Against the grain: For Prairie farmers, carbon tax shows how little Ottawa understands their industry

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Hour after hour, the massive grain dryer on Janina Currah’s family farm churns away, slowly heating bushel after bushel of damp canola.

It’s an expensive necessity this year after heavy autumn rains left much of Saskatchewan’s vast wheat, barley and other grain crops too wet to send directly to market. Without the dryer, Mrs. Currah, 33, says her grain would have to be sold at a discount, and could simply rot. Even with a newly purchased energy-efficient machine, and a computerized monitoring system, she has spent thousands of dollars on drying so far.

On top of that, the farm has already had to pay more than $1,200 in federal carbon tax on the natural gas used to run the dryer.

The 2019 harvest is the first since the tax came into force. The levy is in place in Saskatchewan and in three other provinces: Manitoba, Ontario and New Brunswick. It will arrive in Alberta in January. Ottawa decided to impose the tax because all five provinces’ carbon policies fall short of its standard for reducing greenhouse gas emissions.

Mrs. Currah’s father, Chris Gislason, estimates his family will pay more than $10,000 in carbon tax this harvest: the full bill for drying 150,000 bushels of wheat, barley, oats and canola, plus indirect costs for the tax embedded in things such as trucking, grain-elevator fees and rail charges to get grain to market, and on other energy used by the farm.

But the family can’t simply charge buyers more to recoup that cost – grain prices are set on international commodity markets.

Modern agriculture relies heavily on mechanization and fossil fuels to increase productivity, and the Trudeau Liberals gave some recognition of that fact when designing federal carbon policy: diesel and gasoline used in field operations aren’t taxed.

But natural gas is, just one of the many complexities in how the federal carbon tax is applied across agricultural sectors. Fuel burned in processing isn’t exempt, even though that consumption might happen on the farm. Some operations get exemptions for natural gas while others do not. Wood-fired power is not taxed at all. As well, the effect of the carbon tax on the substantial expense of shipping product to market is deemed to be indirect and was hence ignored in official calculations.

For Mrs. Currah and her father, like thousands of other farmers across the Prairie heartland, the tax is more than an onerous financial burden. It has become a potent symbol of how Ottawa does not understand – or does not care to understand – the challenges they face. “It just kind of feels no one is looking out for us,” she says.

Saskatchewan is being particularly hard hit. Its largest industries – petroleum, mining and agriculture – and the coal-fired power plants it relies on for half its electricity, make it the biggest emitter of greenhouse gases per capita of all the provinces. Saskatchewan’s agricultural sector alone emitted 18.1 megatonnes of carbon dioxide equivalent in 2017, second only to Alberta and more than double Quebec agriculture’s 8.95 megatonnes.

Like thousands of other grain farms and cattle ranches across the Prairies, Mrs. Currah and her family run a large and highly mechanized operation. Their 6,500 acre farm, about 200 kilometres northeast of Regina, is about six times the size of Vancouver’s Stanley Park. Smaller dairy and other livestock operations haven’t been hit as hard by the carbon tax, but transportation and heating costs still expose them to it.

Mrs. Currah and Mr. Gislason, 58, wince when asked about Ottawa’s assertion that 80 per cent of Canadian households will receive annual rebates bigger than their carbon-tax bills. They are not urbanites just paying tax for fuelling a vehicle and heating their home. The $1,843 carbon rebate that the family’s six adults and four children are eligible for in 2019 won’t even come close to matching the cost to their farm.

And the burden will only get heavier. The carbon tax is scheduled to rise from its current $20 per tonne of greenhouse gas emissions to $50 a tonne in 2022. The federal government has not yet spelled out what will happen after that, but third-party estimates have said the tax will need to hit $210 a tonne – 10 times the current level – to meet reduction targets if Ottawa takes no additional steps.

Mr. Gislason says the farm, in his family since 1905, is unlikely to break even this year.

Like thousands of farmers across the Prairies and beyond, he’s wondering how to square the inexorable and inescapable rise in the carbon tax with the slender and volatile profit margins of agriculture. “There’s no end to it," he says.

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Look at the federal government’s carbon strategy, and much of agriculture is largely insulated. There are the gasoline and diesel exemptions. The sector’s emissions of two potent greenhouse gases – methane from livestock, and nitrous oxide from fertilizer – aren’t subject to carbon pricing either.

Ottawa is also assuming greenhouse gas emissions from agriculture will rise marginally, while the government wants to reduce the carbon footprint of industry and households.

The Parliamentary Budget Office even excluded agriculture from its calculations when assessing the net impact of the carbon tax, on the assumption that the sector was exempted from the levy’s direct costs.

