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Stakeholders divided on need for renewable targets in new clean fuel standard

By Neil Moss      

Some stakeholders say that the government should set the targets for greenhouse gas emissions from fuel, but allow producers to reach the target on their own.

Under the framework for Environment Canada's clean fuel standard, spearheaded by minister Catherine McKenna, questions remain about the need for blending mandates to reach greenhouse gas emission targets. The Hill Times photograph by Andrew Meade
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Some stakeholders say the current rules around renewable fuel have a place in Canada’s anticipated clean fuel standard, while others say that the government should stick to mandating reductions in greenhouse gas emissions, but allow producers to reach those targets their own way.

“[The government] should not in any way, shape or form dictate how that happens,” W. Scott Thurlow, an Ottawa-based lawyer with a specialty in fuel-related policy, said. “If a company has an obligation to reduce [carbon dioxide] and they can demonstrate that they can do it, the government should just say ‘congratulations you’ve complied with the law’ and not take any additional steps.”

In 2017, Environment and Climate Change Canada announced the development of a clean fuel standard with the goal of reducing annual greenhouse gas emissions by 30 megatonnes, or 30 million tonnes, by 2030, which would help Canada reach its commitments under the Paris climate agreement.

This would be the equivalent of removing seven million cars from the roads. The standard would require producers, importers, or distributors to reduce the carbon intensity of fuels, also known as the carbon footprint, according to a government backgrounder. “Carbon intensity is the measure of the greenhouse gas emissions associated with production, processing, distribution, and use of a fuel,” it said.

Under the renewable fuel standard, fuel producers and importers need to have an average renewable fuel content of five per cent, and two per cent for diesel. Photograph courtesy of skitterphoto.com

The final regulations for liquid fuels under the clean fuel standard won’t be released until 2020, and won’t be implemented until 2022.

Under the federal renewable fuel regulation, “fuel producers and importers [need] to have an average renewable fuel content of at least five per cent based on the volume of gasoline that they produce or import into Canada and of at least two per cent based on the volume of diesel fuel and heating distillate oil that they produce or import into Canada.”

The mandated percentages were adopted for both practical and operational reasons—there were questions if a biodiesel that is more than two per cent renewables would be able to operate in cold environments.

Environment and Climate Change Canada said it plans to maintain the renewable fuel framework for now, but in the long term it will be re-evaluated within the clean fuel standard.

Even though the new clean fuel standard won’t operate on a strict blending mandate, higher blends of renewable fuels in the standard will still spur high blends to meet the environment guidelines. A review of the renewable fuel regulations will come only after there has been time to review how the clean fuel standard is progressing.

The renewable fuel regulations achieved a reduction of around four to six megatonnes annually, says Bora Plumptre, senior analyst at the Pembina Institute.

In 2016, Canada emitted 704 megatonnes.

Mr. Plumptre said the regulations have been “really important” for getting low-carbon fuel producers going in Canada.

On the other hand, Mr. Thurlow said the environmental benefits are “dubious” when U.S.-produced ethanol that was previously made with coal-fired plants was being imported to Canada. However, the environmental impact of the the Canadian and American renewables has since become less divergent.

“Renewable diesel that was indistinguishable from a carbon intensity from ordinary diesel was satisfying the requirements in the western provinces,” Mr. Thurlow, a former president of the Canadian Renewable Fuels Association, said. “It could reduce GHG emissions, but there is not a lot of evidence to show that it was as successful as it was supposed to be.”

Under the clean fuel standard, more domestic production of renewable fuel will be encouraged, said Fred Ghatala, director of carbon and sustainability at Advance Biofuels Canada. Instead of what’s happening now where the renewable fuels are a mix of domestic and foreign.

The new clean fuel standard will create a requirement to prove that the fuels are better from a life-cycle perspective, which Mr. Thurlow said is a “significant” improvement from the original renewable fuel standard.

Mr. Thurlow said that he would “wholeheartedly” support the phasing out the renewables fuel mandates, so the government can focus on the reduction of carbon dioxide.

He said the blending models should be a choice to meet the clean fuel standard requirements, not a requirement themselves.

If renewable fuels are as good at limiting greenhouse gas emissions as the renewable fuels industry claims they are, they would be the primary pathway for compliance in the clean fuel standard, Mr. Thurlow suggested.

He said renewable fuels should be able to stand on that benefit alone, and not need mandates to encourage their use, adding that the subsidies have helped grow the Canadian renewable fuels industry far more than any mandated percentage.

Mr. Plumptre said the regulations are still useful for the stability of the investment environment.

Mr. Ghatala said it would be too early to consider removing the renewable fuels standard before the clean fuel standard is able to establish itself, which is a few years away.

Mr. Ghatala said there is an opportunity to roll the standards together to maintain the blending requirement, and that a minimum blend is useful to both the renewable fuel association as well those in the petroleum industry.

“It works,” he said, adding it can be used to support the clean fuel standard.

Peter Boag, president and CEO of the Canadian Fuels Association, said if the objective of the clean fuel standard is the reduction of the carbon intensity of fuel, other requirements, such as the renewable fuel standard, can complicate complying.

“[There is] no question that blending of biofuels is still the main compliance option and we would expect that increased biofuels blending is going to occur as a result of the [clean fuel standard],” Mr. Boag told The Hill Times.

He said companies should not be tied to one way to comply with reduced greenhouse gas emissions.

To keep costs down, companies should be able to be given “maximum flexibility.”

Mr. Boag said the government also shouldn’t be too prescriptive of types of fuels that will be blended, like ethanol and bio-diesel.

“It should include any fuel that can be substituted to achieve the objective of carbon intensity reduction,” he said. “Don’t impose a specific requirement to impose a specific kind of renewable fuels.”

nmoss@hilltimes.com

The Hill Times

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