Key issue: Environment & Conservation
Section Chair: Mike Chromczak
This section was established in 2018 to advocate proactively on issues related to environment and conservation including those related to water, nutrient and resource management. The section will inform key policy makers on the impact of environmental policy on industry competitiveness while promoting the beneficial environmental and conservation practices.
Bill 4, Cap and Trade Cancellation Act, 2018
The OFVGA submitted the following to the Ontario government regarding Bill 4, Cap and Trade Cancellation Act, 2018. A copy can be downloaded here.
October 11, 2018
Re: Bill 4, Cap and Trade Cancellation Act, 2018, ERO #013-3738
We are writing on behalf of the Ontario Fruit and Vegetable Growers’ Association (OFVGA) to express support for the Ontario government’s commitment to repeal the Climate Change Mitigation and Low-carbon Economy Act. In our view, the legislation did not meet the objective to reduce emissions, but did substantially increase costs for Ontario’s farmers to competitively grow fruits and vegetables.
During 2017, the OFVGA commissioned a study that looked at three major government policies that were driving up costs for our farmers: minimum wage, cap and trade, and electricity. The study, led by JRG Consulting Group estimated that the cap and trade program would add an additional cost of approximately $55 million to Ontario’s fruit and vegetable farmers. This represents a reduction in farm profitability by 2.5%. The majority of the anticipated impact is felt in the greenhouse vegetable sector which relies significantly on energy to heat their facilities. The impacts have not only been on farmers directly, but also on businesses along the value chain, including transportation and shipping. Additional costs on the value chain have a downward effect on the end price paid to the farmer.
The cumulative effect of additional costs from cap and trade, minimum wage, and electricity have significant implications for domestic food security, resulting from a reduction in investment, early retirement of farmers, and the transition of farms from high input cost fruit and vegetable crops to less intensive grain crops.
Ontario’s fruit and vegetable farmers compete in a global marketplace, meaning that these additional costs have not been recouped through the market place. The ability for retailers and consumers to purchase less costly produce means additional costs for Ontario’s farmers has a direct impact on the sector’s competitiveness. The sector has a goal to be globally competitive by increasing its output, domestic market share, exports and its value to the Ontario economy. Your government’s efforts to reduce unnecessary business costs, like cap and trade, are absolutely needed and supported by the industry.
While the OFVGA supports the repeal of the cap and trade program, we do want to be part of the government’s solution when it comes to meeting carbon emission reduction targets, as no other industry is more impacted by the effects of climate change than the agriculture. In that light, the OFVGA was disappointed when the GreenON program for covered agriculture was cancelled. There were many fruit and vegetable farmers who applied for this funding to do improvements that would increase their farm’s energy efficiency, but none of the funding was ever approved or delivered.
The OFVGA would welcome an opportunity to discuss opportunities for the sector to collaborate with government to help meet provincial targets, without putting our ability to grow food competitively at risk. We urge the provincial government to consider investments in the fruit and vegetable sector when determining how best to distribute additional funds accrued in the Cap and Trade Wind Down Account.
The OFVGA is also very concerned about the federal backstop carbon tax that is set to take effect in Ontario on January 1, 2019. We are supportive of Ontario’s intent to prevent the carbon tax from being applied in Ontario. However, in the event implementation occurs, the fruit and vegetable sector’s position is that all fuels used for the production of fruits and vegetables, including heating and cooling, must be exempt from the carbon tax. At this time, only some fuels are exempt and the application of various carbon pricing schemes across Canada has created regional disparity amongst farmers and farm sizes. Given the amount of fuel used in the greenhouse vegetable sector for heating greenhouses, this lack of exemption will be very harmful to the competitiveness of the greenhouse vegetable sector.
While the fruit and vegetable sector has been in contact with the federal government regarding further exemptions under the federal carbon tax, progress on this matter has stalled. The OFVGA’s national counterpart, the Canadian Horticultural Council has been leading this work and attached to this submission is further background and key messages on this issue. The OFVGA would be appreciative of provincial support when it comes to addressing this matter with the federal government. For Canada to support its own food security, any kind of carbon pricing mechanism needs to exempt energy required for modern food production in our northern climate.
Thank you for the opportunity to submit comments on Bill 4, Cap and Trade Cancellation Act. The OFVGA looks forward to opportunities for the OFVGA to collaborate with the Ontario government on a workable climate change strategy. After reviewing OFVGA’s comments, should you have any questions or would like to meet, don’t hesitate to contact us.
Jan VanderHout, Chair, OFVGA Board
Mike Chromczak, Chair, OFVGA Environment and Conservation Section
Bill 4 - Presentation to Standing Committee on General Government
The OFVGA had the opportunity to present its perspectives on Bill 4, Cap and Trade Cancellation to the Standing Committee on General Government. A copy of the presentation can be downloaded here.
Presentation to the Legislative Assembly of Ontario’s
Standing Committee on General Government
Subject: Bill 4 - Cap and Trade Cancellation Act, 2018
Date: October 15, 2018 – 9:00 a.m.
Presentation by: Jan VanderHout, Chair
Gordon Stock, Senior Policy and Government Relations Advisor
Thank you, Mister Chair. Good morning honourable committee members, and thank you for inviting us here to discuss Bill 4.
