Carbon Tax Misses the Mark in Agriculture

This column is long overdue. It should have been written shortly after Trudeau announced plans for a mandatory national price on carbon emissions during harvest in early October. Or even earlier, when some provincial governments started announcing their carbon tax or cap and trade programs.

For all the time that’s passed and words that have been said since then, I still have yet to hear a good explanation of how government sees a carbon tax creating the desired outcome in agriculture.

Maybe I assumed somebody would eventually answer the questions the agriculture community needs clarified. Or at least someone would admit they didn’t have good answers. I haven’t seen or read it if they have, so in some ways, this is a last ditch effort to get some answers. Here it goes:

First, a simple, fundamental question — how will making required inputs for food production, such as fertilizer and fuel, more expensive achieve the goal of a real reduction in greenhouse gas (GHG) emissions from farms?

And, if reducing GHG emissions is the number one reason for the additional costs, are carbon taxes the most effective way to achieve this outcome in agriculture?

Yes, higher prices generally result in lower consumption. That’s the rationale behind increasing the price of GHG-emitting purchases. However, the problem in farming is that demand for fertilizer and fuel is inelastic. Consumption can’t be changed significantly in the short term. Farmers can’t simply skimp on fertilizer or reduce the number of times they refuel their combine in getting a crop harvested now that there’s a price on carbon. And if they could, they would. Incentive to reduce consumption already exists, without the additional cost of a carbon tax.

At the same time, the risk of unintended consequences from making critical inputs more expensive needs to be weighed by politicians, as farms are uniquely vulnerable.

Farmers are price-takers on both the input and output sides of their business. When it comes to expenses, fertilizer and input suppliers bump up the prices they charge farmers to cover their carbon tax costs. On the farm income side, grain companies, railways and truckers all carve their carbon tax slice out of the revenue pie. Farmers can’t pass these direct and indirect costs on, and so lower farm incomes and reduced competitiveness versus farmers who don’t face these costs in the U.S. are likely outcomes of this policy.

There’s also the potential for unintended consequences, for example, in livestock and poultry production. To maintain air quality (and animal welfare) inside barns during a Canadian winter, energy for heating — often natural gas or propane — is a significant expense. A carbon tax makes it more expensive for a producer to maintain the same standard of animal care.

This is why I’m confused about why the government thinks a carbon tax is an effective way to achieve reduced emissions in agriculture.

Rather than making farms pay tens of thousands of dollars more each year to maintain current production, government policy should focus on making farmers more efficient with the necessary inputs they use. They should incentivize practices that boost output per unit of greenhouse gas emitted.

In other words, we need to figure out how to grow more food using the same amount or less GHG-emitting fertilizer and fuel. It’s a matter of increasing farm efficiency, instead of disproportionately increasing costs for primary producers.

Since nitrous oxide emissions from nitrogen fertilizer are a significant part of ag’s contribution to overall emissions, it would be logical to implement programs that incentivize improved nitrogen efficiency. For every pound of nitrogen applied, a certain percentage is used by the plant, but some is also lost and ends up in the atmosphere as a greenhouse gas. Farmers and manufacturers have made large strides in reducing losses, but there’s still lots of room to improve.

Helping farmers adopt 4R nutrient management practices, investing in technology and research that leads to improved fertilizer efficiency, and fostering crops with N-fixing capability are examples of steps governments could take to have a direct impact on nitrous oxide emissions. These policies would not only achieve the desired outcome of reduced greenhouse gas emissions, but they would also boost the amount of food produced per unit of GHG emitted.

Unless there’s an explanation I haven’t heard, the rationale that a carbon tax will simply reduce consumption for GHG-emitting products appears misguided in agriculture. If we really want to reduce GHG emissions from agriculture, governments should focus on helping farms become more efficient with fertilizer and fuel.

More yield per pound of N or litre of diesel would not only result in reduced emissions per unit of food but it would also reduce farmers’ input costs so they could afford to contribute more to something like a carbon tax.

Ontario, Quebec, Alberta and BC have already followed through and implemented their provincial carbon pricing schemes. To be fair, there are some exemptions on direct costs and some examples of governments investing in fertilizer and fuel efficiency. And whereas a carbon tax doesn’t recognize the sequestration and positive impact of agriculture, the cap and trade approach, which Ontario has taken, potentially allows for farms to receive credits to offset costs.

