7. Canada

Canada has significantly reduced support to agriculture since the late 1980s. Producer support as a share of gross farm receipts was halved from 1986-88 to 2000-02, largely because market price support (MPS) to the grains industry was discontinued in 1995. Producer support was halved again by the early 2010s and averaged about 10% of gross farm receipts in 2019-21 – a little over half of the OECD average.

Despite past reductions, MPS continues to dominate support to producers (albeit limited to the dairy, poultry and egg sectors, which remain under supply management), with custom tariffs, production quotas and price-setting elevating domestic prices above world prices. Milk receives high single commodity transfers, at 37% of its gross farm receipts value. Prices received by farmers in 2019-21 were 5% higher on average than world markets, while prices for commodities not under supply management aligned with world levels. Payments based on unconstrained use of variable inputs, notably fuel, are also potentially most-distorting. Together with MPS, these represented 55% of aggregated gross producer transfers in 2019-21, or 5% of gross farm receipts. Other budgetary support to individual producers focused on risk management. Due to severe weather conditions, risk management tools played a more important role in 2021, with payments for crop insurance increasing by nearly CAD 2.9 billion (USD 2.3 billion) compared to the previous year.

Support to general services (GSSE) declined relative to the size of the sector, indicating that rising expenditures have not kept pace with the sector’s growth. These amounted to 3% of the agricultural production value during 2019-21, down from 6% at the beginning of the century and slightly below the OECD average. In terms of composition, the top two priorities for Canada are consistently expenditures on agricultural knowledge and innovation, and inspection and control systems, each accounting for about 40% of GSSE expenditures in recent years. However, while agricultural knowledge and innovation held a relatively stable share of the GSSE since the late 1980s, the share of expenditure devoted to inspection and control systems increased by 17 percentage points over the same period.

Overall, the cost of total support to the agricultural sector fell. The total support estimate represented 0.4% of Canada’s GDP in 2019-21, down from 1.6% in 1986-88 and 0.7% in 2000-02, well below the OECD average. Of total support, three quarters went to individual farmers in the past three years, and almost all the remainder went to general services.

Federal, provincial and territorial Ministers of Agriculture jointly issued the Guelph Statement on 10 November 2021. The statement sets out the direction for the future of the sector and for the next Canadian agricultural policy framework, due in April 2023. The sustainable agriculture approach was announced, with priorities including tackling climate change and environmental protection; science, research and innovation; creating the conditions for Canadian businesses to meet evolving challenges; building sector capacity and growth; and enhancing resiliency to anticipate, mitigate and respond to risks.

Recent policy interventions in Canada focus on alleviating financial pressure on livestock farmers who faced extraordinary additional costs due to drought and wildfires. Record high temperatures and the lack of rainfall in 2021 affected agricultural production in western Canada. The federal government made CAD 100 million (USD 80 million) available through the AgriRecovery Framework to address immediate needs. A raft of measures was introduced at the provincial level with the same purpose.

  • Agriculture’s share of Canada’s greenhouse gas (GHG) emissions (8%) remains below the OECD average, and agriculture’s absolute emission levels remained largely stable over the last 15 years. Ambitious, economy-wide GHG emission reduction targets do not specifically cover the agricultural sector, which may result in the sector lagging. The national fertiliser emission reduction target is a step towards curbing nitrous oxide (N2O) emissions, which, contrary to methane (CH4) emissions, increased over the past 15 years.

  • Canada has one of the most stringent carbon pricing systems in the world. However, the agricultural sector remains largely excluded, with non-energy-related agricultural emissions not covered by the system, and with exceptions and rebates provided for gasoline and diesel fuel used by farms. The carbon pricing system thus provides weak incentives to reduce a small fraction of emissions from agriculture. Specific targets for agriculture and land use emissions, based on their marginal costs, are recommended to support the economy-wide GHG mitigation efforts. Additionally, wider use of agricultural carbon offset schemes could contribute to practices that reduce GHG emissions and increase carbon storage in soil.

  • The Healthy Environment and a Healthy Economy plan is a step towards reducing negative environmental externalities from agriculture and boosting the sector’s sustainability through the development and adaptation of clean technologies and processes. However, clear and specific targets, monitoring and impact assessment will be crucial to achieve the policy’s ambitions.

  • The Canadian Agricultural Partnership Framework Agreement for 2018-23 continues to emphasise general services support to the sector through programmes that target industry-led research and development, adoption of innovation, and inspection and control systems. The next policy framework should reinforce this focus to strengthen the sector's long-term competitiveness and sustainability.

  • The 2018-23 agricultural policy framework provides farmers with an array of risk management tools. The Canadian approach to risk management evolved over time to reduce reliance on ad hoc policy responses and shift towards a more proactive policy framework. Nonetheless, holistic evaluation of the risk management policy toolkit and additional resilience-building programmes could enable larger-scale adoption of the most successful programmes, stimulate the development of market-based tools, and encourage farmers to find better ways to manage risks at farm level. Furthermore, the sector’s long-term resilience could benefit from linkages and trade-offs between business risk management programmes and environmental outcomes (OECD, 2020[1]).

  • Although producer support relative to gross farm receipts was below the OECD average in recent years, potentially most-distorting transfers remain the main component of transfers to producers – particularly market price support to the dairy sector. For most commodities, domestic market prices align with world prices, but the dairy, poultry and egg sectors continue to be protected from international competition via market price support measures that distort production and trade. To phase out supply management for these commodities, the quotas should increase and price support for the dairy, poultry and egg sectors should be reduced. This would encourage market responsiveness, stimulate innovation (to increase efficiency and diversify towards higher-value products), and reduce quota rents.

Prior to the mid-1980s, Canada heavily supported the agricultural sector through measures such as import tariffs, export and production subsidies, and price and production controls. The dominant features of agricultural policy were supply management measures in the dairy and poultry sectors, collective marketing in grains and oilseeds (notably by the Canadian Wheat Board, or CWB), and income stabilisation programmes (Barichello, 1995[2]). Support varied between eastern and western provinces, largely due to Canada’s decentralised political system, and the independence of provincial governments in policies such as marketing legislation (Anderson, 2009[3]).

