Office: +1 (604) 947-0040 www.advancedbiofuels.ca 1 VIA EMAIL: [email protected]August 24, 2018 Ms. Bobbi Plecas Deputy Minister, Climate Change Ministry of Environment and Climate Change Strategy 3 rd Floor, 525 Superior Street Victoria, BC Dear Ms. Plecas, Re: BC Clean Growth Strategy Consultation – Clean Transportation & Clean Growth for Industry We appreciate the opportunity to provide our comments on the subject review. As indicated by the Province on the Clean Growth Strategy (BC CGS) consultation website 1 , the Government of British Columbia (GoBC) is seeking to “bring together our action on climate change and work underway on our energy roadmap to drive sustainable economic growth with cleaner energy and fewer emissions. [The long-term clean growth strategy] will be integrated with the province’s Economic Development Strategy, #BCTech Strategy and Emerging Economy Task Force. It will set out our vision for a clean growth future and a pathway to our greenhouse gas emissions reductions targets.” To initiate the BC CGS consultation, the GoBC is seeking input on three priority areas: clean transportation, clean efficient buildings, and clean growth for industry. Paramount to the BC CGS, low carbon fuel production in BC is a key driver for clean economic growth and ‘green jobs’, while clean fuel use is the principal mechanism to reduce greenhouse gas (GHG) emissions and improve the environmental performance of the transport and industrial sectors. Since 2010, the province’s Renewable and Low Carbon Fuel Requirements Regulation 2 (RLCFRR) has led the development of the low carbon fuel sector in Canada. Further, the province’s carbon tax system 3 has led North American efforts to price carbon pollution on fuels. The BC CGS can leverage this leadership to advance clean growth and economic development from the production and use of lower carbon fuels in British Columbia. A recent economic impact assessment by Doyletech Corporation analyzed potential impacts of enhanced clean fuel regulations on the Canadian economy. 4 The results point to significant economic gains for western Canada under an expanded federal renewable fuel standard (RFS), and/or a clean fuel standard (CFS). Construction impacts of increasing the RFS blending rates to 10% and 5% (in gasoline and diesel, respectively) for the region include almost $1.4 billion of economic output, and over 6,900 clean energy jobs. Operations would generate almost $2.0 billion of annual economic output, and support approximately 1,500 full time jobs. Based on our internal member survey in the fall 2017, Advanced Biofuels Canada members are actively engaged in the development of over 35 advanced biofuels projects 1 BC Clean Growth Consultation 2018: https://engage.gov.bc.ca/cleangrowthfuture/ 2 BC RLCFRR: https://www2.gov.bc.ca/gov/content/industry/electricity-alternative-energy/transportation- energies/renewable-low-carbon-fuels 3 BC Carbon Tax: https://www2.gov.bc.ca/gov/content/environment/climate-change/planning-and-action/carbon- tax 4 Doyletech EIA 2018: https://advancedbiofuels.ca/biofuelssuccesscfs/
VIA EMAIL: [email protected] August 24, 2018 Ms. Bobbi Plecas Deputy Minister, Climate Change Ministry of Environment and Climate Change Strategy 3rd Floor, 525 Superior Street Victoria, BC Dear Ms. Plecas, Re: BC Clean Growth Strategy Consultation – Clean Transportation & Clean Growth for Industry We appreciate the opportunity to provide our comments on the subject review. As indicated by the Province on the Clean Growth Strategy (BC CGS) consultation website1, the Government of British Columbia (GoBC) is seeking to “bring together our action on climate change and work underway on our energy roadmap to drive sustainable economic growth with cleaner energy and fewer emissions. [The long-term clean growth strategy] will be integrated with the province’s Economic Development Strategy, #BCTech Strategy and Emerging Economy Task Force. It will set out our vision for a clean growth future and a pathway to our greenhouse gas emissions reductions targets.” To initiate the BC CGS consultation, the GoBC is seeking input on three priority areas: clean transportation, clean efficient buildings, and clean growth for industry. Paramount to the BC CGS, low carbon fuel production in BC is a key driver for clean economic growth and ‘green jobs’, while clean fuel use is the principal mechanism to reduce greenhouse gas (GHG) emissions and improve the environmental performance of the transport and industrial sectors. Since 2010, the province’s Renewable and Low Carbon Fuel Requirements Regulation2 (RLCFRR) has led the development of the low carbon fuel sector in Canada. Further, the province’s carbon tax system3 has led North American efforts to price carbon pollution on fuels. The BC CGS can leverage this leadership to advance clean growth and economic development from the production and use of lower carbon fuels in British Columbia. A recent economic impact assessment by Doyletech Corporation analyzed potential impacts of enhanced clean fuel regulations on the Canadian economy.4 The results point to significant economic gains for western Canada under an expanded federal renewable fuel standard (RFS), and/or a clean fuel standard (CFS). Construction impacts of increasing the RFS blending rates to 10% and 5% (in gasoline and diesel, respectively) for the region include almost $1.4 billion of economic output, and over 6,900 clean energy jobs. Operations would generate almost $2.0 billion of annual economic output, and support approximately 1,500 full time jobs. Based on our internal member survey in the fall 2017, Advanced Biofuels Canada members are actively engaged in the development of over 35 advanced biofuels projects 1 BC Clean Growth Consultation 2018: https://engage.gov.bc.ca/cleangrowthfuture/ 2 BC RLCFRR: https://www2.gov.bc.ca/gov/content/industry/electricity-alternative-energy/transportation-energies/renewable-low-carbon-fuels 3 BC Carbon Tax: https://www2.gov.bc.ca/gov/content/environment/climate-change/planning-and-action/carbon-tax 4 Doyletech EIA 2018: https://advancedbiofuels.ca/biofuelssuccesscfs/
