Introduction

Background

5.1 Greenhouse gases, such as carbon dioxide, are the main cause of human-induced climate change. In 2021, about 10% of Canada’s total greenhouse gas emissions came from the agriculture sector. The leading sources of greenhouse gas emissions from agriculture in Canada are shown in Exhibit 5.1.

5.2 Between 1990 and 2021, greenhouse gas emissions from the agriculture sector grew by 39%, mostly driven by an increase in emissions related to crop production (Exhibit 5.2).

5.3 While greenhouse gas emissions from the agriculture sector contribute to climate change, the sector can also help slow climate change by adopting beneficial management practices^{Definition 1} that can reduce the amount of greenhouse gas emissions in the atmosphere. Such practices include, for example, planting cover crops after the fall harvest or before the spring seeding of main crops to sequester (store) carbon in soil as organic matter. Another example is implementing nitrogen management practices to help farmers optimize the amount of fertilizer they use and to reduce the amount of nitrogen oxide emissions released into the atmosphere. In 2021, agricultural soils stored 18 megatonnes of carbon dioxide equivalent (Mt CO2 eq),^{Definition 2} offsetting approximately 26% of Canada’s total annual agricultural emissions.

5.4 Since 2015, the federal government has made several commitments to take action on climate change in the agriculture sector (Exhibit 5.3).

5.5 Agriculture and Agri‑Food Canada launched 3 main programs in 2021 designed to reduce greenhouse gas emissions from the agriculture sector:

• The Living Labs program aims to implement at least 1 ”living lab” in every province. A living lab brings together producers of agricultural products, scientists, and other sector stakeholders to co‑develop and test innovative technologies and on‑farm practices to reduce greenhouse gas emissions and sequester (store) carbon in real‑world conditions. By June 2023, the department had approved 14 living labs.
• The On‑Farm Climate Action Fund aims to help producers adopt beneficial management practices that store carbon and reduce greenhouse gas emissions. Agriculture and Agri‑Food Canada provides funding to 13 initial recipients who assess applications to the program and in turn distribute the funding to ultimate recipients—producers—to enable the adoption of beneficial management practices.
• The Agriculture Clean Technology program—Adoption stream aims to support the purchase and installation of commercially available clean technology or equipment upgrades that will reduce greenhouse gas, fertilizer, and methane emissions. We audited only the Adoption stream of this program. All references to the program in this report refer only to the Adoption stream.

5.6 Agriculture and Agri‑Food Canada. Agriculture and Agri‑Food Canada is responsible for providing leadership in the growth and development of a competitive, innovative, and sustainable Canadian agriculture and agri‑food sector. As part of its mandate, the department supports Canada’s national and international commitments to meet targets for reductions in greenhouse gas emissions. This involves implementing programs and activities that contribute to reducing greenhouse gas emissions from the agriculture sector, such as carbon dioxide from on‑farm energy use, nitrous oxide from fertilizers, and methane from livestock production.

5.7 Agriculture is a shared jurisdiction in Canada, and the department must work closely with provincial and territorial governments in developing and delivering policies and programs to reduce greenhouse gas emissions and to sequester carbon in the agriculture sector. The department must also work with other government departments, such as Environment and Climate Change Canada and Natural Resources Canada, as well as Indigenous peoples and sector stakeholders.

Focus of the audit

5.8 This audit focused on whether Agriculture and Agri‑Food Canada designed and implemented an approach for how the agriculture sector will contribute to Canada’s 2030 and 2050 greenhouse gas mitigation and sequestration goals, commitments, and targets. This audit also examined whether the department delivered its climate change mitigation programs and activities to ensure that results are being achieved with respect to commitments to reduce greenhouse gas emissions and sequester carbon.

5.9 This audit is important because the agriculture sector can play a key role in mitigating climate change through agricultural management practices that reduce emissions of greenhouse gases and remove carbon dioxide from the atmosphere.

5.10 More details about the audit objective, scope, approach, and criteria are in About the Audit at the end of this report.

