Pricing carbon to encourage fewer greenhouse gas emissions and mitigate climate change will affect all Canadians, including farmers. How depends on the program each province implements.
It could raise farmers’ nitrogen fertilizer and fuel costs, but sequestering carbon with zero-till or rotational grazing could earn credits offsetting some of those costs.
And while some farm groups are in opposition, the Keystone Agricultural Producers (KAP) says since carbon pricing is political reality, it will focus on influencing the outcome to minimize the potential negative effects on farmers.
Agriculture is Manitoba’s largest emitting sector, accounting for about 40 per cent of the province’s greenhouse gases, including the Koch nitrogen plant in Brandon, which is the province’s single largest emitter.
Transportation is the second-largest emitter at about 30 per cent.
“A poorly designed carbon pricing system could do little more than increase costs for farmers, or it could leave out farmers entirely and bring you no benefits ever,” KAP general manager James Battershill said during a conference call with close to 40 farmers Oct. 4. “However, we think a well-designed carbon price could actually help farmers to be part of the solution and to generate some new revenue while doing it.”
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KAP says most Manitoba farmers are price-takers and can’t pass on a ‘carbon tax.’
“It just speaks to the rationale that we have for making sure we’ve got a system that works for farmers,” Battershill said.
Cathy Cox, Manitoba’s minister of sustainable development, mandated by Premier Brian Pallister to develop a ‘made-in-Manitoba’ carbon price, met with KAP and other stakeholders last week.
“We realize there will be real challenges for the ag sector,” Cox said in an interview. “It is such an important part of our economy. We are going to work together with them to make sure that the plan we develop is very inclusive and provides thought about the challenges the ag sector will face.”
Cox raised agriculture’s concerns with her federal counterpart Catherine McKenna at the federal-provincial-territorial environment ministers’ meeting in Montreal Oct. 4.
“She has agreed that we are going to look at that and our unique situation,” Cox said.
Under the Paris climate change accord Canada will cut its greenhouse gas emissions by 30 per cent from 2005 levels by 2030.
There’s consensus among climate scientists that human-caused greenhouse gases are warming the planet, and if not reined in, threaten civilization.
To meet Canada’s target Prime Minister Justin Trudeau announced Oct. 3 a $10-a-tonne floor price on carbon emissions starting in 2018, increasing annually by $10 a tonne to $50 in 2022.
Each province must implement its own pricing system or the federal government will do it for them.
Last week Pallister rejected the ‘cap and trade’ option. It doesn’t work well with just a few, large carbon emitters. It also involves trading offsets with other jurisdictions.
“We would like to keep any money that we generate from this whole carbon pricing discussion in Manitoba,” Cox said.
“I think we are looking at a different carbon pricing model and it could be a hybrid — perhaps a carbon price and something else. We are still working on that.”
KAP president Dan Mazier says ‘carbon tax,’ has a negative connotation.
“Put the word ‘tax’ in there and it’s dynamite,” he said in an interview. “It blows the whole conversation up.”
The federal Conservative opposition says carbon pricing is a tax grab, noting the Canadian Taxpayers Association estimates it will “potentially” cost Canadians, on average, $2,500 a year. It’s unclear where the estimate comes from since many provinces haven’t said how their carbon tax will work.
Conservative opposition critic Ed Fast didn’t respond to an email asking what the Conservatives propose instead. The Conservatives had the same emissions reduction target as the current government.
Putting a price on greenhouse gas emissions, or taxing it, is intended to raise emission costs to encourage reduction of them. It’s a market approach, which in theory, makes for better decisions and more flexibility than regulations. Former prime minister Brian Mulroney pioneered the approach when he tackled the acid rain problem in the 1980s, with a limit and cost imposed on emissions of sulphur dioxide.
Battershill said a carbon tax can be revenue neutral, as it is in British Columbia, or revenues can be recycled to further reduce emissions.
“B.C. made its carbon tax revenue neutral by law,” he said. The government must recycle all of the money they get from the carbon tax into cutting other taxes.”
B.C. cut personal income tax by five per cent, created a new low income tax credit, cut corporate income tax from 11 from 12 per cent, and cut small business income tax to 2.5 per cent from four.
“And I think a lot of folks will be interested to know they cut the school tax on farmland by half.”
Cox said it was too soon to say what Manitoba will do.
“The federal government told us any of the revenue that is generated will remain in the province so I think as part of the process we have to determine what that is going to look like,” she said.
B.C.’s carbon tax started at $10 a tonne in 2008 and is now $30, said KAP’s climate project co-ordinator, Sean Goertzen. It applies to gasoline, diesel, propane and natural gas. Fuel companies remit the tax to the government and pass it on to consumers at the pump.
Initially the carbon tax included farm gasoline and diesel fuel, but they were exempted starting in 2014.
Starting that year rural and northern B.C. residents also got an annual rebate of $200 for personal fuel use.
Since 2014 greenhouse growers became eligible for an 80 per cent rebate on heating fuel.
B.C.’s $30-a-tonne carbon tax translates into an extra 6.67, 7.67 and 4.62 cents a litre on gasoline, diesel and propane, respectively and 5.7 cents per cubic metre on natural gas.
Of the greenhouse gas emissions coming from Manitoba farmers, more than a third are generated by crop production — mostly nitrous oxide from nitrogen fertilizer, which is 300 times more potent as a greenhouse gas than carbon dioxide.
Another third comes from livestock production — mainly methane from livestock production and manure. The rest is generated from fuel burned producing crops and livestock.
Based on B.C. figures a $30-a-tonne carbon tax will add $57 to a tonne of anhydrous ammonia; a $50-a-tonne tax adds an extra $95. (It takes about 1,000 cubic metres of natural gas to make a tonne of anhydrous ammonia.)
While no farmer wants to pay extra, anhydrous prices sometimes vary more than what a carbon tax would add. Last winter anhydrous was around $820 a tonne, now it’s $650 — a drop of $170 a tonne or 21 per cent.
Adding a $30-a-tonne carbon tax now, and presuming the maker passed it on, $650-a-tonne anhydrous would cost nine per cent more.
Climate versus competitiveness
Minto farmer and entrepreneur David Rourke is conflicted. He doesn’t want a carbon tax to make him uncompetitive, but he also worries about climate change.
“A lot of people are suggesting that we need a 90 per cent reduction in fossil fuel use,” he said. “Ten dollars a tonne (carbon tax) or even $30 a tonne isn’t going to change our behaviour at all, or very little.”
It would take more like a $240-a-tonne carbon tax, he said, but that isn’t practical in the short term. It would double farmers’ current fuel costs, but they would still be lower than in the European Union and similar to what farmers have paid before.
It might also see farmers convert more canola oil to diesel fuel, an almost carbon-neutral option because it is renewable. Rourke estimates western farmers could meet their diesel needs with 2.5 per cent of their arable acres.
Chicken Farmers of Manitoba director Murray Klassen is skeptical about a revenue-neutral tax. But Henry Nelson, vice-chair of the Manitoba Forage and Grasslands Association, said there are examples, including stewardship taxes on tires and batteries.
Recycling carbon tax revenue into cutting agriculture’s emissions will help the environment and farmers’ bottom lines, he said.
“That’s a positive thing that we in agriculture can have — an opportunity here to be a big part of the solution,” Nelson said.
In the end farmers still have an ace in the hole, KAP’s Mazier agreed: climate change is important, but people gotta eat.