Carbon tax will drive up grocery prices

The environmental and social costs of producing, distributing and selling food are rarely factored in. That’s about to change

Sylvain CharleboisThe carbon tax is now a reality for all Canadians – and that means food prices will be impacted.

The federal carbon pricing scheme took effect in Ontario, New Brunswick, Saskatchewan and Manitoba on April 1. These provinces had previously chosen not to comply with the new federal law through their own initiatives. Pricing will begin in Nunavut and Yukon on July 1.

Every other province and territory already had a carbon pricing scheme in place.

Of course, even if this new tax is paid by businesses, it will have an impact on everything we consume, including food.

Gas prices increased 4.4 cents per litre on April 1. And that’s projected to rise to 11 cents a litre by April 2022. This jump will parallel the carbon tax’s gradual increase, based on targets set by the Paris climate accord signed in 2015.

Some consumers will get rebates of up to $500 a year. Lower-income, food-insecure households, with lesser carbon footprints, will receive a rebate equal to and perhaps more than the increase in the cost of goods the new tax create. This may be good news for a demographic in need of cash.

But it’s not good news for the rest of us. We’ll face inflation at restaurants and in grocery stores whether we get rebates or not.

Energy is required to get the food, although the exact impact of the tax on food prices remains unknown. One report published in 2012 suggested that the effect of a $50-per-tonne carbon tax on food prices would be three per cent. For Canada, that would come in 2022. Given that food prices go up one to two per cent most years, a rise of three per cent is not unmanageable for most households.

While few of us enjoy paying more taxes, the reality is that climate change has had on impact on food prices for decades. Over the winter months, produce prices can go up by as much as 15 per cent in a month. Climate change has resulted in more volatile food prices in Canada.

So there is some consensus on the need to act now.

Carbon pricing may discourage food importers from buying certain goods overseas, giving local food products an opening into the market. There’s strong evidence that companies and consumers are influenced by carbon pricing and eventually make alternative choices. These choices end up being better for the environment.

Carbon pricing will no doubt discriminate against certain food categories for which the carbon footprint is more substantial. And that might seem desirable. But Canada’s nordic climate means producing food all year round is challenging.

Canadian consumers are conditioned to expect cheap food. We also expect to be able to buy whatever we want whenever we want it. However, carbon pricing will challenge these notions. The foods available and where they come from will eventually change.

Food is generally quite affordable in Canada compared to other countries. Relative to the cost of living, Canadians have access to one of the cheapest food baskets in the world. What’s rarely priced in are the environmental and social costs of producing, distributing and selling food. Some products sold to us are a bargain, given their climatic impact on our planet.

How will government spend the funds from carbon taxes?

The money may be redirected to support other, unrelated programs, as we’ve seen many times before. The federal bureaucratic machinery can barely be trusted, so discipline and transparency are necessary, especially when dealing with climate change.

The federal government should be lauded for at least doing something about climate change. And creating incentives for companies to reduce greenhouse gas emissions through carbon pricing isn’t a perfect idea but action of some sort is necessary.

If we don’t pay a price for pollution now, the future cost will likely be much greater.

But the implementation of any tax is political. And considering what’s happening with the SNC-Lavalin scandal, implementing this new tax in key regions across the country isn’t especially timely for the Liberal government.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at at Dalhousie University, and a senior fellow with the Atlantic Institute for Market Studies. 


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