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Founded in 1909, UFA Co-operative Limited is an Alberta-based agricultural co-operative with more than 120,000 member-owners. UFA’s network comprises more than 114 bulk fuel and Cardlock Petroleum locations, 34 Farm & Ranch Supply stores and a support office in Calgary, AB. Independent Petroleum Agents and over 1,000 UFA employees provide products, services and agricultural solutions to farmers, ranchers, members and commercial customers in Alberta, British Columbia, and Saskatchewan.
Intro: [00:00:00] It takes a certain kind of ambition to do what farmers do. Between the hours and the hard labor, to the public scrutiny and bureaucratic maze running, it's not an easy task. While the agriculture industry feeds millions, quietly tilling and producing behind the scenes, many forget that our food comes from the hands of real people, with real stories.
Join us as we share stories from those with boots on the ground and unearth unique perspectives on agriculture's biggest conversations. It's time to grab your shovel and get to work. I'm Don Shafer, and this is Digging In with [00:01:00] UFA. On this podcast, we set out to tackle the biggest and most pressing conversations in ag.
Conversations surrounding topics that have shaped, defined, and changed the foundation of the agricultural industry as we know it. As the conversation shifts, we want to be right alongside it, contributing perspectives from the people it most affects. That's why this week, we're digging back in on the carbon tax.
For some. The drive to agriculture starts with the family, the generations of a lineage tilling and harvesting the same soil as their great grandparents and cultivating the next generation of agriculture's most impactful figures. For others, it's the broader impact, the daily choices, the purchases that feel as routine as tying your shoes, the policies curated by thousands of decisions.
And how they impact the producers who grow [00:02:00] our food and the consumers who buy it. Our first guest today is someone who's intrigued into the seemingly little things led to a lifetime of agricultural education and foundational change. This is Ellen Goddard.
Ellen Goddard: Hi, my name is Ellen Goddard. I'm an agricultural economist.
For about 22 years I worked at the University of Alberta. I retired in 2023 and I'm continuing to work because I still have graduate students and research grants. I also worked at the University of Guelph for about 15 years and the University of Melbourne. My focus as an agricultural economist is It's been largely on livestock production, although I've done everything, as you can imagine, over such a long period of time.
And I really am interested in consumer and behavior, what incentivizes both farmers and consumers to change their [00:03:00] behavior. And that crosses over into carbon tax.
I didn't grow up on a farm, interestingly enough. And I switched out of marine biology as an undergraduate into agriculture. And I just loved the fact that it had something to do with everyday decisions that people were making. And I became quite excited about agriculture, so I've always worked in agriculture.
But mostly about, originally, it was about why the prices were the way they were in the grocery store. But more recently, it's all about decision making and how people make the decisions they do, in terms of my research.
Intro: It's easy to say that fuel moves us. It's energy. It's movement. It's process. In whatever form it's used, the chemical exchange of energy is a symbiotic transfer that drives industry the world over.
And shapes life as we know it today, even in an era where electric energy is becoming more commonplace, [00:04:00] what drives intrigued to affect the component of propulsion that led us into the modern age. For that, we turned to Don O'Connor.
Don O'Connor: My name is Don O'Connor. I'm a mechanical engineer by training, but I have never really done any sort of classical engineering, but I have been involved in fuels and environmental issues for fuels for more than 40 years.
So I have a company called S& T Squared Consultants, and I've had that for 25 years, and we do these days almost exclusively greenhouse gas modeling of systems. So fuel production systems, agricultural systems, and that kind of thing. One of the consulting projects was looking at greenhouse gas emissions of alternative transportation fuels.
And I had gathered quite a bit of experience both on the production and marketing side of alternative fuels. So I joined the team that had this project for the Federal government and one thing led to another. [00:05:00]
Intro: The carbon tax is contentious at its surface. It's an initiative to offset carbon emissions and ease the rate of carbon's environmental impact.
However, at its root, a much larger conversation has surfaced. What complexities surrounding this tax have sparked such an engaged debate between those for and against
Ellen Goddard: the simplest definition that I know of. is it's an emissions fee on fuel purchased and it's to take account of the greenhouse gas emissions that are going to be burned or created when you burn the fuel and that makes it a difficult thing for an individual to see happening because they're paying the tax today and the burning of the fuel maybe sometime in the future.
