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From gallons to carbon intensity: New trends in Canadian ethanol policy

From gallons to carbon intensity: New trends in Canadian ethanol policy

Dan Pfeffer
Renewable Industries Canada

Transcript

  1. From gallons to carbon intensity New trends in Canadian ethanol

    policy Dan Pfeffer Presented at the National Ethanol Conference February 2021
  2. DISCLAIMER OF WARRANTIES AND LIMITATION OF LIABILITY Unless we otherwise

    agree in writing, this site and our products or the services are provided on an “as is” and “as available” basis without warranty of any kind. RICanada expressly disclaims all warranties, whether express, implied, or statutory, regarding the services, including, but not limited to, the implied warranties of title, merchantability, fitness for a particular purpose, and non-infringement. RICanada does not represent or warrant that the services will be error free, secure, virus free, or without interruption. RICanada will not be liable for any consequential, incidental, indirect, special, or exemplary damages of any kind, including without limitation any loss of use, loss of business, or loss of profit or revenue, arising out of or in connection with products or services provided by us (however arising, including negligence), even if we are aware of the possibility of such damages.
  3. About Us • Renewable Industries Canada (RICanada) is a business

    coalition of producers of renewable fuels, products, & technology. • Committed to raising consumer awareness and policy building, RICanada has been the leading national voice for Canada's domestic biofuel industry for over 35 years. • RICanada membership includes some of Canada’s largest and brightest biofuels producers, business innovators, agricultural leaders, and industry experts.
  4. Political landscape shifts in Canada in 2015 2015: Justin Trudeau

    is elected Prime Minister. Promises to address the climate crisis and build an economy beyond fossil fuels. 2016: Canada Signs Paris climate agreement. Commits to reducing its GHG emissions by 30% below 2005 levels by 2030. 2017: Federal Government begins consultations to develop a national Clean Fuel Standard (CFS). 2018: Ontario announces plan to increase its provincial ethanol blending requirement from 10% to 15%. Quebec announcement follows. 2021: U.S. President Joe Biden rejoins Paris climate agreement; PM Trudeau and U.S. VP Harris discuss climate change and desire to work closely with Canada on a wide “range of issues.” 2020: Canada announces plans to drive toward net-zero by 2050, increases carbon price, and publishes draft regulations for the CFS. 2019: National Carbon Price begins.
  5. 5% Ethanol 4% BBD (70% GHG reduction) Ontario 5% Ethanol

    4% BBD (20% GHG reduction in overall carbon intensity by 2020) British Columbia 5% Ethanol 2% BBD (25% GHG reduction to petroleum required) Alberta Canadian Renewable Fuels Policy (Then*) Saskatchewan Manitoba 7.5% Ethanol 2% BBD 8.5% Ethanol 3.5% BBD Federal Current mandates • 5% Ethanol • 2% Biomass-based diesel (BBD). *circa 2016
  6. 10% Ethanol avg. 45% GHG reduction Gradually increasing: 2025 →

    11% 2028 → 13% 2030 → 15% with 50% GHG reduction 4% BBD (70% GHG reduction) Ontario 5% Ethanol 4% BBD (20% GHG reduction in overall carbon intensity by 2030) LCFS values carbon intensity of biofuels British Columbia 5% Ethanol 2% BBD (25% GHG reduction to petroleum required) Alberta Canadian Renewable Fuels Policy (Today) Saskatchewan Manitoba 7.5% Ethanol 2% BBD 9.5% moving to 10% Ethanol in 2022 3.5% moving to 5% BBD in 2022 Federal Current mandates • 5% Ethanol • 2% Biomass-based diesel (BBD). Clean Fuel Standard • Proposed CFS projects an average of 15% ethanol and 11% BBD across Canada by 2030 • Credits projected to hit $215 CAD per tonne in 2030 Quebec Plan for a Green Economy announces 2030 target for 15% ethanol and 10% BBD mandates. Likely to include CI component
  7. Market • Canada’s domestic consumption is typically in the range

    of 3 Billion litres, with a production capacity in the neighbourhood of 1.8 Billion litres. • Canada imports approximately 1.2 Billion litres per year (approx. 321M gallons) from the U.S. Ethanol imports were 10% lower in 2019 compared to 2018. • Implied demand was 3.08 billion litres (approx 814M gallons). • For the most part, Canada is under stricter lockdowns due to COVID-19 than the U.S. • The path forward for a full return to business as usual activities will be slower than in the U.S., as Canada lags behind in vaccine procurement and deployment. • A significant drop in demand for fuel has recovered considerably, but we are still lagging behind pre-COVID levels. Ethanol imports Ethanol Production
  8. The Clean Fuel Standard • Part of a broader climate

    plan, the Clean Fuel Standard is a key piece of the puzzle to lowering the carbon intensity (CI) of fuels. Other key initiatives include a carbon tax, and a commitment to reach net zero emissions by 2050. • Under the proposed CFS, producers and distributors of fossil fuels would have to reduce the CI by 2.6 per cent by December 2022 and 13 per cent by 2030. • Ethanol is forecast to be a key compliance option under the CFS, with Environment and Climate Change Canada (ECCC) predicting E15 to be Canada’s average blend in 2030. • This is expected to lead to 2.8 billion litres (740M gallons) of new demand in 2030. Demand increases start mostly in 2025-26 range. • For ethanol producers, it will be important to ensure that all possible avenues for CI reductions are recognized by the policy. CFS - required CI reductions for fossil fuels (g/MJ)
  9. CFS compliance options • Credits will not be divided equally

    among these categories. Category 2 is expected to outperform the others, particularly as of 2026. • Even when there is no switch from liquid fuels, low carbon gaseous fuels such as renewable natural gas and green hydrogen can also generate limited credits (up to 10% of the program’s goal). Category 1 • Efficiencies in oil production and refining Category 2 • Using low carbon biofuels Category 3 • Switching from liquid fossil fuels, to electricity; hydrogen; or other. Abstract compliance • Purchasing credits from a compliance fund
  10. Regulatory Process and Timeline • Electoral cycle could pose a

    challenge or delay the policy. • Clear signals that the Trudeau minority government is keen to have an election, possibly in the summer/fall 2021. • A change of government, in particular a Conservative government would re-evaluate key environmental policies i.e. national carbon pricing and possibly the CFS. Draft regs published (Dec 2020) Formal comment period (closes March 4 2021) Final regulations published (anticipating Dec 2021). Early action credits begin. Coming into force of CFS obligation Dec. 2022
  11. Sustainability Provisions • Done right, biofuel policies are environmentally sustainable.

    Famers in Canada and the U.S. do this extremely well but this is not always the case in other parts of the world. • Canada’s department of Environment and Climate Change (ECCC) is committed to including measures in the CFS to ensure that land and water resources are protected. • ECCC is putting in place land-use and biodiversity (LUB) criteria mainly with the aim of: 1. Ensuring that high carbon intensity, foreign feedstocks (namely palm oil) don’t count for compliance 2. Preventing the CFS from incentivizing land use change that sees forests converted to farms to meet demand for biofuels. • Canadian and US agriculture are largely exempt from these sustainability criteria and will benefit from aggregate compliance. • Some level of feedstock tracking could be required, including declarations attesting to where feedstock was grown. • RICanada’s engagement on LUB is on-going to help ensure that all criteria can be satisfied at the national level. Monthly statistics 2019
  12. THANK YOU! Website RICanada.org Email d.pfeffer@ricanada.org Social @RenewCan