Hon. David M. Wells moved second reading of Bill C-234, An Act to amend the Greenhouse Gas Pollution Pricing Act.

He said: Honourable senators, I rise today as the Senate sponsor of Bill C-234, An Act to amend the Greenhouse Gas Pollution Pricing Act, which was introduced in the other place by member of Parliament Ben Lobb on February 7, 2022.

This bill was recently passed through the other place with the support of the Bloc Québécois, the Conservatives and the New Democratic Party, along with a few Liberal MPs. It is truly a cross-party effort and is a much-needed piece of legislation.

The objective of this bill is quite simple, and that is to create additional on-farm exemptions from the carbon tax for critical farming practices such as grain drying, heating and cooling livestock barns and greenhouses, steam flaking and irrigation.

When the Greenhouse Gas Pollution Pricing Act, or GGPPA for short, was adopted in June 2018, the bill imposed a fuel charge on fossil fuels like gasoline and natural gas. The fuel charge is applicable in all provinces and territories which do not have their own federally approved carbon pricing systems. This currently includes Alberta, Saskatchewan, Manitoba, Ontario, Yukon and Nunavut. On July 1 of this year, the Atlantic provinces will be added to that list as well.

Under the GGPPA, gasoline and diesel fuel used by farmers in eligible farming machinery such as trucks and tractors is already exempt from the carbon tax. In addition, the act provides an exemption for up to 80% of the carbon tax for natural gas and propane used to heat an eligible greenhouse.

But what the current legislation does not include is an exemption for natural gas or propane used for on-farm activities such as grain dryers and heating barns. This was a critical oversight which Bill C-234 seeks to correct.

Colleagues, as we all know, natural gas is a transition fuel. As Liberal MP Kody Blois, member for Kings—Hants, Nova Scotia, said in the other place:

 . . . at the time the Greenhouse Gas Pollution Pricing Act was developed, it seems as though there was not necessarily a lot of thought given to grain drying and, particularly, to barn heating for livestock. That is exactly what this bill tries to do. It would extend to what a number of policy-makers feel was a small oversight at the time of the original drafting of the legislation that brought the carbon price into force.

As senators know, the purpose of the carbon tax is to provide an economic incentive through a price signal to encourage people to shift their energy consumption from fossil fuels to other sustainable energy options. However, when it comes to agriculture, this poses a number of problems.

The first is that farmers have no viable sources of alternative energy for their agricultural practices. This is widely recognized, as noted by New Democratic Party Member of Parliament Alistair MacGregor at the House Standing Committee on Agriculture and Agri-food. He noted that:

We realize that a price on carbon is there to incentivize a change in behaviour, but it doesn’t work very well if there aren’t commercially viable alternatives available.

This is the first fundamental reality which underscores the importance of Bill C-234: The law currently penalizes farmers for something over which they have no control. They cannot shift their energy use away from fossil fuels because alternatives are not yet available. This makes the current situation punitive and fundamentally unfair.

It is recognized, however, that the current lack of renewable energy options for farmers could change. Research and development is already under way to develop renewable energy sources for farm production including biomass, geothermal, hydroelectric, solar and wind power. Although these options have not yet reached the stage of development where they are workable options to replace the farm use of fossil fuels, that day will come.

For this reason, the bill includes an eight-year sunset clause. On the eighth anniversary of Bill C-234 coming into force, the changes made to the Greenhouse Gas Pollution Pricing Act by this bill will be automatically repealed, reverting the legislation to its current state. If, however, the government of the day believes they should not be repealed, then the legislation allows both houses of Parliament to debate and vote on a proposed extension. This would remove the need to relitigate a similar piece of legislation if at the time it’s found that an exemption from the carbon tax on farm fuels is still needed.

The second reason the carbon tax imposes significant problems on farms is because farmers are price takers, not price makers. This is a long-standing and well-understood reality. Farmers must sell their production at the prevailing market price, and they have no control over that price. If their expenses are increased, they cannot pass those on. They must simply absorb them. This is the reality that farmers face today because of the lack of sufficient agriculture exemptions in the Greenhouse Gas Pollution Pricing Act.

Bloc Québécois Member of Parliament Yves Perron put it this way:

Without an alternative, if we impose a tax on these processes at this time, it would simply increase production costs and reduce farmers’ profit margins since they have no other options.

This, colleagues, is the current reality on farms which are located in federal backstop provinces and territories. Farmers and ranchers require propane or natural gas to dry their grain, irrigate their land and heat or cool their barns and greenhouses in order to feed Canadians and drive our export market. Yet, they are unable to pass the cost of the carbon tax on to consumers and are left to absorb the additional expense.