in Canada, representing over 3 billion litres per year in new production capacity and totaling over $4 billion in new capital investment. British Columbia is well positioned to attract new advanced biofuel investments. The Ministry of Energy, Mines and Petroleum Resources provides a comprehensive overview of the RLCFRR compliance results on its website.5 In their Biofuels in Canada 2018 report, Navius Research highlights biofuels use in BC and other Canadian jurisdictions from 2010 to 2016.6 Overall, biofuels use in BC has been proven to have marginal net economic impact on fuel prices. However, use of biofuels in the diesel pool has declined since 2015, and, as a result, while biofuels have contributed to significant GHG reductions to date, the total avoided emissions under the RLCFRR declined from 2015 to 2016. Given the impacts of climate change on British Columbians and BC-based industries, now is the time for new action. Our submission incorporates key recommendations for the BC CGS. Appendix 1 sets out specific recommendations on the RLCFRR, carbon tax, and clean transportation and clean growth for industry proposals in the BC CGS consultation. Appendix 2 provides updated market data regarding transportation fuels and biofuels use. Key Recommendations Advanced Biofuels Canada’s recommendations target specific actions under the BC CGS ‘Clean Transportation’ and ‘Clean Growth for Industry’ discussion threads, including specific measures to revise the RLCFRR and carbon tax and complementary measures that will overcome market barriers to attract new capital investment, support existing and new clean energy jobs, and further reduce greenhouse gas emissions in the province. Renewable and Low Carbon Fuel Requirements Regulation – Improve Greenhouse Gas Performance of LCFS
1. Increase the low carbon fuel standard (LCFS) requirement to reduce the average carbon intensity of fuels to 15% compared to 2010 levels by 2030
2. Enable an increase of the LCFS carbon intensity reduction requirement up to 20% by 2030, subject to a feasibility assessment in 2020
3. Incrementally increase the renewable fuel standard (RFS) volumetric requirements in regular unleaded gasoline fuel to 10% and in diesel fuels to 5% by 2021 and 2020, respectively
4. Implement an additional ‘Advanced Biofuel RFS’ blending requirement of 0.5%, subject to established commercial production capacity, in each fuel pool (gasoline, diesel)
Fair Carbon Pricing 5. Revise the carbon tax design to exempt biofuels from the carbon tax for biofuel blends above 10%
in gasoline and 5% in diesel
6. Assure eligibility to the Clean Growth Program ‘Industrial Incentive’ for facilities such as biomass processors (agricultural processing, rendering, mills) and advanced biofuel producers to maintain competitive market conditions under the BC carbon tax system for Energy Intensive Trade Exposed (EITE) industries
5 BC RLCFRR Summary (2010-2016): https://www2.gov.bc.ca/assets/gov/farming-natural-resources-and-industry/electricity-alternative-energy/transportation/renewable-low-carbon-fuels/rlcf-007-2016.pdf 6 Navius – Biofuels in Canada 2018: https://www.naviusresearch.com/publications/2018-biofuels-in-canada/
New Capital Investment in Production and Use of Low Carbon Fuels 7. Adopt a ‘Clean Fuel Strategic Plan’ as part of the Clean Growth Strategy and utilize funds from the
‘Clean Industry Fund’ and revenues from the carbon tax on transport fuels to ‘recycle’ (re-invest) these carbon revenues to specifically support transport sector decarbonization, including the production and use of advanced biofuels
8. Attract capital investment in clean fuel production capacity by establishing a production credit program for advanced biofuels production in the province
9. Expand support to increase use of mid- and high-level blends of low carbon biofuels (e.g. E15, E30, E85, B6-B20, B50-B100) and cold weather use of biodiesel (B2-B5) through the RLCFRR ‘Part 3 Agreement’ program
Key Outcomes The proposed recommendations align broadly with and complement the core initiatives and targeted measures that British Columbia has set out in the BC CGS.7 Taking action now can positively influence energy and climate action measures under development across Canada (e.g. federal and provincial carbon pricing systems and fuels regulations, including the federal Clean Fuel Standard8), and secure investments in, and access to, markets for British Columbia-made advanced biofuel products. By increasing the stringency of the RLCFRR to 2030 and expanding measures under the regulation to reflect ‘best practices’ across North America, the GoBC will support secure clean energy jobs, attract new investment in low carbon fuel production and use, improve fuel market competition, and demonstrate leadership in effective climate action. These measures will build on an established, proven platform that has attracted significant investment in biomass processing (canola crushing, rendering, bioenergy production) and advanced biofuel production assets in western Canada. Importantly, these steps will ensure the province is on the right path to achieve long-term decarbonization of transportation through to 2050. An expanded RLCFRR, when combined with amendments to the carbon tax and aligned investment measures, will drive low cost greenhouse gas emissions reductions across the transport sector and whole economy, and capture the benefits of clean economic growth and diversification in British Columbia. The challenges of transitioning to a global clean energy economy remain daunting; but BC’s leadership in pioneering effective low carbon fuel regulations and carbon pricing is a cornerstone achievement on which to build. We look forward to supporting the BC CGS review and to working with you, your colleagues, and fellow stakeholders in the coming months to implement the new Clean Growth Strategy in the province. Respectfully submitted, Doug Hooper, Director Policy & Regulation Advanced Biofuels Canada / Biocarburants avancés Canada
