The Best Canadian Climate Policy You’ve Probably Never Heard Of

It just might be the best climate policy you’ve never heard of.

It’s called the Clean Fuel Standard. Proposed back in December 2016 when the landmark Pan-Canadian Framework was signed by most provinces and territories, it’s since been vastly overshadowed by other, splashier policies, such as carbon pricing, the federal coal phase-out and methane regulations.

But as outlined in a brand new report by Clean Energy Canada — a think tank based at Simon Fraser University — the policy has incredible potential to cut Canada’s annual greenhouse emissions: upward of 30 megatonnes per year, compared to 18 megatonnes from the carbon price.

So why hasn’t anyone heard of it? DeSmog Canada took a look at the details to help you make sense of the situation.

What is the Clean Fuel Standard?

Simply put, it’s a federal requirement for fuel suppliers to cut their annual emissions by a certain percentage every year. It’s a way of accelerating the switch to cleaner fuels and technologies such as biofuel, clean electricity, carbon capture and storage and “renewable natural gas.”

By fuel suppliers, we mean mostly oil refineries and natural gas suppliers.

With that said, the policy will impact every producer and consumer of fuels, which include gasoline, diesel, natural gas, heating oil, coal and petcoke.

The key thing about this particular policy is that it won’t just include transportation. A fair few other jurisdictions have crafted clean fuel standards for transportation, including B.C. and California. But if unveiled as expected, Canada’s policy will include fuel used in buildings and industry, two considerable sources of emissions not dealt with by the current B.C. standards

“If implemented the way that the federal government says they would implement it, it would be the first of its kind in the world,” Dianne Zimmerman, director of the Pembina Institute’s transportation and urban solutions program in Ontario, told DeSmog Canada.

How much emissions reduction are we talking here?

The equivalent to removing seven million cars from the road.

Overall lifecycle carbon intensity is expected to drop by 10 to 15 per cent by 2030. That means removing upward of 30 megatonnes of greenhouse gas emissions per year, according to modelling by Clean Energy Canada. In a webinar hosted by Clean Energy Canada on Tuesday, senior analyst Jeremy Moorhouse indicated that could come from 19 megatonnes from transportation reductions and another 15 million tonnes from buildings and industry.

It’s still not enough for Canada to actually meet its Paris climate targets. In fact, Environment Commissioner Julie Gelfand recently calculated that Canada is expected to miss its 2030 market by 44 megatonnes, even if all policies from the Pan-Canadian Framework are fully implemented.

Wait, wasn’t this what the carbon tax was for?

Yes and no.

Warren Mabee, geography professor and Canada Research Chair in Renewable Energy Development and Implementation at Queen’s University, noted in an interview with DeSmog Canada that he sees the carbon price as setting a floor. A minimum price of sorts.

But he says the Clean Fuel Standard will accelerate emissions reductions in certain sectors, especially where there are cleaner technologies and fuels already available. Mabee actually described the standard as essentially “setting an alternative price for carbon.”

It’s similar to what Simon Fraser University economist Mark Jaccard was getting at in his 2016 paper about ‘politically viable’ solutions to emissions reductions. In it, he argued that flexible regulations “approximate the incentives and flexibility of emissions pricing, but comparative surveys of climate policy acceptability… indicate that they are likely to be less politically difficult.”

That approach also helps explain how a Clean Fuel Standard can potentially interact with existing policies known as “renewable fuel mandates” in provinces like Ontario, B.C. and Alberta.

While the jargon might seem a bit redundant, the latter requires fuel producers to integrate a certain percentage of renewable fuel — mostly biofuels — into their product.

The Clean Fuel Standard on the other hand is concerned specifically with the actual carbon intensity of the fuel right at the source.

The two policies work best together in tandem, according to Mabee.

“Honestly, there is no one policy that’s going to solve these problems,” he said. “If there’s going to be a real solution, we’re going to need multiple policies to help push us there. This is one way we can differentiate those.”

What will the standard actually look like?

