October 18, 2016 / 5:25 PM / 3 years ago

Canadian carbon price worries farmers, fertilizer makers

WINNIPEG/TORONTO, Oct 18 (Reuters) - 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 C$10 a year until it reaches 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, according to CIBC.

“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 more fuel-efficient machinery have made Canadian farming more friendly to the environment, and crops absorb carbon from the air and leave it in the ground, Speer said.

Agriculture accounted for 10 percent of Canada’s total greenhouse gas emissions in 2014, behind the oil and gas, and transportation sectors, which accounted for about one-quarter each, 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 future 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.

“Since Canadian plants are very efficient, the only way to significantly reduce carbon emissions is to reduce production.”

Canadian Agriculture Minister Lawrence MacAulay, asked whether a carbon price would make farm products less competitive globally, said provinces have options for using carbon revenue.

“It could be (used) to reduce taxes, in innovation, it could be to help farmers make sure the product they produce is less expensive,” he said on Oct. 7.

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

Manitoba will recognize farm sector concerns in its plan, which is under development, said Sustainable Development Minister Cathy Cox. (Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by David Gregorio)

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