In April 2022, the Parliamentary Budget Officer estimated that the cost of the carbon tax on natural gas and the propane used in the agricultural sector in Alberta, Saskatchewan, Manitoba and Ontario would cost agricultural producers $235 million from 2020-21 to 2024-25. Over the next 10 years, this total will reach $1.1 billion. This has been corroborated by studies completed by numerous agricultural organizations.

The Agricultural Producers Association of Saskatchewan calculated the carbon tax at $50 per tonne to cost farmers between $13,000 to $17,000 annually, the equivalent of a 12% decrease in net income. At $170 per tonne, they estimated the carbon tax will cost a grain farmer $12.52 per acre by 2030.

The Keystone Agricultural Producers reported that Manitoba producers paid $1.7 million in carbon taxes related to drying grain in 2019. Examples include a producer growing 250 acres of corn spending $33,664 on propane to dry their crop with the carbon tax adding another $1,043 to their fuel bill, and a chicken farmer heating a barn from October 24, 2019, to January 21, 2020, spending $5,935 on natural gas with the carbon tax adding another $1,300 to their fuel bill or 22.16%.

The Grain Farmers of Ontario have noted that, under the current legislation, the tax credit returns less than 20% of the carbon tax cost. They estimate when the carbon tax reaches $170 per tonne some farmers could pay between $50,000 and $70,000 just in carbon taxes.

The Canadian Canola Growers Association calculated that the carbon tax would cost their industry $52.1 million in 2022 at $50 per tonne, and $277.9 million in 2030 at $170 per tonne. The cumulative cost of the carbon tax to the industry from 2022 to 2030 would be $1.429 billion.

Colleagues, input costs are the greatest expenses on Canadian farms. Farmers and ranchers are already judicious in their use of natural gas and propane on farms. Carbon surcharges on these fuels only serve to reduce the financial resources available for producers to invest in efficiencies that mitigate costs and reduce emissions, such as a more efficient grain dryer, precision agriculture equipment, solar panels, LED lighting, heat exchangers for barns or anaerobic digesters, to name a few.

Remember colleagues, in southern Alberta in particular, where farms are plentiful, it can get to minus 40 in the winter and plus 40 in the summer. It can be used not only for heating but also for cooling, especially when livestock are involved.

It is a well-known fact that farmers have a record of being environmental stewards and innovators. They have adopted new technologies and proven their ability to continually lessen their environmental footprint while increasing production and maintaining their competitiveness, without a carbon price incentivizing them to do so. However, without the changes introduced by Bill C-234, the carbon tax will extract hundreds of millions of dollars from the agriculture sector reducing the ability of farmers to invest in the capital-intensive innovations and technologies that drive sustainability and productivity gains.

This was an unintentional impact of the Greenhouse Gas Pollution Pricing Act, and Bill C-234 seeks to rectify this oversight.

This is not the first time the Senate has had an opportunity to address this unintentional impact. In 2018, the carbon tax was brought in under Part 5 of the Budget Implementation Act, in Bill C-74. It was the Senate that was able to conduct a more in‑depth study in how this affected agriculture. Unfortunately, this was not addressed as the legislation was pushed through the Finance Committee very quickly in the context of an omnibus bill.

Subsequently, our House and Senate colleagues similarly sought to correct this omission through Bill C-206, which was put forth by MP Philip Lawrence. As some of you may recall, it was also attempted by our former colleague the Honourable Diane Griffin. Her bill sought to amend the Greenhouse Gas Pollution Pricing Act to modify the definitions of “eligible farming machinery” and “qualifying farming fuel.”

Colleagues, here we are today with an opportunity to correct a lapse in the law that is now affecting the core of our agriculture system and, essentially, our food supply. Canada’s farmers sit at the heart of an agri-food system which contributes nearly $140 billion to our economy annually and provides one in nine Canadian jobs. Agriculture is an international success story in terms of productivity and innovation, but requires a policy environment that enables our farms to thrive.

This bill is not about whether you like the carbon tax. Although Conservatives are opposed to the carbon tax in principle, the NDP, Bloc Québécois and the Green Party fully support it. Yet all these parties voted in favour of this bill, along with a number of Liberal members including the chair of the House Standing Committee on Agriculture and Agri-food, the committee that studied this bill.

This bill is not about politics, it is about Canadian farmers. It’s not about removing the carbon tax or diminishing its effectiveness. It’s about making sure the carbon tax is equitably applied and does not harm our agriculture industry.

