GLOBAL ENERGY REPORTER
Ottawa is set to push ahead with a plan to dramatically increase the use of grain-based ethanol, despite growing controversy over the greenhouse gas emissions that result from agricultural practices used to grow the feedstock grains.
Environment Minister Jim Prentice has won cabinet approval to proceed with regulations requiring refiners to include at least 5 per cent ethanol in their gasoline by September, 2010, sources say. A spokesman for Mr. Prentice's office said the Minister had "nothing to announce" on the issue of ethanol regulations.
The department has invited the industry to a briefing this week in which officials will outline how the government intends to proceed.
Ottawa claims Canadian grain-based biofuels can reduce emissions by 40 per cent compared to gasoline. But it has not begun to factor in indirect land-use emissions, a highly controversial measure of greenhouse gas emissions that result from deforestation and increased land cultivation needed to feed the demand for biofuels.
In recent weeks, both the U.S. federal government and California have said that a full accounting of such emissions can render ethanol just as "dirty" as gasoline, depending on production practices, fuel sources and the time horizon over which they are measured.
The U.S. government has a new renewable-fuel standard that requires refiners to include 15 billion gallons of ethanol in their product mix by 2012, and 30 billion gallons by 2020, with a maximum 15 billion gallons of conventional corn-based product. (Current gasoline consumption is 140-billion litres a year.)
The federal 5-per-cent mandate would establish a national market for some two billion litres of ethanol annually, a volume that is 50-per-cent higher than Canada currently produces.
The Conservative government passed legislation more than a year ago allowing it to set a renewable fuel standard, but has been slow to establish regulations as a global debate has raged over the extent to which ethanol demand has driven food prices higher, and the actual environmental benefits of grain-based transportation fuel.
Gord Quaiattini, president of the Canadian Renewable Fuels Association, said the federal mandates will help drive investment in new capacity for an industry that has been hit hard by declining gasoline prices, high feedstock costs and the credit crunch.
Mr. Quaiattini said Canadian plants easily exceed U.S. standards that ethanol must reduce emissions by 20 per cent to be considered a renewable fuel. The Canadian calculations don't include indirect land use, but Mr. Quaiattini said it would be premature to factor in those emissions.
"We think that more work needs to be done before those kinds of targets are imposed simply because the science isn't there," he said. "And we're not anticipating the application of any of those kinds of thresholds on the industry until the science is there."
In the U.S., the corn-based ethanol industry suffered a setback when California regulators concluded that much of the American corn-based ethanol supply was little better than gasoline when indirect land use emissions were included. However, California agreed to review its models for determining emissions after a furious reaction by the industry.
The U.S. federal Environmental Protection Agency issued its own emissions profiles, which were substantially different from those adopted by California. The EPA also promised to review its conclusions regarding indirect land use.
Including those indirect factors, the EPA said the corn-ethanol producers that use natural gas in production processes produce 5 per cent more emissions per gallon of fuel than gasoline producers over a 30-year period, while ethanol producers that use coal create 34 per cent more emissions.
Over the longer term, as the one-time impacts of greater land cultivation fade, corn ethanol made by using natural gas produce 16 per cent fewer emissions than gasoline, while coal-fired ethanol is still 13 per cent higher than gasoline.
While some of the biggest producers in the U.S., including agricultural giant Archer-Daniels-Midland Co., have massive coal-fired plants, all Canadian producers use natural gas.
Natural Resources Canada calculates biofuel emissions using a Canadian-made model that reflects differences in grain feed stocks, fuels, agricultural techniques and fuel used. On average, grain-based ethanol produces 40 per cent less greenhouse gas emissions per litre of fuel than gasoline, said Carol Buckley, director general in the department's Office of Energy Efficiency.
But the department does not include indirect land use emissions in its calculations. "These issues are very complex and we don't think the science is mature yet," Ms. Buckley said.
As well, the Paris-based International Energy Agency said recently the emission gains from corn-based ethanol will have doubled between 1995 and 2015, as the industry becomes more efficient. It estimates corn-based ethanol would result in 55 per cent fewer emissions per litre of fuel than gasoline by 2015.
However, critics argue that by failing to account for emissions that result from agricultural land-use practices, the Canadian government is overstating the environmental gains achieved through its biofuels policy.
Industry consultant Barry Bower, a former official in the Ontario government, said governments are often less concerned about emissions from ethanol plants than they are about providing markets for grain growers and incentives to build plants in rural constituencies.
"The impression that I get is that the environmental analysis of how ethanol plants perform is not allowed to impinge on the decision whether or not that plants gets built," he said. "Those things are being driven by other forces."
Collingwood Ethanol LPLocation: Collingwood, Ont.
Production: 50 million litres a year (MMly)
Enerkem Inc.Location: Westbury, Que.
Feedstock: Wood Waste
Production: 5 MMly
Locations: Johnstown, Ont.,
Varennes, Que., Tiverton, Ont., Chatham, Ont.
Production: 496 MMly
Husky EnergyLocations: Lloydminster, Sask., Minnedosa, Man
Feedstock: Wheat, corn
Production: 260 MMly
IGCP Ethanol Inc.Location: Aylmer, Ont.
Production: 150 MMly
Iogen CorporationLocation: Ottawa
Feedstock: Straw from wheat, barley, and oats
Production: 2 MMly
NorAmera BioEnergy Corp.
Location: Weyburn, Sask.
Production: 25 MMly
Permolex International, L.P.
Location: Red Deer, Alta.
Production: 40 MMly
Pound-Maker Agventures Location: Lanigan, Sask.
Production: 12 MMly
Suncor St. Clair Ethanol Location: Sarnia, Ont.
Production: 200 MMly
Terra Grain Fuels Inc.Location: Belle Plaine, Sask.
Production: 150 MMly