The Hidden Cost of Carbon Taxes and How it Will Impact Food Retail in Canada [Op-Ed]

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On April 1, the carbon tax will be set at $65 per metric tonne. We are slowly marching towards a carbon tax of $170 per metric tonne, by 2030, which is more than double what it is today. Yet so far, not one study has looked at how the carbon tax will be impacting food affordability in Canada. Not one.

Ottawa is currently considering Bill C-234, which would offer a desperately needed carbon-tax exemption to farmers for grain-drying and barn-heating. If no election is called, the bill remains on track to pass both the House and the Senate and become law by summer. This would be welcome news for farmers who are subjected to price-taking economics. Taxing farmers more can only cost them more. Ottawa has now invested heavily in programs to help farmers adopt greener soil and energy management practices, but realizing any financial benefits from these changes will take time. And farmers need help now.

But for the rest of the food supply chain, the economic impact of the carbon tax remains a mystery. The federal carbon tax presently impacts Ontario, Manitoba, the Yukon, Alberta, Saskatchewan, and Nunavut. Starting July 1, 2023, the list of provinces under the federal carbon pricing scheme will grow to include Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland and Labrador. This will only leave British Columbia, Quebec, and the Northwest Territories, which have their own federally approved provincial carbon pricing.

According to a report from the Canadian Federation of Independent Business (CFIB), more than $8 billion will be collected from small business through the carbon tax by the end of fiscal 2023, and as little as $35 million will be given back as credit in the form of programs. Many small businesses, especially family businesses, are in the food industry. In other words, much of the funding is disappearing into Ottawa’s big black public funding box and few understand what the funds collected through the carbon tax are being used for.

Again, according to a recent survey from the CFIB, 56 percent of businesses will have no other choice but to raise prices due to pressures created by the carbon tax. Some will argue that businesses need to get with the times and reduce their reliance on fossil fuels. But the funds are just not coming quickly enough to support small businesses.

In essence, Ottawa should consider helping businesses which are part of our agri-food eco-system. Bill C-234 is just a start. Food processors, artisan shops, and restaurant owners need more and better support or else, by 2030, the carbon tax will have the potential to become a much more significant driver of food inflation than climate change itself. That’s right, the policy to penalize polluters could hurt citizens more than climate change, the very thing we are all trying to mitigate.

The ‘stick’ approach exemplified by the carbon tax could be complimented by a ‘carrot’ approach, such as tax credits, a reduction in other taxes or even new grant programs with minimal red tape, which could help businesses reduce their carbon footprint.

Ottawa should be applauded for doing something about climate change. Whether we agree or not with the carbon tax, at least the government is doing something about the climate change problem. But when looking at supply chain economics, as we see the carbon tax increase over time, our own trust in food affordability hangs in the balance. We need to assess and forecast how the carbon tax will burden our food suppliers over time and evaluate how we can support food companies in their journey to a greener future while remaining profitable.

Many families are already severely impacted by food inflation and some are quick to criticize grocers for higher food prices. What many don’t realize is how our current fiscal regime is making it more difficult for many companies to keep food affordable. Without careful consideration, many families already suffering will be impacted even more by some of these environmental policies. At the very least, we need to know how significant the impact is going to be.  

Sylvain Charlebois
Sylvain Charlebois
Dr. Sylvain Charlebois is Senior Director of the Agri-Foods Analytics Lab at Dalhousie University in Halifax. Also at Dalhousie, he is Professor in food distribution and policy in the Faculty of Agriculture. His current research interest lies in the broad area of food distribution, security and safety, and has published four books and many peer-reviewed journal articles in several publications. His research has been featured in a number of newspapers, including The Economist, the New York Times, the Boston Globe, the Wall Street Journal, Foreign Affairs, the Globe & Mail, the National Post and the Toronto Star.

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