441-00603 (Taxation)

The Minister of Agriculture and Agri-Food understands and acknowledges the concerns of the petitioners. Agriculture and Agri-Food Canada (AAFC) recognizes that taking action to address climate change is critical and urgent, both for our environment and our economy. The Department is actively engaging with partners to ensure that Canadian farmers and ranchers remain competitive and that our water, air, and soil are sustainable for generations to come.

Farmers are important drivers of the Canadian economy and play a key role in land stewardship and conservation. The Government recognizes their important role in reducing greenhouse gas emissions, including through new land management practices and innovative technologies.

The costs of inaction on climate change are enormous, as evidenced in the catastrophic weather events that have had severe impacts, including for Canadian farms. The costs of a changing climate mean that it cannot be free to pollute. Putting a price on carbon pollution is the most efficient way to reduce greenhouse gas emissions as it reduces pollution at the lowest cost to businesses and households, and stimulates investments in clean innovation.

The federal approach to price carbon pollution was specifically designed to provide targeted relief for farmers. For example, the federal fuel charge does not apply to gasoline and diesel used in tractors, trucks and other farm machinery. Commercial greenhouse operators receive an 80% exemption on the use of propane and natural gas, and there is no price on pollution for emissions from livestock and crop production. All proceeds from the federal price on pollution are returned to the province of origin, to individuals, families and businesses with rural families receiving a supplementary amount.

AAFC recognizes that costs have gone up for some producers because of carbon pollution pricing applied to natural gas and propane. The Government is committing to a path forward that addresses such challenges, including new rebates for on-farm fuel use such as grain drying, to both support our food producers and encourage new investments in sustainable technologies that go beyond existing exemptions for farm fuels and rebates for greenhouses. As such, the Government has introduced a refundable tax credit this year for farm businesses operating in backstop jurisdictions. It is estimated that farmers will receive $100 million in the first year, and this amount is expected to increase in subsequent years as the price on carbon increases. This measure will help farmers transition to lower-carbon ways of farming while maintaining the price signal to reduce emissions.

As well, the Government of Canada's recently announced Emissions Reduction Plan, confirmed in Budget 2022, provides over $1 billion in funding for the agriculture sector.

This investment includes additional funding of $330 million for the Agricultural Clean Technologies Program, to support the development of transformative clean technologies and help farmers adopt commercially available clean technology, and $470 million for the On-Farm Climate Action Fund, which targets projects that accelerate emission reductions by improving nitrogen management, increasing adoption of cover cropping, and normalizing rotational grazing. As well, $150 million has been allocated for a Resilient Agricultural Landscapes Program to support carbon sequestration, adaptation and address other environmental co-benefits, and $100 million has been proposed to support fundamental and applied research, knowledge transfer, and developing metrics that will allow for net-zero emission agriculture.

The Government of Canada also intends to develop a Green Agriculture Plan for Canada, in collaboration and engagement with a wide range of stakeholders, to provide an integrated and coordinated approach to addressing environmental issues in the sector. This includes climate change mitigation, adaptation and resilience, water, biodiversity and soil health.

Canada’s GHG Offset Credit System was launched on June 8, 2022, and encourages cost-effective, voluntary emissions reductions and removals across Canada from activities not covered by carbon pollution pricing, expanding the financial incentives to reduce carbon pollution across the economy. It could create economic opportunities for farmers who implement innovative projects to reduce carbon pollution.

Current provincial and federal renewable fuels regulations have helped build a vibrant yet relatively small domestic biofuels industry, for which Canadian farmers and food processors supply high-quality feedstock. The renewable fuel industry is an important stable, domestic market, and a driver of market diversity for the agriculture and agri-food sectors. The Clean Fuel Regulations will include low-carbon and zero-emissions fuels and further enhance the opportunity for agriculture and agri-food sectors to provide low-carbon feedstock and contribute to Canadian climate change commitments, while providing farmers in Canada with more domestic marketing opportunities for their product.

On climate change, the science is clear—we must take action now to protect our planet and secure our children’s future. But the economics are clear too: to build a strong, resilient economy for generations to come we must harness the power of a cleaner future.

It is much harder to cut pollution if it is free to pollute. The principle is straightforward: a price on carbon pollution establishes how much businesses and households need to pay for their carbon pollution. The higher the price the greater the incentive to pollute less, conserve energy, and invest in low-carbon solutions.