In the mid-1980s, Canada began agricultural policy reform, particularly in the grain sector. In 1990, the Western Grains Stabilization Program, which was intended to stabilise net margins for major grains and oilseeds from western Canada, was terminated (Anderson, 2009[3]). This was replaced by the National Tripartite Stabilization Program (NTSP), which established federal-provincial cost-sharing of programmes (Antón, Kimura and Martini, 2011[4]). The Farm Income Protection Act of 1991 changed Canada’s approach to supporting producers by moving from policies aimed at particular commodities towards programmes supporting farm incomes. This established two safety-net programmes: (1) the Gross Revenue Insurance Plan (GRIP, 1991-1996/2002) to protect against reductions in revenues and yields; and (2) the Net Income Stabilization Account (NISA, 1991-2009) to subsidise savings accounts for individual producers (Anderson, 2009[3]; Klein and Storey, 1998[5]). Furthermore, compliance with the General Agreement on Tariffs and Trade (GATT) and free trade agreements of the early 1990s (NAFTA) accelerated the reform process, eliminating most commodity-based policies (e.g. NTSP) except those targeting supply-managed commodities (Antón, Kimura and Martini, 2011[4]). In 1995, transport subsidies to grains (the Western Grain Transport Assistance and the Feed Freight Assistance) were abolished (Anderson, 2009[3]), ending the period of high market price support1 to these commodities (Figure 7.4).

The Agricultural Income Disaster Assistance (AIDA) programme introduced in 1998 was the first to comply with criteria for income insurance and safety-net programmes under the World Trade Organization Agreement on Agriculture. AIDA was established to serve as a core income stabilisation policy, reducing the need for ad hoc programmes. The “disaster” component was integrated into subsequent programmes: the Canadian Farm Income Program (CFIP, 2001-03); the Canadian Agricultural Income Stabilization (CAIS, 2004-08); and AgriStability (Anderson, 2009[3]; Statistics Canada, 2021[6]; Antón, Kimura and Martini, 2011[4]). Since 2003, agricultural policy objectives and approaches are set out in longer-term Agricultural Policy Frameworks developed through co-operation by federal, provincial and territorial (FPT) governments. The first Framework covered five areas: (1) business risk management, (2) food safety and quality, (3) environment, (4) science and innovation, and (5) renewal (skills and training) (Agriculture and Agri-Food Canada, 2005[7]). Initially, the federal government delivered programmes directly. This evolved with the Growing Forward framework (2008-13) which transferred programme implementation to the provinces and territories, allowing for more flexibility and better adaptability to local needs (OECD, 2015[8]). During this time, the AgriStability and AgriInvest programmes replaced CAIS and NISA, respectively, continuing to provide farmers with income stabilisation products and subsidised saving accounts. The Growing Forward 2 framework (2013-18) strengthened the role of these programmes and incorporated additional initiatives, such as AgriInsurance (previously referred to as the Crop Insurance) and the AgriRecovery disaster programme framework (Anderson, 2009[3]; Statistics Canada, 2021[6]; Antón, Kimura and Martini, 2011[4]). Risk management programmes continue under the current Canadian Agricultural Partnership (2018-23) (see next section).

Support to agricultural producers in Canada decreased over the last three decades, with government support declining from over 35% of farmers’ revenues in the mid-1980s to around 10% in recent years (Figure 7.4). This resulted from the discontinuation of market price support to grains and oilseeds in the mid-1990s, and the reduction or phase-out of several programmes offering payments based on output (e.g. support to dairy farmers under the Agriculture Stabilization Act) and input use (e.g. Federal Fuel Tax Rebates) between the late 1980s and the early 2000s. Market price support to supply-managed commodities, particularly to the dairy sector, remains the largest share of transfers to producers. Payments based on current production, including multiple risk management programmes (e.g. AgriInsurance), are the second largest contributor. The share of such support is particularly high in the years when producer costs are higher or profitability reduced due to difficult weather conditions such as drought and wildfires in 2021. Other categories of payments play a relatively minor role in Canadian farm revenues.

Canada’s agricultural support policies differentiate between supply-managed sectors (dairy, poultry and eggs) which are protected and oriented towards the domestic market, and the remaining commodity sectors, which operate in an open market and export-orientated environment.

A supply management system provides market price support to the dairy, poultry and eggs sectors through customs tariffs (import control) and production quotas (production control), tradable within provinces, combined with domestic price-setting according to production costs (pricing mechanism). Successive agriculture policy frameworks regard this system as a risk management instrument (Parliament of Canada, 2017[9]; Parliament of Canada, 2012[10]).

The Canadian Agricultural Partnership (CAP) 2018-23, multilateral policy framework, outlines general policies and programmes established to support Canada’s agriculture and agro-food2 sector (Agriculture and Agri-Food Canada, 2018[11]). Agriculture is a shared jurisdiction, and all levels of government (FPT: federal, provincial and territorial) work closely in the development of agriculture policy frameworks and the delivery of programmes across the country. The principle of shared responsibility provides provinces and territories flexibility to design and deliver programmes that respond to regional needs while remaining aligned with national priorities. Provinces and territories can also develop and fund agriculture programmes outside of this framework.

The current policy framework comprises a suite of business risk management (BRM) programmes to help farmers manage market volatility and disaster risks, and strategic initiatives to increase competitiveness, productivity and profitability in the sector, increase its environmental sustainability, expand domestic and international markets, and improve the anticipation and mitigation of and response to risks.

The BRM programmes support producers in managing risks that threaten the viability of their farm or are beyond their capacity to control, and build on the backbone of programmes delivered during the previous frameworks. It also attempts to balance ex ante and ex post measures while limiting ad hoc forms of assistance. Under the CAP 2018-23, FPT governments jointly provide approximately CAD 1.5 billion (USD 1.1 billion) per year to finance five BRM programmes:

  • AgriStability, an income stabilisation programme to support producers in years of significant whole-farm margin declines.

  • AgriInvest, a savings tool matching contributions to producers who make annual deposits to an AgriInvest account, to help them manage moderate income declines, make investments in farming operations to mitigate risk or improve market income.

  • AgriInsurance, a cost-shared insurance programme to reduce the financial impact of production or asset losses due to natural hazards.

