I call this meeting to order.
Welcome to meeting number 30 of the House of Commons Standing Committee on Agriculture and Agri-Food. Pursuant to the order of reference of Wednesday, February 24, 2021, and the motion adopted by committee on March 9, 2021, the committee is resuming its study of Bill , an act to amend the Greenhouse Gas Pollution Pricing Act (qualifying farming fuel).
Today's meeting is taking place in a hybrid format pursuant to the House order of January 25, 2021. Therefore, members are attending in person in the room and remotely using the Zoom application. The proceedings will be made available via the House of Commons website. As you are aware, the webcast will always show the person speaking rather than the entirety of the committee.
I would like to take this opportunity to remind all participants in this meeting that screenshots and taking photos of your screen are not permitted.
To ensure an orderly meeting, I would like to outline a few rules to follow.
Before speaking, please wait until I recognize you by name. If you're on the video conference, please click on the microphone icon to unmute yourself. The microphones of participants in the room will be controlled as normal by the proceedings and verification officer. Remember that all comments by members and witnesses must be directed through the chair. When you aren't speaking, your microphone should be on mute.
Before welcoming our witnesses, I'd like to remind members that amendments for Bill must be sent to the clerk before Friday, May 7 at 5 p.m.
I'd now like to welcome our witnesses. From the Department of Agriculture and Agri-Food, we have Mr. Warren Goodlet, director general, research and analysis directorate, strategic policy branch.
Welcome, Mr. Goodlet.
Also from the department, we have Matt Parry, director general, policy development and analysis directorate, strategic policy branch.
From the Department of Finance, we have Phil King, director general, sales tax division, tax policy branch, and Mr. Gervais Coulombe, senior director, excise, sales tax division, tax policy branch.
Welcome to both of you.
From the Department of the Environment, we have Judy Meltzer, director general, carbon markets bureau, environmental protection branch.
I understand that there will be just one opening statement for all departments, and it will be for five minutes.
For whoever wants to do the opening statement, the floor is yours.
As mentioned, my name is Matt Parry. I'm the director general of the policy development and analysis directorate at Agriculture and Agri-Food Canada.
Thank you for the opportunity to be here today to talk about Bill and the government's initiatives related to carbon pollution pricing in the agriculture sector.
I'll start by noting that climate change is one of the greatest challenges of our time. Addressing it requires engagement from all parts of Canadian society, and Canada's farmers and ranchers are a part of the climate solution.
Agriculture and Agri-Food Canada is actively engaged on many fronts to support the agriculture sector in reducing emissions, from scientific research to direct support for farmers across the country. We are working to develop solutions that are effective and efficient and that ensure farmers can grow their businesses while reducing emissions.
Greenhouse gas emissions from Canada's agriculture sector have been relatively stable since 2005. According to Canada's national inventory report for 2021, greenhouse gas emissions from the agriculture sector in Canada were approximately 73 megatonnes of carbon dioxide equivalent in 2019, the last year for which data is available.
Most of these emissions—about 60 megatonnes—are from biological emissions from livestock and crop production. The remaining 13.6 megatonnes are from on-farm fuel use, which includes fuel for machinery such as tractors and combines, as well as heating sources. These emissions have remained relatively stable since 2005.
Of the fuel emissions, about 10 megatonnes are from on-farm transportation like gasoline and diesel, which are currently exempt from pollution pricing. About 3.6 megatonnes are from stationary combustion, including grain drying and barn heating operations, which are not exempt.
Based on how the carbon pollution price is structured, this means approximately five per cent of greenhouse gas emissions from agricultural production are currently covered by pollution pricing.
Carbon pollution pricing is considered the most efficient means to drive innovation and energy efficiency in order to reduce emissions. Since 2019, every province and territory in Canada has had a price on pollution. Provinces and territories can design their own systems, aligned with minimum national standards, or opt for the federal system. The federal carbon pollution pricing system has been specifically designed to account for the agriculture sector's unique circumstances.
The government announced in February 2021 that it would commit to new rebates for on-farm fuel use such as grain drying, in order to support food producers and encourage new investments in clean technology.
As announced in the budget, the government intends to return a portion of the proceeds from the federal fuel charge directly to farmers.
