OFVGA response to the Cap & Trade Program Design Options

Photo by Bob Nichols

Premier Kathleen Wynne has challenged the agricultural and food sector to double its annual growth rate and create 120,000 jobs by the year 2020.  The Ontario Fruit & Vegetable Growers Association (OFVGA) supports this laudable target and the OFVGA wishes to work in partnership with the Government of Ontario to support this goal.  The OFVGA is also supportive of policies and legislation that enhances the competitiveness of Ontario’s fruit and vegetable sector.

The Government of Ontario, through its Ministry of the Environment and Climate Change (MOECC), has introduced the Cap & Trade Program Design Options for consultation and is proposing a carbon trade program for the development of a market for carbon.

The OFVGA is respectfully submitting these comments with regard to the Province of Ontario and MOECC proposal to introduce the Cap & Trade Program Design.

It must be stated from the outset that none of the fine details of this program have been provided, nor have they been evaluated from an impact perspective.   There are too many unknowns for these impacts and there is significant concern that Ontario’s economy will face too great a restructuring, and in particular, those of the agricultural and horticultural economies will not be able to sustain this direction as it currently is stated.

The OFVGA is also very concerned with the impact of legislation, which puts Ontario in a less competitive position than our neighbours, and the potential impact for businesses relocating from Ontario to these jurisdictions.  This is contradictory to the Premier’s Challenge stated above.  The potential “leakage” of Ontario production and jobs due to this and other policies cannot be overstated.

Questions Concerning the Cap & Trade Program
Food security and competitiveness are at the core of Canadian fruit and vegetable production and the development of a Cap & Trade program will impact Ontario grower’s ability to compete.  It is essential that the impact of a Cap & Trade program be linked to the direct and indirect impacts on the economy and this analysis simply has not been done.  While the questions being asked in this consultation contribute to a better understanding of the impact of what is being proposed, it should not be construed that growers are accepting of the way this program is being put forth.  A full economic analysis of the Cap & Trade program including impact analysis on horticulture is required.

1. How do you anticipate linking with Quebec and California affecting your sector and/or facility?   

The linkage of Ontario’s program to Quebec and California would have a similar impact on many in agriculture – the effect of increasing the costs of production with little to no economic benefit.  The Ontario horticulture sector already faces stiff competition for both domestic and export markets from jurisdictions including Mexico, Peru and Colombia that have much lower publicly regulated cost structures including labour and environmental compliance costs.  Further, California is a direct competitor to domestic horticultural production.  It is critical that we identify the areas where the adoption of innovative techniques will effectively reduce carbon emissions and incentivize growers to undertake these improvements.  Under the Quebec program, the only offsets that appear to be agriculturally related are linked to bio-digesters.  There is very little uptake on this in Quebec.  Ontario’s version of the Cap & Trade must encourage offsets through management, including grasslands, no-till, orchards, buffer strips, and other good practices that support carbon capture and sequestration.    This will encourage Ontario farmers to engage in the program.

2.  Do Ontario industries have experience with the linking of trading regimes in other jurisdictions that can be instructive for Ontario? 

Not applicable

3.  How do you anticipate this timing affecting your sector and/or facility? 

It is anticipated that there will be a significant increase in the cost of production for Ontario horticultural producers, resulting in a less competitive sector.  This will result in increasing the cost of food to Ontario consumers as growers cannot be expected to absorb these added costs.  This is a challenge for Ontario growers, as we are price-takers.  While costs for consumers will no doubt increase through direct sales, the ability of Ontario growers to pass these costs through the retail chain will be minimal, because of the impact of imported foods.  Higher costs of Ontario produced food will have the impact of consumers purchasing imported product, thereby not supporting the Ontario “Buy Local” strategy.  The net result will be that higher imports will result in reduced employment in Ontario in this sector, negatively influencing the Premier’s Challenge to grow agriculture in this province.

Because many of our producers are subject to either strong exports (for example, greenhouse producers, ginseng growers) or subject to intense international competition (for example, asparagus growers, vegetable growers, tender fruit growers), the increase in costs will result in them being less able to compete with jurisdictions that already have competitive advantage (in terms of costs of production – low labour rates or lower power rates, environmental inequities and technology limitations).  For example, asparagus producers from Peru are not subject to Cap & Trade policies, and as a result will not face the increased cost of their sources of energy (fuel, electricity) being pushed down from their suppliers.  Further, those growers that require energy for storage of their crops (apples for example) will have elevated costs which they will not be able to pass to the consumer – it does NOT work that way.  The speed of implementation of this program may accelerate the departure of some significant investments and businesses as a result of the increased costs of production.  It would be anticipated that greenhouse investments (at approximately just <$1M per acre) would leave this province faster and land in similar locations in the United States (Michigan, Ohio).

4.  Noting that a later program start date would mean a steeper decline in annual caps to support achievement of Ontario’s GHG reduction targets, does a January 1, 2017 start date give sufficient time for industry, businesses, and households to prepare for a cap and trade program? 

It is essential that a regulatory impact assessment be conducted on those businesses that are directly impacted by imports and exports so that the economic impact can be determined.  Competing jurisdictions must be made accountable to the same standard of mandated government costs that are being forced on Ontario food growers.  In order to use a January 1, 2017 date (which is less than 13 months away), the economic impact assessment must be done so that industry can evaluate the correct timelines for implementation of such policies.

5.  Ontario plans to have extensive training and outreach to assist emitters with understanding their compliance obligations under the program.  What else can Ontario do to support industry as it prepares for a cap and trade program? 

