Carbon fight about to enter new phase
Prices could rise under clean fuel standard
Canada’s environment commissioner Julie Gelfand delivered a stern warning to the federal government this week, declaring that to deal with climate change Ottawa needs to move “from a seemingly endless planning mode into an action mode.”
That will mean more than just putting a price on carbon — to date the only element in the Liberals’ pan Canadian climate change framework that’s received much attention. The government’s plan also includes a suite of lesser-known policies, including a proposed clean fuel standard that some say amounts to a second carbon tax.
The new standard, likely unknown to most Canadians, could actually have more of an impact than a carbon price in cutting Canada’s carbon emissions to 30 per cent below 2005 levels by 2030, according to some experts.
“It’s big,” said Jeremy Moorhouse, a senior analyst with Clean Energy Canada. “It’s the single biggest carbon-fighting policy in the pan-Canadian framework.”
The government is expected to release a framework for the clean fuel standard this fall, but in a discussion paper published in February, it suggested the standard would require a 10 to 15 per cent reduction in the carbon intensity of fuels used in transportation, homes and industry. That could be achieved by mixing more renewable fuel like ethanol into gasoline or switching to lower-carbon fuels like electricity, natural gas and hydrogen.
The goal is to reduce emissions by 30 million tonnes annually by 2030 — a sizable chunk of the roughly 220 million tonnes of emissions cuts Canada needs to make by 2030 to meet its target under the Paris Agreement, and the equivalent of taking about seven million cars off the road. The federal government hasn’t said how much a national carbon price will cut emissions, but an estimate from consultants EnviroEconomics suggests it might be about 18 million tonnes annually.
“I think that the clean fuel standard will drive change faster than carbon pricing,” said Warren Mabee, director of the Queen’s Institute for Energy and Environmental Policy, in an email. “In fact, (it) will essentially create a ‘de facto’ price on carbon which is higher than the national price that the government has talked about, by forcing companies to invest and to make changes in the fuel supply chain.”
In other words, “it’s essentially yet another carbon tax,” said Timothy Egan, president and CEO of the Canadian Gas Association, which represents natural gas companies. “And I actually don’t think Canadians have a clue about this initiative.”
Moorhouse said the clean fuel standard is a great opportunity for Canadian industry. “What this means is really creating a market for cleaner fuels,” he said. In California, renewable fuel production has increased by 75 per cent since 2010 under a low carbon fuel standard, and renewable fuel use has doubled since 2010 in B.C., the only province with a standard, he said.
It’s not yet known how much the clean fuel standard might cost, at the pump or on home heating and electricity bills. Mabee suggested it might cost consumers about the same amount as a carbon tax. “It’s going to hurt,” he said. “I do see people paying more at the pump. I do see people using alternatives wherever possible.”
He believes the clean fuel standard is necessary to get people to change their behaviour, particularly in the transportation sector, where he says a carbon tax may not be enough to make people cut back on fuel use.
Egan said the clean fuel standard could encourage communities to switch to natural gas instead of oil or diesel. Natural gas could also be used as a cleaner transportation fuel, he said, but that will come with a price tag.
“We (natural gas producers) offer one of the most cost-effective ways to reduce emissions, but even then, none of these are cheap,” he said. “It is not inexpensive to reduce emissions.”
Moorhouse, however, said Californians have not experienced major price hikes because of their clean fuel standard.
Others have concerns about the supply of low-carbon fuels needed to meet the new standard, and the available technology.
“There are some very important questions to be asked about the vehicle fleet mix for the future and what are those vehicles going to look like,” said Brian Ahearn, vice-president of the Canadian Fuels Association.
Stephen Laskowski, president of the Canadian Trucking Association, said Canada’s long-haul trucking industry currently doesn’t have a viable alternative to diesel. “There is no long-haul electric truck option for the foreseeable future,” he said, and Canada doesn’t yet have the fuelling infrastructure for natural gas-powered trucks.
“We’ve sort of hit a technology wall right now,” he said. “In the end, we’re going to make products moved by truck more expensive.”
The federal government was supposed to release a summary of comments on its February discussion paper this summer, but it has yet to be published. A’s framework for the clean fuel standard is expected later this fall.