This will apply to farmers in Alberta, Saskatchewan, Manitoba and Ontario, the provinces where the federal fuel charge applies. It is estimated that farmers in those jurisdictions will receive $100 million in the first year, and this figure is expected to increase as the price on pollution rises. Further details will be provided by the government later in 2021.
Also announced in budget 2021, $50 million of the recently announced $165-million agricultural clean technology program will focus on grain-drying technologies, and $10 million will focus on powering farms with clean energy.
These two components of the agricultural clean technology program will help farmers invest in more efficient and new technology that further reduces on-farm fuel use.
Work is currently under way to develop and launch these initiatives as soon as possible.
Through these programs, along with existing initiatives under the Canadian agricultural partnership, Agriculture and Agri-Food Canada is working with farmers and other agricultural stakeholders to reduce emissions and fight climate change.
In closing, the measures announced in budget 2021 will provide relief for farmers in backstop jurisdictions while also supporting the sector in reducing fossil fuel use through improved efficiency and new technologies. Agriculture and Agri-Food Canada is working to support farmers today, while developing and implementing policies that will help reduce emissions tomorrow.
Thank you for your time, and we look forward to any questions.
As you know, we have only one witness for the second panel, so we'll extend this one up until 6:00 Atlantic time or 5:00 eastern time. It will give us roughly 30 minutes for our single witness in the second panel.
I'll just go down the list for the order of questions. I'll just go down it, and if I have to, I'll come back up. We have about an hour and 10 minutes to do that.
Welcome, Mr. Lawrence.
I also want to welcome you, Ms. Pauzé—
This is for whichever witness wishes to respond. If it's all three, that's fine with me.
Thank you very much. I agree with you that climate change is a real, serious and pressing issue. I think that is the consensus in this panel and in this committee. That's not in doubt and not in discussion.
One issue is with regard to what the stakeholders have said to me. Stakeholder after stakeholder has said that they prefer Bill for a number of reasons. One of the primary ones is that the money is an exemption. It stays in their pocket. It's having a real financial impact. While the credit system may be better than nothing, the idea of it coming to government, coming back, and they don't have the details on it really isn't enough. If the government is so generous and they do a fantastic job with the credit, there's nothing stopping them from repealing Bill C-206 in the future, once they have this credit system up and running.
Wouldn't you want to give the farmers a break with respect to Bill ? If it is up to the government's discretion, they can of course repeal it if their credit system is so generous that farmers no longer require the exemption.
I can respond directly on why, perhaps, it would be a support program rather than an exemption. There are a couple of reasons.
There are some technical issues. For example, the delivery of natural gas and propane is slightly different from the delivery of gasoline and diesel, which is exempt. It's generally piped in directly and continuously. You may have a situation where it's not just the farm operations receiving the natural gas but also the house that's being fed the natural gas. It would be difficult to distinguish and take the fuel charge off the farm operation use versus the house use when it's a single meter. There's house heating, or they might have a barbecue hooked up to the natural gas, and that would be exempt from the fuel charge. So there are some technical issues.
There's also the issue of the price signal. At the very least, with the ex post relief, you're maintaining the price signal. It still presents an incentive for farmers to find more efficient, greener, lower GHG-emitting ways of engaging in their farm operations. The ultimate objective, really, is to have nobody pay this fuel charge. It's the change in behaviour via technology. Where farmers can't do this, well, they're getting the money back, so there is financial support for them.
Those are the two main reasons it's been chosen—
Also, what has come across in the testimony.... The Agri-food Innovation Council, the group we're going to hear in the next panel, put together a great report demonstrating that while there are some technologies, they are just in their novel phase and are not able to be widespread. The price signal really goes nowhere.
I would also call out the government for being hypocrites in this matter. It just recently came to light in a National Post article that they're giving DuPont a huge exemption for hydrofluorocarbons, which are said to be a thousand times worse than carbon dioxide. While this billion-dollar international company is getting an exemption, we won't give an exemption to farmers. I would think that this price signal would apply to billion-dollar corporations in addition to farmers. Is that not true?
Thank you, Mr. Chair, and thank you to our witnesses.
I'll start, perhaps, with Mr. King or someone from Environment.