Findings and Recommendations

The department had no strategy to meet its expected contributions to reductions of greenhouse gas emissions

5.11 Climate change is a complex, long‑term problem, and having a strategy for Canada’s agriculture sector would establish transformational goals and targets. A strategy would also support collaboration with federal partners, other levels of government, Indigenous peoples, and sector stakeholders. With a goal of contributing to Canada’s target of reducing greenhouse gas emissions by 40% to 45% below 2005 levels by 2030, a strategy would provide a common vision and direction of collective action on climate change mitigation for the agriculture sector.

No strategy on climate change mitigation for the agriculture sector

5.12 We found that as of January 2024, Agriculture and Agri‑Food Canada had no strategy in place to guide its climate change mitigation programs and activities. Since 2015, the government has mandated the department to take specific action on climate change issues. The government then called for the department to develop a strategy to support the agriculture sector’s actions on climate change in the Fall Economic Statement 2020. In 2021, the government again called for the department to develop an agri‑environmental strategy for Canada that, among other aims, would enable collective action to address climate change.

5.13 The department expected that a strategy would help create a set of ambitious environmental objectives to be achieved through the 5‑year (from the 2023–24 to 2027–28 fiscal years) Sustainable Canadian Agricultural Partnership. This is a federal-provincial-territorial agricultural policy framework with many cost‑shared programs, including the Resilient Agricultural Landscape Program. However, we found that the 5‑year framework began in April 2023, with no strategy in place to inform policy objectives.

5.14 The department further expected that a strategy would guide the development of its On‑Farm Climate Action Fund and Living Labs programs. This included developing a data strategy to address data and measurement challenges at the farm, regional, and national levels to measure, report on, and track environmental performance in the agriculture sector and assist in decision making. We found that the programs were developed and put in place in 2021 without a strategy to inform their design or without a data strategy in place. However, we did find that since then, the department had done extensive consultations as part of the development of a sustainable agriculture strategy.

5.15 In the absence of a strategy, we found that from late 2020 to mid‑2023, the department had undertaken extensive science-based work that informed its current climate change programming. This work helped identify promising greenhouse gas mitigation practices that would help the sector. According to the department, the policy and programming approaches that are needed to advance the adoption of these practices were being considered and discussed as key elements of a sustainable agriculture strategy.

5.16 We also looked at whether the department had done a review of its programs to ensure policy coherence. We found that it had not done any such review. In our view, this presents a risk of programs working at cross-purposes or the potential for overlap among initiatives, and the inefficient use of available funding and resources.

5.17 One of the benefits of a strategy was that it is intended to contribute to Canada’s 2030 and 2050 climate change targets and international commitments. Canada’s 2030 Emissions Reduction Plan: Canada’s Next Steps for Clean Air and a Strong Economy, released in 2022, outlines a sector‑by‑sector path for Canada to reach the 2030 target. In 2022, the department initially estimated sector reductions under this plan would be 13.07 Mt CO₂ eq, to be achieved through its climate change mitigation programs and activities. The department had reduced its estimated contributions to 11.21 Mt CO₂ eq for Canada’s Greenhouse Gas and Air Pollutant Emissions Projections report, December 2023 (Exhibit 5.4).

5.18 We found that one of the reasons for the decreased estimate of 13.07 Mt CO₂ eq to 11.21 Mt CO₂ eq was because the department initially included emission reduction estimates from tree planting on agricultural lands as a beneficial management practice. For example, trees planted on the edges of fields protect crops and livestock from wind and snow accumulation. The department later removed the reductions for this practice from its updated estimate.

5.19 We found that the department had also estimated emission reduction costs per tonne for the programs in Exhibit 5.4, broken down by mitigation practices. However, this information had not been made public by the department. In our view, making this information publicly available would provide more transparent information to the agriculture sector to explain federal policy development and decisions.

