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.”

The Best Canadian #Climate Policy You’ve Probably Never Heard Of https://t.co/EL9wAhGoLb #cleanfuelstandard @Pembina @cleanenergycan

— DeSmog Canada (@DeSmogCanada) November 8, 2017

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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A little known federal plan to adopt a clean fuel standard could cut Canada’s emissions by as much as Ontario’s coal phase-out (North America’s single largest emissions reduction initiative) — if done right.

The clean fuel standard, announced last November, will require fuel suppliers to decrease the carbon footprint of the fuels they sell in Canada.

But unlike similar regulations in British Columbia and California, which target transportation fuels only, the federal government is considering using the clean fuel standard to also target emissions from fuels used in buildings and industrial processes, such as heating oil and petroleum coke.

“Gas, solids, liquids, whatever. If it is a fossil fuel, it is going to be subject to this standard,” Clare Demerse, policy advisor at Clean Energy Canada, told DeSmog Canada. “That is a really … powerful signal. All fossil fuels in Canada have to improve their carbon performance.”

However, it does make the policy more complex to design and a number of questions remain on how the federal government will craft a regulation with such a broad reach.

The federal government is proposing to reduce Canada’s greenhouse gas emissions by 30-megatonnes by 2030, equivalent to 17.5 per cent of transportation emissions, via the clean fuel standard.

“It has been shown in California and to some extent in B.C. and Oregon that a clean fuel standard or a low carbon fuel standard works really well at greening your overall fuel mix,” Warren Mabee, associate professor at Queen’s University and Canada Research Chair in renewable energy development and implementation, said.

British Columbia’s low carbon fuel standard is responsible for one-quarter of emissions reductions in the province since 2007. California’s standard is estimated to have grown the use of clean fuels in the state by 36 per cent and made significant emissions reductions as well.

Despite advances in vehicle fuel efficiency and federal requirements for a small percentage of renewable content in gasoline and diesel, transportation emissions in Canada have remained steady at about 171 megatonnes for the last decade. In the meantime, freight emissions have grown an alarming 132 per cent since 1990.

Transportation is Canada’s second largest contributor to climate change.

A discussion paper on the clean fuel standard published last month by the federal department of Environment and Climate Change proposes making fuel suppliers reduce the carbon footprint of fuels by 10 to 15 per cent by 2030. If a fuel supplier cannot meet this target, the company can purchase credits from another supplier who has exceeded the threshold.

“What is really going to make these standards work is if there’s multiple ways for companies to get to where they need to be,” Mabee told DeSmog Canada. “So you can reduce the carbon intensity of your fuel, you can reduce your facility emissions…you can buy credits, you can sell credits. There’s a bunch of different things that can happen inside the system.”

Maximum Flexibility for Fuel Suppliers

The federal government has promised “maximum flexibility” to help fuel suppliers comply with the clean fuel standard.

But Ian Thomson, president of Advanced Biofuels Canada, said maximum flexibility for petroleum fuel suppliers could mean minimum flexibility for low-carbon fuel suppliers like the biofuels industry.

“The ones who really need lots of flexibility should be the low carbon fuel providers. Those are the folks who are facing a huge uphill battle,” Thomson told DeSmog Canada. “You’ve got David up against Goliath and you are telling Goliath he’s going to have maximum flexibility.”

On the flip side, Peter Boag, president of the Canadian Fuels Association, said reducing flexibility could make compliance with the clean fuel standard difficult for petroleum fuel suppliers.

“The more you start to layer on those additional requirements beyond the overall objective of reducing the carbon intensity to some level, you are starting to constrain suppliers’ ability to comply and you also start to make compliance more costly,” Boag told DeSmog Canada.

The federal government’s decision to “not differentiate between crude oil types” in the clean fuel standard may also be a point of contention for some. Oilsands usually produce more greenhouse gas emissions than conventional oil, but fuels from these sources may be treated as having the same carbon footprint in the proposed regulation.

Is a National Zero Emissions Vehicles Standard Next?

Jonn Axsen, associate professor in the Faculty of Environment at Simon Fraser University, said transforming Canada’s transportation sector will likely take more than a clean fuel standard. Additional measures like a zero-emissions vehicle mandate will probably be needed.

“The clean fuel standard just doesn’t send the right signal so that automakers are developing, innovating and creating the vehicle drivetrains. It’s a whole different process,” Axsen said. “It might not make sense for Canada to just have a low carbon fuel standard if it doesn’t have something very strong on the vehicles side as well.”

Developing “a Canada-wide strategy for zero-emission vehicles by 2018” is part of the pan-Canadian framework on clean growth and climate change, the federal government’s playbook on reducing greenhouse gas emissions.

Quebec adopted a zero emissions vehicle mandate last fall, whichit requires zero-emissions vehicles like electric cars to account for 15 per cent of all vehicle sales by 2025. California also has a zero emissions vehicle mandate.

Photo: Hakan Dahlstrom via Flickr

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.