  • AgriRecovery, a disaster relief framework to help producers with the cost of activities necessary to recover from natural disasters.

  • AgriRisk, a programme to support the development of new risk management tools by the private sector.

Strategic initiatives aim to foster the long-term prosperity of Canada’s agriculture and agro-food sector under the CAP 2018-23 by providing an investment of CAD 3 billion (USD 2.3 billion), including CAD 1 billion (USD 0.8 billion) in federal programmes and activities and CAD 2 billion (USD 1.5 billion) in cost-shared programmes and activities.

Federally funded strategic initiatives comprise large, national programmes to support the sector in areas of federal jurisdiction and focus on three pillars:

  • Growing trade and expanding markets through the AgriMarketing programme, which supports industry-led market development activities by helping the sector identify and seize domestic and international opportunities; and the AgriCompetitiveness programme, which helps the sector adapt to changing commercial and regulatory environments, share best practices, and provide mentorship opportunities.

  • Fostering innovative and sustainable growth in the sector through the AgriScience programme, which supports innovation driven by industry research priorities, including pre-commercialisation activities and investments in cutting-edge research to benefit the agriculture and agro-food sector; and the AgriInnovate programme, which supports projects that accelerate the demonstration, commercialisation or adoption of innovative products, technologies, processes or services that increase the sector’s competitiveness and sustainability.

  • Supporting diversity and a dynamic, evolving sector through the AgriAssurance programme, which aims to foster public trust by helping industry develop and adopt systems, standards and tools to measure food safety and traceability; and the AgriDiversity programme, which aims to increase the capacity of youth, women, Indigenous Peoples and persons with disabilities to better participate in the agricultural sector. It supports skills, leadership, and entrepreneurial development; and facilitates knowledge sharing and best management practices.

Cost-shared strategic initiatives are funded 60% by the federal government and 40% by the provincial/territorial governments, and delivered by the latter to ensure that programmes meet their needs. These initiatives focus on six priority areas:

  • Science, research and innovation to help farmers, food processors and agro-businesses adopt innovative products and practices in order to improve resiliency and productivity through research, innovation and knowledge transfer.

  • Markets and trade to facilitate the maintenance and expansion of domestic and international markets, and help farmers and food processors improve their competitiveness through skills development and improved export capacity, underpinned by a strong and efficient regulatory system.

  • Value-added agriculture and agro-food processing to foster continued growth by supporting targeted actions aiming to increase productivity and competitiveness.

  • Public trust to build a firm foundation for the sector through improved assurance systems in food safety and plant and animal health, stronger traceability and effective regulation.

  • Risk management to enable proactive and effective risk mitigation and adaptation, and strengthen the resilience of the sector by ensuring comprehensive, responsive and accessible programmes.

  • Environmental sustainability and climate change to build the sector’s capacity to protect natural resources, mitigate agricultural GHG emissions and adapt to the anticipated impacts of climate change by enhancing sustainable growth.

Provincial/territorial governments design and administer most farm-level environmental programmes. For instance, the Environmental Farm Plans (EFP) programmes and the Environmental Stewardship Incentive programmes, financed jointly by FPT governments, strive to advance environmentally sustainable agriculture. The EFP consists of an assessment of on-farm environmental risks and the development of an action plan to mitigate them. The Environmental Stewardship Incentive programmes provide financial assistance to farms with an EFP to adopt specific beneficial practices, such as nutrient management, manure storage and soil erosion controls (OECD, 2015[8]). They are implemented on the basis of specific regional partnership programmes, such as the 2018 Canada-Ontario Lake Erie action plan to reduce phosphorus pollution (Gruère and Le Boëdec, 2019[12]). The government of Quebec has its own agri-environmental programme, the Prime-Vert (2018-23), and consulting services that aim to increase and facilitate the adoption of agri-environmental practices by agricultural producers. The government of Manitoba provides the Ag Action Manitoba programme offering activities for farmers that support the growth and sustainability of primary agriculture. Its pilot programme, Assurance: Agricultural Crown Lands Forage Productivity (2021), supports pasture improvement by funding grazing management plan development, infrastructure expansion (cross-fencing, wells, dugouts) and rejuvenation of forage lands (perennial forage seed, seeding and brush management) (Government of Manitoba, n.d.[13]).

The first Food Policy for Canada (2019) aims to create a co-ordinated and food-systems-based approach to taking action on food-related opportunities and challenges. The Food Policy indicates four areas for short-term actions, including: (1) helping Canadian communities access healthy food; (2) making Canadian food the top choice at home and abroad; (3) supporting food security in northern and indigenous communities; and (4) reducing food waste.

The agricultural sector accounted for 59 MtCO2eq in 2019, equal to 8.1% of Canada’s total GHG emissions.3 Forty-eight per cent of agricultural emissions were in the form of nitrous oxide (N2O), primarily from nitrogen fertiliser use, while 47% were methane (CH4), mainly from cattle production, and the remainder was carbon dioxide (C2O) from lime and urea application.

In its 2021 updated Nationally Determined Contribution (NDC) to the Paris Agreement, Canada committed to reducing national net GHG emissions 40-45% below 2005 levels by 2030 and committed to achieving net-zero emissions by 2050, an increase in ambition from previous targets. Both targets are economy-wide and include agriculture and other land use sectors, however without providing agriculture-specific targets (Government of Canada, 2021[14]). Canada also signed the Global Methane Pledge and committed to reducing its economy-wide methane emissions by 2030 (Environment and Climate Change Canada, 2021[15]). A national target was set for emissions from fertilisers to be reduced 30% below 2020 levels by 2030 (Government of Canada, 2021[14]). The government also proposed to work with fertiliser manufacturers, farmers, provinces and territories to develop an approach to meet the target.

The commitments were enshrined in the Canadian Net-Zero Emissions Accountability Act, which received Royal Assent on 29 June 2021. The act aims to ensure transparency and accountability by requiring the establishment of national emissions reduction targets for 2035, 2040 and 2045 ten years in advance; the development of a science-based emission-reduction plan for each target; and monitoring of progress on implementation and effectiveness (Government of Canada, 2022[16]).