5.20 The broader Government of Canada plan, the 2030 Emissions Reduction Plan: Canada’s Next Steps for Clean Air and a Strong Economy, also states the following: “Actions taken to date, and those laid out in this plan, set into motion many of the key transformations that will be needed to achieve a net‑zero emissions world.” According to the department’s projections and analysis, based on 2021 data, 51 Mt CO₂ eq of emissions need to be reduced or sequestered for the agriculture sector to reach net‑zero emissions by 2050. Although Agriculture and Agri‑Food Canada acknowledged that significant data and funding gaps remain to map out a feasible pathway to reach net‑zero emissions by 2050, we found that it had no long‑term strategy for how it would achieve the 2030 or 2050 goals.

5.21 Our recommendation for this section is at paragraph 5.29.

Programs’ emission reduction contributions toward fertilizer and methane targets not identified

5.22 For fertilizer, under Canada’s 2020 strengthened climate plan, A Healthy Environment and a Health Economy, the government committed to setting a national fertilizer emission reduction target of 30% below 2020 levels by 2030. In 2021, the agriculture sector accounted for 75% of Canada’s nitrous oxide emissions, primarily from fertilizer use (Exhibit 5.5).

5.23 We found that the department did not consult with stakeholders (for example, farmers and industry associations) prior to establishing the fertilizer emission reduction target. One consequence of this lack of consultation was that some sector stakeholders interpreted the target as an absolute reduction of 30% in fertilizer use, rather than a 30% reduction in emissions from improved fertilizer application techniques.

5.24 To achieve the fertilizer emission reduction target, the department planned to establish voluntary agreements with fertilizer manufacturers, agricultural stakeholders, provinces, and farmers. However, we found that it had established none by January 2024.

5.25 The department estimated 1.44 Mt CO₂ eq in fertilizer emission reductions through the On‑Farm Climate Action Fund and the Sustainable Canadian Agricultural Partnership. We found that the Living Labs program and the Agricultural Clean Technology program had not quantified any expected greenhouse gas emission reductions from their projects that would contribute to the government’s fertilizer target. We also found that the remaining 2.07 Mt CO₂ eq required to meet the 3.5 Mt CO₂ eq fertilizer emission reduction target remained unfunded.

5.26 Departmental analysis in September 2023 stated that the greatest opportunity for reducing fertilizer-related emissions in the short term was increasing the adoption of certain beneficial management practices related to nutrient management. The department identified 3 such practices. For example, instead of applying fertilizer only once during the season when seeding, a better practice to optimize the effects of fertilizer might be to apply it at strategic times during the growing season to align with crop needs. According to the department, current adoption rates of these practices are at about 20% of Canadian farms, but 50% to 75% of farms must adopt these practices to contribute up to 3.2 Mt CO₂ eq of the total target. The department was unable to tell us how it would close the gap to reach the total target of 3.5 Mt CO₂ eq in reductions by 2030.

5.27 In 2021, the agriculture sector accounted for 31% of methane emissions. Canada confirmed its support for the Global Methane Pledge in 2021. The pledge aims to reduce global methane emissions by 30% below 2020 levels by 2030. In 2022, the Government of Canada released Faster and Further: Canada’s Methane Strategy. With the methane reduction measures and supporting programs outlined in the strategy, the government estimated that Canada will be able to further reduce domestic methane emissions by more than 35% below 2020 levels by 2030. The methane strategy noted that agriculture is one of the sectors critical to reducing methane emissions. It listed Agriculture and Agri‑Food Canada’s mitigation programs among the measures that are expected to contribute to methane reductions.

5.28 We found that the 3 programs we examined had not yet quantified any expected greenhouse gas emission reductions from their projects that would contribute to Canada’s methane emission reduction target. Furthermore, without a strategy to provide the sector with a long‑term vision and direction, the department’s path to help achieve this target remained unclear.