When I look at the actual Bill , it's relatively straightforward. It's just trying to amend the definition of qualifying farm fuel.
My understanding, when we look at the entire Greenhouse Gas Pollution Pricing Act, is that there are definitions for eligible farming activity and also eligible farming machinery that qualify, which this particular bill does not address at all. Would it be your position that the challenge, despite the noble intent from Mr. Lawrence in relation to this bill, is flawed in the sense that it doesn't actually address the activities and the machinery that are perhaps needed to capture grain drying or the heating of barns and other facilities?
I appreciate that explanation. That's clear.
When we look across the country, we see that we have the price on pollution. In backstop provinces the actual amount collected is then returned on a per capita basis, per se, whereas if you're someone who's a higher polluter you might essentially have to pay more into the system than what you get back. If you're someone who paid less into the system, you get a cheque to reimburse and top you up.
I know it's early days, so, to the extent that you can tell me, how do you intend to be able to take that $100 million and distribute it back on a per capita basis to the actual farmers to ensure that we're incentivizing, and those farmers who are changing their behaviour are rewarded as such?
I want to start by saying that I sit on the Standing Committee on Environment and Sustainable Development. Honestly, I don't feel disoriented at all when I hear from you. It's fine.
My first question is for Mr. King.
You said that you were very familiar with the bill, because you wrote it.
So initially, in the first draft, there wasn't any exemption for propane and natural gas, but now there is one?
Thank you, Mr. King. I do want to add a few things.
It's important to remember that, when the greenhouse gas pricing bill was introduced, consultations were held. Before that, in 2017, a technical paper was prepared. Throughout this process, there has been an awareness campaign and extensive consultation with Canadians, including farmers, of course.
The fuel charge, which is currently in effect in the four provinces concerned, doesn't apply to many emissions from the agricultural sector. Consider, for example, all biological emissions that come from herds. These emissions constitute a significant portion of total greenhouse gas emissions.
Thank you so much, Mr. Chair, and thank you to our witnesses.
Mr. King, I'll maybe start with you.
In the previous exchange that you had with Mr. Blois, you expressed some doubt as to whether Bill was drafted in a way that would give the CRA clarity about its intended purpose.
When I look through the existing definitions in the Greenhouse Gas Pollution Pricing Act, it's quite clear that growing grain and harvesting fall under the definition of farming, and that the machinery used for drying it, I think, could be found under “eligible farming machinery”. It's a stationary machine; it's an industrial machine on the property.
Are you still quite sure that, even if we're just making this narrow definition as to what a qualifying farm fuel is, there will be a misconception as to what its intended purpose is?
I agree with you 100%. I think innovation and conversations through farmers and sharing data have led to amazing innovation in the agriculture sector. I put on the record that saying—and having very senior people in the Department of Agriculture say—that innovation is brought forward in agriculture by carbon pricing is something I think many people I represent and many people I know would have a difficult time believing is the only way to get to innovation.
I think that's what this bill is about, when you talk about it. You can't get innovation. I know we talked about how there might be innovative and new technologies for grain drying. There might be, but that's five to 10 years off. The reason, Mr. Parry, you couldn't mention one is because there isn't an innovation right now that can dry 50,000 bushel bins, other than natural gas or propane. We're a long ways off of that.
This bill Mr. Lawrence is proposing is that exemption to give farmers a chance to continue to do what they do well, because there are farmers in Saskatchewan, Alberta and Manitoba who pay tens of thousands of dollars on a carbon tax because of using grain dryers and irrigation pumps.
Mr. King, you talked about irrigation. My farm still has delivery. They have a propane tank, and that propane tank is delivered by a truck into the yard, and that tank runs a motor that pumps irrigation through the pipes. It's not just a pipeline. There are still cases where propane gets delivered for on-farm use. I think Mr. Lehoux would have many people who have propane delivered to heat barns in his riding of Beauce.
Those are just a couple of things I wanted to point out. Farming is an agribusiness in Saskatchewan and western Canada, and they're very big operations. These grain dryers are solid equipment, industrial equipment, that gets used to keep people fed, not only across Canada but around the world. I believe these farmers need this exemption to make sure they can continue to provide that good service.