Direct emissions from agriculture under the current program are to be considered exempt.  While this is an important first step, more consideration must be given to the indirect effects of the Cap & Trade on agriculture.  The Government of Ontario can first recognize the challenge that this policy will provide to Ontario horticultural farmers, and provide the economic impact assessment to growers.  Ontario growers would then be able to establish the impact on the value of their crops and the viability of their operation, thereby making informed decisions on how to proceed in uncertain times. 

The Government of Ontario must provide consumers with an accurate assessment of the impact of this Cap & Trade program on consumer prices. 

6.  Should there consideration be given to broadening the scope to other sectors?  

No, consideration should not be given until there is a credible impact analysis of the Cap & Trade program.  

7.  How should Ontario’s program treat energy-from-waste facilities considering that emissions from landfilling are proposed not to be covered by the program? 

The government of Ontario should redefine the term “waste”.  In agriculture, a so-called “waste” product is something that is looking for a commercially viable use, but one has not yet been found for it. In horticultural production if such products are available for conversion to energy (for example in bio-digesters), those products from this production scheme that are put into a renewable or recyclable position should be exempted from this legislation. 

Landfills should be considered under this part of the legislation.      

8.  Should there (be) consideration given to broadening the scope to other sectors? 

Other sectors that capture and sequester carbon (forestry, ethanol, biodiesel) should also be subject to various exemptions.  We agree that those who capture carbon should get exemptions and credits under the Cap & Trade program.

9.  How should Ontario’s program treat energy-from-waste facilities considering that emissions from landfilling are proposed not to be covered by the program?

 It has been considered that current landfills are a source of methane, and indeed, in many locations methane digestion/production should be captured and utilized.  While methane is a significant greenhouse gas, it can also be a significant fuel source will less GHG impact if used with the right technology.

10.  How should the treatment of fixed process and combustion emissions differ?

Not applicable

11.  What should be the guiding principles for defining what are fixed process emissions versus combustion emissions?

Offsets for those that capture carbon must be an essential component of the development of these policies.  For horticultural producers, orchards (trees and grass are long term plants), greenhouses (for short term capture), no-till practices, best management practices which support a healthy soil micro- and macro-biota (including earth worms which sequester carbon into the soil), turning land into to grassland, buffer strips, wind breaks to decrease soil erosion should all be included in offsets.

Recommendations to the Ministry of the Environment and Climate Change concerning the Design of the Cap & Trade Program.

Offsets – It is strongly urged that multiple offsets from agriculture be included, with no restrictions on whether a process is common practice or not.  Those activities that significantly contribute to carbon capture (any plant) and carbon sequestration (the long term deposition of carbon out of the atmosphere) must be eligible to be included as carbon offsets.  A less than exhaustive list would include orchards (trees and grass are long term plants), greenhouses (for short term capture), no-till practices, best management practices which support a healthy soil micro- and macro-biota (including earth worms which sequester carbon into the soil), turning land into to grassland, buffer strips, and the utilization of wind breaks.

Implications to International Trade – A robust and complete analysis of the Cap & Trade program on the impact on both imports of produce from other jurisdictions (including those that have and those that do not have similar carbon strategies), and exports to jurisdictions must be completed prior to any legislation moving forward.  The impact of this proposed program on competitiveness and domestic food production and security is not known at this moment.  For Ontario growers to be able to compete in a fair manner, artificially determined costs of production, such as government-mandated costs, must be evaluated for their impact on food prices, farmers, consumers, jobs and the economy.   A comprehensive evaluation on how the government intends to deal with importation of produce from regions that do not have similar Cap & Trade system is required. 

Use the Farm Business Registration Number for tax implications – If the Cap & Trade system is to be used, then a system to ameliorate the costs of this program to farmers, either as a tax credit or elimination for fuel, could be used as an example tactic to address farmer’s concerns. 

Credit Aggregation – From a horticultural sector perspective, the OFVGA could be used as an aggregator of credits for the sector.  It is suggested that some indication of carbon capture and sequestration be used for each subsector within horticulture (for example, acres of apples could be used as a credit, with a value of trees per acre provided).

We request that the MOECC work with OFVGA to develop a strategy to facilitate the transition of the horticulture sector to a low-carbon economy and ensure horticulture remains a sustainable source of fresh produce for all Ontarians.

To view the original submission, please click here. To view the original discussion document, please click here.

About the Ontario Fruit & Vegetable Growers Association
The Ontario Fruit and Vegetable Growers’ Association (OFVGA) was established in 1859, which makes it one of Ontario and Canada’s oldest farm commodity organizations. As the voice of Ontario’s fruit, vegetable and greenhouse farmers, the OFVGA is a nationally recognized not-for-profit association that advocates on behalf of Ontario fruit and vegetable farmers and the edible horticulture industry, and represents its members provincially, nationally, and internationally.   The sector supports 30,000 farm-based, non-family jobs in Ontario, as well as a further 8,700 jobs specific to horticulture and specialty crops. Over 125 different fruit and vegetable crops are grown in Ontario with an estimated annual farm gate value of $1.74 billion (2014).

For more information, please contact:

Jason Verkaik
Chair of the Board of Directors, OFVGA
905 775 2432

Jan Vander Hout
Vice-Chair of the Board of Directors, OFVGA
905 628 3709

Brian Gilroy
Property Section Chair, OFVGA
519 270 3032

Norm Charbonneau
Director, OFVGA
519 832 5283

Mark Wales
Safety Nets Section Chair, OFVGA
519 773 6706

George Gilvesy
Director, OFVGA
519 326-2604

Dr. John Kelly
Executive Vice President, OFVGA
519 763 6160 x115

Dr. Justine Taylor
Energy and Environment Co-ordinator
Ontario Greenhouse Vegetable Growers (OGVG)
519 326 2604 x205