5.29 To ensure that Agriculture and Agri‑Food Canada can meaningfully contribute to Canada’s 2030 and 2050 climate change targets, including the fertilizer and methane emission reduction commitments, the department should finalize and implement a sustainable agriculture strategy with actions that include

• establishing measurable outcomes based on best available science, with concrete deliverables, accountabilities, timelines, performance metrics, and a plan to monitor progress
• undertaking analysis to ensure policy coherence among its programs and with programs of the department’s federal-provincial-territorial partners
• expediting the development of a data strategy to address data and measurement challenges at the farm, regional, and national levels
• assessing the funding and resources needed to successfully implement the strategy and the department’s climate change mitigation programs and activities to lead to permanent emission reductions through to 2050
• reporting on the costs of the department’s climate change mitigation programs and activities against the greenhouse gas reductions achieved by those programs and activities

The department’s response. Agreed.

See Recommendations and Responses at the end of this report for detailed responses.

The department had limited results and poor results measurement

5.30 This finding matters because effective program design and implementation enables the achievement of results, supports departmental and governmental policy objectives, establishes conditions for the fair and transparent treatment of applicants, and provides Canadians and Parliament with assurance that public funds are being used as promised.

Results achieved limited by delays in program implementation

5.31 We found that delays in reviewing applications and selecting recipients for funding led to delays in implementing projects on the ground and limited results achieved in the programs’ first year.

5.32 The Agricultural Clean Technology program launched its first application intake on 16 June 2021. The intake was to remain open for 10 months and allow multiple project applications per applicant. However, the department did not anticipate the high demand for the program, and within 6 weeks of the launch, the department had received 443 initial applications, and the requested funding exceeded available funding for the 2021–22 fiscal year. On 1 August 2021, it paused assessments of any further applications. However, the program continued to receive applications through the intake window, which led to a backlog of an additional 1,057 applications received through to 31 March 2022. We found the following:

• Of the 443 applicants who submitted in the first 6 weeks of the intake, 268 (60%) were approved for funding.
• In October 2022, additional funding was made available to the program, which allowed the department to triage the backlog and undertake a call for proposals for a new intake.
• Between November 2022 and January 2023, the program approved about $35 million in funding to an additional 71 (7%) applications from the 1,057 backlog. These additional recipients from the first intake were not able to implement the funded projects (for cleaner technologies and equipment) for the 2022 growing season, which limited or delayed program results.
• The department’s processing of applications was not fully automated and included some manual inputting. In our analysis of the department’s data, we found that the department had missed 6 applications, which were not considered as part of the triage of the backlog. The department told us that the applications were missed when they were manually transferred to the department’s database.

5.33 In addition, we used representative sampling to examine a sample of 35 of 55 completed applications (47 approved and 8 rejected) for the Agriculture Clean Technology program. We found that in 66% (23 of 35) of cases, the program did not meet the 100‑business‑day service standard (4.5 months) to review and approve or reject an application, taking an average of 121 business days (5.5 months).

5.34 We also found delays for both the On‑Farm Climate Action Fund and Living Labs programs. We found that on average, it took over 5 months for the department to finalize contribution agreements with successful applicants under both programs. The programs were launched in 2021. To ensure that recipients could take advantage of the 2022 growing season, their contribution agreements would have needed to be signed by spring 2022. We found, however, that only 1 of 22 contribution agreements across these 2 programs were signed in advance of the 2022 growing season, with half of the 22 signed as late as fall 2022 through to February 2023. This delayed the transfer of funds to recipients, limiting the data and results that could have been achieved through the 2022 first‑year season.

5.35 The On‑Farm Climate Action Fund, originally scheduled to end by 31 March 2024, was extended to 31 March 2028. While the department told us that it informed recipients in November 2023 that their agreements would be extended by 1 year, no agreements had yet been amended by January 2024. The recipients raised concerns as early as May 2023 because they were uncertain about whether their funding would be continued and the impact this would have on their ability to plan and carry out longer‑term project planning decisions. In our opinion, this uncertainty could further affect the achievement of the programs’ results.