The Pan-Canadian Framework (PCF) on Clean Growth and Climate Change established in 2016 is Canada’s first national climate change plan to reduce GHG emissions, accelerate clean economic growth and build resilience to a changing climate. The PCF was developed jointly by federal, provincial and territorial (FPT) governments and outlines a strategy for emission reductions across all sectors of the economy, including the agriculture, forestry and other land use (AFOLU) sector (Canada, 2016[17]). Building on the PCF, the government of Canada created its A Healthy Environment and a Healthy Economy plan, which contains new and strengthened federal policies, programmes and investments to cut pollution and build a stronger and cleaner economy, including initiatives supporting climate-smart agriculture4 in Canada (Environment and Climate Change Canada, 2020[18]). The plan was released on 11 December 2020, with more details on the initiatives announced in 2021.

The provincial governments set their own climate goals and key actions. For instance, Quebec’s 2020-2030 Sustainable Agriculture Plan (Plan d’agriculture durable 2020-2030), with a budget of CAD 125 million (USD 93 million) spread over the first five years, aims to accelerate the adoption of efficient agri-environmental practices by 2030 (Government of Quebec, 2020[19]). New Brunswick’s 2016 climate change action plan, Transitioning to a Low-Carbon Economy, proposes to reduce emissions from agriculture by promoting beneficial farm management practices that mitigate GHGs and increase on-farm adaptation solutions, and encourage agricultural carbon sinks (Government of New Brunswick, 2016[20]).

Carbon pollution pricing is considered Canada’s main instrument to achieve GHG reductions. However, the agricultural sector remains largely excluded, with non-energy-related agricultural emission not covered by the system, and exceptions and rebates provided for gasoline and diesel fuel used by farms. Carbon pollution pricing was developed under the PCF and is in place in every jurisdiction since 2019. Canada’s approach offers flexibility as provinces and territories can design pricing systems tailored to their needs, provided they meet the federal minimum stringency standard. Sub-national systems include a cap-and-trade system for GHG emissions in Quebec and a carbon tax in British Columbia. The federal backstop carbon pollution pricing system comprises two parts: a regulatory charge on fossil fuels such as gasoline and natural gas (known as the fuel charge), and a performance-based system for industries (known as the output-based pricing system). It applies to any jurisdiction that requests it or does not meet the federal benchmark. By early 2022, these include Manitoba, Nunavut and Yukon (in full), and Alberta, Ontario, Saskatchewan and Prince Edward Island (in part) (Government of Canada, 2022[21]).

Canada's carbon tax system is expected to become more stringent over the next decade, while retaining reliefs for the agricultural sector, thus reducing its incentives to contain emissions. The federal fuel charge works by taxing the sale of fossil fuels based on their carbon content. The federal carbon tax will reach CAD 50 (USD 40) per tonne of CO2eq in 2022 and continue to increase by CAD 15 (USD 12) per year until it reaches CAD 170 (USD 136) per tonne in 2030 (Government of Canada, 2021[22]). All direct proceeds are returned to Canadians and their communities with approximately 90% going to citizens through the Climate Action Incentive Payment.5 The federal carbon pollution pricing system is designed to provide targeted fossil fuel relief to limit the impact on the country’s agricultural sector (Government of Canada, 2019[23]). In its 2021 Fall Economic and Fiscal Update, the federal government proposed to return fuel charge proceeds directly to farming businesses in backstop jurisdictions via a refundable tax credit, starting with the 2021-22 fuel charge year (Government of Canda, 2021[24]). Payments to producers would be based on eligible expenses on gasoline or light fuel oil (diesel fuel) used in their operations. The government estimated that CAD 100 million (USD 80 million) would be available as rebates in the first year, and CAD 121 million (USD 97 million) the following year. There are also reliefs granted at the provincial level. For instance, under the Greenhouse Carbon Tax Relief Grant Program in 2021, British Columbia reimbursed up to 80% of the carbon tax to commercial vegetable, floriculture, and wholesale nursery and forest seedling operations (Government of British Columbia, 2021[25]).

Carbon pricing is complemented by the Clean Fuel Standard (CFS), a new regulation published by the government of Canada on 18 December 2020. The proposed regulations would reduce the lifecycle carbon intensity6 of liquid fossil fuels used in Canada and support the domestic production of cleaner fuels, such as lower-carbon-intensity biofuels. A credit market would be established with each credit representing a lifecycle emission reduction of one tonne of CO2eq. The CFS regulations would contribute to the goal of reducing GHG emissions by more than 20 MtCO2eq per year by 2030. They would also create economic opportunities for voluntary parties like biofuel and other lower-carbon fuel producers to create and sell their credits, which in turn would generate favourable conditions for feedstock providers, such as farmers, supporting lower-carbon fuel production. The final version of the regulations is expected in spring 2022, with the CFS reduction requirements coming into force on 1 December 2022 (Government of Canada, 2022[26]; Government of Canada, 2020[27]).

Within the frame of A Healthy Environment and a Healthy Economy plan, the government of Canada is undertaking both agriculture-specific and economy-wide actions that benefit the agricultural sector (Environment and Climate Change Canada, 2020[18]). Among the policy tools:

  • The Agricultural Clean Technology (ACT) initiative supports farmers and agro-food businesses in developing and adopting clean technologies to reduce GHG emissions. This programme provides CAD 165.7 million (USD 132.2 million) over seven years through two funding streams. The first, the Research and Innovation Stream (2021 to 2028), aims to support the agricultural sector in developing transformative clean technologies and enabling the expansion of current technologies in three areas: green energy and energy efficiency; precision agriculture; and bioeconomy. The support is directed to pre-market innovation, including research, development, demonstration, and commercialisation activities. The second, the Adoption Stream (2021 to 2026), aims to help farmers adopt commercially available clean technologies and processes, with priority for those that show evidence of reducing GHG emissions and generating other environmental benefits. This funding stream is to support the purchase of more efficient grain dryers and fuel switching initiatives, in particular powering farms with clean energy and moving off diesel.

