National | Opinion

Carbon levy falsely accused as culprit behind food inflation

Some politicians and commentators are working to convince Canadians that our carbon-levy-and-rebate program (miscast as the carbon tax) is causing food price inflation. That’s wrong.

When it comes to inflation, and especially food price inflation, the carbon levy is not the problem. Here are four pieces of evidence.

First, inflation is high everywhere. But Canada’s rate is among the lowest. Over the past year and a half (January 2022 to August 2023),  inflation was lower in Canada than in the United States or the European Union, according to the OECD.

Similarly, food price inflation is high everywhere. In Canada, over the past year and a half, food prices are up 13.1 per cent, according to Statistics Canada. In the U.S., where there is no carbon levy, food prices rose nearly as much: up 11.8 per cent.

And when it comes to most farm products (e.g., meat, grains, oilseeds) the carbon levy cannot be driving up prices because there is an exemption for most farm inputs (e.g., machinery fuel, energy to make fertilizers, etc.).

Granted, farmers pay the carbon levy on a minor portion of their fuel use (propane and natural gas to dry grain or heat barns), but that is a small percentage of farm expenses; the vast majority of farm inputs are exempt.

Finally, the Bank of Canada has quantified the carbon levy’s contribution to Canadian inflation overall: just 0.15 per cent — a fraction of the inflation we are seeing. And the impact on food will be even smaller, given the exemptions for farm fuels, etc.

Clearly, food price inflation, in Canada and around the world, cannot be caused by our carbon levy. So, what are the real causes?

The largest factor is the lack of competition and high degree of concentration among food retailers and processors, leading to windfall profits for many of these corporations. On top of this, there is the Russian invasion of Ukraine, and that disruption to a major grain exporter.

Also affecting prices are lingering COVID-related supply chain issues. Another cause is increasing demand: global consumption of grains and oilseeds has doubled since 1984. Another large factor is climate impacts.

That last point is key, because it will be climate change (and not carbon levies that work to lower emissions and slow climate change) that will be the largest driver of food price increases moving forward.

If we do not rapidly reduce our emissions (via the carbon levy and other measures) and if we do not blunt the impacts of climate change, the food price increases of the past year or two will be eclipsed by much larger supply and price shocks in coming years.

The United Nations Office for Disaster Risk Reduction warns that “climate change is increasing the frequency, severity, and duration of droughts in many regions” and that “simultaneous events affecting connected breadbaskets like Argentina, Australia, Brazil, Europe and the United States of America could lead to a food price crisis ….

“In view of climate variability at the global scale, there is increased probability of multiple global breadbasket failures.”

Another recent report, from the Intergovernmental Panel on Climate Change (IPCC), warns that “Multiple climate change risks will increasingly compound and cascade in the near term …. These interacting impacts will increase food prices …”

Climate change will affect the rivers that supply irrigation water to much of the world’s most productive farmland. Lending gravity to these predictions is the fact that in each of the past five years, the world consumed more grains and oilseeds than it produced.

The evidence is clear: our carbon levy is not the cause of food price increases. To the contrary, in coming years, the biggest risk to food supplies and price stability and affordability is climate change caused by greenhouse gas emissions.

And the carbon levy, a key tool for reducing those emissions, is thus also a key tool to help moderate and stabilize food prices. The carbon levy is not the problem, but it is a crucial part of the solution.

Stewart Wells is a Saskatchewan farmer and National Farmers Union vice-president of operations and Darrin Qualman is the NFU director of climate crisis policy and action.