7 BC CGS: https://engage.gov.bc.ca/app/uploads/sites/391/2018/07/MoE-IntentionsPaper-Introduction.pdf 8 Government of Canada – Clean Fuel Standard: https://www.canada.ca/en/environment-climate-change/services/managing-pollution/energy-production/fuel-regulations/clean-fuel-standard.html
cc: Honourable George Heyman, Minister, Environment and Climate Change Strategy ([email protected]) Honourable Carole James, Minister, Finance ([email protected]) Honourable Michelle Mungall, Minister, Energy, Mines and Petroleum Resources ([email protected]) Andrew Weaver, Leader of the BC Green Party and MLA ([email protected]) Dave Nikolejsin, Deputy Minister, EMPR ([email protected]) Mark Zacharias, Deputy Minister, ECCS ([email protected]) Jordan Goss, Assistant Deputy Minister, Revenue Division, Finance ([email protected]) Les MacLaren, Assistant Deputy Minister, Electricity and Alternative Energy Division, EMPR ([email protected]) Dan Green, Executive Director, Alternative Energy, EMPR ([email protected]) Tim Lesiuk, Acting Executive Director, Clean Growth Strategy, Climate Action Secretariat, ECCS ([email protected]) Richard Purnell, Executive Director, Tax Policy Branch, Finance ([email protected]) Michael Rensing, Director, Low Carbon Fuels, Alternative Energy, EMPR ([email protected]) Climate Solutions and Clean Growth Advisory Council (Climate Advisory Council) – c/o Marcia Smith and Merran Smith, Co-Chairs ([email protected] and [email protected]) Advanced Biofuels Canada/ Biocarburants avancés Canada Our organization promotes the production and use of low carbon advanced biofuels9 in Canada, which our members supply to Alberta, across North America, and to global markets. Our members have invested in advanced biofuels processing and supply chain operations in the province, and they are actively bringing to market the next generation of low carbon biofuels. Advanced Biofuels Canada has provided expert advice to Canadian governments on transport fuel regulations and carbon pricing systems since 2005. For more information, please visit: www.advancedbiofuels.ca
9 Advanced biofuels have GHG reductions of at least 50% below comparable fossil fuels and are made from sustainable biomass. Canada has approximately 750 M litres of advanced biofuels production capacity.
Appendix I: Key Recommendations - Discussion Introduction Over the past few years, international, national, and sub-national governments have focused on implementing effective measures to meet the climate action commitments under the Paris Agreement.10 Major steps to define climate action policies at the national level in Canada include the 2016 Pan-Canadian Framework on Clean Growth and Climate Change (PCF)11 and NRCan’s 2018 Generation Energy Council Report on Canada’s Energy Transition (GECR).12 Under the PCF, signatories - including the Province of British Columbia - committed to a suite of actions to tackle growing GHG emissions from the transportation sector. These included:13
i. Implement increasingly stringent vehicle emission standards ii. Support for fuel switching in rail, aviation, marine and off-road sectors
iii. Developing a Canada-wide zero-emission vehicle strategy by 2018 iv. Accelerate deployment of EVs and alternative fuels v. Developing a clean fuel standard for fuels used in transportation, buildings, and industry
In 2017, the Minister for Natural Resources formed the Generation Energy Council to prepare a report on Canada’s long-term energy future, and define goals, pathways, and milestones to achieve it. The report focused on the goal of transitioning to a clean energy future, and defined four key pathways to get there:14
i. Wasting less energy ii. Switching to clean power
iii. Using more renewable fuels iv. Producing cleaner oil & gas
The GECR identified the ‘three most important steps’ of the renewable fuels pathway:
1. Switch to cleaner fuels wherever possible 2. Blend cleaner fuels, such as biofuels and renewable gas, into the existing fuel supply 3. Expand the supply of cleaner fuels to improve availability
Advanced Biofuels Canada endorses the findings and recommendations of these reports. Our recommendations, and the discussion comments below, are designed both to achieve of the objectives of effective climate action and clean growth, and adhere to the principles established by the governments of Canada. The effects of climate change and other negative impacts from the reliance on fossil fuels are well understood. Effective policy tools, such as fuel regulation, have been successfully deployed. The opportunity to capture the clean growth benefits from the transition to clean energy is equally recognized. Those benefits will best be realized by close collaboration between governments and clean energy sectors to ensure measures are in place to attract investment and support operation of clean energy assets in British Columbia.