Don O'Connor: Well, there's basically an emission factor that is applied to the quantity of fuel. So, whether it's a liter of gasoline or diesel fuel, there's an emission factor which accounts for [00:06:00] the CO2 emissions from burning that fuel, and the same as natural gas. So that's the simple part. It becomes a little bit more complex when we have things like ethanol blended in the gasoline.
So at the federal level, they assume that there's 5 percent ethanol in gasoline when they calculate what that emission factor could be. And over time, those percentages can change, but the emission factors don't always change. And so you get a disconnect between what the emissions actually are and what you're paying the carbon tax on.
Intro: If the goal is to reduce carbon emissions, is taxation the most efficient way to meet reduction goals? If not, what more could be done to help address its challenges? What do the conversations look like with those on either side of the discussion? Or for that matter, Those who are on the fence.
Ellen Goddard: I think that the carbon tax is the most efficient way of doing it and [00:07:00] the reason why a lot of economists, not all, would agree that it was the most efficient way of trying to reduce greenhouse gas emissions is because it doesn't constrain either individuals or companies to pursuing a particular action.
And the particular action may not work in some cases or some instances or some industries. And that means that forcing a particular action could be very inefficient. But the carbon tax itself gives an incentive to people and companies to change how they're doing things in the way that suits them the best.
So they can pick the type of innovation that they want to use. They can pick the level of emissions that they want to produce if they figure they can afford that. And every individual, whether they're getting a rebate or not, has an incentive to reduce their emissions because over time that will reduce the tax that they pay and they will still get the rebate.
So they're better off [00:08:00] financially.
Don O'Connor: I have a different view. I think it's an incredibly. inefficient tax in terms of reducing emissions. So with the carbon tax, you know what you're paying, but you have no idea what the emission reduction is going to be from that. Whereas with a targeted program, you know what the emission reduction requirement is for the program, but you don't know what the cost is.
And so when you have products like transportation fuels, which we know from decades of study is very inelastic. The demand is very inelastic. You don't get a very big impact from a carbon tax. And so you're paying carbon tax on the whole fuel. You get a minuscule reduction in emissions. So the cost per ton of greenhouse gas emissions reduced becomes extremely high.
So I think that today with the carbon tax on gasoline and diesel fuel, we're probably 1, 000 per ton of carbon actually [00:09:00] removed. In fact, it may be higher. And if you look at the clean fuel regulation, the credits, which is equivalent to the cost of emission reductions are on the order of 150 per ton of carbon removed.
So I'm okay with the theory that you put the price up. The demand goes down, but the devil is in the detail, and the federal government has never wanted to talk about elasticity of demand for all the various sectors that it impacts.
Ellen Goddard: I don't disagree. The data is the biggest limitation of all of this, because it's not something easy to measure, it's not something easy to monitor at the individual household or firm or car.
even level easier for a car, I suppose, in some senses. But what happens is we don't have really good data tracking. We don't have good data measurement of a lot of these things. And so I wouldn't disagree that in some [00:10:00] instances, the cost of reducing a ton of emissions is going to be widely variable. And we could be charging more than what the cost to reduce a ton of emissions are in certain circumstances.
However, for the government to be able to figure that out and be able to charge every individual and every company. Is, um, monumental task
Intro: when it comes to tracking these emission targets and seeing impacts from implemented initiatives like the carbon tax, how do we ensure that the data we're seeing is both reliable and the correct data sets needed when benchmarking specific carbon goals,
Ellen Goddard: best guesses in some cases, I think the work that Don and people like Don do is about trying to improve the quality of the data that we do use to make these decisions and hopefully that gets factored into policy at some point.
I know that there's lots of people working in agriculture that I work with that are [00:11:00] desperate to figure out better ways to collect the data. And by the way, carbon's not the only thing. That's a greenhouse gas emission. So if you extend the list, it even gets more complicated.
Intro: If the current standards of procedure for collecting this data and benchmark tracking seem even semi unreliable, are there any better programs or theories available?
How are strategies adapting to also help increase efforts in reducing carbon emissions, if at all?
Don O'Connor: So, when we talk about carbon tax, we're looking maybe just at the combustion of burning a liter of gasoline or a liter of biodiesel or whatever, and we don't always include in that the emissions associated with producing the gasoline.
