Will a carbon tax negatively impact the competitiveness of Canadian farms?


From the inception of the Liberal government’s carbon tax plan, agriculture has had major reservations. Farm group leaders have expressed concerns over rising costs, decreasing global competitiveness and a lack of recognition for agriculture’s role in mitigating greenhouse gas emissions.

Farm groups have lobbied hard to either be omitted from the pricing, or to receive further financial considerations based on the importance of the industry and the inability to pass on increased costs.

But are these concerns valid? Are they backed up by quantitative data? Or is agriculture jumping to conclusions based on climate denier hysteria?

A recent article in the Toronto Star quoting the president of the Canadian Federation of Agriculture suggests the impacts on the agriculture industry will be mixed:

“The federal carbon price could increase costs for Canadian farmers who must burn fossil fuel to plant and harvest their crops, hurting international competitiveness, says Ron Bonnett, president of the Canadian Federation of Agriculture. He called on the government to consult with the industry before implementation in 2018. He added farmers could benefit from the policy if they are able to sell carbon credits from farming practices that sequester carbon or result in reductions in greenhouse gas emissions”

University of Ottawa associate professor and Canadian Research Chair in Climate and Energy Policy Nicholas Rivers has a slightly different view. Rivers co-authored a study published in 2014 looking at the effect of British Columbia’s carbon taxes to agricultural trade in the province.

“There’s certainly been a lot of concern around the impacts of carbon taxes — or carbon policies in general — on the competitiveness of agriculture. And we saw that at least going back to 2010 or 2011 when British Columbia reviewed its carbon tax, which was then five years old,” Rivers says in the following interview with RealAgriculture’s Shaun Haney. “Farmers there were concerned that they were competing with farmers in Mexico and California who weren’t facing similar prices, and that they were getting priced out.”

Hear Shaun Haney’s discussion with Nicholas Rivers regarding his research on how a carbon tax impacts agricultural trade:

The concern inspired Rivers and his colleague, Brandon Schaufele, now assistant professor in Business, Economics and Public Policy at the Ivey Business School, to work on the file, looking for changes to the commodity trade data. The duo couldn’t find any real decline as a result of the province’s carbon tax.

“Our view,” says Rivers, “was that the tax was too small to have a substantial impact on agricultural trade at that point.”

According to Rivers, the average farm spends 3-5 percent of all costs on energy. If a carbon tax increases energy costs by 3 percent, that’s only increasing the farm’s overall input costs by around 0.1 percent.

So what is a number where the increased cost would have an impact on competitiveness?

In the above interview, Rivers says that “we do not have the empirical research to draw from but if we look at modelling, there is no discrete threshold,” he says. “I would say that as we move from $30 to $50 (per tonne emitted) and higher, we would want to take a closer look and monitor the impact to ensure there is not detrimental impact.”

“The very first thing on the government’s mind is competitiveness.  They want to make sure that the impact is not negative. Up until this point governments have tried to mitigate, but we need to stay on top of it as the price on carbon rises.”


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