Up, up and away. That’s the real-world trajectory of fertilizer prices, one of the most energy-intensive inputs in agriculture. Increases, current and proposed, to Canada’s carbon tax are set to have a seismic impact on fuel costs, reverberating with unintended, negative consequences on food production.
“At the gas pumps in my hometown of Meaford, Ontario, gasoline went up $0.15/litre early in January 2021, when it was predicted to increase by only $0.05/litre due to the carbon tax,” reports Brian Gilroy, an Ontario apple grower and president of the Canadian Horticultural Council. “I have also heard from fertilizer suppliers that significant increases are anticipated and locking in pricing now is recommended.”
That advice is confirmed by Spenser Greenfield, sales manager for Niagara Orchard and Vineyard Corporation. “Nitrogen supplies were brought in last fall at stable prices, but the big one will be phosphorus. That price will be going up significantly,” he says.
It's a strange marketplace right now, with ocean freight rates going up and fewer boats on the water, adds Greenfield. Some growers may have pre-purchased fertilizer for some of the 2021 season. Refill prices will depend on your local supplier.
As recently as early December 2020, the federal government announced that carbon taxes will increase to $170/tonne by 2030. That’s a jump of $15/tonne every year, starting in 2023. Canadian horticulture is primed to lobby hard for exemption on all on-farm energy use, says Gilroy.
“You have heard the statement that the carbon tax system as currently structured is a death by a thousand cuts for agriculture in Canada,” says Gilroy. “It has created greater competitive challenges for Canadian farmers in a global economy. We’re price takers. We can’t produce food for less than last year.”
The case for exempting horticulture on energy use is complex. Not all growers are created equal when it comes to carbon reduction. Orchardists, by virtue of their perennial crops, are able to sequester carbon because they don’t disturb their soils. Potato growers, on the other hand, use annual tillage which stimulates the loss of organic carbon to the atmosphere as carbon dioxide.
Consider the regional differences. Approximately 75 per cent of the grains and oilseeds grown on the prairies is planted under minimum or zero-till conditions points out Mitch Rezansoff, executive director of the Canadian Association of Agri-Retailers (CAAR). Practically speaking, the region is a carbon sink. In contrast, Ontario and Quebec vegetable crops, grown in abundance, need tillage so not surprisingly these commodities have an added hurdle when it comes to carbon offsets.
On a parallel track, the federal government published a proposed Clean Fuel Standard (CFS) in the Canada Gazette in late December 2020. There’s a 75-day window for feedback. The aim of CFS is to reduce yearly greenhouse gas emissions by 30 million tonnes and covers all fossil fuels by providing individual regulations for each of liquid, gaseous, and solid fuels, defining fertilizer production under the gaseous stream.
CFS currently does not exempt either fertilizer production or the crop production carbon sequestration activities (4R and others) of farmers. Under the proposed schedule, plans are to finalize a CFS regulation in 2022 with enforcement to start January 1, 2023.
A rising carbon tax is not fair to farmers writes John Ivison for the National Post. “There is no offset or rebate, which means it is not revenue neutral. It is pretty clear that increases in the price of inputs such as fertilizer and transportation mean that farming in this country is going to become more and more precarious because of the carbon tax increase.”
And of course, fertilizer production is a big deal for Canada. Nutrien, the largest producer of potash fertilizer in the world is headquartered in Saskatoon, Saskatchewan. It’s also the third largest global producer of nitrogen, a high consumer of natural gas.
It’s of interest to note that, late last year, Nutrien launched a carbon program to support sustainability in agriculture, partnering with growers to plan, plant and track sustainable farming practices to improve carbon performance.
“Working with select growers, Nutrien will design programs that facilitate climate-smart products and sustainable practices to reduce greenhouse gas emissions, sequester carbon and measure the resulting improvements in financial, productivity and environmental performance,” according to the company’s November 30, 2020 news release.
The Canadian government has expressed interest in exploring potential benefits from cross-border carbon trading, saying Canada would look to work with like-minded economies such as the E.U., the United States and Mexico. This may be just a calculated outreach to Joe Biden Jr’s new climate-minded administration, but then again, it could be a surprising nod to good business.
At least two outstanding questions remain. Will individual growers be able to create and trade carbon credits? And will growers receive an exemption to compensate for past and present soil conservation efforts or carbon reduction practices?
During a year of ongoing issues such as labour and crop protection, such burning questions are on a top 10 list. As Brian Gilroy says, “Recent announcements about carbon taxes by the federal government have reawakened the threat.”