Renewable and Low Carbon Fuel Requirements Regulation – Improve Greenhouse Gas Performance of LCFS
1. Increase the low carbon fuel standard (LCFS) requirement to reduce the average carbon intensity of fuels to 15% compared to 2010 levels by 2030
The BC CGS ‘Support for Cleaner Fuels – Low Carbon Fuel Standard’ (Discussion #2) proposes to adopt the 15% reduction requirement.15 We support this approach and offer the following comments. Fundamentally, the most effective regulatory structure for decarbonizing transport fuels is to twin progressive renewable fuel standards (RFS) with carbon performance (LCFS) regulations. The combination of a clear market access, volumetric signal (RFS), combined with a market-based carbon price signal (LCFS credits) has been proven to effectively incent lower carbon fuels in British Columbia, California, and Oregon. As evidenced by compliance data under these LCFS regulations, a progressively more stringent carbon intensity requirement twinned with robust RFS standards, has resulted in significant reductions in greenhouse gas (GHG) emissions from fuels use over the 2010-2018 period. Together with the State of California, British Columbia pioneered the development and implementation of low carbon fuels standards in North America. CA was first to adopt an LCFS, bringing its regulation into effect in 2011 with a 10% carbon intensity reduction requirement by 2020. This year, California has advanced actions to adopt an increase to the stringency of its LCFS regulations to require a 20% reduction in the average carbon intensity of gasoline and diesel transport fuels compared to revised 2010 baseline levels by 2030.16 The increased stringency of the CA LCFS will be accompanied by other technical amendments and measures to support greater production and use of clean fuels. While conventional jet fuels are excluded from the CA LCFS, they are proposing to credit use of alternative jet fuels.17 Implementation of the BC LCFS under the Renewable and Low Carbon Fuel Requirements Regulation (RLCFRR)18 was delayed until July 1, 2013 due to pressure from fossil fuel suppliers. While the current 10% carbon intensity reduction requirement by 2020 is comparable to the CA LCFS design, the BC LCFS is considered less stringent due, in part, to the fact that BC awards ‘Part 3 Agreement’ program credits for up to 25% of the prior year’s compliance obligation. After extensive public and stakeholder consultations in 2014-15, the GoBC released a Climate Leadership Plan in 2016 that called for an increase in the average carbon intensity reduction requirement to 15% by 2030.19 We have recommended that Alberta align their RFS fuel regulation with the British Columbia RLCFRR to expand the market supply/demand for low carbon fuels and capture market efficiencies across the western fuel distribution system. (This alignment would ideally extend across Saskatchewan and Manitoba as well.) Investments to produce, distribute, and use lower carbon fuels require policy stability to support high capital investments, long project lead times, and protracted payback periods. The current BC and CA regulations were adopted in 2007 and 2008, respectively, and prescribed requirements from 2010 to 2020. Now is the time to set regulatory signals for fuel markets from 2020 to 2030. 15 BC CGS: https://engage.gov.bc.ca/cleangrowthfuture/2018/07/20/772/ 16 CA ARB LCFS: https://www.arb.ca.gov/regact/2018/lcfs18/15dayatta2.pdf 17 CA ARB LCFS: https://www.arb.ca.gov/fuels/lcfs/lcfs_meetings/092217workshop_presentation.pdf 18 BC RLCFRR: https://www2.gov.bc.ca/gov/content/industry/electricity-alternative-energy/transportation-energies/renewable-low-carbon-fuels 19 BC CLP (archived by Pembina Institute): https://www.pembina.org/reports/bc-climate-leadership-plan-august-2016.pdf
We urge the GoBC to amend the RLCFRR immediately to require a 15% average carbon intensity reduction by 2030. As noted in #2 below, we support enabling an increase in the reduction requirement up to 20% by 2030 at the time of regulatory amendment. Further, GoBC should also consider eligibility for advanced aviation and marine biofuels under the BC LCFS to align with the CA approach and incent greater production and use of these fuels. In addition, the ‘Part 3 Agreement’ program should be used to support production of novel bio-crude feedstocks for co-processing and expand the use of mid- to high level biofuels blends and cold weather use of biodiesel (see #9 below). In general, any alignment of the BC LCFS with CA measures to utilize credits to incent production and use of low carbon fuels (e.g. the CA LCFS refinery upgrade, EV, and hydrogen proposals) should be incorporated into the existing ‘Part 3 Agreement’ program. Due to the significant dilutive effect of the ‘Part 3 Agreement’ program (e.g. compliance signal reduced by 25%), we do not support an expansion of the program credit allowance (i.e. stay within 25% maximum).