Colleagues, the scope of this bill is narrow and targeted. It expands the existing list of “eligible farming machinery” to include property used for the purpose of providing heating or cooling to a building or similar structure used for raising or housing livestock or for growing crops and drying grain. Secondly, it expands the definition of “qualifying farming fuel” to include marketable natural gas and propane.

These are reasonable, moderate and necessary changes, and are badly needed and broadly supported across the agricultural sector. Here’s what agriculture organizations from across the country have had to say about the need and value of Bill C-234.

The Agriculture Carbon Alliance, known as the ACA, is a coalition of 15 national farm organizations representing more than 190,000 farm businesses. I was shocked that there were that many farm businesses in Canada. Agriculture Carbon Alliance members include members of the Canadian Canola Growers Association, Canadian Federation of Agriculture, Canadian Cattle Association, Grain Growers of Canada, Canadian Pork Council, Chicken Farmers of Canada, Turkey Farmers of Canada, Fruit and Vegetable Growers of Canada, Canadian Hatching Egg Producers, Canadian Forage and Grassland Association, National Sheep Network, National Cattle Feeders’ Association, Dairy Farmers of Canada, Canadian Seed Growers’ Association and Mushrooms Canada.

The Agriculture Carbon Alliance said:

As a national coalition of industry-wide farm organizations, we are focused on prioritising practical solutions to ensure our farmers and ranchers can remain competitive and utilize the tools available to them where no alternative fuel sources exist. . . . This Bill will provide economic relief for our members, freeing up the working capital they need to implement environmental innovations on farm.

By adopting policies that enable producers to remain competitive, they will be able to further their investments in the sustainability of their operations, which will augment the sector’s potential to further lower emissions and sequester carbon.

The Canadian Federation of Agriculture stated:

Producers across Canada are working every day to improve the sustainability of their operations. This continuous improvement is reliant on the commercialization of new viable on-farm technologies that come with significant capital expenses. This proposed legislation helps ensure farmers have the capital needed to make those investments and continue to realize the sector’s potential as climate solutions-providers.

The Chicken Farmers of Canada stated:

Canadian chicken farmers constantly advance our operations in order to improve bird health and welfare, and to ameliorate environmental stewardship and sustainability on the farm. Through the implementation of good production practices, chicken farmers are taking steps to ensure that our sector is environmentally sustainable for decades to come. We look to our partners in government and in the House of Commons to provide legislative and financial support for farmers so we can keep feeding Canadians.

The Canadian Pork Council stated:

Having barn heating costs subject to the carbon price is especially challenging for producers given that they are responsible for the welfare of their animals. In Canada’s climate, producers have no choice but to manage the temperatures in barns to ensure the care of our animals.

The Grain Growers of Canada:

Canada’s grain farmers welcome the introduction of this bill and appreciate the exemptions included for critical on-farm activities — including grain drying. Through this relief from the carbon tax, our farmer members would have additional capital to invest in innovative technologies and sustainable practices that reduce emissions.

Canadian Hatching Egg Producers stated:

Canada’s hatching egg farmers represent an important segment of the poultry industry. Our farmers work hard to be at the forefront of innovation for sustainability while striving for efficiency at every opportunity. Bill C-234 will provide necessary support on farms to help alleviate financial pressures and ensure capital is available to reinvest in our farm operations . . . .

Canadian Canola Growers Association:

Canola farmers are committed to a sustainable future and have established production goals to support that commitment. I have made investments on my farm to retrofit my natural gas grain dryer, making it more energy efficient. While this is an important step, farmers today simply do not have viable fuel alternatives available for drying grain, which is why Bill C-234 is so important.

That’s from Mike Ammeter, Chair of the Canadian Canola Growers Association.

The Canadian Cattlemen’s Association:

Beef farmers and ranchers are continuously looking at ways to environmentally improve operations and further contribute positively to Canada’s climate change objectives.

Colleagues, you see a trend in all of these. They want to take these savings and make their systems better. He went on to say:

Bill C-234 will provide the much needed exemptions for critical farming practices including heating and cooling of livestock barns and steam flaking.

The Fruit and Vegetable Growers of Canada said:

Canadian fruit and vegetable growers are committed to being a part of global climate solutions and the sustainability of their operations. We believe the support for farmers found in Bill C-234, will incentivize continued innovation, and recognizes that farmers need a range of feasible fuel and energy options. Ultimately, this will benefit the entire food value chain, including Canadian consumers.

Colleagues, Bill C-234 is critically necessary for Canadian farmers who are essential to our food supply and security and also builds on the multi-party support that Bill C-206 received in 2020 and 2021. I ask for your support, colleagues, for this legislation at second reading, and look forward to hearing directly from stakeholders at committee. Thank you.