when compared to outdoor growing.
How much do we grow under glass or under plastic in Canada? Is it a significant amount, or are we talking about not much?
Mr. VanderHout: I will be careful not to go too deep into stats. It actually is a significant portion of the horticultural production in Canada. If you put that against potatoes on P.E.I. or Manitoba, there is obviously a big factor there.
The greenhouse industry is one of the key players in Canadian agriculture. It is not a tiny part, by any means.
Senator Doyle: Would you have any idea as to how we might compare with the U.S.? Can we compare favourably to the amounts they produce per capita and what we produce under glass?
I would imagine they produce a whole lot more, given their variance in climate and what have you. It would be more favourable to grow under glass in the U.S.
Mr. VanderHout: Again, I don’t have any stats, but I would be willing to bet that we have a larger greenhouse industry in Canada than the entire U.S. combined.
Given our population is approximately 10 per cent of theirs, I would say that makes the greenhouse sector a very significant part.
Senator Doyle: Do you know if the greenhouse growers are looking into different ways of providing lower carbon footprint heating for their greenhouses? I am thinking about heat pumps and that kind of thing. Is that on the radar at all?
Mr. VanderHout: The short answer to that is yes. One of the things that is looked at is heat pumps.
One factors that creates a lot of costs in heating for greenhouses is the control of humidity. You may be surprised to learn that we use a significant amount of heat, even in the summertime. Often that heat is offset by using the exhaust for CO2 enrichment. Nevertheless, we are using a lot of heat to remove humidity through the year.
The use of heat pumps to make an evaporative or condensing type of humidity removal while heating the greenhouse is an emerging technology. This is something that is being worked on in the research stations globally. Certainly we would be there to adapt that type of technology.
Over the last number of years, greenhouses have been involved in the installation of energy saving devices such as curtains to add an extra blanket between the crop and the roof of the greenhouse.
On our farm, right now our greenhouse is double poly. We are in the process of adding a third layer of poly. We are working on the potential savings, which there clearly will be, but we are also watching for the potential negative impacts on production.
To save a dollar on fuel and to lose $2 in production, those economics don’t work. The short answer is yes, we are working on it.
Senator Doyle: Can these new LED lighting systems be used in greenhouses, or are they too cold a lighting system to be using?
Mr. VanderHout: Actually, that is a complicated question. There is a lot of science in the LED department.
One of the big advantages of LEDs is that you can tune the light. The perspective that there is no heat coming from an LED is a fallacy. There is a fair bit of heat coming from LEDs, but the problem is they can’t run as hot. It requires more active cooling than does a high pressure sodium light.
Interestingly enough, more light per unit of electricity comes from high pressure sodium. It is just that the spectrum doesn’t exactly match. It doesn’t have the tunability. A high pressure sodium light always uses the same spectrum, whereas with LEDs you can add more blue, more red or more white.
Senator Doyle: Is there a good future for greenhouse growing in Canada? Do you see a good future for it?
Mr. VanderHout: I really hope so. My brother and I run our farm today. I have four children. My brother also has four children. I really hope that we can over time pass it over to them and that they can have a viable business to run.
Senator Doyle: Climate change makes it more advantageous to probably use the greenhouse system over an outside growing system.
The Chair: Senator Doyle, we will leave that as a statement rather than a question. We have 10 minutes left and three of us to ask questions.
[Translation]
Senator Dagenais: My first question is for Ms. Paillat. In the documents, I saw different definitions of a farmer. Do you think that different definitions of a farmer were deliberately included, or is this a mistake, or an omission? If it was deliberate, does that mean that the government wanted to exempt certain agricultural producers without saying so publicly?
[English]
Ms. Paillat: You ask tough questions. I really can’t comment on the intention.
Senator Dagenais: Yes, you can comment on the intention.