2. Enable an increase of the carbon intensity reduction LCFS requirement up to 20% by 2030, subject to a feasibility assessment in 2020
The BC CGS ‘Support for Cleaner Fuels – Low Carbon Fuel Standard’ discussion states, “The government could consider raising [the LCFS average carbon intensity reduction requirement] to 20% when they review the standard again in 2020.” We support this general approach and offer the following observations. The RLCFRR regulation has been subject to extensive consultations and reviews from 2007 to date. More recently, extensive stakeholder consultations were held in 2014 and 2017-18. As a result of these reviews, the feasibility of the current LCFS has been clearly established, notwithstanding firm opposition by some incumbent fuel suppliers (obligated parties). Fundamentally, biofuels use in North America and other jurisdictions has demonstrated viability of a number of low carbon fuel market penetration strategies to achieve compliance with the fuel regulations. However, all of these solutions were achieved in markets with stable, well designed market-based regulations. We recommend the GoBC ‘enable’ the increase in the LCFS requirement up to 20% by 2030 when enacting the regulatory amendment to reset it at 15%. By enabling the revision to increase the requirement from 15% up to 20% in 2020, the government can avoid delay, redundancy, and costs related to a second statutory process. We support the periodic review of the LCFS, and the projected 2020 timeline for the next review. As part of the 2020 review, a ‘feasibility assessment’ of increasing the requirement up to 20% by 2030 should be performed to determine if an increase can be triggered. Establishing a prescribed structure to increase the stringency of the RLCFRR would be comparable to the State of Minnesota system to increase its Biodiesel Mandate from 5% (B5) to 10% (B10) in 2014, and 20% (B20) in 2018.20 The purpose of the increased requirement (to reduce emissions and support clean economic growth) and scope of the feasibility assessment should be prescribed at the outset. Subject to establishing feasibility, a new schedule for lowering average carbon intensity reductions up to 20% by 2030 should be adopted for 2021 to 2030 following the 2020 review.
3. Incrementally increase the renewable fuel standard (RFS) volumetric requirements in regular unleaded gasoline fuel to 10% and in diesel fuels to 5% by 2021 and 2020, respectively
The current RFS blending rates are achieving the 2008-era objectives of the RLCFRR. The blending rates should be increased to mirror ‘best practices’ in low carbon transportation fuel policy and fuel use in North America. For example, biofuel blend levels under the US RFS are approximately 10% and 5% in regular gasoline and on-road diesel fuels, respectively.21 Ontario recently established a 10% blend requirement in regular grade gasoline,22 and increased the blend and carbon intensity reduction requirements to 4% in diesel fuel in 2017.23 Further, Manitoba’s new climate policy24 has targeted a 5% biofuel blend level in diesel. Under a new Renewable Energy Directive (RED),25 the European Union has committed to support biofuels blend levels of at least 14% by 2030. To enable an orderly market transition to higher blends of lower carbon fuels, we propose the following rate schedule be adopted:
Fuel Type 2018 2019 2020 2021 2022 Renewable gasoline 1
(ethanol, methanol) 5.0% 7.0% 8.5% 10.0% 10.0%
Renewable diesel 2 (biodiesel and RHD)
4.0% 4.5% 5.0% 5.0% 5.0%
1 Blend rate in regular grade gasoline 2 Blend rate in diesel grade fuels (RHD refers to ‘renewable hydrocarbon diesel’)
As demonstrated by RLCFRR results to date, decarbonization of transport fuels through increased use of low carbon biofuels is a highly effective GHG emissions mitigation strategy. Under existing carbon performance measures (LCFS markets), early compliance with federal, provincial, or state RFS blending requirements enabled rapid adoption and credit banking through low carbon biofuels use in the US and Canada (CA, BC, OR). Expanding the BC RFS to ‘best-practice’ levels in Canada will create a level market ‘floor’ structure for biofuels demand, which lowers overall fuel costs for suppliers and consumers. The commensurate expansion in infrastructure and fuel supply systems will build a stronger platform on which individual market participants can choose compliance strategies. Under the RLCFRR, biofuel blend levels have ranged from 6-7% in gasoline and 5-6% in diesel fuels since 2013. Modestly improving stringency of the RFS will complement and reinforce compliance actions under the LCFS and the proposed federal Clean Fuel Standard26 to 2020 and beyond. Given established fuel quality standards, accepted handling and use fuel quality management practices, established fuel blending and distribution infrastructure, historic blending rates in the province, and the
21 US RFS2: https://www.epa.gov/renewable-fuel-standard-program 22 ON Ethanol in Gasoline: https://ero.ontario.ca/notice/013-1929 23 ON GD: https://www.ontario.ca/laws/regulation/140097 24 MB CGP: https://www.gov.mb.ca/climateandgreenplan/index.html 25 EU REDII: http://data.consilium.europa.eu/doc/document/ST-10308-2018-INIT/en/pdf 26 Government of Canada – Clean Fuel Standard: https://www.canada.ca/en/environment-climate-change/services/managing-pollution/energy-production/fuel-regulations/clean-fuel-standard.html
existing regional surplus production capacity for conventional biofuels, we believe that new blend levels could be implemented in the 2019 compliance period. For example, biodiesel and renewable hydrocarbon diesel (RHD)27 are commonly used in blends up to 20% seasonally, and E15 is currently widely available in the United States and will soon be approved for use in Canada. An incremental, gradual phase in to 2020/2021 of the higher blend rates will provide for an orderly market transition across the whole supply chain. We recommend increasing renewable fuel use to 10% in regular unleaded gasoline and 5% in distillate fuels to match the amended regulation in Ontario and the proposed regulation in Manitoba, respectively. Both of these blend levels are well within technical limits and, in the case of distillate fuel blending, have already been achieved under the RLCFRR. In addition, the proposed blending levels will align the BC RFS with the proposed carbon tax exemption for biofuels in blends above 10% and 5% in gasoline and diesel fuel, respectively, and help mitigate carbon tax impacts on consumers, industry and obligated parties (see below).