What Jgenius does, it looks at systems on a wells to wheels basis or cradle to grave basis. So, in the case of ethanol, we look at the emissions of making the fertilizer that goes onto the [00:12:00] field, that grows the feedstock, that gets transported to the ethanol plant, that gets turned into ethanol, and then gets transported back to some place where it's burned.
So, These systems are a lot more complicated than just, you know, a single emission factor that's applied to a fuel.
Certainly I would say that in the first decade of this century, there was a lot of talk about having to get to be cost competitive, alternative fuels cost competitive with Crude oil and people were always trying to calculate the break even price on that kind of thing. I think today we've moved beyond that and there's a recognition that we need to factor in externalities.
And so you don't find nearly as much discussion about break even. People recognize that reducing emissions is going to cost more than not reducing emissions. And cost of crude oil rarely [00:13:00] comes into the equation anymore. Plus, the cost of gasoline doesn't track the cost of crude oil. It tracks it within a range, but you get a lot of noise within the range.
Intro: Are farmers currently using low emission alternatives to offset emissions? And are there any other carbon offset technologies we could be using, or implementing even further, that may not be being utilized to their potential?
Ellen Goddard: In a nutshell, I do think farmers are using low emission technologies. Are they doing everything they possibly can within limits?
I mean, we have to recognize that some of the other economic factors that have been front and center in Canada over the past few years have directly affected farmers as well. Farmers are pretty involved with interest rates, for example. They may be borrowing money in the spring for planting and hopefully getting it back from the market in the fall when they harvest.
They have huge capital investments in all sorts of equipment and buildings and [00:14:00] all sorts of things that require borrowing from the bank. So interest rates have been a big problem. If you're being constrained financially, then it's hard to think about getting new equipment or changing the way you do something.
to try and reduce your costs. One of the big contentious issues around farming is kind of the level at which they're going to be exempt from some aspects of carbon pricing and to a certain extent they have been exempted from the beginning from some aspects of carbon pricing that are big costs on the farm.
They were very concerned about things like grain drying and heating barns, that sort of thing, and they wanted to be exempted from that as well. As everybody knows, there was all kinds of politics around that, and that legislation didn't pass, but the government has seen a way of trying to [00:15:00] increase the rebates to farmers through a variety of mechanisms to try and account for some of those costs.
They're also going to be eligible for the small business rebates that go back to 2019, which should help a bit with some of those costs. So you don't want to completely take the incentive away to change how you're doing business to reduce the emissions. But by the same token, you recognize that there are many constraints on agriculture and to a certain extent on forestry that don't exist in some other industries to the same extent, weather being one of the big deals, for example, sometimes you're going to have a good year.
Sometimes you're going to have a bad year. And we certainly don't want them all farmers to go out of business. just because it's a bad year weather wise because we also have carbon taxes. So I think they've tried to come up with policy fixes that are addressing some part of the additional cost for farming, but definitely there are additional costs for farming.
One of the other things they did to try and reduce nitrous [00:16:00] oxide was to suggest they were going to originally put restrictions on the use of nitrogen fertilizer on farms, which was hugely unpopular. And you can see the government trying to feel its way through, will this work or will that work? And we have to recognize these policies are coming from different ministries than they used to.
So if it was coming from the Ministry of Agriculture, that's one thing. If it's coming from the Ministry of the Environment, they may be more used to a regulatory environment that says industry will do the following than what has traditionally happened in agriculture. So. There's a number of things going on.
But are farmers changing the way they do business? Absolutely.
Don O'Connor: Well, I was just going to say that we get greenhouse gas emissions when we spend money and Canadian agriculture was never supported financially from the government the way that U. S. agriculture was. And so in order to compete, our producers became very efficient at what they were [00:17:00] doing, which also means that they weren't spending a lot of money.
So. We're world leading adoption of no till agriculture, and I think from what I've looked at, particularly across Western Canada, our greenhouse gas emissions for the production of crops is amongst the very lowest in the world. And some of that's because of things that producers have done, like adopt no till, others is because of our climate.
So, we have a lack of precipitation, which hinders crop development, so our yields aren't very high. But it also means that we have pretty low N2O emissions from the application of fertilizer. And that turns out to be, depending on the crop, but it can be 40 to 65 percent of the total GHG emissions are from N2O emissions.