Ms. Paillat: There have been other scenarios, potentially, where a definition of farming has been used. If they have not been looking to Agriculture and Agri-Food Canada, and if they have not been consulting and listening to their agricultural stakeholders, then you cannot get the definition perfectly correct.
We have a good sense of what is agriculture. We always have to remember how it is evolving. If its intentional or unintentional to exclude the size of farm or the type of farm, for example, if it is a hobby farm, those kinds of questions I can’t answer. Certainly we have been engaged, and we feel the definitions must be inclusive.
Mr. Wales: A farm is a farm is a farm. That is something we strongly support.
The challenge with the definition of agriculture is, as Ms. Paillat mentioned, that the industry is constantly evolving. There are many different definitions in many different pieces of legislation, historically. Most of them are outdated.
The challenge constantly is: What is the current definition? The one we provided covers all the bases and allows for that evolution to be covered as well. That is the key point to remember.
I want to make a quick point about a previous question about the U.S. and the greenhouse industry. Anecdotally, the U.S., because it has so many different growing seasons, have been slow to move indoors. It’s probably only in the northern states where there is any degree of greenhouse agriculture.
Since you can grow strawberries and peppers in winter in the southern states, there hasn’t been the need to move indoors. That is historical. As Mr. VanderHout said, we would be a much larger industry here than they are.
[Translation]
Senator Dagenais: To conclude, I have a question on the carbon tax, but I’m going to wait until the month of June, because it’s possible that this problem will solve itself. There may no longer be a carbon tax.
[English]
Senator Woo: Thank you for your testimony. I want to clarify what you are proposing.
The proposed legislation has already proposed an on-farm fuel charge exemption. You are suggesting that the definition of agriculture be expanded so that it covers a wider range or a more correct definition of agriculture. I get that, but you are asking for more than that as well. You are asking for a national exemption on all carbon tax applied to that sector. Is that correct?
Mr. VanderHout: Yes.
Mr. Wales: Yes.
Senator Woo: The logic of the framing of the clause is that provinces have the ability to do that. You kind of answered that question already when you said some provinces are ahead of others. There is an issue of consistency in the logic and how far the federal government can or should infringe on the provincial right and responsibility to adapt circumstances to their needs.
I am thinking about the Ontario situation, for example, where you mentioned that in the recent auction $1.6 billion was raised. How much of that was reinvested in technology that would benefit the farm sector, or is intended to be invested in the farm sector for improvements in reducing carbon emissions, improving efficiency and so on?
Mr. Wales: That is the challenge we face in Ontario. The government has been very slow. The correct answer would be almost nothing.
I refer to what I have seen in Ontario as the giant sucking sound. It is really money paid for energy, for gasoline, diesel, natural gas and propane. That money is relocating from rural Ontario to urban Ontario, where most of it is being invested in electric cars, subways and the electrification of GO lines. All of them are important, but they have no relevance to rural Ontario whatsoever.
We are paying for that, and that is a problem.
Senator Woo: I hear that, and that is obviously an issue we can’t deal with directly. It is something provinces have to come to grips with. The coming election may well sort that question out.
To follow up on the whole question of how funding is allocated for innovation, you talked about how the tax would not incentivize further improvements in energy efficiency because you have climbed the curve already, based on your own initiative and desire to be more energy efficient.
At the same time, you talked about how there is a reluctance to adopt new technologies because you are not sure about the environment for incentives.
Clearly, you are hinting that there are things out there that you can and might want to do, but you are waiting to know where the money will come from to help you do it.
Do you not think that some scheme of carbon tax or cap and trade could, in theory, generate the funds to government to incentivize you to go further in your energy efficiency initiatives?
Mr. Wales: I will let Mr. VanderHout take that one.
Senator Woo: He didn’t mention it, but you did. It is not an unfair question.
Mr. VanderHout: No, this is good. I know what the presentation looked like, so we are all good there.
I will speak from a personal level. On our farm, we are always looking for ways to become more energy efficient. Energy is one of our biggest costs. Energy and labour are our two big ones. We are always looking for ways to be more efficient in those respects.