  • The Agricultural Climate Solutions (ACS) initiative supports the development and implementation of farming practices to tackle climate change (Government of Canada, 2021[28]). It is a multi-stream programme under the Natural Climate Solution Fund.7 The Living Labs stream, with CAD 185 million (USD 148 million) over ten years, aims to develop regional collaboration hubs, which will bring together farmers, scientists and other sector partners to develop, test and monitor beneficial management practices on farms that sequester carbon and mitigate GHG emissions to reduce Canada’s environmental footprint and enhance climate resiliency. In addition, the On-Farm Climate Action Fund (2021-2024) worth CAD 200 million (USD 160 million) helps farmers adopt such practices, including nitrogen management, cover cropping and rotational grazing.

  • The Natural Climate Solutions Fund invests in programmes that do not specifically target agriculture (Government of Canada, 2021[29]). It makes over CAD 3 billion (USD 2 billion) available over ten years to plant two billion trees. In addition, it will provide CAD 60 million (USD 48 million) over the next two years to protect existing wetlands and trees on farms, as announced in the Budget 2021. Through the Nature Smart Climate Solutions Fund, it also provides CAD 631 million (USD 470 million) for projects that help conserve, restore and enhance wetlands, peatlands and grasslands to store and capture carbon.

  • The Low-carbon and Zero-emissions Fuels Fund, a CAD 1.5 billion (USD 1.1 billion) investment, aims to increase the production and use of low-carbon fuels. Although this initiative is not specific to agricultural sector, it is to help farmers diversify by producing feedstocks for biofuels.

Provincial governments also use investment projects. For instance, the government of Nova Scotia announced the Agriculture Clean Technology Program in March 2021. This is an investment of CAD 5 million (USD 4 million) over two years to help farmers and food processors improve their operations, including adopting clean technologies that help reduce GHG emissions, improving energy efficiency, promoting sustainable and clean growth, increasing value-added agricultural production, extending growing seasons, and improving costs of production (Government of Nova Scotia, 2021[30]). The government of Prince Edward Island (PEI) launched the PEI Agriculture Climate Solutions Program in March 2021 to encourage and assist the PEI agricultural sector to implement best-management practices that mitigate the production of greenhouse gases from various in-field or on-farm activities or by stimulating carbon storage in soils (Government of Prince Edward Island, 2021[31]). In October 2021, the government of Quebec announced the Quebec Sustainable Agriculture Research Network, a flagship measure of the 2020-2030 Sustainable Agriculture Plan. The network aims to promote the development of knowledge for improved health and conservation of agricultural soils, and to reduce the use of pesticides and their associated risks in the context of climate change. It also aims to increase research potential by providing training in the field of sustainable agriculture (Government of Quebec, 2021[32]).

On 10 November 2021, FPT Ministers of Agriculture issued the Guelph Statement setting out the direction for the future of the sector and, in particular, for the next Canadian agricultural policy framework, due to be launched in April 2023. The Statement presents the vision of further improving the sustainability of the agro-food sector through investment in tackling climate change and environmental protection; science, research and innovation; creating the conditions for Canadian businesses to meet evolving challenges; building sector capacity and growth; and enhancing resiliency to anticipate, mitigate and respond to risks.

Risk management was an important issue in 2021, as record high temperatures and the lack of rainfall affected agricultural production in western Canada. In August 2021, the federal government made available CAD 100 million (USD 80 million) through the AgriRecovery Framework to address the immediate extraordinary costs faced by producers due to drought and wildfires. This funding is designed to match all provincial AgriRecovery submissions on a 60-40 cost-shared basis between the federal and the provincial/territorial governments. A raft of measures were introduced at the provincial level. These include:

  • The Alberta government announced, on 6 August 2021, an AgriRecovery response, the 2021 Canada-Alberta Livestock Feed Assistance Initiative, to help address the extraordinary extra feed costs incurred by Alberta’s livestock producers because of reduced grazing capacity.

  • The British Columbia government, in collaboration with the government of Canada, enabled an AgriStability “Late Participation” Option to allow producers to register for the 2021 programme year until 31 December 2022. However, late registrants will receive a 20% lower payment rate than those who proactively enrolled. The 2021 Canada – British Columbia Wildfire and Drought Recovery Initiative was launched to help agricultural producers deal with extraordinary costs associated with the 2021 wildfires. In addition, the Emergency Management British Columbia (EMBC) Wildfire 2021 Emergency Feed Program provided emergency feed support for up to 14 days to commercial livestock businesses to help them respond to the threats and impacts of wildfire and transition to revised operational strategies.

  • The Manitoba Government launched the Hay Disaster Benefit in July 2021. This initiative provided an additional CAD 44 (USD 35) per tonne to insured forage producers to help offset the additional cost of replacement feed and transportation due to severe shortage of forage throughout the province. In August 2021, the Canada-Manitoba AgriRecovery Drought Assistance was announced with three programmes totalling up to CAD 155 million (USD 124 million): (1) the Livestock Feed and Transportation Drought Assistance to help livestock producers purchase and test feed for livestock, including transporting purchased feed from distant locations; (2) the Livestock Transportation Drought Assistance to help livestock producers offset freight expenses associated with moving their breeding herd to an alternate feeding location due to shortages of feed; and (3) the Herd Management Drought Assistance to help producers to offset the cost of replacing breeding animals when culling is above normal due to shortage of winter feed.

  • The Ontario Government provided up to CAD 2 million (USD 1.6 million) through the Northwestern Livestock Emergency Assistance Initiative to assist farmers in north-western Ontario with emergency measures for feed, water, and basic livestock needs. In September 2021, the federal and provincial governments announced up to CAD 12.5 million (USD 10 million) in financial support through the Canada-Ontario Transported Feed AgriRecovery Initiative to help cover extraordinary costs associated with sourcing feed or transporting livestock to feed due to drought conditions. The same month, the provincial government announced the Northwestern Ontario Drought Assistance Initiative to provide financial assistance for well drilling and pond construction projects.

  • The Saskatchewan Government launched the 2021 Canada-Saskatchewan Drought Response Initiative under the AgriRecovery Framework in September 2021. Up to CAD 297.5 million (USD 237 million) in direct supports to help cattle producers maintain breeding stock while facing extraordinary costs.

