Pork Pen

I did not come up with the line “hard to be green while in the red”, but I wish I had. It is a succinct phrase describing one of the most challenging policy aspects of sustainability. It is difficult, or even impossible, to change farming practices aimed at improving environmental sustainability when experiencing negative margins. The idea applies to every business.

Even though this policy truism seems obvious, it is not always recognized by governments. Governments most frequent policy tool is regulation. Imposing costly restrictions and penalties on businesses is often the default action. It should not be.

Take the carbon tax for example. The stated policy objective is to reduce carbon emissions by discouraging the use of fossil fuels. This may work when the use of fossil fuels is a discretionary expense, but heating a hog barn in winter is not discretionary. For hog farmers, energy costs are the second highest operating expense after feed. At a time when farmers’ margins are written in red ink, the carbon tax is making it more expensive to raise pigs. This is antithetical to the policy objective of reducing greenhouse gas emissions because farmers are more likely to take on innovative business practices when their operation is profitable. The carbon tax has become a barrier to adoption of innovation that could improve environmental sustainability.

The carbon tax is also making Canadian hog farmers less competitive internationally. Manitoba exports 90% of the pigs raised in the province every year, either as live animals exported to the United States or as packages of pork exported around the world. Canadian farmers are competing against producers in other countries who do not face the added cost of the carbon tax. The reduction in our competitiveness impacts jobs in both urban and rural areas, which in Manitoba equals 22,000 jobs across the province, and discourages investment in every link of the industry’s value chain.

So, to summarize, when applied to the energy requirements for raising pigs, the carbon tax does not achieve its policy goals and it inhibits the adoption of alternative business practices that may improve sustainability, all while decreasing the competitiveness of Canadian farmers in world markets.

The cost and ineffectiveness of the carbon tax when applied to farming operations was recognized by the Member of Parliament (MP) who introduced bill C-234,An Act to Amend the Greenhouse Gas Pollution Pricing Act . This legislation, which is supported by a majority of MPs, would remove the carbon tax from essential agricultural operations like heating a barn in winter. Unfortunately, the Senate has disagreed and amended the legislation, removing the reference to barn heating. How much will this change cost Canadian farmers? The Parliamentary Budget Officer estimates this cost to be $910 million annually.

There is a better way. Not all government policy objectives need to be met using a regulatory hammer as is being done with the carbon tax. Instead, governments should be adopting an incentive-based approach. The alternative policy approach is one that is rooted in collaboration with farmers and accepting that financial sustainability for producers must be at the foundation of any strategy.

The collaborative approach may not appear to be the easy path to take for those who are charged with implementing government policy. Canada is a large, diverse country, and innovative practices that drive fiscal and environmental sustainability in Quebec or the Maritimes or British Columbia may not work on the Prairies. There must be enough flexibility in approach to account for differences in climate, soils, and ecosystems across Canada. Provincial and local governments need to be engaged when determining which new practices and technology will work in a specific region. While this may sound messy and complicated when compared to a one-size-fits-all regulation, in the long run, incentives and collaboration, instead of costly regulations, will deliver meaningful results.

The federal carbon tax is set to increase again on April 1st . If this happens Canadian farmers will be a little less competitive internationally and see a little bit more red ink on the bottom line. It does not have to be this way.