+ RMA Rural Municipalities
of Alberta

Resolution 16-23F

Federal-Provincial Partnership to Counter the United States Inflation Reduction Act

Date:
November 8, 2023
Expiry Date:
December 1, 2026
Active Status:
Active
Sponsors:
Westlock County
District:
3 - Pembina River
Year:
2023
Convention:
Fall
Category:
Other
Status:
Intent Not Met
Vote Results:
Carried
Preamble:

WHEREAS the agriculture sector in Alberta is vital to the provincial and federal economy, contributing to food security, rural development, and employment opportunities; and

WHEREAS the Inflation Reduction Act in the United States has introduced significant tax incentives and support programs for American agricultural producers, creating a competitive advantage over their Canadian counterparts; and

WHEREAS the disparity in tax incentives puts Canadian producers at a significant disadvantage, impacting their competitiveness, profitability, and ability to invest in innovation and sustainable practices; and

WHEREAS a joint effort between the governments of Alberta and Canada is necessary to address this disparity and ensure a level playing field for Canadian producers;

Operative Clause:

THEREFORE, BE IT RESOLVED that the Rural Municipalities of Alberta (RMA) advocate to the Government of Alberta (GOA) to initiate meaningful dialogue with the Government of Canada (GOC) to explore opportunities for collaboration and partnerships in addressing the challenges posed by the Inflation Reduction Act (IRA) and the competitive advantage it provides to the American agricultural sector; and

FURTHER BE IT RESOLVED that the RMA advocate for the GOA and the GOC to form a joint task force, including members from the RMA, industry, and agricultural groups, to evaluate the IRA’s impact on Canadian producers and recommend policy adjustments to enhance the competitiveness, sustainability, and resilience of Alberta’s agricultural sector.

Member Background:

The United States government passed the Inflation Reduction Act (IRA) on August 16, 2022. The agricultural sector in Alberta, and across the country, has been concerned with the competitive advantage that the IRA provides to American agricultural producers and the agricultural sector relative to its Canadian counterparts. The legislation has provided numerous supports to, and unduly advances the interests of American industry sectors, including the agriculture sector. Through tax incentives and other programs and initiatives, Canadian agricultural producers and the burgeoning agricultural sector is put in a disadvantaged position which threatens the ability of the province and the country to grow and diversify the agricultural sector.

The IRA is poised to provide US$300-billion worth of tax credits, grants, and loans to fund various programs and initiatives, many targeted to include the agricultural sector. Without counteracting the IRA, the Canadian agriculture sector is at risk. Supports and programs included in the IRA that create a competitive advantage for the U.S. agriculture sector over Canadian interests include:

  • $3.1 billion for United States Department of Agriculture (USDA) to provide relief for distressed borrowers with certain Farm Service Agency (FSA) direct and guaranteed loans. The law directs USDA to expedite assistance for those borrowers whose agricultural operations are at financial risk. The IRA provides $2.2 billion in financial assistance for farmers who have experienced discrimination in USDA’s farm lending programs.
  • Approximately $19.5 billion of IRA funds will support USDA’s conservation programs within the Natural Resources Conservation Service (NRCS) beginning in fiscal year 2023 and continuing over the following four years. The funds will support agricultural producers by financially incentivizing and rewarding America’s farmers, ranchers, and forest landowners for the critical role their lands play in addressing the climate change.
  • Providing production and investment support for biofuels estimated at $9.4 billion to 2031. Included in this initiative is $500 million for the Higher Blend Infrastructure Incentive Program at the USDA, the goal of which is to increase the sale and use of higher blends of ethanol and biodiesel. The program will provide grants to improve infrastructure for blending, storing, distributing, and supplying biofuels, including higher ethanol and biodiesel blends. This program will provide agricultural producers certainty, stability, and a domestic market for crops including canola which will be used in the production of biofuels.
  • Starting in 2025, the Clean Fuel Production Credit, part of the IRA, will offer a significant tax incentive to U.S. producers of clean transportation fuels, including those bound for export. The Biomass-based Diesel Blenders Tax Credit (BTC), included in the IRA, will have a drastic impact on Alberta’s agricultural and energy sector. The BTC grants a $1-per-gallon tax credit to each gallon of biodiesel and renewable diesel blended into the U.S. diesel pool, and through further incentives provides up to $1.75-per-gallon tax credits.

