For this video podcast, I spoke with Fred Ghatala, Director of Carbon and Sustainability for Advanced Biofuels Canada. We talked about the industry’s engagement in and reaction to the recently released draft Canadian Clean Fuels Regulation (CFR). Following are a couple of excerpts from our discussion, which you can view or download below, or listen to in ITunes, Spotify, Google Podcasts or TuneIn.
“Those of us in the sector who have been involved since day zero, we definitely applauded the milestone of draft regs being released. If the current Canadian Renewable Fuel Regulation is one of the most simple around, you could say that the CFR is making up for it in terms of all the complexity that’s involved with it.
There’s lots of different aspects to it, but it’s worth recognizing that this grew out of the Pan-Canadian Framework on Clean Growth and Climate Change. The government of Canada is currently led by the Liberal Party of Canada with Prime Minister Justin Trudeau. The major climate omnibus approach is to reach and now exceed Paris Agreement targets and now go even further than that after the Biden’s recent climate summit. Now we’re targeting 40% to 50% below 2005 emissions.
The CFR is part of that with a focus on decarbonizing liquid fuels. Eighty percent of our liquid fuels are used in transportation. This is where those emissions will be captured through regulation as opposed to a carbon pricing mechanism. We have carbon pricing in place, federally implemented provincially. We just had a Supreme Court case that validated the constitutionality of it. I think anybody who really knows how it works, knows that carbon pricing alone is not sufficient. You need actual regulation that can help drive things. That’s what the CFR intends to be.”
“I’d say at the top, what is the primary room for improvement in the reg? What’s the primary issue? It’s the clarity of the signal. It’s signal versus noise. I’ve described the CFR to folks as essentially an LCFS plus, plus, plus, plus. It really intends to include a big opportunity for upstream oil and gas emission reductions to participate in the Clean Fuel Regulation. The main thing is the signal. How are renewable fuels going to participate? Is there a strong enough signal that we can pull in investments to Canada, to produce renewable fuels here to serve this market? We’re heavily import-dependent on refined fossil fuels in Central and Western Canada. We’re import-dependent on renewable fuels especially on ethanol.
Our federal RFS is 5% renewable alternatives to gasoline, ethanol, 2% renewable alternatives to diesel which is biodiesel and renewable diesel. The CFR is very different. This takes most of the liquid fuels in Canada — your gasoline, diesel, light fuel oil, heavy fuel oil and it multiplies them by their energy density, multiplies them by a grams per megajoule reduction target for that specific compliance period. The whole thing is 12 grams, but they break them out into different fuel pools and calculate a net amount of debits that need to be covered by each obligated party (they’re called the primary supplier) in the reg. That becomes their obligation, that they can meet through a number of different compliance pathways.
It can be blending renewable fuels, but you can comply through using upstream oil and gas credits so CCS, enhanced oil recovery, those are all compliance pathways. We’ve got a refinery improvement credit approach that’s included in the CFR similar to California’s and there will be the ability to generate credits from that. There’s a lot of different options, EVs included. There’s a lot of opportunity for mitigation and not many different fuel pools, but knowing exactly how that will impact say renewables and diesel renewables and gasoline, it’s hard to determine.”