4. Implement an additional ‘Advanced Biofuel RFS’ blending requirement of 0.5%, subject to established commercial production capacity, in each fuel pool (gasoline, diesel)
In addition to the baseline biofuel blend levels for gasoline and diesel fuel pools, we recommend an incremental ‘carve-out’ blending rate be created for use of ‘Advanced Biofuels’ in each of the fuel pools under the RFS. We propose the Advanced Biofuels RFS be set at 0.5% in each of the gasoline and diesel pools and that the carve-out volume provision be in addition to the basic RFS blend rate in each pool. Conventional biofuels, such as grain-ethanol, biodiesel or RHD, would not be eligible for compliance in the Advanced Biofuels RFS. The Advanced Biofuels RFS would come into effect in the calendar year following the establishment of commercial production capacity of Advanced Biofuels in the province of at least 25 million litres per year. The Advanced Biofuels RFS would provide assured market access for new, advanced biofuel technologies using unconventional feedstocks, encourage investment in new production capacity, and support ongoing research and development in emerging fuel technologies in British Columbia. While there is not yet sufficient commercial capacity to ‘trigger’ the Advanced Biofuels RFS requirement, several companies, such as Canfor Pulp and Carbon Engineering, are vigorously pursuing candidate technologies and commercial production. For the purpose of the Advanced Biofuels RFS, ‘Advanced Biofuels’ would be defined as non-conventional biofuels. Advanced Biofuels would include fuels made from Municipal Solid Waste (MSW), cellulosic biomass, renewable hydrogen, renewable natural gas, carbon-capture-conversion technologies (e.g. direct air, flu gases), and co-processing of biomass-based crude. The lifecycle carbon intensity of Advanced Biofuels would be measured on a comparable data and modelling basis to conventional biofuels, and Advanced Biofuels would be subject to prescribed biomass feedstock requirements. The proposed Advanced Biofuels RFS provides a mechanism to encourage development, production, and use of biocrude-based fuels (i.e. co-processing), while providing a stable market signal for conventional fuels under the BC RFS blend levels. As a principle, given the underlying environmental and economic policy goals, renewable fuel standards (RFS) and carbon performance-based regulations (LCFS) should increase stringency (e.g. expand blend levels, deepen CI reduction requirements), rather than cannibalize demand, when new technologies for lower carbon fuels are commercialized.
27 Note re: RHD – HDRD terminology. To create a common regulatory language, we recommend aligning the BC RLCFRR with other North American fuel markets by using ‘renewable hydrocarbon diesel’ or ‘RHD’ in place of ‘hydrogenation-derived renewable diesel’ or ‘HDRD’.
In order to be eligible under renewable fuel regulations, biocrude-based finished fuels must meet biogenic carbon content eligibility requirements and biomass standards. Further, the carbon intensity of the biocrude-based finished fuels will vary between biocrude feedstocks, refining platforms, and process conditions. Biocrude-based fuel pathways must be measured on a consistent systems data and lifecycle assessment modelling basis to other biofuels. Extensive research is underway now to analyze biocrude-based fuels in the CA LCFS market;28 this work should help inform eligibility considerations within the RLCFRR framework. The Advanced Biofuels RFS would be accretive to the separate blend rates in the gasoline and diesel pools to provide a stable market-based signal across both fuel pools. Advanced Biofuels litres could be utilized for compliance under either the RFS baseline mandates or the Advanced Biofuels RFS, but only counted once. Further, as markets expand availability of commercial production of Advanced Biofuels, the Advanced Biofuels RFS should be expanded to support market access and deepen emissions reductions. Looking forward, expanding stringency of the LCFS and RFS RLCFRR components will create regional economic advantage under the federal Clean Fuel Standard (CFS).29 British Columbia’s canola and livestock farmers and rendering operations rely on the growing market for advanced biofuels in North America. New technologies are expanding the potential of advanced biofuels, and demand for other sustainable biomass feedstocks, such as forestry and crop residues, MSW, renewable hydrogen, and renewable natural gas. Increasing the use of renewable fuels in the province will reduce export risk and market volatility for commodity feedstocks and BC-based advanced biofuel producers, which will enhance the economic potential of biofuels production and attract new investments to expand and construct production capacity. Fair Carbon Pricing
5. Revise the carbon tax design to exempt biofuels from the carbon tax for biofuel blends above 10% in gasoline and 5% in diesel