As of Dec. 31, 2024, the Act switches the existing blender’s credit for biodiesel and renewable diesel into a producer’s credit. Canadian producers, who had access to the blender’s credit when selling biofuels into the U.S. market, will no longer be eligible for the new producer’s credit, as it will only apply to U.S. based production. Further, U.S. producers will be able to collect the credit on fuels destined for export – this is not the case under the existing blender’s credit program. That means heavily subsidized U.S. biodiesel and renewable diesel will likely flow across the border into Canada impacting the Canadian producers and resulting in corporate and personal tax losses for provincial and federal governments. The impact will be significant – not only will Canadians lose access to the American market because they will not be able to compete, but Canadian producers are also to be disadvantaged, since subsidized American product will entering the Canadian marketplace, undercutting Canadian producers.

RMA Background:

RMA has no active resolutions directly related to this issue.

 

Government Response:

Alberta Jobs, Economy and Trade

Alberta’s government recognizes the significant financial commitment the US is making to its agricultural sector through IRA. Notably, IRA adds more than $18 billion in funding to existing farm bill conservation programs, aiding landowners in implementing conservation practices on agricultural land. Additionally, IRA’s introduction of a Clean Fuel Production Credit, which offers a significant tax incentive to American producers of clean transportation fuels, could draw biofuel investment away from Alberta and Canada.

We are taking action to amplify Alberta’s first-class reputation for high-quality agricultural products and increase capacity to help meet global demand. For example, the Agri-Processing Investment Tax Credit provides a 12 per cent non-refundable tax credit for corporations investing $10 million or more to build or expand agri-processing facilities in Alberta, such as facilities that produce crops-derived biofuels. Our agricultural producers and agribusinesses can also leverage Agriculture Financial Services, which provides loans, crop insurance and farm disaster assistance.

Alberta also has conservation programs similar to those in the US, under the Sustainable Canadian Agricultural Partnership. This federal-provincial partnership has launched a five-year (2023-2028), $3.5 billion investment in programs and services for the agriculture and agri-food industry in Alberta. Alongside support for conservation, this partnership helps producers to reduce the energy use of their operations, processors to expand and farmers to adopt water management practices for continued growth, among other things.

We continue to keep sight on how support to the agricultural sector in the US impacts Alberta businesses. The scale of the subsidies available through IRA means that Alberta and Canada must continue to carefully consider the competitive risks created by the legislation. To that end, we continue to encourage the Government of Canada to come to the table and work with Alberta to develop a comprehensive competitive response that enables us to successfully compete for private sector investment.

Development:

RMA appreciates Alberta Jobs, Economy and Trade acknowledging the need for combatting the competitive advantage that the Inflation Reduction Act (IRA) gives the agricultural sector in the USA. Although initiatives such as the Agri-Processing Investment Tax Credit and the Sustainable Canadian Agricultural Partnership are a step in the right direction to promoting the agriculture sector in Alberta, they do not address the specific challenges that the IRA poses. There must be meaningful dialogue between the Government of Alberta and Government of Canada to ensure that every effort possible is made to reduce the competitive advantage that the IRA provides to the agriculture sector in the USA.

Further, it is crucial that the provincial and federal governments commit to creating a task force that will adequately evaluate the IRA’s impact on Canadian producers and recommend policy adjustments to enhance the competitiveness, sustainability, and resilience of Alberta’s agricultural sector.

RMA assigns this resolution a status of Intent Not Met and will continue to advocate on this issue.

Provincial Ministries:
Agriculture and Forestry,
Economic Development and Trade
Federal Ministries and Bodies:
Agriculture and Agri-Food
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