Canadians and businesses understand that putting a price on carbon pollution spurs the development of new technologies and services that can help reduce their emissions cost-effectively, from how they heat their homes to what kind of energy they use to do so. It also provides Canadians and businesses with an incentive to adopt these changes or solutions into their lives. That's why experts consistently recommend carbon pollution pricing as an efficient, effective approach to reducing emissions.

Since 2019, every jurisdiction in Canada has had a comparable price on carbon pollution. Not only does this help fight climate change, it puts more money back into people's pockets. Canada's approach is flexible: any province or territory can design its own pricing system tailored to local needs, or it can choose the federal pricing system. The Government of Canada sets minimum national stringency standards (the "benchmark") that all systems must meet to ensure they are comparable and effective in reducing greenhouse gas (GHG) emissions. If a province decides not to price carbon pollution, or proposes a system that does not meet these standards, the federal system is applied. In August 2021, the Government of Canada published strengthened benchmark criteria that all systems will need to meet from 2023-2030.

A key element of the federal benchmark is the price on carbon pollution. The price on carbon pollution started at $20 per tonne of emissions in 2019 – and has been rising at a predictable rate of $10 per year to reach $50 in 2022. Starting in 2023, the price will start rising by $15 per year until it reaches $170 per tonne in 2030. The price schedule is laid out to 2030 to create certainty, which is important for attracting private sector investment.

The federal carbon pollution pricing system has two parts: a regulatory charge on fossil fuels like gasoline and natural gas (the "fuel charge"), and a performance-based emissions trading system for industries known as the Output-Based Pricing System (OBPS).

The Government of Canada recognizes the important role Canadian farms have to play in reducing greenhouse gas emissions including through new land management practices and innovative technologies.

The costs of inaction on climate change are enormous – as evidenced in the catastrophic weather events that have had severe impacts, including for Canadian farms. The costs of a changing climate mean that it cannot be free to pollute. It is well known that putting a price on carbon pollution is the most efficient way to reduce greenhouse gas emissions and stimulate investments in clean innovation. It is critical to drive low-cost emission reductions and lay the foundation for a low carbon economy.

The Government designed the federal approach to pricing carbon pollution to provide targeted relief for farmers. For example, the carbon pollution price does not apply to greenhouse gas emissions from livestock or crop production. In addition, the federal fuel charge does not apply to gasoline and diesel used in tractors, trucks and other eligible farm machinery. Moreover, all direct proceeds from the federal price on pollution are returned to the province of origin, to individuals, families and businesses, and rural families receive a supplementary amount.

The Government of Canada is also creating economic opportunities through carbon offsets. Canada’s GHG Offset Credit System will encourage cost-effective, voluntary GHG emissions reductions and removals across Canada from activities that are not covered by carbon pollution pricing and that go beyond legal requirements and common practices. The system was launched on June 8, 2022, including publication of final regulations and the first federal offset protocol on Landfill Methane Recovery and Destruction. Agriculture sector protocols currently under development include Livestock Feed Management and Enhanced Soil Organic Carbon. This system will create opportunities for farmers who implement projects to reduce GHG emissions or sequester carbon to earn revenue for GHG reductions.

This is an example of another tool we are using to combat climate change, and create a cleaner, healthier future, and create new economic opportunities. It is part of the Government of Canada’s larger strategy, which also includes over $350 million in new agro-environmental programs as outlined in A Healthy Environment and a Healthy Economy.

Taking serious climate action is an important economic opportunity that will maintain and create Canadian jobs, and make Canada’s economy more competitive.

The Clean Fuel Regulations are a key part of Canada’s 2030 Emissions Reduction Plan - Canada’s Next Steps for Clean Air and a Strong Economy. The Clean Fuel Regulations aim to reduce emissions and accelerate the use of clean technologies and fuels. It is estimated that the Clean Fuel Regulations will result in up to 26.6 million tonnes of GHG emissions reductions in 2030.

The Regulations will work in combination with other federal, provincial, and territorial climate change policies to create an incentive for firms to invest in innovative technologies and fuels by setting long-term, predictable and stringent targets. The broad range of compliance strategies allowed under the Regulations will also allow fossil fuel suppliers the flexibility to choose the lowest-cost compliance actions available.