My final question would be: When it comes to crop rotation—and I know you guys know this very well—it is one of the great innovations in agriculture that led to keeping nutrients in the soil. Once again, I'd ask Mr. Parry: Was there a tax brought forward that induced crop rotation practices by farmers across Canada?
Thank you very much, Mr. Chair, and thank you to all our panellists for being here. I appreciate this.
I'm just expanding on the line of questioning by my colleagues. It's fantastic that now we can say that all the major political parties agree on the importance of the price of pollution. I'm glad that the Conservatives have changed their minds and come on board with that. I appreciate that.
I want to say that everyone on this panel, from all the parties, supports farmers. Our government is supporting farmers and the innovations that were mentioned and that they are championing.
I know we have different pillars and ways of supporting them, and we all agree on pricing pollution. The government is saying that we want to further reduce emissions as much as possible and affect the impact of climate change and continue to help farmers build resilience. We also want to support that clean technology, which will also create some jobs.
If I could direct my questions to Mr. Parry off the top, you touched briefly on some new clean technologies, which are already emerging. You specifically mentioned Triple Green using biofuels. I think that's out of Manitoba. It uses dry heat and biomass fuel. I have done some studying on that, because in my riding of Kitchener—Conestoga, there's a company called Bio-En. It uses anaerobic digesters, which take the methane from the composting and turn it into energy.
Can you expand on some of the ways we can use biomass fuel to create heat?
I want to take this opportunity to thank the witnesses who are here today, since I didn't have the chance to do so in the first round.
I know that this question has been asked before, but I don't believe that we've received a clear answer. I don't know which one of you will answer my question. However, I want to know why the exemption for propane and natural gas wasn't included in the first draft of the Greenhouse Gas Pollution Pricing Act.
We can understand why diesel and gasoline were exempted, since it makes sense for production and other reasons. However, most witnesses say that propane and natural gas are less harmful to the environment and that no other options are accessible or economically viable, despite the innovations being made.
Why wasn't this exemption included in the first place? It appears to be in keeping with the spirit of the legislation.
Thank you, Chair. Maybe my question will be for Mr. Parry, with Agriculture and Agri-Food Canada.
I don't really have many more questions on Bill per se, but I am interested in whether or not the Government of Canada has done an analysis of the carbon sequestration potential in Canada's farms.
I know in budget 2021 there were $60 million dollars allocated over the next two years for the nature smart climate solutions fund, and that's really to protect existing wetlands and help save trees on farms. However, I'm just wondering, overall, whether we have done an in-depth analysis of Canada's agricultural soils and really what our sequestration potential is if we're really going to be depending on them to act as a carbon sink as a part of our overall fight against climate change?
I'm just wondering if you could give the committee an update on that.
Thank you very much, Mr. Epp.
Mr. King, I just want to follow the line that Mr. MacGregor took earlier.
When we look at the definitions of Bill , to me it's absolutely clear, in fact it's crystal clear—and that's in fact what our parliamentary lawyers have all said as well—that grain drying is included.
If we look, in fact, and we ask, what's the definition of farming, it almost certainly includes the growing of grain. What is “eligible farm activity”? That includes the operation of eligible farming machinery. What is “eligible farming machinery”? It is an industrial machine or a stationary or portable engine.
All of that fits grain drying to a T. I don't understand how you could possibly conceive that grain drying is not included in this, and I think it's just silly to say otherwise.
Maybe I can just jump in.
As Matt mentioned, it's a mixture of incentives and investments. One of the ways in which we're looking to create economic opportunities by sequestering carbon, for example, in the agricultural sector is through the development of a federal GHG offset system. It's currently under development. We have draft regulations. This is going to provide an economic incentive to reduce or remove carbon in activities that aren't carbon priced, including in sectors such as agriculture and forestry.
One of the protocols we're going to be looking to develop first is an enhanced soil organic carbon protocol, so that we can create a financial incentive for farmers and recognize some of their innovative work, and as a complement to carbon pricing. I just want to mention that as just one example of an incentive that we're developing.
Thank you, Mr. Ellis. We're doing great with time.
If I may, I'll add a question or statement. I don't know if any of the witnesses can help me.
