Canadian Carbon Price Worries Farmers, Fertilizer Makers

Canada's carbon price may weaken the farm sector in one of the world's biggest grain-shipping countries, raising farmers' costs and discouraging investment in fertilizer production, industry groups say.

Ottawa this month promised a price on carbon emissions by 2018 to protect the environment, and will let provinces choose between a tax or cap and trade system. Carbon pollution will cost C$10 a tonne in 2018, rising annually until reaching C$50 in 2022.

At C$50, it would raise fertilizer prices by C$2 per acre for Canadian farmers, and some experts peg the total farm cost at C$6 an acre, according to the CIBC bank.

"Everyone is paying attention to this, especially in a downtime for the (farm) economy," said Robin Speer, executive director of Western Canadian Wheat Growers, which has gathered 2,500 petition signatures opposing the tax.

Reduced soil tilling and use of fuel-efficient machinery have made Canadian farming more environmentally friendly, and crops absorb carbon from the air and leave it underground, Speer said.

Agriculture accounted for 10 percent of Canada's 2014 total greenhouse gas emissions, according to Canada's environment department.

Nitrogen fertilizer producers, among major polluters in western provinces, are leery of a carbon price. Agrium and CF Industries will pay Alberta's provincial carbon tax of C$20 per tonne when it takes effect next year.

Higher costs will discourage expansion and shift production elsewhere, said Garth Whyte, chief executive of industry group Fertilizer Canada. To prevent that, provinces should credit fertilizer makers for reductions in nitrous oxide, a byproduct of production, he said.

Fertilizer makers can justifiably argue they need provisions to stay competitive, and farmers should also receive support, said Keith Brooks, programs director at Environmental Defence.

"You want the price to influence everyone's behavior but we don't want it to mean farmers can't make a living," he said.

Liberal government legislators on Tuesday rejected an opposition motion at a committee meeting to study how the carbon price will affect the farm sector, Conservative legislator David Anderson said.

Canadian Agriculture Minister Lawrence MacAulay, asked on Oct. 7 whether a carbon price would make farm products less competitive globally, said provinces could use carbon revenue to support farmers.

Saskatchewan Premier Brad Wall on Tuesday pitched an alternative approach to carbon pricing, focusing instead on developing clean energy technology and renewable power.

British Columbia, which already charges a carbon tax, gives farmers an exemption on farm fuel purchases. Alberta plans to do the same.

Reporting by Rod Nickel