And so if you're in an environment with low moisture, which leads to low N2O emissions, you get low greenhouse gas production.
Ellen Goddard: I totally [00:18:00] concur. Totally.
Don O'Connor: So 30 years ago, we had hardly any renewable fuels. We had a little bit of ethanol in Canada and Ontario and Western Canada, driven by a single company in each of those regions.
So we've come a long way. We're just about 10 percent ethanol and gasoline all across Canada. I expect that we're going to go to 15 percent ethanol pretty soon in some regions. We've seen a huge increase in renewable diesel, blending in Canada, and yes, it's been more expensive, but the prices come down as supply has increased faster than demand.
So, surprise, surprise, supply and demand has a big impact on the price. So, if we look at what's happening in California, the combined Biodiesel and renewable diesel blend ratio is more than 60 percent now, and so, you know, we could see, I don't know that we see 60 percent in Canada, but we'll certainly see more.
But there is a limit to how much we can do with renewable [00:19:00] fuels. We have some limited feedstocks. for biodiesel and renewable diesel. So those are a problem. So it does require some other solutions like electric vehicles, or I think hybrid electric vehicles actually would have been a better thing for the government to get behind in the early days, you know, we're never going to see net zero in the transportation sector.
And I'm pretty critical of government's efforts for net zero because it's just not a realistic target. And so people throw out viable solutions, doesn't get you to net zero. Well, nothing gets us to net zero. So it's misplaced priorities.
Intro: In the auto industry, a huge shift of the last couple of decades has been the rise of hybrid and electric vehicles. Would current infrastructure handle a large influx of electric vehicles? How would a large scale energy shift affect rural communities as far [00:20:00] as access and feasibility?
Don O'Connor: No. So, you know, the problem we have to manage this sector is that we have a dozen grids in Canada.
We don't have one. They're all provincially regulated. You know, the federal government can try to throw its weight around, but at the end of the day, it doesn't have enough authority. The utilities tend to be less than innovative in general. They have a very long lead time in terms of increasing supply to forecast demand.
And they've been burned a couple of times in the past where demand was forecast to increase significantly and yet we had periods of time when it didn't happen, you know, demand was pretty constant. year over year. I think when you dig into that, there's a whole bunch of different factors at play, but no, we don't have a plan.
We don't have anything coordinated. When you ask where the electricity is going to come from, from a [00:21:00] 100 percent EV fleet, nobody's going to answer.
Ellen Goddard: I can't disagree that we don't have the answer yet, but I would like. To say that if there was any good news in the story, the recent estimates of the kind of reduction in greenhouse gas emissions, very small, that were estimated by the government for the 2023 year, an awful lot of that came from reductions around the electricity sector.
So, we're seeing change in that sector. Whether we can also see the ramp up that's going to be required is a different question. And can we ramp up with greenhouse gas emission friendly tools or how is that going to work?
Don O'Connor: So when you compare Canada's greenhouse gas emissions to the U. S. greenhouse gas emissions, the U.
S. has done a much better job of reducing greenhouse gas emissions from Whatever year you want to pick, 1990, 2005, whatever, the U. S. has actually reduced emissions. And the single biggest thing that happened in the U. [00:22:00] S. to enable that reduction was the price of natural gas became lower than the price of coal.
And that drove a huge change in their electricity sector. So again, the two big sort of step reductions we've seen in Canada is when Ontario closed down their coal 10 years ago and when Alberta switch from coal to natural gas. The thing that we don't talk enough about, I mean, the policy people talk about electrification and, you know, we can reduce our greenhouse gas emissions if we electrify everything, is electrification depends on cheap electricity.
And if electricity prices don't come down, it's going to be very hard to electrify a whole bunch of different sectors.
Ellen Goddard: And clearly that does affect rural communities in a different way than it does major urban centers for all the obvious sorts of reasons. Distance and number of people and providing the infrastructure to a smaller size communities, those sorts of things.[00:23:00]
Don O'Connor: One of the things that I think the government hasn't done a good job of when they introduce new policy is looking at what are the impediments to the rollout of the new policy. So what are the limitations? And in the case of electric vehicles, the limitation has been the supply of lithium. So there isn't enough lithium production in the world to make the batteries to supply all the EVs that governments would like people to buy.