There was, to me, some misleading information. I heard that because natural gas or propane has a low humidity content, the grain would dry a lot faster with these fuels than with others. From my days on the farm—and I've been around a few dryers—I know that the flame doesn't directly dry the grain. It goes through a heat exchanger, so to me that's irrelevant to the fuel.
Also, biofuel and biomass heating have been around for a long time. Actually, I've had a biomass boiler for over 30 years, and there's been a lot of improvement. I've seen one on the island and it burns straw. I think there was also some statement saying that if we removed the straw, we'd lose some valuable nutrients, but we do that all the time when we want to sell straw or other products.
I'm just curious if this could be accelerated, because there's already technology out there. It's more of a statement, but if somebody wants to comment on that, I'll take it. If not, we can move on.
I want to thank Mr. Goodlet and Matt Parry from the Department of Agriculture and Agri-Food, Phil King and Gervais Coulombe from the Department of Finance, and Judy Meltzer from the Department of the Environment. Thank you all for being here.
We will suspend for a few minutes and then come back with our final witness. Don't go too far; we'll be back shortly.
Thank you for inviting me again to appear in front of your committee. The last time I presented was in February. There was a snowstorm, and I think I reflected on the challenges of the Internet in rural regions. I am proud to say that we've had an upgrade in our region, so I should be fine on my Internet today. As well, there is no snow.
When I appeared the last time, it was to discuss processing capacity. I note that your report has come out, and I would really like to congratulate the committee on a great report that came out, with substantial recommendations. My hope is that the government will reach out to stakeholders in order to discuss implementation—stakeholders such as us.
That would be great to see, but I'm here to discuss Bill , Mr. Chair.
I wanted to mention first that the intent of the draft legislation is to extend the exemption on the carbon tax to some farming operations that use propane and natural gas. As you know, reducing GHG emissions is a priority. It's a priority for Canada. It is a priority for farmers. However, when there are no viable options, farmers shouldn't be penalized for doing what they do best: feeding Canadians and contributing to our economy.
We are certainly supportive of this legislation, and we are supportive for the following reasons.
At this point, there are no viable options that are scalable to serve the whole sector. While there are some new technologies, they still need to be researched, especially in terms of how they adapt to our particular conditions in Canada.
The scalability of those new technologies is also an issue. We're simply not there yet, and we must be realistic that we will not be able to scale up those new technologies in the near future.
We've researched the issue, Mr. Chair. We've consulted our members, and there was an almost unanimous response from our members on this issue. Increasing the costs for farmers will lead to some abandoning agriculture, and this will have a negative impact on our jobs, on the trade balance and also on our food security, an issue that we should really consider specifically.
The AIC recently held a webinar on agrifood and climate change. It included international experts such as Dr. Ould-Dada, deputy director at the UN food and agriculture organization; Dr. Ringler, who is with the International Food Policy Research Institute; and Dr. Sally Rockey, a long-time senior civil servant in the U.S. and now executive director of the Foundation for Food and Agricultural Research.
They all agreed with the following statement: It is important to consider food security when implementing measures to reduce GHG emissions in agriculture, and sustained investments in research and innovation are essential to support reductions in GHG emissions in agriculture and adaptation to climate change.
We certainly agree with those two statements from our experts, and we believe that the committee should reflect on those and pass [Technical difficulty—Editor]. However, we also believe that the exemption should go to other types of farming.
The exemption right now is limited to some types of farming, and we believe that it is not fair to penalize other types of farmers, such as farmers who have barns and need heat for animals. It's not fair for them to be left aside. There are other types of farmers who also do important work and provide Canada and Canadians with an important service that is required, and we believe that they should also be considered in and supported through this legislation.
As well, Mr. Chair, we believe that the measure should be permanent. This was a topic of some discussion within our council, but ultimately the great majority of our members who responded to the survey indicated that it was important to extend the protection on a permanent basis.
The rationale for this is simple. Farmers make significant investments in material and equipment. For them to have a temporary measure will increase concerns and affect their ability to plan financially and get new machinery. As no machinery and no technology is scalable at this point to enable them, in a viable manner, to have other sources of fuel, such as clean and renewable fuel, we believe that the measure should be permanent to give them certainty—and I stress the word certainty—that there will be no changes in the near future.