In March 2021, FPT Ministers of Agriculture agreed to fully remove the reference margin limit (RML)8 to the AgriStability programme. This change could increase the overall amount the programme pays out to participants by approximately CAD 95 million (USD 76 million) nationally. Furthermore, it was agreed that private insurance payments will be excluded from calculating a participant’s programme year margin. This change applies to private insurance payments from programmes where the premiums are fully producer-funded and compensates for losses related to price, revenue, productions or margins. Both modifications were retroactive to the 2020 programme year. In addition to changes at the national level, the government of Ontario announced, on 25 June 2021, an increase in the compensation rate from 70% to 80% on the provincial portion of the AgriStability payments.

In December 2021, the government of Canada announced CAD 28 million (USD 22 million) in funding to support Prince Edward Island potato growers, who have been affected by trade disruptions caused by the temporary suspension of export certificates for fresh potatoes from Prince Edward Island to the United States.9 This funding will be used to help to redirect surplus potatoes to organisations addressing food insecurity and support for the environmentally-sound disposal of surplus potatoes. It will also support marketing activities and help industry to develop long-term strategies to manage future challenges.

On supply-managed commodities, in its 2020 Fall Economic Statement, the government of Canada announced CAD 691 million (USD 515 million) over ten years for programmes specific to supply-managed chicken, egg, broiler hatching egg and turkey farmers. In April 2021, two programmes were announced to be launched in the financial year 2021-22. The Poultry and Egg On-Farm Investment Program aims to support on-farm investment in: (1) increasing efficiency or productivity; (2) improving on-farm food safety and biosecurity; (3) improving environmental sustainability; and (4) responding to consumer preferences (improving animal welfare, adopting alternative housing systems, transitioning to organic production, etc.). The non-repayable contributions of almost CAD 647 million (USD 516 million) are allocated to chicken (54%), turkey (12%), egg (21%) and broiler hatching egg (14%) producers. The Market Development Program for Turkey and Chicken is focused ono helping increase domestic demand and consumption of Canadian turkey and chicken products through industry-led promotion activities. Funding will be distributed to national not-for-profit industry organisations working to improve the sector’s market position: CAD 19.23 million (USD 15 million) for the Turkey Farmers of Canada and CAD 25 million (USD 20 million) for the Chicken Farmers of Canada.

On food safety, in 2021, the Canada Grain Regulations were amended. (1) The fees charged by the Canadian Grain Commission (CGC) for official inspection and official weighing were realigned with an adjusted grain volume forecast. (2) Canary seed was add to the list of seeds designated as grains for the purposes of the Canada Grain Act to ensure that their producers are eligible for compensation under the CGC Safeguards for Grain Farmers Program and for its other grain grading and quality assurance services. The amendments came into force on 1 August 2021.

On food policy, the Canadian Food Policy Advisory Council was established in February 2021 as an independent advisory body supporting the Minister of Agriculture and Agri-Food. Members of the Advisory Council are appointed by the Minister.

As part of Canada’s preparations for the UN Food Systems Summit 2021, the AAFC and other organisations held a series of “Dialogues” which brought together a wide range of stakeholders on key elements of sustainable, equitable, and resilient food systems. Outcomes of the Canadian “Dialogues” have been used to identify national pathways towards sustainable food systems. In 2022, Canada will publish its National Pathways Document that uses a food systems lens to support progress on the Sustainable Development Goals and the Food Policy for Canada’s vision.

Within the framework of the Food Policy for Canada, the federal government has been implementing several programmes planned for the period of 2019-24, including the Local Food Infrastructure Fund, the Food Waste Reduction Challenge, the Northern Isolated Community Initiatives and the AgriCommunication Initiative.

As announced in the 2021 Budget, the Local Food Infrastructure Fund, initially a five-year programme of CAD 50 million (USD 37.7 million), was enhanced by an additional CAD 10 million (USD 8 million) top-up. This programme aims to strengthen food support organisations and help improve access to safe and nutritious food for Canadians at risk.

In May 2021, the government of Canada launched the last two streams of the Food Waste Reduction Challenge. Up to CAD 6.5 million (USD 5 million) will be awarded to innovators of technologies that can extend the life of food or transform food that would otherwise be lost or wasted. The first two streams of this challenge were launched in November 2020 with awards totalling up to CAD 10.8 million (USD 8 million) dedicated to innovative business models that can prevent or divert food waste at any segment of the food supply chain.

In December 2021, the government of Canada launched the AgriCommunication Initiative, which is to contribute to better connecting Canadians with Canada’s farmers, and promote consumer awareness of the strengths of Canada’s agricultural sector. This initiative has two streams. The first stream, with financing of up to CAD 8 million (USD 6.4 million) over three years, aims to help Canadians better understand how their food is produced. Projects will also help enhance Canadians’ trust in sustainability, animal care, and efforts to reduce food waste. As part of this stream, communications and awareness activities will be launched in spring 2022. The second stream of the initiative will focus on increasing the sector’s understanding of consumer preferences and expectations.

In January 2021, the Canadian Northern Economic Development Agency (CanNor) launched the Northern Food Innovation Challenge to encourage the development of innovative solutions to food insecurity in the north. Innovation may include the development of a new product or process, but also adaptation of an existing product or process to work in a northern climate or in remote areas. This is the third stream financed through the Northern Isolated Community Initiatives Fund, totalling to CAD 15 million (USD 12 million) over five years, which supports community-led projects for local and indigenous food production systems with an emphasis on innovative and practical solutions to increase food security across the north. The first stream, Support for Northern Food Business, provides funding to northern businesses and communities to build a strong territorial food industry and help reduce food insecurity using practical approaches, while the second stream, Support for Northern Territorial Food Systems, provides funding to territorial initiatives to increase economic opportunities in the territories related to growing, harvesting, and processing healthy food.

On local food, in January 2021, the government of New Brunswick (NB) released its new Local Food and Beverages Strategy 2021-2025. This four-year action plan aims to strengthen NB’s food system and improve self-sufficiency through three core pillars related to production, marketing and the use of healthy local food within New Brunswick.