5.36 Despite these findings, funded recipients of the Agricultural Clean Technology program and the On‑Farm Climate Action Fund, and voluntary participants in the Living Labs program, expressed to us and in their performance reports the value of these programs. This value included

• allowing producers the ability to adopt clean technology that otherwise they might not have been able to do
• receiving the co‑benefits of beneficial management practices, such as reduced soil erosion
• data collection and information being available to producers enabling better decision making for land management

5.37 To minimize administrative lag times, enable longer‑term project planning, and support the continuity and sustainability of its climate change mitigation programs, Agriculture and Agri‑Food Canada should

• inform, as soon as possible, delivery organizations administering the On‑Farm Climate Action Fund, and lead partners implementing the Living Labs program, whether they will have their contribution agreements extended to the end of the programs
• ensure that any future iterations of its climate change mitigation programs improve the timeliness of the review and approval of applications and the finalization of contribution agreements to avoid delays in project implementation

The department’s response. Agreed.

See Recommendations and Responses at the end of this report for detailed responses.

Missing or non‑finalized performance targets for climate change mitigation programs

5.38 Establishing programs with meaningful indicators, targets, outcomes, and timelines can provide a clear path forward on the level of ambition desired of the department’s climate change mitigation programs and activities, and their contribution to helping the sector reduce greenhouse gas emissions.

5.39 We found that performance targets for all 3 programs were changed over time and were reported inconsistently across departmental and government documents. For the On‑Farm Climate Action Fund and Living Labs programs, we found that many of the dates by which targets were to be established, finalized, or achieved were pushed out to later years. This was because the programs were either waiting on first‑year results (2022–23) to establish or finalize targets, which had been delayed, or the programs were extended and received additional funding. In our view, these changing targets make it difficult to assess progress and publicly report results in a clear and transparent manner (Exhibit 5.6, Exhibit 5.7, and Exhibit 5.8).

5.40 We found that the programs have tracked a total of only 0.2 Mt CO₂ eq in greenhouse gas emission reductions by 31 January 2024. Given the limited results to date, nearly all the reductions will need to take place in the remaining 6 growing seasons until 2030.

5.41 To achieve the expected reductions of greenhouse gas emissions by 2030, and help achieve greater reductions to 2050, Agriculture and Agri‑Food Canada should

• identify and implement concrete actions to expedite the reduction of greenhouse gas emissions from its climate change mitigation programs and activities
• finalize measurable, time‑bound targets for the programs and publish annual results reports on the progress achieved against the programs’ expected results, in particular, on reductions of greenhouse gas emissions

The department’s response. Agreed.

See Recommendations and Responses at the end of this report for detailed responses.

Gender-based analysis plus considered in program design, and indicators aligned with the United Nations’ Sustainable Development Goals

5.42 We found that the department had integrated the required gender-based analysis plus^{Definition 3} considerations into the program design of all 3 programs. The department collected data from program applications so that data could be disaggregated and examined for the programs’ impact on specific under-represented and marginalized groups. This included Indigenous peoples, women, youth, people with disabilities, members of minority-language communities, members of visible minority groups, and lesbian, gay, bisexual, transgender, queer, and 2‑spirit (LGBTQ2) people.

5.43 Canada’s Federal Sustainable Development Strategy sets out the Government of Canada’s goals, targets, and plans to implement the 2030 Agenda for Sustainable Development and the United Nations’ Sustainable Development Goals. Every goal in the federal strategy is aligned with a specific United Nations’ Sustainable Development Goal. The federal goals that the department was responsible for and that are most relevant to this audit are

• Goal 2 (Support a Healthier and More Sustainable Food System), which is aligned with the United Nations’ Sustainable Development Goal 2 (Zero Hunger)
• Goal 13 (Take Action on Climate Change and Its Impacts), which is aligned with the United Nations’ Sustainable Development Goal 13 (Climate Action)

We found that Agriculture and Agri‑Food Canada had 1 or more indicators within each of the 3 programs that aligned with one or both of these goals (Exhibit 5.6, Exhibit 5.7, and Exhibit 5.8).

