Thursday, May 31, 2018

The Standing Senate Committee on Agriculture and Forestry has the honour to table its

TWELFTH REPORT

Your committee, which was authorized to examine 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, has, in obedience to the order of reference of Tuesday, April 24, 2018, examined the said subject-matter and now reports as follows:

Following the adoption of the motion put forward by the Hon. Diane Bellemare on April 24, 2018 regarding Bill C-74, An Act to implement certain provisions of the budget tabled in Parliament on February 27, 2018 and other measures (short title: Budget Implementation Act, 2018, No. 1), the Standing Senate Committee on Agriculture and Forestry (the Committee) was authorized to examine the subject matter, insofar as it relates to farming, of those elements contained in Part 5, which enacts the Greenhouse Gas Pollution Pricing Act and makes the Fuel Charge Regulations.

In October 2016, the federal government released a framework for applying carbon pricing to the main sources of greenhouse gas (GHG) emissions across Canada by 2019. This approach gives the provinces and territories flexibility in deciding how to implement their own carbon pricing system. As part of the approach, the federal government also committed to implementing a federal carbon pricing backstop that would apply in provinces and territories that do not meet the benchmark for a carbon pricing system by 2018. Provinces and territories intending to establish or maintain their own carbon pricing system would have until September 1, 2018 to show that their system meets the requirements.

The Committee held five meetings between May 1 and May 22, 2018 on this matter. During these meetings, the Committee heard from senior officials from Environment and Climate Change Canada, Agriculture and Agri-Food Canada, and the Department of Finance Canada. In addition to hearing from representatives of the Canadian Federation of Agriculture, the Committee had the opportunity to hear from representatives of provincial agriculture associations and from carbon-pricing experts. Briefs were also submitted by stakeholders in the food supply chain.

Witnesses made the following observations:

• Exempt heating and cooling fuel costs related to farming from the carbon pricing levy in the Greenhouse Gas Pollution Pricing Act;

• Specifically include propane and natural gas under the definition of a qualifying farm fuel in the Greenhouse Gas Pollution Pricing Act to exempt those fuels from the carbon pricing levy;

• Ensure that the definition of farming in the Greenhouse Gas Pollution Pricing Act is consistent with the Income Tax Act and also the Canada Revenue Agency’s Ordinary Definition of farming activities;

• The difference in, and the lack of harmonization of, carbon pricing mechanisms among provinces as well as the absence of carbon pricing in some competing nations. This could affect the competitiveness of stakeholders in the Canadian agriculture and agri-food sector;

• The effect that carbon pricing could have on the cost of transportation and other inputs and the ability to access markets;

• The lack of government outreach to agriculture and agri-food stakeholders to offer information about the proposed carbon pricing legislation and the related programs and resources available;

• The lack of data on the economic effects of carbon pricing mechanisms on the Canadian agriculture and agri-food sector;

• The negative effect of implementing a carbon pricing levy would have on the cost of fossil fuels such as propane and natural gas;

• The import and export of fossil fuels among provinces could involve additional costs for producers;

• The importance of having federal and provincial governments invest in research and development for clean technologies while being transparent about the investments made with revenues from the carbon pricing mechanisms;

• The importance of having efficient offset programs that recognize the efforts of the agriculture and agri-food sector to reduce GHGs;

• The importance of monitoring the effectiveness of the measures adopted to ensure that GHG reduction targets are met;

• The importance of supporting the production and use of renewable energy on farms;

• The fact that some aspects of the legislation that affect agriculture are under provincial jurisdiction;

• That farmers in some provinces could be impacted more than others because of the diverse sources of electricity and therefore the diverse costs of electricity;

• That incentives for the use of biofuels could increase crop diversion wherein farmland is used for the growth of non-food crops;

• That farmers’ costs could increase as carbon-intensive processes become more necessary as a response to climate change; and

• That carbon pricing could hurt the value-added sector.

Respectfully submitted,