Carbon taxed

New carbon taxes affect every aspect of horticultural production from the diesel fuel for tractors and transports to cooling costs of long-term storage. Exemptions on purple fuel for agricultural use make only a small dent in the overall equation. With Lake Erie in the background, this grape farmer near Harrow, Ontario is concentrated on the work at hand. The fuel bill will come later. Photos by Glenn Lowson.

That’s a quote from Terence Hochstein, executive director of Potato Growers of Alberta. When viewed through that perspective, carbon taxes are a sack on every back.

 

Ironically, politicians say that carbon taxes are designed to make the Canadian economy more sustainable. To look at examples of cap and trade in Ontario and carbon taxes in Alberta, the business community is stymied as to how to quantify effects on the bottom line. 

 

“Carbon affects everything we do in agriculture,” says Hochstein, “from the fertilizer we buy to long-term storage to the freight to processors. It will be at least a year before we can determine the true costs to business.”

 

The Alberta government announced its carbon taxes for January 1, 2017 to be 4.5 cents per litre on gas, 5.4 cents per litre on diesel and $1 per gigajoule for natural gas. Prices are already posted for 2018:  6.7 cents per litre on gas, 8.3 cents per litre on diesel and $1.50 per gigagoule for natural gas.

 

“Freight costs have already gone up five per cent,” says Hochstein. “We’ve been told to prepare for more increases.”   

 

Meanwhile, consumers are getting rebates on LED lights while farmers are paying high input costs to produce food. Canadian consumers pay only 9.2 per cent of disposable income on food and beverages, one of the lowest rates in the world.

 

David Knight, an apple grower near Colborne, Ontario, is located close to the Greater Toronto Area, the densest consumer population in Canada. He points out that it’s costing an extra two cents per litre of diesel to drive 150 kilometres to the Ontario Food Terminal in Toronto. Meanwhile Washington state apples can be trucked in at lower prices, with truckers fuelling before crossing the border.

 

“If truckers fuel in Buffalo, any taxes are going back to the state government, not the Ontario government,” says Knight. “U.S. truckers are not contributing to cap and trade in Ontario.”

 

Jennifer Morris, vice-president sales for Two Roads Logistics, offers some experienced perspective on why carbon taxes have not been immediately transparent in their effects on clients.

 

“The carbon taxes have not been felt acutely because they were enacted when diesel prices were down historically,” she explains. “We’re in a weird grace period, but that will change. When? I don’t know.”

 

All transportation costs are derived from the price of oil. In March 2017, the average price was pegged at $49.33 per barrel. If a grower is using a regular “lane,” a trip from Toronto to Montreal for example, then the costs will be stable.   

 

For carriers, the truck costs and insurance are relatively fixed, but fuel is the one factor that is constantly fluctuating. When the costs of a barrel of oil start to rise, expect carriers to quote a base plus fuel surcharge. Morris regularly consults a website on Canadian domestic fuel surcharges to gauge the impact on quotes from carriers.

 

“There’s a lot to understand in transportation costs,” says Morris. “I like to teach my grower clients, so their business gets better.”

 

Carbon taxes aside, there’s some hope that governments understand current impediments in physically getting goods to market, whether that’s across congested cities or to port for foreign markets. The federal government’s Trade and Transportation Corridors Initiative is currently seeking input on where to spend $10.1 billion in the decade ahead.

 

The strategy is well-timed to address urgent capacity constraints at key ports and trading gateways. For example, two-hour lineups for transports at the Ambassador Bridge from Windsor, Ontario to Detroit, Michigan are standard fare. This border crossing currently carries 25 per cent of all Canada’s exports to the United States. 

 

A new six-lane bridge – the Gordie Howe International Bridge – will likely miss the target opening in 2020. However, when it’s operational, current truck transits of 2.5 million carrying goods worth $100 billion per year will likely surge.

 

Those carbon taxes look more like a fuel tank for provincial governments to siphon funds for the massive infrastructure projects underway. Will there be any decreases in greenhouse gas emissions from carbon-based fuel? It doesn’t appear to be the case for the trucking industry.     

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Thursday, May 25, 2017

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