And so if you look at, okay, so how do we make the lithium go as far as we can from a greenhouse gas reduction perspective, and Toyota talks about, I think it's one, six, twenty or something or other. So the amount of lithium that needs to go into one electric vehicle, is enough to make 20 plug in hybrid electric vehicles and 90 gasoline hybrid vehicles.
So it all depends on the size of the battery and the greenhouse gas emission reductions we can get from that lithium going into [00:24:00] gasoline hybrids far exceeds the reductions that we can get. from electric vehicles as long as we have restrictions in the supply of electricity. And that's just one example.
I mean, I've seen other things where, you know, there's lots of people think hydrogen is a viable solution, but we have limitations on the amount of electricity. And, you know, it just, It doesn't make sense to use electricity to make hydrogen when you could use electricity directly in an electric vehicle and get about six times as much mileage as you could get putting it into a hydrogen fuel cell vehicle.
Intro: As we've seen with the hybrid model, the consumer's ability to fill up their car with gasoline and produce significantly less output of carbon emissions without the complete switch to an all electric vehicle. offers some flexibility to reduce emissions. But could the hybrid model solve, at least in the short term, our carbon offset?[00:25:00]
Don O'Connor: Yes, so there's huge infrastructure problems. You know, I mean, people think it's great I can recharge my car at home. There's problems doing that. I heard a stat in the U. S. that 60 percent of the residences have no garage. And or street parking. So that means the 60 percent of the fleets got to charge somewhere else, or we get silly things like people, you know, running extension cords across the sidewalk to plug in their car because they have no garage or they have no off street parking.
You know, there's real infrastructure issues, plus our electrical distribution system in general across Canada is pretty old and in dire need of maintenance or replacement, so it's not going to be cheap.
Ellen Goddard: And that's what Don said, is the government doesn't think about the process to get this to happen and how that also has to be incentivized in some way or other.
Intro: As we've discussed, CO2 is not the only greenhouse gas [00:26:00] affecting the climate. Though it may be the most frequently emitted, what are the challenges when trying to assess or even find solutions that change our output of other gases?
Don O'Connor: They're hard to measure, so, you know, I always, when it comes to methane reduction and what the governments have tried to do with, you know, 25 or 35 percent reduction in methane emissions, well, they had no idea what the baseline was, so there's been 25 percent below a made up number, you know, no measurements, whatever, I mean, how do you implement that?
And so methane is one sort of problem. I think the oil and gas industry is doing a better job of trying to find those sources of methane and eliminate them. But when it comes to agriculture, the big thing is N2O emissions. And they're incredibly difficult to measure and to try to figure out what's happening.
So, you know, they happen over the whole year. The actual emission rate is very low. But because it's a very potent [00:27:00] gas, it makes a big difference. You know, we can do things to reduce N2O emissions from the application of nitrogen fertilizers, but we don't have a good handle today on what kind of percent reduction we're going to get.
Because we don't have studies in all climates, all soil zones, across Canada yet, it's big enough to have reasonable confidence in what the percent reduction is. So there's lots of research work going on to try to drive those kinds of numbers so that we might get a better handle on what reductions are possible.
Ellen Goddard: I think you shouldn't miss Don's point about how variable it is by climate. It's probably by topology as well as by soil type that is all going to affect the emissions. And so a blanket rule like let's restrict nitrogen fertilizer is It's not necessarily gonna have the same effect across every farm, if you like, in Canada by any stretch of the [00:28:00] imagination.
Don O'Connor: That was an absolute silly proposal to bring out. I just don't understand how the government could think that that was a good idea. It was just way too simple a solution that totally missed the point. And if you want to have a dialogue with producers, if the first thing that comes out of your mouth ticks them off, what kind of constructive dialogue do you think you're going to have?