That’s entirely up to the federal government.

One thing that’s often overlooked is just how customizable climate policies — like carbon pricing or zero-emission vehicle mandates — really are.

Sure, there’s a basic framework required. But governments can handpick prices, exemptions, incentives and penalties.

For that reason, it’s tough to say at this point how new rules will roll out. The federal government has been delaying the release of key parts of the framework and final regulations aren’t due until 2019. But a good place to look for clues is a similar existing policy in B.C.

The B.C. Low Carbon Fuel Standard was adopted back in 2008, requiring carbon intensity of transportation fuels to be cut by 10 per cent by 2020. According to the province, that cut 6.4 megatonnes of emissions between 2010 and 2016.

The controversial 2016 Climate Leadership Plan raised the standard, requiring a carbon intensity cut of 15 per cent be implemented by 2030.

Fuel suppliers have three ways of doing that. They can just cut emissions intensity during production. Or they can buy credits from another fuel supplier: think of a carbon trading system of sorts.

The third option includes entering into a “Part 3 Agreement” with the province, in which a fuel supplier has to take certain actions, which are deemed to be equivalent to actually cutting fuel intensity. That can include building a new pump station that sells gasoline with biofuels mixed in, or testing certain additive formulas for cold weather operability of biodiesel-blended diesel.

This is what’s known as a “flexible” regulatory approach. That’s opposed to a more prescriptive policy, in which emitters clean up or pay (think the carbon price). As a result, fuel suppliers are expected to find the most cost-effective and technologically innovative solutions that work for them.

If things go as planned, Canada could implement a 10 per cent reduction of transportation fuels by 2030 from 2015 levels like B.C. has already done. Then, throw in a 3.5 per cent cut in fuels for buildings and industry, or a five per cent renewable natural gas mandate.

According to Clean Energy Canada, that would result in the 30 megatonnes in reductions.

Hold up…renewable natural gas?

It’s natural gas that comes from landfills and water treatment plants! Pretty neat, actually. It currently escapes and adds to fugitive methane emissions in the atmosphere — but could be captured.

In fact, Moorhouse said in the webinar that if you had a renewable natural gas station at every landfill across Canada, we could meet a good portion of the Clean Fuel Standard using waste.

What would this new standard mean for jobs and fuel prices?

It could be a net plus!

According to Clean Energy Canada, it’ll generate a net growth of 11,100 jobs and $4.1 billion in economic activity.

Indeed, growth would slow in some sectors such as refining and service stations, but would increase in building new biofuel facilities and cleantech investments: between $200 million to $2 billion a year between 2020 and 2030.

As for impacts on fuel prices: it’ll be minimal, between $2 and $5 per month in direct household energy bills including cars, furnaces and electricity by 2030. The important thing to keep in mind is that energy efficiency measures between now and then will greatly cut costs for households.

In the end, Canadians will end up saving between $17 and $82 a month by 2030, depending on things like how efficient your furnace and cars are.

Alright, what’s the catch?

There are certainly challenges.

Zimmerman of the Pembina Institute notes that one of their concerns is that the new fuel standard could be delayed and not be implemented. She calls the schedule by which they’re attempting to get it regulated under the Canadian Environmental Protection Act as “very aggressive.” But we’re already seeing the government fall behind. They also delayed implementing methane regulations on oil and gas producers until well after the next election.

Those delays have consequences.

“Every year there’s a delay of climate policy has implications to further decades,” she said.

There’s also the big question mark about counting reductions, especially related to credit trading. Mabee of Queen’s University noted it’s still unclear how reductions will actually be verified: whether it will be a government agency or something more independent.

“That’s your danger,” he said. “You get a powerful industry lobbying group that says ‘I’m buying so many litres of this biofuel or this low-carbon oil source and therefore I should be getting this benefit.’ But if there’s no proof that it’s actually doing that, and if there’s disputes, who do you go to to resolve the dispute? That isn’t clear yet.”

Now, we just have to hold our breath and wait for the actual policy.


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