+ RMA Rural Municipalities
of Alberta

Resolution 6-16F

Carbon Levy Exemption on Natural Gas and Propane Used for Agricultural Operations

October 25, 2016
Expiry Date:
November 30, 2019
Active Status:
County of St. Paul
5 - Edmonton East
Vote Results:

WHEREAS the Climate Leadership Implementation Act states that recipients shall pay a carbon levy on natural gas and propane; and

WHEREAS when implemented elsewhere (notably in Europe), carbon taxes have often been accompanied with exemptions for certain sectors to shield them from the full impact of the tax; and

WHEREAS the Government of Alberta has recognized the importance of the agricultural industry in the Climate Leadership Implementation Act by providing an exemption for marked fuel used for farming operations; and

WHEREAS a significant number of agricultural producers are engaged in intensive animal husbandry, greenhouses, grain-drying and other intensive agricultural operations that require other fuels such as natural gas and propane to be used for heating purposes; and

WHEREAS increased costs posed by a carbon levy on natural gas and propane will add significant operational costs to many operators in the agricultural industry;

Operative Clause:

THEREFORE, BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties request that the Government of Alberta amend the Climate Leadership Implementation Act to exempt farming operations from the carbon levy on natural gas and propane.



Member Background:

The Climate Leadership Implementation Act states:

8 (5) Subject to subsections (6) to (9), every recipient shall pay to the Crown a carbon levy on natural gas, at the rate for natural gas set out in the Table in the Schedule, at the time the recipient sells, removes or purchases natural gas from a natural gas distribution system…

15 (1) Subject to the regulations, a consumer is exempt from paying a carbon levy on fuel if:

(e) the fuel is marked fuel that is used for farming operations, or

 (f) the fuel is not put into a fuel system that produces heat or energy, and is not flared or vented, when used

 (i) as a raw material in an industrial process that produces another fuel,

 (ii) as a raw material in an industrial process that produces another substance that is not a fuel,

 (iii) as a solvent or diluent in the production or transport of crude bitumen or other substances, or

 (iv) for any other prescribed purpose.

 On January 1st, 2017, Alberta’s carbon levy will take effect and it will have profound financial implications for the agricultural industry particularly those that rely on natural gas and propane to run their operations. Agricultural producers will have no ability to pass these added costs of production on and it will present challenges to the industry’s competitiveness. This is especially concerning given the current state of the Albertan economy.

The perceived challenge of a carbon levy for the agriculture sector stems from the difficulty posed by decreasing fuel use in the short-run in order to adapt to the tax. Heating greenhouses and harvesting crops with machinery, for example, are essential to the proper functioning of many agricultural operations. An increase in the price of fuels drives up energy costs and could lead to adverse results: for example, potentially decreased profits, reduction of planted acres, a decline in net exports or even farms leaving the industry altogether.

Other jurisdictions such as British Columbia have recognized the challenges a carbon levy poses for the agricultural sector. As a result of these perceived challenges, in 2012 the government granted BC’s high-tech greenhouse vegetable and horticulture growers a one-time, $7.6 million reprieve from the carbon tax, allowing producers to remain more competitive.

This was followed in the 2013 Budget by a permanent grant program for commercial greenhouse growers (vegetable, floriculture, wholesale production and forest seedling nurseries) that is set at 80 percent of the carbon tax paid on natural gas and propane for heating and carbon dioxide production. In Budget 2014, Carbon Tax Relief for the Greenhouse Sector provides an incremental $1 million over three years for the Greenhouse Carbon Tax Relief Grant program.

While British Columbia has implemented a series of grant programs and rebates, these would require additional government resources to administer and would take longer to be returned to the agricultural producer.

An exemption is the simplest and most effective way to ensure that agricultural producers can remain competitive when it comes to purchasing natural gas or propane for their operations.

RMA Background:

The AAMDC has no active resolutions directly related to this issue.

Government Response:

Environment and Parks (Climate Change Office): The Government of Alberta (GOA) has provided exemptions for marked gasoline and diesel used by farmers in farming operations. There are no exemptions for natural gas or propane.

In October 2016, the GOA announced a $10 million expansion of efficiency grants to help energy-intensive farmer operations reduce their emissions and save on their energy bills. Energy Efficiency Alberta will also co-ordinate education and incentives regarding energy-efficiency and community-energy systems. A Greenhouse Growers’ Rebate took effect on January 1, 2017. This allows greenhouse owners to recoup up to 80 per cent of the carbon levy, bringing them in line with similar programs in other jurisdictions such as, British Columbia.

In addition, some agricultural operations are likely to benefit from the small business tax cut, from three per cent to two per cent, effective January 1, 2017.

The GOA will continue to work with the farming community and agricultural producers as we implement the carbon price.

Agriculture and Forestry: Agriculture is the only industry in the province to be exempted from the Carbon Levy on gasoline and diesel fuel. In addition:

  • Alberta has implemented a partial rebate of natural gas costs for greenhouse operations, as it recognizes that energy costs are a large proportion of operating costs for the greenhouse industry—an energy intensive/exposed sub-sector.
  • Alberta is aligned with British Columbia (BC) policy that rebates marked fuel and supports greenhouses. BC has no other Carbon Tax support for agriculture; thus, no ongoing program competitiveness.
  • Alberta has a small business tax reduction to ease the costs on small businesses.
  • Alberta has enhanced the farm energy efficiency program under Growing Forward 2 to incent technology changes that provide permanent reductions in energy costs to farms. Exempting costs does not drive industry to make energy reductions as much as incenting practice change and technology adoption.

Energy Efficiency Alberta will be designing programs to incent practice change and technology adoption for all Albertans, available sometime in 2017.

Other provinces and the federal government have intentions to implement carbon pricing over the next few years. The federal government has agreed to review provincial policies in three years to ensure mechanisms for carbon pricing result in similar levels of emission reductions across the country.


The Government of Alberta response indicates that natural gas and propane used for agricultural purposes will not be exempted from carbon levy payments. The AAMDC appreciates the exemptions applied to marked gasoline and diesel for agricultural use, as well as other current and future tools implemented by the Government of Alberta to assist agriculture producers in balancing energy efficiency with operational viability. However, as the response does not indicate a willingness to meet the intent of the resolution, this resolution is assigned a status of Intent Not Met. The AAMDC’s Climate Change Advisory Committee explored the impacts of the carbon levy on the agriculture industry and identified the need for continued advocacy for an exemption from the carbon levy on natural gas and propane used for food production.  Advocacy on this issue will continue.

Provincial Ministries:
Agriculture and Forestry,
Environment and Parks
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