Several labour-related measures were extended and enhanced in 2021. To ease the burden on Canadian employers, the government of Canada increased the funding of the Mandatory Isolation Support for Temporary Foreign Workers (TFW) Program to CAD 142 million (USD 113 million) in 2021. The programme intends to help with the impacts of the COVID-19 pandemic on food supply in Canada by assisting the farming, fish harvesting, and food production and processing sectors with some of the incremental costs associated with the mandatory 14-day isolation period, as well as cost associated with the 3-day hotel quarantine imposed under the Quarantine Act on TFWs.

To provide food assistance to food vulnerable populations during the pandemic, the Emergency Food Security Fund, introduced in 2020, was reinforced with additional financial resources, for a total announced value of CAD 330 million (USD 263 million) in December 2021.

At the provincial level, for example, the government of Quebec together with the federal government made available CAD 21.8 million (USD 17.4 million) in 2021 to livestock producers impacted by the slaughterhouse slowdown caused by the pandemic. The initiative (Initiative Canada-Québec d’aide aux éleveurs pour atténuer l’impact de la COVID-19 en 2020-2021) was aimed at alleviating their exceptional costs of keeping surplus animals on farms or carrying out the humane slaughter of surplus animals on the farm. This funding was provided through the AgriRecovery disaster relief framework.

On 1 April 2021, the Canada–UK Trade Continuity Agreement (TCA) came into force. The TCA substantively replicates the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), ensuring continuity in Canada’s trade with the United Kingdom after 31 December 2020 (the end of the transition period after the United Kingdom leaving the European Union). The TCA maintains tariff elimination commitments for most agricultural exports, including products still subject to tariff phase-outs. The agreement continues Canada’s duty-free quota access for beef, pork, bison, wheat, and processed sweetcorn, while not providing any additional market access for cheese or any other supply-managed products (dairy, poultry and eggs). The TCA is a transitional measure and includes a commitment by both parties to enter into negotiations on a new comprehensive bilateral trade agreement within a year of the TCA’s entry into force, with a view to conclude within three years. The negotiations are expected to start in early 2022.

On 16 November 2021, Canada and the Association of Southeast Asian Nations (ASEAN) agreed to proceed with negotiations toward a comprehensive Free Trade Agreement. The first round of negotiations with ASEAN is expected to take place in 2022, when Canada completes its necessary domestic procedures for entering into trade negotiations.

On 20 June 2021, Canada and Indonesia agreed to proceed with negotiations toward a Comprehensive Economic Partnership Agreement (CEPA). The first round of negotiations is scheduled in 2022.

Canada is a large, wealthy country with a small population relative to its land area, and has relatively abundant land and water available to the agricultural sector. Primary agriculture accounts for less than 2% of GDP and employment (Table 7.3), but contributes to a larger share of economic output in some of the country’s regions. Crop production is concentrated in the western prairies, where the typical farm is twice as large as the national average, is highly productive, and is largely for export. Most milk production is located in eastern Canada, which has relatively smaller farms and a larger variety of crops. Red meat industries are present across Canada, with beef cattle production being especially prominent in western Canada, and hog production concentrated in Quebec, Ontario and Manitoba.

For most of the past two decades, with the exception in 2009 related to the financial crisis, Canada enjoyed a stable macroeconomic environment characterised by relatively low inflation rates, fluctuating around its 2% target, and positive economic growth. However, the economy has been heavily affected by the COVID-19 pandemic and related restrictions, which caused a recession in 2020. In 2021, Canada’s economy rebounded: its GDP grew to nearly 5% and the unemployment rate declined to 7.6% (Figure 7.5).

Canada’s economy is well integrated in international markets – as measured by the ratio of trade to GDP at 23% in 2020 (Table 7.3). Agro-food products represent 14% of total Canadian exports and 9% of imports. Canada is a large net exporter of agro-food products and access to export markets is highly important for the sector. More than half of Canada’s agro-food exports are destined for the United States. Most of Canada’s agro-food exports are either processed products intended for direct consumption (37%), or primary products for processing (35%). Canadian households’ final consumption absorbs 75% of agriculture and food imports, of which two-thirds are processed goods (Figure 7.6).

At 3.1%, Canada’s agricultural output growth over the decade 2010-19 was above the global average. It was driven by rapid growth in Canada’s agricultural productivity, as measured by total factor productivity (TFP), combined with further intensification in the use of intermediate inputs, in particular fertilisers (Figure 7.7). The agricultural output growth over the past decade has been achieved with either reduced or minimally increased pressure on natural resources, as shown in various environmental indicators. Average nutrient surplus intensities have been stable since 2000 for nitrogen and decreasing for phosphorous. Both nutrient surpluses are below the average for OECD countries, as is the share of agriculture in Canada’s GHG emissions (Table 7.4). The latter, after peaking in 2005, have remained largely stable.10 This trend was mostly driven by a drop in emissions from livestock production, resulting from a reduced beef cattle population, largely offset by an increase in emissions from crop production, due to greater use of inorganic nitrogen fertilisers.11

References

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[18] Environment and Climate Change Canada (2020), A Healthy Environment And A Healthy Economy: Canada’s strengthened climate plan to create jobs and support people, communities and the planet, https://www.canada.ca/content/dam/eccc/documents/pdf/climate-change/climate-plan/healthy_environment_healthy_economy_plan.pdf (accessed on 22 March 2022).

[36] Food and Agriculture Organization (n.d.), Climate-Smart Agriculture, https://www.fao.org/climate-smart-agriculture (accessed on 22 March 2022).

[25] Government of British Columbia (2021), “Greenhouse Carbon Tax Relief Grant”, https://www2.gov.bc.ca/gov/content/industry/agriculture-seafood/programs/greenhouse-carbon-tax-relief-grant#:~:text=The%20Greenhouse%20Carbon%20Tax%20Relief,nursery%20and%20forest%20seedling%20operations.https://www2.gov.bc.ca/assets/gov/farming-natural-resources-and-industry/agriculture-and-seafood/programs/greenhouse-carbon-tax/greenhouse_carbon_tax_relief_grant_learn_more.pdf (accessed on 22 March 2022).

[16] Government of Canada (2022), Canadian Net-Zero Emissions Accountability Act, https://www.canada.ca/en/services/environment/weather/climatechange/climate-plan/net-zero-emissions-2050/canadian-net-zero-emissions-accountability-act.html (accessed on 22 March 2022).