As a result, there are no estimates of the total dollar cost of the carbon tax to agriculture. But industry groups and other experts have examined some aspects of the tax. In April, the Agricultural Producers Association of Saskatchewan (APAS) added up projected extra costs per acre to grain farmers from the tax. It included the effect on drying, shipment by truck to grain elevators and then by rail to port in Vancouver, as well as heating and electricity. The additional costs totaled $2.07 per acre, rising to $3.85 by 2022.

But APAS’s estimate did not include the effect of the tax on fertilizer costs. The association said there isn’t enough information to estimate how much prices will rise. In theory, fertilizer producers won’t be able to pass on costs because prices are determined by global demand and supply. However, APAS and farmers aren’t convinced that will be the case.

Duane Haave, APAS’s general manager, says it’s been frustrating trying to appeal to Ottawa. Part of the problem, he believes, is the division of the federal climate change file between three ministries: agriculture, environment and finance. “They’re sort of kicking the difficult things between them. When things get sticky, they just punt it off to someone else,” he says.

Which Canadians have the biggest

carbon footprint?

Not Albertans. On a per-capita basis, Saskatch-

ewan outstrips every other jurisdiction, due to

its oil and gas production, potash mining, coal-

fired electricity generation and agriculture.

GHG EMISSIONS PER CAPITA BY PROVINCE

2017, tonnes CO2e

Saskatchewan’s per capita emissions of 67.7 tonnes of carbon-dioxide equivalent are three times the national average of 19.3, and seven times higher than the province with the smallest per-capita carbon footprint–Quebec, at 9.4 tonnes per person.

EMISSIONS INTENSITY BY PROVINCE

2017, CO2e per million $GDP

Saskatchewan’s economy needed 910.4 tonnes of emissions to generate $1-million in GDP. The national average was 355.9 tonnes; Quebec again had the lightest carbon footprint.

13

193.7

YT

12.6

BC

241.7

28.1

NT

252.1

15.6

NUN

216.4

64.3

809.9

AB

67.7

SK

910.4

16.2

MB

325.4

11.3

208.4

ON

9.4

203.7

QC

18.7

435.5

NB

12.1

300.9

PEI

16.4

395

NS

19.9

311.7

NL

GHG EMISSIONS BY SECTOR

2017, per cent of total

Saskatchewan’s oil and gas sector accounted for nearly

one-third of its emissions. But agriculture was not far

behind, with about one-quarter of the province’s

emissions.

BUILDINGS

AGRICULTURE

TRANSPORTATION

OIL/GAS

INDUSTRIES/MFTG.

WASTE/OTHERS

ELECTRICITY

2.9%

10.1%

24.4%

10.4%

CANADA

11.9%

27.2%

13.2%

0.9%

23.3%

13.8%

SASKATCHEWAN

20%

32.5%

4.6%

4.9%

the globe and mail

source: Canada Energy Regulator

Which Canadians have the biggest

carbon footprint?

Not Albertans. On a per-capita basis, Saskatchewan

outstrips every other jurisdiction, due to its oil and

gas production, potash mining, coal-fired electricity

generation and agriculture.

GHG EMISSIONS PER CAPITA BY PROVINCE

2017, tonnes CO2e

Saskatchewan’s per capita emissions of 67.7 tonnes of carbon-dioxide equivalent are three times the national average of 19.3, and seven times higher than the province with the smallest per-capita carbon footprint–Quebec, at 9.4 tonnes per person.

EMISSIONS INTENSITY BY PROVINCE

2017, CO2e per million $GDP

Saskatchewan’s economy needed 910.4 tonnes of emissions to generate $1-million in GDP. The national average was 355.9 tonnes; Quebec again had the lightest carbon footprint.

13

193.7

YT

12.6

BC

241.7

28.1

NT

252.1

15.6

NUN

216.4

64.3

809.9

AB

67.7

SK

910.4

16.2

MB

325.4

11.3

208.4

ON

9.4

203.7

QC

18.7

435.5

NB

12.1

300.9

PEI

16.4

395

NS

19.9

311.7

NL

GHG EMISSIONS BY SECTOR

2017, per cent of total

Saskatchewan’s oil and gas sector accounted for nearly

one-third of its emissions. But agriculture was not far

behind, with about one-quarter of the province’s

emissions.

BUILDINGS

AGRICULTURE

TRANSPORTATION

OIL/GAS

INDUSTRIES/MFTG.

WASTE/OTHERS

ELECTRICITY

2.9%

10.1%

24.4%

10.4%

CANADA

11.9%

27.2%

13.2%

0.9%

23.3%

13.8%

SASKATCHEWAN

20%

32.5%

4.6%

4.9%

the globe and mail, source: Canada Energy Regulator

Which Canadians

have the biggest

carbon footprint?

67.7

64.3

Not Albertans. On a per-capita basis,

Saskatchewan outstrips every other

jurisdiction, due to its oil and

gas production, potash mining,

coal-fired electricity generation

and agriculture.

