Ottawa’s plan to implement a mandatory $50-per-tonne carbon tax by 2022 will cost Western Canadian farmers more than their Eastern Canadian counterparts, iPolitics has learned.

A January 2017 memo to Agriculture Minister Lawrence MacAulay, prepared by Agriculture and Agri-Food Canada and obtained by iPolitics via an Access to Information request, states a $50-per-tonne carbon tax would cost the average Western Canadian farm $3,705 annually — a 1.45 per cent increase in net operating expenses.

In comparison, Agriculture Canada found the average farming operation in Eastern Canada would see its next operating expenses rise by $2,423 annually, or 0.97 per cent.

“The disparity of impacts between the east and west are due to the different sources of electricity available to farmers across the country,” the memo notes. “In provinces with a large endowment of hydroelectricity, farms will incur lower increased costs than farms in provinces that derive most of their electricity from fossil fuels due to the larger carbon content.”

The cost of electricity for Western farmers is expected to rise 24 per cent, to $1,070 per average farm annually, Agriculture Canada said in a February 2017 PowerPoint presentation based on 2016 input prices. Alberta and Saskatchewan, the department noted, use coal to generate most of their electricity, while provinces like Quebec and British Columbia rely largely on hydroelectricity.

Avoiding higher electricity costs will be difficult for farmers, Agriculture Canada added.

“For electricity, customers are captive and electricity companies will be able to pass some of their carbon costs on to consumers,” the memo notes. “However, farmers may be able to benefit by generating low carbon-electricity and selling it back to the grid.”

Farmers also will see higher machinery fuel costs. Under a $50-per-tonne carbon price, the department said, the average farm in Eastern Canada can expect its fuel bill to go up by $1,556 annually, or 18.2 per cent. Farmers in Western Canada can expect to pay an average of $2,364 (17.6 per cent) more.

But not all farms will be affected by the proposed price on carbon the same way, Agriculture Canada told MacAulay.

“This result is for a typical or average farm. However, impacts on net operating expenses will vary depending on the cost and input structure of various sub-sectors. Some farms will have a larger share of their inputs tied to carbon. (e.g. greenhouses have very energy-intensive production),” the memo reads, adding other effects are yet to be determined.

“The true financial impacts on agricultural producers will depend on various unknown elements,” Agriculture Canada wrote. “The priority issue is to consider how other industries in the supply-chain pass on their carbon costs to farmers. (i.e. suppliers of commercial feed, fertilizers and transportation services.” That will required further analysis, the department said.

Canada’s agriculture industry accounts for 10 per cent of Canada’s greenhouse gas emissions — largely emitted biologically by livestock and crops, sources which are expected to be exempt from Ottawa’s carbon pricing plan.

As such, “carbon pricing will not impact the majority of agricultural emissions,” said Agriculture Canada. The memo, however, warns carbon pricing could “make Canada less competitive internationally” because it would “alter production decision for environmental gain.”

Net agriculture-based greenhouse emissions, the department noted, have declined slightly over the past two decades, while emissions intensity has “fallen more dramatically over the same period of time.” For example, the department said emissions generated by the dairy industry per kilogram of milk have dropped 20 per cent since 1991.

“In other words, the agricultural sector is producing more without increasing its [greenhouse gas emissions],” the memo reads.

Ottawa has drafted what it says is a revenue-neutral carbon tax of $10 per tonne in 2018, rising to $50 per tonne by 2022, for any province that has not signed on to the Pan Canadian framework that requires provinces create a carbon tax or cap-and-trade system of their own.

Canadian farmers are staunchly opposed to the plan, arguing it will hurt the multi-billion industry. Some within the sector want farmers exempted from the tax, while others insist the policy should be scrapped altogether.

Saskatchewan Premier Brad Wall, who opposes Ottawa’s plan, has repeatedly cited the agriculture industry as one of his reasons for not signing on.

Prime Minister Justin Trudeau and MacAulay have argued provinces can use the revenues generated by a federal carbon pricing plan to help industries like agriculture remain competitive. Some provinces that already have a carbon pricing plan in place — like Alberta and British Columbia — have developed exemptions for the sector.