OTTAWA — Bora Plumptre, senior analyst at the Pembina Institute, made the following statement in response to Environment and Climate Change Canada’s release of regulations for cleaner fuel (PDF/HTML):
“The Clean Fuel Standard is a critical measure for reaching Canada’s climate goals, especially when paired with a price on carbon pollution. While carbon pricing motivates a gradual reduction in greenhouse gas emissions across the economy, the Clean Fuel Standard gets to work right away, specifically creating a market for zero- or lower-carbon fuel by regulating the amount of carbon pollution in our fuel supply. Steep, sustained reductions in transportation are essential if we are to meet our climate targets in time and drive down the rapidly increasing health, infrastructure and environmental costs of climate change already being borne by Canadians. A standard on liquid fuels will help Canada cut more than 20 million tonnes of carbon pollution, in turn delivering about 10 per cent of the progress needed to achieve our fast-approaching 2030 emissions target. Just as important, the standard will spur the development of clean energy solutions to meet growing global demand for low-carbon fuels.
“Clean fuels such as sustainable biofuels, low-carbon hydrogen, and electricity from renewables are at the core of all countries’ net-zero ambitions, and so we applaud the federal government for taking this long-heralded next step to build Canada’s competitive advantage in these key sectors. The implementation of this policy follows years of extensive consultation with a broad range of stakeholders across industry and civil society.
“Given the standard will no longer require reductions in carbon intensity in gaseous and solid fuels, it’s imperative the liquid fuel regulation achieves every emission reduction possible. Enforcement of the liquids rule in 2022 is critical to bending the curve on rising GHGs from transportation and other sectors. We must act as quickly as possible to make up lost ground and prevent the release of more emissions that we would otherwise have to neutralize later. Delay is not an option, only a costly form of denial.”
Impact on consumers:
“Canadian consumers can rest assured that the Clean Fuel Standard will result in only marginal cost increases at the pump, and will even reduce fuel costs for those who use more biofuels, low-carbon electricity or hydrogen. While carbon pricing gives consumers incentives to seek out such lower carbon options, the Clean Fuel Standard actually reduces the carbon content of our fuels. Considering the enormous and growing cost of climate change to all Canadians, this regulation is both fair and cost-effective.”
Impact on alternative fuel producers:
“The Clean Fuel Standard will drive significant investment into additional production capacity for biofuels, hydrogen, electricity and other clean fuels, laying the groundwork for broader clean fuel deployment as Canada moves toward a net-zero economy. While the removal of gaseous and solid fuels from the regulation will scale back the potential for the regulation to incentivize hydrogen production, hydrogen and renewable gases supplied for transportation use will still qualify, as will limited quantities of these fuels blended into the general energy system.”
Impact on the fossil fuel industry:
“Canadian industry will recognize that this regulation is in keeping with existing health- and market-motivated rules to remove other pollutants in fossil fuels, including sulphur, lead, and benzene. In terms of industrial decarbonization over time, by regulating carbon intensity in our fuel supply, this regulation helps Canadian fuel companies reach publicly stated net-zero commitments, making them part of the climate solution. The gradual decline in carbon intensity required by the standard matches the decline in corporate emissions trajectories already implied by the growing number of climate commitments.”
On energy and financial markets:
“As industry decarbonizes, the Clean Fuel Standard provides the foundation for a new environmental commodity of enormous potential significance both in Canada and abroad: the CFS credit. We look forward to watching the development and maturation of this commodity in the coming compliance market.”
On competitive advantage:
“The potential to deliver competitive advantage is another important upside to the Clean Fuel Standard. It will give Canada a chance to gain a competitive edge against U.S. competitors, to prepare for the possibility of similar federal regulatory action on fuels by the incoming Biden-Harris administration, and to safeguard access to international markets increasingly interested in carbon border adjustments.”
Quick facts
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The Clean Fuel Standard is a regulation, not a tax, on carbon pollution in our fuel supply. Government also regulates lead, benzene and sulphur content. This regulation will result in a marginal cost increase for consumers at the pumps, estimated to range from 4 cents to 11 cents per litre more.
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The Clean Fuel Standard was originally announced in 2016. Government had planned for the new rules comprising the CFS to be finalized by 2019, after years of consultation with industry and other stakeholders.
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Regulations on liquid fuels are intended to achieve upwards of 20 million tonnes of greenhouse gas emission reductions. With gaseous and solid fuels, the Clean Fuel Standard would have addressed 30 million tonnes of emissions.
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The Clean Fuel Standard is a flexible, market- and performance-based regulatory approach that provides multiple routes to compliance for regulated fuel suppliers, including credits for upstreams emission reductions (cleaner fossil fuels), blending of low-carbon fuels, and fuel-switching to electricity or hydrogen for use in transportation.
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The CFS liquid fuel class regulations are broadly similar to British Columbia’s Low Carbon Fuel Standard which regulates the carbon intensity of liquid fuels used in transportation and was originally published in 2008. California and Oregon also have similar low-carbon fuel regulations which have been in place since 2009 and 2015 respectively. The European Union’s Fuel Quality Directive requires reduction of the greenhouse gas intensity of transport fuels by a minimum of 6% by 2020 from a baseline of 2010.
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Apart from its fundamentally low-cost structure arising from tradeable compliance credits, the Canadian CFS includes multiple distinct mechanisms to further contain costs, including a Credit Clearance Mechanism and a Compliance Fund.
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Clean fuels are characterized by lifecycle carbon intensities lower than those of petroleum-based fuels. Clean fuels include biomass-based fuels (such as ethanol, biodiesel, and hydrogenation-derived renewable diesel), biogas/renewable natural gas, low-carbon hydrogen and electricity, as well as co-processed biocrudes and emerging synthetic fuels.
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Contact
Sarah MacWhirter
Communications director, Pembina Institute
416-389-7465
Background
Report: Canada’s Clean Fuel Standard: Setting the record straight
Blog: Canada’s clean fuel standard is exactly the kind of climate action we need
About the Pembina Institute
The Pembina Institute is a non-profit think-tank that advocates for strong, effective policies to support Canada’s clean energy transition. We have offices in Vancouver, Calgary, Edmonton, Ottawa and Toronto. Learn more: www.pembina.org