28.1

19.9

18.7

16.4

16.2

15.6

12.6

12.1

11.3

13

9.4

193.7

241.7

252.1

216.4

809.9

910.4

325.4

208.4

203.7

435.5

300.9

395

311.7

MB

QC

BC

NUN

AB

PEI

NL

YT

NT

SK

ON

NB

NS

GHG EMISSIONS PER CAPITA BY PROVINCE

2017, tonnes CO2e

EMISSIONS INTENSITY BY PROVINCE

2017, CO2e per million $GDP

Saskatchewan’s per capita emissions of 67.7 tonnes of carbon-dioxide equivalent are three times the national average of 19.3, and seven times higher than the province with the smallest per-capita carbon footprint–Quebec, at 9.4 tonnes per person.

Saskatchewan’s economy needed 910.4 tonnes of emissions to generate $1-million in GDP. The national average was 355.9 tonnes; Quebec again had the lightest carbon footprint.

GHG EMISSIONS BY SECTOR

2017, per cent of total

Saskatchewan’s oil and gas sector accounted for nearly one-third of its emissions.

But agriculture was not far behind, with about one-quarter of the province’s emissions.

24.4%

TRANSPORTATION

13.8%

2.9%

WASTE/OTHERS

0.9%

10.1%

AGRICULTURE

23.3%

CANADA

SASK.

10.4%

ELECTRICITY

20%

11.9%

BUILDINGS

4.6%

13.2%

INDUSTRIES/MFTG.

4.9%

27.2%

OIL/GAS

32.5%

the globe and mail, source: Canada Energy Regulator

Keith Currie, first vice-president of the Canadian Federation of Agriculture, says it was difficult to even secure a meeting with the Environment Minister. When federation officials finally sat down with then-minister Catherine McKenna this past April, the meeting was annoyingly short. Mr. Currie also recalls that later that day, Ms. McKenna announced a $12-million subsidy to Loblaw Cos. Ltd. for energy-efficient refrigeration systems.

Then there are the seeming contradictions in the taxation of different sources of energy for different types of farms.

Not all types of farmers pay full freight for natural gas. Greenhouse growers, who are overwhelmingly concentrated in Ontario and Quebec, get an 80-per-cent reduction on the tax on gas used for heat or to generate carbon dioxide for plants. Why do they pay less than grain farmers? Justine Taylor, science and government relations manager for Ontario Greenhouse Vegetable Growers, says greenhouses use gas in their primary operations, while grain farms use the fuel to process their crops.

Tristan Skolrud, an assistant professor and agricultural economist at the University of Saskatchewan, argues that all natural gas consumption on farms should be exempt from the carbon tax. But he questioned the cost projections of the APAS, saying that it could be overestimating increases in the cost of rail shipments since federal regulations limit how much railways can flow through to their customers (who then pass on costs to their clients, farmers).

Saskatchewan Agriculture Minister David Marit said the structure of the tax shows a fundamental lack of understanding of modern agriculture. Farmers have used technology and fossil fuels to become fantastically productive.

Mr. Marit and other Saskatchewan ministers and agricultural lobby groups have told Ottawa for a year that grain drying should be exempted, and a Senate committee officially recommended it. But those pleas were ignored. “They won’t consider it,” he said.

Environment and Climate Change Minister Jonathan Wilkinson declined to be interviewed. But in a statement, he said he recognizes that the 2019 harvest has been difficult and he is looking for “practical solutions.”

Marie-Claude Bibeau, Minister of Agriculture and Agri-Food, would not discuss any potential changes to the natural-gas rules, but said in an interview that her department and the Environment and Climate Change department plan to conduct a review of export-dependent industries next year, including agriculture.

She said she understands the frustrations of farmers, and wants evidence of how agriculture is contributing to carbon emissions reduction to show her cabinet colleagues. “We’re still listening,” Ms. Bibeau said.

She also noted that her department has hired 75 scientists as part of its research into agricultural technologies. And small and medium-sized businesses, including farms, can apply for federal subsidies to become more energy efficient.

Asked what farmers such as Mrs. Currah could do to limit their carbon tax bill, she noted that all Canadians receive carbon rebates.

In an email, the Environment and Climate Change department said Ottawa is also developing a carbon-offset system for agriculture that could become a source of revenue for the industry. Typically, such systems measure participants’ carbon reductions against a predetermined threshold, and then allow them to sell reductions that exceed the minimum.

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Back in Foam Lake, Mrs. Currah and her father are at a loss to see what more they could do to reduce their carbon footprint. Their new grain dryer, which cost $150,000, is more efficient than its propane-fired predecessor. Mr. Gislason estimates the farm will save $30,000 a year in fuel costs.

