A new fossil fuel subsidy is not the way to help farmers

As the climate crisis worsens, extreme weather events like floods and droughts are increasingly affecting communities and livelihoods, especially farming. Like all sectors, agriculture must be part of the solution to climate change. Many farmers and ranchers are doing their part to reduce emissions and increase resilience to extreme weather. Many also recognize why carbon pollution must be priced.

Farmers struggle to make ends meet, especially as input prices rise. Many farmers sell at prices set by international commodity markets and any additional costs can make already tight margins even tighter. The path to low-emissions agricultural production must ensure sustained food production and support the viability of farming operations.

Recognizing costs faced by farmers, in the provinces where the federal fuel charge applies (Alberta, Saskatchewan, Manitoba and Ontario, while the federal system will expand to the four Atlantic provinces in July), the federal government returns the proceeds from pricing carbon pollution from farm heating fuel use to farmers, based on overall farm expenses. (Rebates are not based on an individual farmer’s fuel use to ensure the price signal is not undermined.)

For the 2022 tax year, farmers will receive rebates totalling $100 million.

What’s wrong with Bill C-234?

A private member’s bill that recently passed third reading and has moved on to the Senate, proposes an exemption for farm heating fuels, removing the incentive to reduce pollution created by the federal carbon levy. Exempting heating fuels from pollution pricing might seem like a good way to recognize costs paid by farmers and make food more affordable, but it fails to deliver on those goals.

Price signals encourage innovative firms to develop and supply technologies that can be used to heat barns and dry grain with lower or zero emissions. A price on pollution also incentivizes farmers to adopt more energy-efficient or zero-emission heating technologies.

By removing carbon pricing from heating fuels used on farms, Bill C-234 means the rebate program will lose its funding source, and rebates will drop to zero. As a whole, because the farm heating fuel levy was already revenue neutral, the sector will be no further ahead.

Experts testifying before Parliament warned it would create a new inefficient fossil fuel subsidy when Canada committed to eliminating fossil fuel subsidies this year. The Parliamentary Budget Office estimates that by fiscal 2030-2031, this subsidy will cost $186 million a year.

A better way to support farmers in a low-emissions future

Topping up government support for low-emissions farm innovation will benefit farmers more than exemptions from the carbon price. Farmers need government assistance to transition to low-carbon practices, such as retrofitting farm buildings and heating systems, using efficient grain dryers and improving livestock facilities.

Federal funding to support farmers in adopting practices like cover cropping, rotational grazing, improved nitrogen management, wetland and tree conservation and adoption of low-emissions machinery, all known to reduce emissions and build resilience, has helped but more is needed.

Technologies to help farms wean themselves off fossil fuels are rapidly improving. Propane and natural gas grain dryers are being retrofitted in Canada to increase efficiency.

A new made-in-Manitoba dryer powered by crop residue or biomass produced on-farm is scalable to any farm size.

Tapping into affordable zero-emissions electricity from renewables will bring benefits, such as heating barns with heat pumps. These alternatives reduce energy bills for farmers and allow them to cut their carbon pollution levy payments. Further expansion of the electricity grid will be needed to meet the energy needs of farms as they swap out fossil fuels.

With prices around the world on the rise, shifting to renewables brings more affordability to every sector. Funding to support farmers in improving energy efficiency, reducing fossil fuel consumption and emissions and enhancing competitiveness was announced by Agriculture and Agri-food Canada in 2021. Transitional support to compete in the clean economy needs to become a core component of federal and provincial agricultural policies and programs.

Carbon pricing needs to be economy-wide

Carbon pricing is widely recognized by economists as one of the most efficient policy approaches to reducing emissions. Since it became a requirement throughout Canada in 2019 and has been rising slowly from its modest start of $20 per tonne CO2, the payoffs are just beginning to show up in reduced carbon pollution.

Bill C-234 would set Canada on a slippery slope of sector-by-sector, interest-by-interest pressure for exemptions that risk fundamentally undermining the act as an economy-wide measure.

This is not the time to pull back from climate action. We are experiencing weather events that will become more frequent and extreme if we fail to reduce emissions. Farmers are on the front line of climate impacts, facing droughts and flooding that leave disappointing harvests.

Instead of locking in a new fossil fuel subsidy with Bill C-234, Parliament should focus on ways the federal and provincial governments can better support farmers for long-run competitiveness in the zero-emissions economy.

It is not only possible, but also necessary to respond to the urgency of climate change while encouraging agriculture practices that support healthy food generation and livelihoods for farmers for generations to come.

Tom Green is a senior climate policy adviser with the David Suzuki Foundation.