The carbon tax and what it means for prairie farmers

Few things are more concerning in business than the possible impact of something new and unknown.

And that is exactly what the agriculture sector is facing as the Canadian government remains steadfast in its commitment to implement a carbon tax.

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On October 23, the federal government announced it will be applying its federal carbon pricing system to Saskatchewan as well as to Manitoba, Ontario and New Brunswick in 2019. The carbon policy will add a tax to fossil fuel production and distribution and for industrial emitters.

The federal government also announced that farmers will receive an exemption for on-farm use of fuel for farm machinery and rural residents would receive a supplement.

The Saskatchewan government has balked at the tax from day one, and is initiating a court challenge, although that effort seems rather hypocritical when you consider they blocked municipalities in the province from turning to the courts when the province tore up long-standing grants-in-lieu agreements in 2017.

For those forgetting that effort, SaskPower and SaskEnergy took a flat percentage of utility sales within a municipality. In the case of SaskPower, the payments in lieu were provided to 13 cities.

In the case of SaskEnergy, there are 97 municipalities, including those 13 cities, which received the payments.

The program dated back to the 1940s, ’50s and ’60s, when SaskPower was amalgamating electrical distribution systems in the province. Municipalities also gave up their right to establish any natural gas distribution systems. A number of agreements were entered into for the Crowns to provide payments to compensate municipalities for lost revenue.

But apparently the federal initiative is worth fighting in the courts, even if municipal governments weren’t afforded that same right for grants in lieu.

Agriculture producer groups are also fearful of the carbon tax. The Saskatchewan Stock Growers Association came out recently suggesting it is “unconvinced that a carbon pricing policy would make any meaningful reduction in global greenhouse gas emissions looking at the experience of other provinces and countries because it is economically inefficient,” according to an SSGA release.

“Despite these rebates and exemptions, producers will still be facing higher costs to run their operations,” said SSGA President Bill Huber in the release.

 In addition to fuel, producers use goods and services like feed and inputs from other sectors which are expected to pass down their added expenses onto cattle producers, detailed the release.

“Getting Saskatchewan cattle to domestic and world markets will also become more expensive because there are few fuel-efficient transport options. As a result, Canadian beef, which is produced sustainably, efficiently and with one of the smallest carbon footprints in the world, will become less competitive in the global market,” it stated.

But will it work? The answer next week.