5.44 We could not assess the programs’ contributions to the Sustainable Development Goals, or their impact on under-represented and marginalized groups, as most results were not yet available.

Unreliable and incomplete results measurement, verification, and monitoring of reductions in greenhouse gas emissions

5.45 We found that the department did not validate the greenhouse gas emission reductions and sequestration data it received from recipients under the 3 programs. The department relied on the data reported by the recipients but did not require documentation to verify results. We also found that the department provided only limited guidance to recipients on how to report results, which led, for example, to inconsistent reporting that made it difficult to roll up overall program results.

5.46 We also found gaps in recipient reporting in 2 programs. For the Agricultural Clean Technology program, recipients were required to provide additional reports when their final performance reports did not contain 1 year of results data. We found that the department had not received all required reports. We also found that there were cases where the program officials did not request an additional report from recipients but accepted recipients’ estimates in place of having 1 year of results.

5.47 In the On‑Farm Climate Action Fund, across the 13 recipients, we calculated that a total of 64 performance progress reports and 64 financial progress reports had to be submitted by December 2023. We found that as of January 2024, only 35 performance progress reports and 48 financial progress reports were provided. The department could not provide evidence of follow‑up to get the missing reports, which were needed for the department to report on its overall program results.

5.48 The department assumed that almost all the expected emission reductions from its program activities would be permanent. Apart from fertilizer emission reductions, the department assessed the emission reduction estimates for programs in Exhibit 5.4 as permanent. The department provided us with its assumptions on permanency but without evidence to support them. For example, the department assumed that once producers find that beneficial management practices are profitable, they would keep using them. Through the programs, the department provides funding and support to producers to adopt these practices, but once the funding ends, it remains to be seen whether producers will be able to continue to adopt these practices over the long term. We acknowledge that many years of results will be needed before the amount of emission reductions could be determined as permanent.

5.49 We found that none of the 3 programs made provision for post‑project monitoring to verify project results or assumptions on the permanency of emission reductions. As a result, the department will not know the extent to which beneficial management practices or greenhouse gas reductions from adopted technology will be sustained over time or what their contributions will be to the 2030 and 2050 targets.

5.50 To enable the accurate, timely, and transparent assessment of results and the ability to roll up greenhouse gas emission reduction data across its projects and programs, Agriculture and Agri‑Food Canada should implement a results monitoring framework that includes

• providing specific requirements and guidelines for data submission by recipients
• verifying the quality and accuracy of the data being provided by recipients to ensure consistency and to permit timely course correction where needed
• verifying the extent to which the adopted beneficial management practices and clean technology would result in permanent reductions of greenhouse gas emissions

The department’s response. Agreed.

See Recommendations and Responses at the end of this report for detailed responses.

Conclusion

5.51 We concluded that Agriculture and Agri‑Food Canada had not designed or implemented an approach for how the agriculture sector will contribute to Canada’s 2030 and 2050 greenhouse gas mitigation and sequestration goals, commitments, and targets, as was first called for in 2020.

5.52 We also concluded that Agriculture and Agri‑Food Canada had not effectively delivered its climate change mitigation programs and activities to ensure that results were being achieved with respect to commitments to reduce greenhouse gas emissions and sequester carbon. Limited reductions of greenhouse gas emissions had been realized by 31 January 2024, many targets had yet to be established or finalized, and some of the dates by when to achieve targets had been pushed out to later years.

Subsequent Event

5.53 In paragraph 5.35, we noted that none of the On‑Farm Climate Action Fund recipient contribution agreements had been amended by the end of our audit period in January 2024. Subsequent to this date, between February and March 2024, Agriculture and Agri‑Food Canada signed amendments with 11 of the 13 On‑Farm Climate Action Fund recipients, extending their contracts for 1 more year to 2025. According to the department, the remaining 2 recipients did not seek to have their contribution agreements extended following the completion of their projects in 2024.