The Regulations will establish a credit market whereby the annual carbon intensity (CI) reduction requirement could be met via three main categories of credit-creating actions:

1.  actions that reduce the CI of the fossil fuel throughout its lifecycle,
2.  supplying low-carbon fuels, and
3.  supplying fuel and energy in advanced vehicle technologies.

The Clean Fuel Regulations are based on lifecycle analysis. Therefore, the lower the CI value a low-CI fuel has on a lifecycle basis, the more credits the low-CI fuel producer or importer will obtain. Producers and importers of low-CI fuel in Canada are expected to benefit from the demand created by the Regulations. 

It is expected that the Clean Fuel Regulations will create demand for about 2.2 billion litres of additional low CI diesel and 700 million liters of additional ethanol by 2030 creating economic opportunities for biofuel producers and feedstock providers such as farmers and foresters.  

The Canola Council of Canada and Canadian Canola Growers Association have endorsed the publication of the final Clean Fuel Regulations citing the certainty that this will provide for the biofuel supply chain and the increased value to growers and the entire industry. Examples of new investments in low CI fuels in Canada include:  

• Braya Renewable Fuels, which recently retrofitted the refinery in Come By Chance, Newfoundland and Labrador, to produce renewable diesel and sustainable aviation fuel.
• Federated Co-operatives Limited’s plans to invest $2 billion to construct a canola crushing facility and renewable diesel plant in Alberta, with production expected to start in 2027.,
• Covenant Energy’s plans to construct a renewable diesel and sustainable aviation fuel production facility in Saskatchewan. 

The Clean Fuel Regulations are complemented by the Clean Fuels Fund, which will help Canadian producers respond to this demand by investing $1.5 billion to support domestic production of cleaner fuels (e.g. biofuels, biomass supply chain, hydrogen, biocrude, renewable natural gas and diesel, and cellulosic ethanol).

The Clean Fuel Regulations were published in Canada Gazette, Part II, on July 6, 2022. See the Government of Canada’s website on the Clean Fuel Regulations and Regulatory Impact Analysis Statement (Canada Gazette, Part II, Volume 156, Number 14) https://www.gazette.gc.ca/rp-pr/p2/2022/2022-07-06/html/sor-dors140-eng.html for more details on the economic analysis of the Clean Fuel Regulations and to read the final regulations.

The Government of Canada is committed to reporting back on progress toward its climate objectives. Environment and Climate Change Canada will continue to report annually to Parliament on the administration of the Greenhouse Gas Pollution Pricing Act. Canada will also continue to report domestically on its climate change efforts through the Annual Synthesis Reports on the implementation of the Pan-Canadian Framework and through progress reports under the Canadian Net-Zero Emissions Accountability Act beginning in 2023.

The Government of Canada knows that climate change presents a threat to our long-term health and economic prosperity. Even in these challenging times, addressing climate change matters. 

The Government values the importance of Canada’s agriculture and agri-food supply chains, and recognizes the vital importance of a resilient agriculture and agri-food sector that is able to grow sustainably.

Putting a price on pollution is an important part of Canada’s future, and the government is doing this in a way that maintains affordability for households and ensures the competitiveness of Canadian companies. 

The purpose of the Greenhouse Gas Pollution Pricing Act (GGPPA) is to reduce greenhouse gas (GHG) emissions by ensuring that pollution pricing applies broadly throughout Canada.

The GGPPA provides farmers with significant up-front relief of the fuel charge for gasoline and light fuel oil (diesel) used in tractors and other farm machinery. The GGPPA also provides greenhouse operators with upfront relief of 80% of the fuel charge on marketable natural gas and propane used to heat an eligible greenhouse, or to supplement carbon dioxide in an eligible greenhouse in order to grow or produce plants.

Recognizing that many farmers use natural gas and propane in their operations, the government is returning a portion of fuel charge proceeds directly to farming businesses in backstop jurisdictions via a refundable tax credit, starting for the 2021-22 fuel charge year. It is estimated that farmers would receive $100 million in the first year and $122 million in the second year, with this amount expected to increase as the price on carbon pollution rises.

The government recognizes the importance of the agriculture sector in Canada. To this end, the Government of Canada is always working hard with stakeholders, representatives of various sectors, and provinces to find real, practical solutions for farmers, as needed.