In Manitoba, the government has said it will implement a carbon tax rather than cap and trade. This new tax is certainly top of mind for many farmers in province right now, with the Pallister government expected to lift the veil on its secretive ‘made-in-Manitoba’ version of carbon pricing shortly.

Here’s hoping it’s not too late to get some answers.

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18 thoughts on “Carbon Tax Misses the Mark in Agriculture

  1. Several years ago read an article that stated reducing the maximum speed limit on roads to 90km/hr could achieve the Greenhouse Gas Emissions as outlined in the Kioto Protocol. This would lower all kinds of emissions at no cost to all involved. (Well I guess the oil companies may be affected).
    Why do our North American governments refuse to look at something like this?

    1. Roger, they are looking at speed limits here in Canada, including increased enforcement of existing limits. Increased speed enforcement is estimated to have a 2-4 Megatonne (Mt) reduction in CO2 emissions by 2030 at a cost of $0-$50/tonne. Also considering funding/incentives for vehicle retrofits for a net reduction of 1-2 Mt but at a cost to taxpayers of ~$50-$250/tonne.

  2. Kelvin, I’m happy to help clarify some of your confusion. From what I have read*, the government does not think that carbon tax alone is an effective way to achieve reduced emissions in agriculture. Rather, pricing carbon is just one part of a multi-pillar approach. If the government was relying on a carbon price alone to achieve Canada’s international target it would require a very, very high price.

    Many of the ideas you suggest around supports for farmers, incentives and increased innovation/efficiency are also part of the plan. The carbon tax is a vehicle that can deliver a whole lot more money towards such supports — now it’s a matter of holding governments to transparent processes to ensure that the carbon taxes farmers pay out are recycled back into supports for those same farmers.

    Also, your comment that “We need to figure out how to grow more food using the same amount or less GHG-emitting fertilizer and fuel” surprises me a bit. I’ve been reading this website for almost a decade now and figuring out how to grow more food with less inputs seems to be a recurring theme that appears to be VERY well funded by both private companies and public researchers/grants. If you’re suggesting that we throw even more public money at such efforts, I would much prefer to pay for it through a carbon tax rather than through my family’s personal income tax.

    *More here: https://www.canada.ca/en/services/environment/weather/climatechange/pan-canadian-framework/introduction.html#1_2

    1. J, As a current farmer the idea of charging me a tax and then rebating it in some other form, is just plain crazy. The only people that benefit with that situation are accountants and lawyers. We as farmers have to spend more time and money on bookkeeping, and then hope we get it back. KISS(with apologies)-keep it simple stupid. If you are going to charge someone a specific fee, and then rebate them the same amount, you are complicating things more than necessary. (did I mention lawyers and accountants!) BUT AS WE ALL should know, this charge and rebate concept is a governments’ slick way of getting more from taxpayers.

      I ask you and all others to seriously consider, “Is it really worth it to charge Canadians to lower our GHGs knowing that we(Canada) contribute a very minor amount to worldwide carbon emissions? Don’t try to convince me that this idea provides leadership to the world. I just don’t buy it.

      If farmers are going to be charged more for any kind of input with regards to a carbon tax, then EVERY single consumer must BE WILLING TO PAY MORE FOR FOOD. If consumers are NOT to willing to do this, they should butt out of farming.(again, my apologies for being blunt).

      1. Roger, thanks for the reply. Note that the gov rebates and supports to farmers seem to be towards helping them reduce GHG emmissions, not to support them in paying the carbon tax. It happens all the time, often quite successfully, like taxing cigarettes then using that money to support existing smokers, provide them “free” healthcare, and reduce the total number of people who smoke.

        Hum, the lawyers and accountants made a lot of money in that example too… you have spotted a trend!

        Our familly is willing (and does) pay more for our food. However, unless you are one of the farm gates we visit, or supply the small shops we buy from I doubt you even get a penny of the premiums we are willing to (and do) pay.

        To be blunt, it is not just your accountants and lawyers who are profiting, but farmers like you seem to be getting milked at both ends… from your input suppliers and your processing/retail partners.