Ellen Goddard: Absolutely. I do a lot of work with cattle and I've been working on a lot of Genome Canada projects where they're trying to breed more feed efficient cattle that will reduce the methane emissions from manure. Other sorts of things and they're also trying to select for cattle that are going to be lower methane emitters in the first place and boy is this process going to be slow and is it going to take a long time to roll out and one of the pieces that I think is really important is we have to understand.
the farmer behavioral piece of this. Farmers [00:29:00] who raise cattle love cattle, and they have developed years and years worth of expertise in selecting the best cattle for their particular circumstances, and the ones they like the best, of course. But Realistically, to get them to go and select cattle on the basis of a breeding formula that is going to guarantee reducing methane emissions when intellectually it's a difficult leap for them to make is not going to happen overnight.
It's not going to happen on every cattle operation at the same time. It's going to be very incremental. And I think sometimes that we assume that these things are just going to get adopted and fix part of the problem. And I think that's not the case in many instances. And I think respecting decision making of farmers is pretty important because many people farm because they want to make [00:30:00] their own decisions.
And that's why they're farmers, but that's just my view.
Don O'Connor: The rollout and the uptake of innovation is a very social process, and people overlook that social aspect, so, you know, the coffee shop and all the little towns is an incredibly important factor in how things get rolled out. And there's competitive instincts between producers, so if someone figures out how to make an extra 10 a ton on growing a crop.
He's not always the first one to share it with his buddies at the coffee shop. So some things take a while.
Intro: As we've heard, adjusting our carbon emissions is not as easy as it sounds. From funding to tracking to infrastructure reform. There's still a long road ahead with many discussions to be had and solutions to discover as it stands today.
Where do we go from here?
Ellen Goddard: It's not perfect, but [00:31:00] probably it's an attempt in the right way with a relatively low cost. And this is what makes it not perfect approach to trying to reduce emissions. We are trying to encourage behavioral change and the tax in and of itself encourages interest, sometimes negative, sometimes positive, in the whole process of greenhouse gas emissions.
Don O'Connor: And I have a hard time finding the evidence that it's reducing emissions. So, you know, again, it's how do you measure this kinds of things? So, you know, I looked at sort of greenhouse gas emissions in British Columbia versus the rest of Canada because BC's had a carbon tax since 2010. Did it have any impact on gasoline consumption, diesel consumption?
I could find nothing that sort of showed that BC was doing a better job at reducing. fuel use compared to other provinces in Canada over a 15 year period. And so, [00:32:00] I think that there are enough problems with the tax and they only get worse as they go up. It makes us uncompetitive with U. S. imports. The kinds of things that the government did to try to reduce the leakage and the impact of imports was done extremely crudely, and the federal government had talked about three different stages of looking at the impact.
They never did the third stage, which was getting more into the weeds. And so, we have companies struggling to be competitive, to remain competitive with U. S. imports because of the carbon tax. I know that many of them visit the issue, do we keep going or do we shut down on a regular basis and we're just going to get more and more companies impacted as the price goes up.
Ellen Goddard: Can I say I think there's one thing that Don and I are totally in agreement on? And that's the absolute necessity for [00:33:00] better measurement and better data and figuring out what your original benchmark is that you're working against. All of those things are absolutely critical to keeping people engaged in the process, but also we have to have tangible results, or we cannot maintain the political support, as you can see from recent politics, we can't maintain the political support for these types of programs.
I think the data is critical. I think we don't know enough about where we're starting from and what changes we're getting. And I think that data, if it could be created, but it's an enormous task to create all those measurements at an individual household or community or company or industry level. is a mammoth task, but I think it's essential to keeping engagement.
And the last thing we really want to do is have to layer other policies to fix the effects of the original policies. It just [00:34:00] ends up making a mishmash of the whole process. At
Intro: the end of the day, we look to our resiliency within ourselves and our communities to make our collective futures as bright as possible. All it will really take is conversations like these, some vulnerability, and a little digging.
Thanks to the support of UFA Cooperative, we're able to share stories from those who live and breathe agriculture. We'd like to thank our guests for sharing their insight into the future of agriculture and for being with us today. For more information and a new episode every month, visit ufa. com. With listeners like you, we'll continue to dig a little deeper here on Digging In with UFA.
I'm Don Shafer. Thanks for listening. [00:35:00] Another Everything Podcast Production. Visit everythingpodcasts.Com, a division of Patterson Media. Subscribe wherever you get your podcast.
Disclaimer: The views expressed in this podcast reflect opinions and perspectives from participating guests and not necessarily those of UFA, UFA cooperatives membership, elected officials, or stakeholders.