Beyond that, however, there’s little they can change. The harvest still needs to be transported, and in most years, dried. The farm already uses modern tilling practices that reduce carbon emissions. If the carbon tax is meant to be a price signal to reduce fossil-fuel consumption, it isn’t working in Foam Lake. “There’s no way it’s deterring us from anything,” Mrs. Currah said.

Mr. Gislason is not only skeptical about the tax, he’s unconvinced that climate change is a real threat. He also doesn’t see any immediate substitute for fossil fuels on his farm. “There’s no electrical tractors out there,” he said.

While Mr. Gislason’s opinions are widespread among farmers, they are far from unanimous. Nearly 300 kilometres to the northwest, on the outskirts of Osler, Sask., Chris Buhler has a much different view of the carbon tax.

In many respects, Mr. Buhler, 46, is at the far opposite end of the agricultural industry from Mrs. Currah and her family. Compared with their farm, the half-acre greenhouse operation he runs with his sister, Rachel Buhler, is tiny. Named Floating Gardens, it grows hydroponic vegetables – tomatoes, eggplants, greens and others – through the Saskatchewan winter.

The greenhouse is also largely insulated from the effects of the federal carbon tax, even though it needs to be heated and temperatures often hit -20 in January.

Twelve years ago, the siblings decided to use wood diverted from landfill as fuel. The greenhouse buys 650 metric tonnes of scrap wood each year, chiefly packing pallets and scrap lumber that would otherwise release carbon as they decayed in a landfill.

That wood is chipped into fragments of one inch or smaller, then stored in two open-ended quonset huts. As needed, the chips are fed into two wood-fired boilers through an augur.

The setup works smoothly now, but it took years to perfect. Economics alone would not have prompted the Buhlers to adopt the system. “It’s not worth doing without an ideology,” says Mr. Buhler.

Still, the decision proved prescient; Floating Gardens uses natural gas only as a backup. And wood – despite releasing carbon as it burns – is not subject to the carbon tax. The Environment and Climate Change department says wood is not a fossil fuel, and carbon is removed from the atmosphere as trees grow.

The greenhouse does pay carbon tax for electricity, but the burden is light – as little as $100 a month. Mr Buhler strongly supports the tax. “The earth is sick, and we have to pull out all the stops to save it,” he said.

Still, Mr. Buhler has something in common with Mrs. Currah and Mr. Gislason: He finds it hard to see how he could further improve energy efficiency.

Solar power would allow him to reduce his carbon footprint, and possibly feed electricity into the provincial grid during the summer. But the greenhouse doesn’t generate enough cash to cover the upfront costs.

For him, collective action makes more sense. if Saskatchewan speeds up its move away from coal-fired generation, the carbon footprint of everyone’s electricity use would decline.

In southern Saskatchewan, dairy farmer Blaine McLeod, occupies some middle political ground. He is a participant in collective action to cut carbon consumption, but also firmly skeptical about the effectiveness of the federal carbon tax.

His modern dairy operation just across the TransCanada Highway from Caronport, Sask., is a model of energy efficiency. It produces 12,000 litres of milk each day. A 24,000-square-foot barn expansion, built in 2011 for $1-million, is warmed by the body heat of 190 Holstein and Jersey cows. They are part of a herd of 600, with 340 being milked at any one time.

Manure from the animals is gathered by mechanical scrapers and pushed into a hydraulic system that feeds the resulting slurry into a pit. After aging, the manure is applied to the farm’s corn, barley and alfalfa fields.

The farm gets credit for none of that under the rules of the carbon tax, nor for other big productivity strides Mr. McLeod has made in his 44 years of farming. The 60-year-old said he wishes other Canadians understood the progress farmers have made, and how much energy efficiency – and the resulting cost savings – are a priority. “Are we the Neanderthals we’re sometimes made out to be? Not a chance.”

Unlike other types of farmers, dairy producers will be able to pass on some of their added costs to consumers through higher prices under the supply-management system.

But Mr. McLeod doesn’t believe that the carbon tax, even when it reaches $50 a tonne in 2022, will be high enough to meaningfully reduce fossil-fuel consumption. “Unless it really starts to hurt and pinch people in a very, very significant way, it isn’t going to make the difference in terms of people’s usages.”

That said, many producers, including Mr. McLeod, are already responding to the tax. Farmers across four provinces are pooling their transportation fees to build a huge new processing facility near Red Deer, Alta. that will remove the water content from up to 300 million litres of milk a year before trucking it to customers.

The facility, will cost more than $50-million, with no subsidies from government. But it will reduce greenhouse gas emissions from transporting the milk from the facility by half, according to Alberta Milk, the association representing the province’s dairy farmers.

The carbon tax drove that decision. Farmers like Mr. McLeod don’t have to agree with the tax for it to influence their actions. They simply have to want to pay less to Ottawa – and be lucky enough to have some way to do so.

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