        Take a look at this: http://www.darrinqualman.com/canadian-net-farm-income/

        Even if every single consumer pays more for their food, is it really going to make it to you the farmer or will it simply increase the already record-high profits of the corporations and professionals you depend on?

        GHG may be the elephant in the room but when it comes to increasing on-farm profits, you let the foxes into the henhouse a long time ago.

  3. Sorry Kelvin, still as confused as you are. Here are some suggestions though. Consumers can quit buying crap from China, where pollution of all kinds doesn’t seem to hurt the environment, but me driving 110km/h does. Next, Premier Notley can give us a tax rebate for purchasing energy efficient light bulbs, instead of hiring outside contractors to screw them in for us. Ironically, these bulbs probably are coming from China. See my first suggestion. I could go on, but we are not really looking for results, are we?

    1. J,
      I farm in a modern way with zero-tillage. I use chemicals as needed, manage my input costs, and don’t receive any government subsidies. Im a 3rd generation farmer and will never go back to the way my Grandpa farmed. My land is in much better shape now, and continues to produce well.
      Darrin Qualman’s graph results tell us that farming should be extinct, but not so. Farming is still going strong, yes changing along with everything else.

      Back to the Carbon issue. Are you suggesting that just because we farm “modern” we deserve to be carbon taxed. Then you are also part of the problem of us as farmers being “hosed” at both ends. It will be interesting to see how organic farmers will like a carbon tax on fuel, seeing as they use much more than modern farming.(I use 40-50% less fuel per acre now with zero-till).

      Again I ask, Why should Canadians pay a Carbon Tax when we are one of the lowest carbon emitters in the world?

      1. “Why should Canadians pay a Carbon Tax when we are one of the lowest carbon emitters in the world?”

        Because you are wrong. We are one of the highest carbon emitting countries in the world. Depending on who’s numbers you go by (our gov, the UN, the EPA, various academics) Canada is one of the top 10-15 carbon emitters in the world. There are 150 to 170 countries in the world who emit far less carbon and GHGs than we do. It is so easy to pass the buck to countries like China and India, but at a per capita basis each one of their Citizens emit less than you or I do.

        I made no mention of “modern” and did not suggest that one type of farming deserves to be carbon taxed over another type of farming.

        I am glad your land is producing well and you feel that farming is still going strong. When you close your farm books for tax season this year I hope that your profits divided by all the hours you worked on the farm works out to be an hourly wage that’s equal or greater to that of your accountant. If not, please figure that sh!t out since the work you do is very important and carbon tax or not, it is important that farmers who grow healthy, nutritious food for Canadians and the world are able earn a respectable living wage.

      2. Yes, it truly does depend on who’s number you look at. And we KNOW for certainty that the UN is totally honest, governments have no alternative agenda, and the EPA was forthcoming all these years right?

        When you can answer yes to all three of your sources, then I’ll believe you.

        Nice hockey stick for a graph you got sir…

      3. Dang it, John, you’re right!

        You sound honest so please go ahead and imagine, best-guess or suspect whatever numbers you’d like me to reference moving forward. If possible, just make sure the really big numbers can also somehow be expressed as a really small percentage so we can continue to debate the efficacy of doing anything at all. I’ma gonna stick my head in the sand ’till you come up with numbers i believe.

  4. J, you are correct that Canada is in the top 10-15 carbon emitters. However when you look at the numbers by percentages Canada only contributes 1.6% of the worlds total. This number is so small that even if we reduced it to 0, our impact as a country would be almost negligible. And if any other countries happen to increase their emissions our efforts will have been a complete waste of money.

    When farmers make more per hour than accountants, we won’t be farming anymore.

    I am proud of what I do and what I produce. I enjoy what I do and wish all farmers the best for the 2017 crop year.

    1. While it is true that Canada only produces ~2% of carbon, you have to consider it in terms of population as well. People always point to China, as they are the highest carbon producer in the world. But of course they are, they have the highest population in the world.

      When you take carbon emissions by country and divide by that country’s population, you will find that the average Chinese individual produces a third of what the average Canadian produces.

      Further, it’s not like China’s not doing anything either. Just like Canada they are currently putting legislation into place to implement a cap and trade system to help reduce their emissions. And if your suggestion is that we do nothing while the rest of the world puts plans into action, then I’m just not sure what to tell you.