The OFVGA represents Ontario’s fruit, vegetable and greenhouse vegetable farmers. Our members strive to grow fresh, high quality food, contributing to healthy eating, food security and economic goals across the province.
Our sector includes more than 3,500 family run farms that employ over 30,000 people directly on-farm. For every on-farm job, it is estimated there are 2.2 jobs created downstream, or almost 100,000 jobs combined.
OFVGA’s members span the province, growing dozens of different crops. Apples, grapes, strawberries, carrots, potatoes and ginseng are just a few examples.
In greenhouses, our members grow fresh tomatoes, cucumbers and peppers year-round. Greenhouses also grow plant seedlings before being transplanted for field production.
While the majority of our sector’s output is consumed fresh, we also support a significant processing industry that makes Ontario field grown vegetables, wine, and cider available all year long.
Fruit and vegetable production drives Ontario’s rural and urban economies by generating more than $4.2 billion in economic activity annually, along with an estimated $600 million in combined tax revenues for all levels of government.
Ontario’s fruit and vegetable farmers compete with global producers for domestic and export markets that demand low cost quality produce. Fruit and vegetable exports from Ontario total over $1.5 billion, almost half of which is generated by the greenhouse vegetable sector.
As a greenhouse farmer that grows over 30 acres of cucumbers near Waterdown, Ontario, I feel I am particularly well positioned to discuss the impacts that cap and trade has had on the fruit and vegetable sector.
In short, the additional costs on food production have been a burden to farmers and the entire value chain. The proposed legislation represents an opportunity for an orderly wind-down of the Cap and Trade program to address the increased costs that Ontario businesses have faced over the past 2 years.
The existing cap and trade program represented increased costs to fuel equipment, climate controls for wash, packing, and storage facilities and heat for greenhouses to support year-round food production in this northern climate.
During 2017, the OFVGA commissioned a study that looked at three significant government policies that were increasing costs for our farmers: minimum wage, cap and trade, and electricity. The study estimated that the cap and trade program would add an additional $55 million cost to Ontario’s fruit and vegetable farmers, representing a reduction in profitability by 2.5%.
Perhaps this reduction in profitability does not seem significant. However, looking deeper, the study showed that on average, the industry operates on margins of approximately 12%. On average, 9% of operating expenses went to pay for energy costs before the introduction of cap and trade. Today, it is estimated that number has increased to at least 12%.
As producing vegetables in greenhouses requires energy for year-round production, the picture is even more stark.
During a review of 22 financial statements from 9 different farms over a period from 2011-2017, natural gas alone accounted for 16.8% of operating expenses. Of course, this amount varies based on weather conditions and natural gas pricing.
The impact on the sector is not just limited to the farm. Energy costs for all businesses involved in the value chain have increased – from packaging and storage, to trucking and processing into value added products, all businesses are experiencing tighter margins.
So why are higher costs such a problem for fruit and vegetable production? The issue is that fruit and vegetable farmers are not in the driver’s seat when it comes to how their products are valued. The price paid to farmers is driven by global production and consumer demand for low priced, safe, quality food.
While we export over $1.5 billion of fruits and vegetables each year, Ontario also imports approximately $5 billion. My competition is not the greenhouse located down the road, or in British Columbia. My farm competes with the greenhouse in the United States, and the vegetable producer who can grow crops outdoors almost year-round in Mexico.
Prices for Ontario product have not increased because our global producers can continue to produce at a lower cost. Those producers do not have equivalent carbon costs to Ontario, and are further advantaged by longer growing seasons and cheaper labour.
Our sector’s goal is to be competitive, to contribute to our nation’s food security and make the significant contributions to the economy and maintain the jobs I mentioned earlier.
To reiterate, we support the repeal of the cap and trade program. The costs created by it are unsustainable for Ontario’s fruit and vegetable farmers.
However, we do support the development of a carbon reduction strategy and we want to be part of the solution.
Agriculture, after all, is one of the most impacted industries when it comes to climate change. Significant weather events, temperature extremes, and inconsistent rainfall all lead to changes in disease and pest prevalence, and other issues for planting and harvesting quality fruits and vegetables.
In fact, the reliance of the sector on energy to grow, store and deliver fruits and vegetables to market, incents farmers to innovate and improve their energy efficiency. Significant investments have been made over time by farmers to keep their energy costs low. This trend began long before the increased costs from cap and trade. These investments have been a necessity to keep our farms financially viable.
The reality is that producing food using modern technologies in our northern climate requires energy use. However, the government could help with the adoption of energy efficient technology, investments in emission reduction, and the development and adoption of best practices to support emission reductions and carbon sequestration.
My final comments are related to the federal carbon tax backstop. While the federal government has had the foresight to exempt many fuels used for agriculture, the exemption does not go far enough. Fuels for heating and cooling are not exempt, but represent a significant expense for many farmers, particularly greenhouse operations.
While we have been working with the federal government to expand their exemption, progress has recently stalled and we are unsure of their current position. In this regard, we look to the Ontario government for support to ensure the federal carbon tax does not further impact the competitiveness of food production in Ontario.
Thank you again for your attention to this important matter. I welcome any comments or questions you may have.