[21] Government of Canada (2022), Carbon pollution pricing systems across Canada, https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work.html (accessed on 22 March 2022).

[26] Government of Canada (2022), Clean Fuel Standard, https://www.canada.ca/en/environment-climate-change/services/managing-pollution/energy-production/fuel-regulations/clean-fuel-standard/compliance-options.html (accessed on 22 March 2022).

[35] Government of Canada (2022), Climate action incentive payment, https://www.canada.ca/en/revenue-agency/services/child-family-benefits/cai-payment.html (accessed on 22 March 2022).

[28] Government of Canada (2021), Agricultural Climate Solutions, https://agriculture.canada.ca/en/agriculture-and-environment/agricultural-climate-solutions (accessed on 22 March 2022).

[14] Government of Canada (2021), Canada’s 2021 Nationally Determined Contribution under the Paris Agreement, https://www4.unfccc.int/sites/ndcstaging/Pages/Party.aspx?party=CAN&prototype=1 (accessed on 22 March 2022).

[29] Government of Canada (2021), Nature Smart Climate Solutions Fund, https://www.canada.ca/en/environment-climate-change/services/environmental-funding/programs/nature-smart-climate-solutions-fund.html (accessed on 22 March 2022).

[22] Government of Canada (2021), Update to the Pan-Canadian Approach to Carbon Pollution Pricing 2023-2030, https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work/carbon-pollution-pricing-federal-benchmark-information/federal-benchmark-2023-2030.html (accessed on 22 March 2022).

[27] Government of Canada (2020), “Clean Fuel Regulations”, Canada Gazette, Part I, Vol. 154/51, https://gazette.gc.ca/rp-pr/p1/2020/2020-12-19/html/reg2-eng.html (accessed on 22 March 2022).

[23] Government of Canada (2019), Fuel charge relief, https://www.canada.ca/en/revenue-agency/services/tax/excise-taxes-duties-levies/fuel-charge/relief.html (accessed on 22 March 2022).

[24] Government of Canda (2021), Economic and Fiscal Update 2021, https://budget.gc.ca/efu-meb/2021/report-rapport/EFU-MEB-2021-EN.pdf (accessed on 22 March 2022).

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[20] Government of New Brunswick (2016), Transitioning to a Low-Carbon Economy: New Brunswick’s Climate Change Action Plan, https://www2.gnb.ca/content/dam/gnb/Departments/env/pdf/Climate-Climatiques/TransitioningToALowCarbonEconomy.pdf (accessed on 22 March 2022).

[30] Government of Nova Scotia (2021), Investing in Clean Technologies in Agriculture, https://novascotia.ca/news/release/?id=20210322001.

[31] Government of Prince Edward Island (2021), PEI Agriculture Climate Solutions Program, https://www.princeedwardisland.ca/fr/information/agriculture-et-terres/pei-agriculture-climate-solutions-program (accessed on 22 March 2022).

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[1] OECD (2020), “Resilience to natural disasters in Canada”, in Strengthening Agricultural Resilience in the Face of Multiple Risks, OECD Publishing, Paris, https://doi.org/10.1787/d1b84788-en.

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Notes

← 1. Market price support to grains and oilseeds, which existed until the mid-1990s, resulted from the assistance provided to grain transportation which lower shipping costs for producers and consequently raised farm-gate grain prices. In 1989-90, the transportation subsidies covered about 70% of total freight costs with producers paying the remaining 30% (Doan, Paddock and Dyer, 2003[33]).

← 2. In Canada, the term “agri-food” is more common and generally includes upstream industries in addition to agriculture and the downstream value-chain. In this chapter, policy measures related to the “agro-food” sector reflect this notion.

← 3. The agricultural sector was responsible for 29% of the national methane (CH4) emissions and 78% of the national nitrous oxide (N2O) emissions in 2019 (Environment and Climate Change Canada, 2021[34]).

← 4. “Climate-smart agriculture (CSA) is an approach that helps guide actions to transform agri-food systems towards green and climate resilient practices.” (Food and Agriculture Organization[36]); “Climate-smart agriculture (CSA) is an integrated approach to managing landscapes -cropland, livestock, forests and fisheries- that address the interlinked challenges of food security and climate change.” (World Bank[37]).

← 5. The Climate Action Incentive Payment is a tax-free amount paid to help individuals and families offset the cost of the federal pollution pricing. It is available to residents of Alberta, Saskatchewan, Manitoba and Ontario, and consists of a basic amount and a supplement for residents of small and rural communities (Government of Canada, 2022[35]).

← 6. The amount of greenhouse gas (GHG) emissions associated with all stages of fuel production and use per unit of energy.

← 7. This is the evolution of the Natural Climate Solutions for Agriculture Fund announced in the 2020 Fall Economic Statement and as reported in the Agricultural Policy Monitoring and Evaluation 2021 report (OECD, 2021[38]).

← 8. In 2013, the reference margin limit (RML) was introduced in the face of rising commodity prices, for which some producers could have potentially triggered a payment on lost profit, rather than on lost income. The lower of the Olympic average reference margin or the producer’s eligible expenses for the reference years was used as the reference margin in the payment calculation. Under the Canadian Agricultural Partnership (CAP), in 2018 a cap on the RML was introduced, which meant the producers’ reference margin used in the payment calculation could not be reduced by more than 30%.

← 9. In November 2021, the Canadian Food Inspection Agency temporarily suspended export certificates for fresh potatoes from Prince Edward Island to the United States in response to US concerns about potato wart.

← 10. Canada’s emissions from agriculture increased by 12 MtCO2eq or 26% between 1990 and 2019 (Environment and Climate Change Canada, 2021[34]).

← 11. High beef prices caused a peak in cattle population in 2005, followed by a sharp decline in both prices and headcount (-27% by 2019) in the aftermath of an outbreak of bovine spongiform encephalopathy (BSE, or mad cow disease) in 2003. The increase in grain prices between 2007 and 2019 encouraged farmers to use more nutrient inputs and convert lands from perennial to annual crop production (Environment and Climate Change Canada, 2021[34]).

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