      1. Tyler, If you have read all of my posts you will see I have not advocated that Canada do nothing. I am simply suggesting that due to the fact that our emissions on a global perspective are low, we should implement no cost measures before a tax. It is clear that we have not implemented the most obvious no cost measure, reduced speed limits. Reduced speed limits benefit each of us in 2 ways, less carbon, better fuel economy.

        Is China working on legislation to reduce their emissions? Maybe, but we all know how those countries knit toques for our heads.

  5. To be fair to farmers, the fact that your crops grow as a result of taking CO2 out of the atmosphere, photosynthesis, the amount of CO2 you take out of the atmosphere should be deducted from the CO2 you make by burning fuel. I suspect that you draw more from the atmosphere than you emit.

  6. According to Environment Canada, Canada emits 1.58% of the world’s CO2. We are number 11 of the top emitters, with China being the highest at 29.55% . All data are estimates as no one can measure all sources of CO2 and no one knows for sure how much is emitted naturally. A volcano or large forest fire can have tremendous impact on CO2 generated and under-sea vents cannot all be found, counted or measured. Man-made CO2 is estimated at 5.53% of all CO2 in the atmosphere (if you ignore water vapour which accounts for 95% of GHG impacts, 0.28% if you take water vapour into account, but they don’t as they say it varies too much). So, we are looking at 1.58% of 0.28% of 3.62% (portion of CO2 in GHG’s). Of this, Trudeau is looking to reduce our CO2 by 5%. The high costs we are being asked to pay is for a reduction in GHG’s amounting to 5% of 1.58% of 3.62% of 5.53% of 0.28%. Did I miss any, my math is rusty? This comes to reducing the world’s GHG’s by 0.00000044%. The error of measurement (or estimation) is large and if Canada were to shut down completely you would not be able to measureably detect a change. A carbon tax has two goals. A small part is to reduce carbon emissions. A larger part is to increase revenue for the government as all taxes go into general revenue for spending in all areas. My opinion for what it’s worth. The numbers just don’t justify the reduced standard of living and hardship incurred. There are still too many unknowns in our calculations and I see it as a tax grab pure and simple.

    1. Hi Adrian, yes your math is rusty but you did do a FANTASTIC job taking numbers that “vary too much” and other estimates that “no one can measure” and expressing it all as a very small percentage to support your opinion. Great work, gold star.

      Could you please clarify what “The high costs we are being asked to pay is for a reduction in GHG” are? It has been widely reporting that the carbon tax could increase the price of gas by as much as 11.2 cents per litre (about 3 cents per gallon). Compared to other countries we already have some of the most affordable gas in the world — especially if you consider what an average daily wage is. My family visited Norway two years ago and gas was TWENTY SIX DOLLARS PER LITER! If 11.2 cents per litre is going to cause you to experience a reduced standard of living and hardship, then perhaps you better consider selling the farm and moving to Venezula where gas is 8 cents per litre. Heck you don’t even need to sell the farm. Keep it. Just sell one tractor for $100,000 and that will be equivalent to working a minimum wage job (now $20/month USD) in Venezula for 408 years!

      Top 10 countries with the cheapest and most expensive gas: http://oilprice.com/Energy/Oil-Prices/Top-10-Countries-With-The-Cheapest-And-Most-Expensive-Gas.html

      1. I agree that the1.7% Canada contributes to emissions isn’t enough for the drastic measures the LIEberals are doing. They ARE NOT implementing this to help reduce emissions anyway it is only a tax grab plain and simple. The fact that we are a resourced base economy and live in a colder climate than the average country it is obvious Crap & Steal is just theft by our beloved LIEberals both federal and Provincial!

      2. 11.2 cents a litre is over 50 cents per gallon(imperial). Quite clear you don’t farm. There is no wage, if your inputs cost 500,000 and you had a not so great year and only made 480,000 at the end due to a frost or something out of your control, happens fairly often, then your 20,000 short. So, ya, lets add another tax to the gazillion others…is there anything left to tax without imagining something else…? Our local governments should have the last word, not the feds, they are out of control…as far as i am concerned, they emit too much carbon.

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