To date, carbon pricing systems in Canada have failed to create a market price signal based on the GHG emissions of fuels used in Canada. In BC30 and AB31, the carbon tax applies equally (at the same rate) to low carbon fuels and high carbon fossil fuels. Fuel tax systems have also failed to reflect different energy densities of low carbon ethanol and biodiesel fuels, which has created a ‘surtax’ on low carbon biofuels use by applying excise and carbon taxes on a volumetric basis.32 As a result, the BC carbon and excise tax structures subsidize the use of high carbon fossil fuels in BC. The GoBC increased the carbon tax rate by $5/tonne of GHG emissions to $35/tonne in 2018, and plans to increase it by a further $5/tonne each year to 2021 ($50/tonne). This will raise the effective rate of the carbon tax on gasoline/ethanol to $0.1114 per litre and diesel/biodiesel/RHD to $0.1286 per litre in 2021. Exempting biofuels from the carbon tax in BC would redress the current tax structure failures that impair adoption of low carbon biofuels. Further, a carbon tax exemption for biofuels for biofuels blends above 10% in gasoline and 5% in diesel fuels would align with: (i) the federal approach under the proposed federal Carbon 28 CARB Co-Processing: https://www.arb.ca.gov/fuels/lcfs/lcfs_meetings/10162017_meetingnotice.pdf 29 Government of Canada – Clean Fuel Standard: https://www.canada.ca/en/environment-climate-change/services/managing-pollution/energy-production/fuel-regulations/clean-fuel-standard.html 30 BC Carbon Tax Rates: http://www2.gov.bc.ca/assets/gov/taxes/sales-taxes/publications/mft-ct-005-tax-rates-fuels.pdf 31 AB Carbon Levy Rates: http://www.finance.alberta.ca/publications/tax_rebates/rates/carbon-levy-rates.html 32 Navius – Biofuels in Canada 2017: https://www.naviusresearch.com/publications/biofuels-in-canada/
Pricing Backstop;33 (ii) the cap & trade program design in QC;34 and (iii) the AB35 carbon levy exemption on biofuels blends above E10 and B5. We support the full review under the PCF of carbon pricing (and excise fuel taxation) systems in 2020 / 2022 to correct design flaws and improve tax efficacy at a national level. However, we urge the GoBC to act now to correct the carbon tax design flaws before carbon tax levels increase and further exacerbate negative market impacts.
6. Assure eligibility to the Clean Growth Program for Industry ‘Industrial Incentive’ for facilities such as biomass processors (agricultural processing, rendering, mills) and advanced biofuel producers to maintain competitive market conditions under the BC carbon tax system for Energy Intensive Trade Exposed (EITE) industries
Canola crushing, rendering, forestry mills, and advanced biofuels production facilities can consume significant quantities of natural gas for process heat. Canadian-based industrial processing facilities produce commodity products that are in direct competition with global competitors for access to markets. As such, these operations are termed ‘emissions intensive and trade exposed’ (EITE) facilities. The application of the BC carbon tax on process fuels negatively impacts market competitiveness of EITE facilities unless, and until, comparable carbon prices are applied in competitor jurisdictions (e.g. neighbouring provinces, US). To support existing industrial assets in BC and attract new clean growth capital investment, it is critically important to maintain the competitiveness of BC-based biomass processors and advanced biofuels producers by enabling facilities to mitigate the impact of carbon pricing on process fuels. The proposed ‘Industrial Incentive’ under the Clean Growth Program for Industry36 is an important tool to achieve this outcome for such EITE industries. To be effective in protecting competitiveness and attracting new capital investments to the province, eligibility for the ‘Industrial Incentive’ and the structure/terms of program (e.g. performance benchmark setting) must align with comparable regulations in Canada, and regionally. Specifically, the ‘Industrial Incentive’ should not exceed the net economic impacts of output-based carbon pricing systems in Alberta37 and federally38, and any emerging carbon pricing policies in Washington State.39 New Capital Investment in Production and Use of Low Carbon Fuels
7. Adopt a ‘Clean Fuel Strategic Plan’ as part the Clean Growth Strategy and utilize funds from the ‘Clean Industry Fund’ and revenues from the carbon tax on transport fuels to ‘recycle’ (re-invest) these carbon revenues to specifically support transport sector decarbonization, including the production and use of advanced biofuels
33 Government of Canada: – Technical Paper on Carbon Pricing Backstop: ibid 34 QC Regulation respecting a cap-and-trade system for greenhouse gas emission allowances. Section 2(2)(3): http://legisquebec.gouv.qc.ca/en/ShowDoc/cr/Q-2,%20r.%2046.1 35 AB Carbon Levy: ibid 36 BC CGS: https://engage.gov.bc.ca/app/uploads/sites/391/2018/07/MoE-IntentionsPaper-Industry.pdf 37 AB CCIR: https://www.alberta.ca/carbon-competitiveness-incentive-regulation.aspx 38 Government of Canada: https://www.canada.ca/en/services/environment/weather/climatechange/climate-action/pricing-carbon-pollution/output-based-pricing-system.html 39 WA Carbon Tax Initiative: https://www.theatlantic.com/science/archive/2018/08/washington-state-carbon-tax/567523/
The RLCFRR and carbon tax policies are two key climate action and clean growth policies within a host of climate action and economic development policies in British Columbia. Our above recommendations (#1-6) reflect specific actions that should be taken to amend these tools to support the production and use of low carbon fuels in BC. The following recommendations (#7-9) reflect on strategies to effectively attract clean growth investment to support the BC CGS. These recommendations are particularly significant to the BC CGS, given that global markets have become increasingly volatile in 2018, with sharp course changes to climate action measures and trade policies. Bold new leadership and strategies are needed to manage these economic and policy risks in order to create appropriate ‘hosting conditions’ to attract capital investment and sustain a competitive operating environment in British Columbia. Across Canada, carbon pricing measures implemented in AB, BC, ON, and QC were budgeted to realize $4.6 billion in revenues in fiscal year 2017-18; these funds are expected to grow significantly as the scope and stringency of carbon