Mr. Chair, there are greener alternatives, and there are various alternatives such as gasification systems, low-temperature pyrolysis, anaerobic digesters and battery-based equipment. There certainly are different alternatives, but there are several factors that work against those alternatives. I mentioned that they're often not viable. The price is simply too high and the price to scale them is not feasible.
We also have to remember that our farmers compete internationally against the U.S., Russia, Brazil and other countries. We have to be careful on that—
Thank you very much, Mr. Chair.
Thank you, Mr. Buy, for your excellent testimony and also an excellent brief. I note that it would be very difficult to describe your organization as a fly-by-night organization, given that, if I do the math right, you've been around for 101 years. Thanks to your organization for its service to the agriculture and agri-food value chain.
Initially, in your brief, you talk about requiring a time frame of at least a decade. Can you expand on that? Why do you require a decade for the exemption for natural gas and propane?
It depends on the country. In France and Germany, for example, many things are done to help producers make the transition. In particular, there's a great deal of funding for producers. This isn't the case in Canada. We aren't at the same level. In those countries, given the subsidies that they receive, farmers can afford to adopt these extremely expensive technologies. Most farmers couldn't afford to do so otherwise.
However, our environmental concerns may not be shared by other countries, such as Russia or Brazil, which still compete with us. Our farmers, if they want to sell their grain, must be able to compete with these types of countries.
That's why I'm saying that we must really pay attention to our actions. As the saying goes, it's better not to kill the goose that lays the golden eggs.
You talked about the need to invest heavily in research and development and to move quickly to advance those efforts. We agree on that.
When you answered a question from Ms. Bessette earlier, you said a permanent exemption was needed to support investment. If memory serves me correctly, one of the witnesses we heard from was Ms. Ross. She had a new dryer and told us that it was more efficient, so better for the environment.
Do you think farmers should still invest in improving their current dryers, or should they keep their money until new and better technologies emerge, say in seven or eight years?
Is it appropriate to focus on upgrading current dryers?
Thank you for being back before our committee, Mr. Buy. I appreciate hearing from you on all of this.
When your organization first saw the Greenhouse Gas Pollution Pricing Act and you went through the definition part of the act, when you came to the qualifying farm fuel, it's quite obvious why gasoline and diesel are there. It's because there aren't any viable alternatives at present that can produce the amount of power needed to operate a modern farm.
Would you agree with that statement?
Mr. Serge Buy: Yes.
When the act first came into being, did your organization or farmers in general have any reaction when you didn't see propane and natural gas listed under the same “qualifying farm fuel” definition?
Yes. I think the intention in putting a price on pollution is to incentivize a change in behaviour, but only if we have an option for people to migrate to. I think your comment about incentives being needed to encourage adoption rings very true for members of this committee.
I mean, if you look at zero-emission vehicles, a lot of people really only started buying them because, for example, here in British Columbia you got a combined $8,000 federal and provincial rebate for purchasing one. Of course, in the early days, the vehicles didn't have much range and they weren't as convenient, but now you're starting to get cars on the market that have a 400-kilometre or 500-kilometre range on a single charge. They can do all of the things that a gasoline car does, except maybe a trip right across the province. It takes some time, but eventually it will be like a snowball effect. It will build up enough pressure that it starts going on its own.
In terms of the new technologies that are coming out, what in your view seems to be the most promising? Are there a lot of companies involved in innovation in this field? Is there a lot of competition? Is there a lot of capital investment in trying to find out which one of these new technologies will actually become commercially viable?
I think we need to develop the technology as fast as we can. We also have a who says he has a great relationship with the new President, so I'm sure we're not looking at taxes on our products or any of those negative impacts.
Let's work on that. Let's put some incentives in place. Let's support and finance the adoption of those technologies, but let's be careful for the farmers who exist presently.
Mr. Chair, you're entirely right. There is a new administration, a new sheriff in town south of the border, probably a bit less loud than the previous one, but there is a new sheriff in town. We're certainly hopeful of seeing some positive changes from that.
Let me be very clear, Mr. Chair. We believe there should be changes and we believe that we should reduce GHG emissions. We just believe we need to do it carefully and not penalize the farming community, which is doing so much to help our country.