On the installation of energy curtains, I happen to have done before there were incentives. I paid for that out of my own pocket. Now that I see all these incentives coming, do I want to invest in improving my environmental performance and my carbon footprint? Unless there is the right support from cap and trade in Ontario or from the carbon tax revenue to encourage me to do that, why should I do it before that is available?
Senator Woo: You may do it because the cost of fuel is going up through a carbon tax or a cap and trade system. Would that not be fair?
Mr. VanderHout: It is often at significant investment.
Senator Woo: What are some of the things you are contemplating doing if the incentives are right for you? I was getting the impression there was nothing left to do. What are some of the things you are considering?
Mr. VanderHout: Is there nothing left to do? Some farms would be at 100 per cent. Right now, I don’t have a lot of options. I am working on better insulating values on my perimeter walls, and I am looking at a third layer of poly on the roof.
Will the savings have any impact, or will that added layer of plastic impact on production? If I produce less, it’s not more efficient. It’s actually less efficient. I am using less fuel but I have fewer products, which doesn’t work either. It’s really about conversion. How can we optimize production while using less energy?
Mr. Wales: I would agree with your comment that, in theory, a cap and trade system should provide money for innovation and so on. The problem is that the Ontario experience is that it is not happening.
We’re now several years into a cap and trade system. We’ve heard talk, but we have seen precious little action. That’s frustrating.
As a field vegetable grower, I look at how I can become more efficient. I have to till the soil, so my main energy use is in either irrigation or soil tillage throughout the season.
Could I upgrade my tractors to the most energy efficient? I could, but would it pay me to do that? Not in my lifetime. Generally when farmers buy tractors, they have them for 20, 30 or 40 years. I am running two tractors that were built in 1959. They are the best tractors for cultivation that were ever built. They don’t make one today that is so good. They’re gasoline tractors, and they are what they are.
With irrigation technology, I try to be as efficient as I can. Could I move to drip irrigation, which is the most efficient? Yes, but unfortunately it’s extremely expensive and the price I receive for my product will never ever return. I am stuck.
Fertilizer is something field growers of all types use, so we will be paying any carbon tax or carbon pricing as part of the fertilizer we buy. We try to use as little as we can. If there is no fertilizer, there is no crop. That’s what you have.
Unfortunately, the greenhouse sector probably has the most ability to use technology. Many of them are already there, and the rest are getting there as quickly as they can. The other experience with cap and trade is when Alberta put in their system of carbon offsets. Farmers received recognition for doing the right thing, and they went back.
Ontario has only talked about starting from today and going forward. Some 40 per cent of the farms in Ontario practise zero tillage and have been practising it for a while. They are early adopters.
Going forward, in order to get any kind of carbon offset, if it ever existed, they would have to start plowing their grounds again. They would have to undo what they’ve been doing for decades to be eligible for a potential carbon offset. It is a true frustration.
We need harmonization. We need systems that are uniform and allow us to plan for the long term.
The Chair: We’ve run out of time. I thank our panel. It has been an interesting discussion. I wish we had more time, but that’s life. It has been great to have you here today.
I want to take a brief pause to discuss our budget and have it approved for our upcoming fact-finding trip to Quebec. I’ll let our panel go; they don’t have to be involved in this.
As you know, senators, we have planned a very short trip to Quebec as a fact-finding trip. I am going to ask Senator Black to address a motion that will deal with the budget.
Senator R. Black: Everyone has the budget in front of them, and I have a motion here. I move:
That the following special study budget application (Study on how the value-added food sector can be more competitive in global markets), for $17,320 for the fiscal year ending March 31, 2019, be approved, for submission to the Standing Committee on Internal Economy, Budgets and Administration. I move that.
The Chair: Are there any questions? This is the Quebec trip. Approved?
Hon. Senators: Agreed.
The Chair: Great.
(The committee adjourned.)