LASER TALK: The Effect of Pricing Carbon on Farmers

Agriculture in Canada is heavily dependent on fossil fuels for running machinery and producing fertilizers, and a price on carbon would, by design, increase the price of fossil fuels.

For farmers, however, the impact associated with a price on carbon is not nearly as great – or as volatile – as other factors, especially if the fee starts low and increases predictably over time. For example, in Canada the price of farm machinery fuel increased by 25% in 2011 from 2010. As well, during that same time period fertilizer prices rose 29%.(1)  Commodity prices, which determine the income farmers receive at any given time, are also extremely volatile.(2)

In addition, the impact of a price on carbon will be minuscule compared to the impact climate change will have on future farm productivity over the long-term if CO2 emissions are left unmitigated. A March 2013 report by Canada 2020 concluded that “climate uncertainty and climate extremes are givens for the future of Canadian agriculture and while there may be some initial benefits from rising temperatures and elevated carbon dioxide levels such benefits are unlikely to last. There is a growing body of evidence pointing to temperature and C02 thresholds, beyond which yields will level off or decline. These risks need to be addressed and policies put in place to reduce them.”(3)

Also, bear in mind that a price on carbon will be an economic opportunity for many farmers and ranchers as demand for carbon-free energy increases. Wind developers are leasing land from farmers to erect turbines.  Solar farms can also replace cropland that doesn’t generate enough income from traditional farming.

Of note, British Columbia’s carbon tax does not appear to have had a measurable impact on international agricultural trade, despite concerns it would greatly reduce the BC industry’s competitiveness, according to new analysis commissioned by the Pacific Institute for Climate Solutions (PICS). (4)

Bottom line: The additional cost of a price on carbon is negligible compared to the increased volatility that comes with a changing climate. In fact, a gradually and predictably increasing price on carbon creates an opportunity for farmers to balance that volatility with steady cash flow from renewables that share land with their crops.

(1)  Canadian Farm Fuel and Fertilizers: Prices and Expenses (Agriculture Canada)

(2) Overview of Agriculture and the Agri-food system (Agriculture Canada)

(3) Canada 2020 – Analytical Commentary on Agriculture and Climate Change (Canada 2020) 

(4) The Effect of British Columbia’s Carbon Tax on Agricultural Trade


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