pricing increases in the future. Canadian governments are actively designing and deploying programs to allocate these revenues across a range of priorities: support for households and trade exposed sectors, climate mitigation actions, and climate adaptation priorities. While carbon revenues and reinvestment programs are relatively new, North American and global markets have more extensive experience in building out the supply and use of low carbon fuels through a mix of regulatory measures, and complementary fiscal and tax policies. We encourage British Columbia, and all governments in Canada, to collaborate with industry, other governments, and stakeholders to develop and implement a national ‘Clean Fuels Strategic Plan’ to expand the production and use of low carbon fuels. A ‘Clean Fuels Strategic Plan’ would contemplate expanding the production and use of low carbon fuels (EVs, alternative fuels, renewable fuels, refinery improvements, etc.), fuel efficiency and fleet conversion, and active mobility and public transportation. A ‘Clean Fuels Strategic Plan’ in British Columbia would bring together private and public-sector capital, innovation, and human resources to ensure the province captures the economic benefits from the global transition to lower carbon transport and industrial fuels. A recent study40 by Doyletech Corporation analyzed the economic impact of the federal CFS on the Canadian economy on a regional and national basis. The report looked at one scenario where biofuel blending increased to 10% and 5% in gasoline and diesel fuels, respectively, and a second scenario that responded to stronger demand for renewable fuels use to reduce greenhouse gas emissions by 21 million tonnes per year by 2030.
As demonstrated in the report, Canada has considerable natural resources (e.g. sustainable biomass, forestry and agriculture residues, wastes) and natural competitive advantages (e.g. proven technologies, fuel production and distribution infrastructure, innovation, and skilled labour) to support the buildout of globally competitive advanced biofuel production plants across Canada.
The regional Western Canada impacts of a federal RFS increase are presented in Appendix 2. The table below summarizes Doyletech’s analysis of national marginal impacts of the two scenarios, as follows:
The proposed ‘Clean Industry Fund’ under the Clean Growth Program for Industry41 is an important measure to assist industrial operations in the province. Biomass processers (agricultural processing, rendering, mills) and advanced biofuels producers would utilize such funds to support capital investments to improve energy efficiency and make their businesses more resilient and competitive. However, as funding is proposed to be limited to a portion of the $5/tonne increase in carbon revenues over 2018-2021, it may have limited capacity beyond energy efficiency / emission reduction project support for existing industrial facilities. To create competitive market conditions to capture a share of the billions of dollars of clean growth capital investment, the GoBC needs to mitigate clean energy risks (through stringent, stable climate action policies like the RLCFRR and carbon tax) and enhance market returns on BC projects (through targeted capital grant and production credit programs). To fund this clean energy transition, British Columbia will need to dedicate carbon revenues on transport fuels to re-invest in decarbonizing transportation systems. Given the province’s abundant natural resources, low carbon power supply, fuel production, refining and distribution assets, and global market access, BC is uniquely positioned to capture the economic growth inherent in the transition to a cleaner, low carbon economy. BC’s large-scale, harvesting and processing of forestry fibre and agricultural crop and livestock production and processing yields significant agricultural and forestry biomass residues and wastes. These sustainable biomass resources, coupled with abundant clean, renewable power sources, are strategic resources that should be leveraged with legacy petroleum assets to expand the production and use of advanced biofuels in the province. We recommend the GoBC work with industry to evaluate opportunities to lead development and implementation of a ‘Clean Fuel Strategic Plan’ as a core component of the BC Clean Growth Strategy.
8. Attract capital investment in clean fuel production capacity by establishing a production credit program for advanced biofuels production in the province
An advanced biofuels production credit program is a critical policy to maintain competitive market balance with US biofuels producers and regional Canadian markets. Long term, stable policy signals are necessary to attract investment in clean energy production, such as advanced biofuels projects which are complex, capital intensive, and require long term investment returns. We recommend the BC CGS be framed within a 2020 to 2030 period context, and that the ‘Clean Fuel Strategic Plan’ component include a production credit program for advanced biofuels production in the province.
9. Expand support to increase use of mid- and high-level blends of low carbon biofuels (e.g. E15, E30, E85, B6-B20, B50-B100) and cold weather use of biodiesel (B2-B5) through the RLCFRR ‘Part 3 Agreement’ program
To support investments necessary to expand availability of low carbon fuels under the RLCFRR, we recommend continuing to prioritize ‘Part 3 Agreement’ program awards to support use of mid- and high-level blends of low carbon biofuels (e.g. E15, E30, E85, B6-B20, B50-B100) and cold weather use of biodiesel (B2-B5).
41 BC CGS: https://engage.gov.bc.ca/app/uploads/sites/391/2018/07/MoE-IntentionsPaper-Industry.pdf
