Justin Trudeau’s Liberals are not usually known for underselling their climate change plans.
Their government has more of a reputation for making grand pronouncements about helping save the planet, then struggling to follow through with policies to meet emissions reduction commitments.
But the Clean Fuel Standard – for which draft regulations are expected in the coming weeks, after several delays – may be a rare exception.
Designed to reduce the lifecycle carbon intensity of fossil fuels Canadians use – their footprint from extraction through to when they’re burned by consumers – the policy is supposed to cut greenhouse gas emissions by 30 megatonnes annually by 2030. If so, it will be one of the single biggest pieces of the government’s plan to exceed Canada’s Paris Agreement target.
It is also supposed to help build domestic low-carbon fuel industries, especially around biofuels – the sort of clean-economy transition Mr. Trudeau is usually eager to discuss.
Yet the CFS gets much less play than other probably less-impactful climate policies in the Liberal playbook. It received no mention in this fall’s Speech from the Throne, and there has been no sustained effort to sell it in advance of its rollout. It may not even get much promotion when the draft regulations are published; there is some suggestion the government will lump its announcement into a broader plan for meeting 2030 targets, expected in December.
It’s understandable that the Liberals aren’t tripping over each other to talk about it. The CFS is an extremely complicated policy – involving multiple paths to compliance and the creation of a credits-trading market – that tends to draw only qualified support even from environmental groups because of concerns about concessions to the oil and gas industry. The case against it – that it will make driving cars and heating homes more expensive, because of costs passed down to consumers, while hurting industry – is more straightforward. So the government seems to figure it’s best to avoid raising the standard’s profile.
In the process, though, the Liberals may be ceding the introduction of the policy to its opponents. In recent months, there has been an increasingly strong effort by the fossil fuel industry – evident through advertising and conservative media and think tanks – to frame it as a “second carbon tax.” Likewise by the governments of Alberta and Saskatchewan.
While the CFS will increase certain costs – notably gasoline, probably by a few cents a litre – the Carbon Tax II framing oversimplifies matters. The fuel standard isn’t about sending price signals. It’s about requiring a particular industry to provide consumers with a more environmentally friendly product.
Any extra burden on households can’t be dismissed, especially because it won’t be counterbalanced by rebates, as carbon pricing is. But the CFS has the potential to offer pretty good bang for buck on emissions reductions. So, for anyone who cares about climate policy, it’s worth trying to cut through the noise and understand the basics of how it should work and where it could go wrong.
For starters, given concerns about the international competitiveness of Canada’s struggling oil and gas sector, it’s important to know that this policy will only affect fuel sold domestically, including imports, but not exports.
As for how suppliers can meet the requirement to lower their product’s lifecycle carbon intensity, likely by about 12 per cent over the next decade, there are several pathways.
The most familiar is to change the gasoline or diesel mix sold to customers by blending in more low-carbon fuels such as ethanol, biodiesel and various emerging biofuels. That also offers the most obvious potential economic upside, since it should boost Canadian biofuel producers seeking to compete internationally.
Another option is to reduce emissions earlier in a fossil fuel’s life cycle – through cleaner industrial practices during extraction and refining, including carbon capture. A third is for energy companies to earn credits for investment in other low-carbon fuel options, such as electric-vehicle charging stations. If all else fails, oil and gas companies can buy credits either from each other or from suppliers of low-carbon fuels who voluntarily enter the market – another way the CFS could help grow new sectors.
The good news, from a climate perspective, is that there is evidence the policy can work. California pioneered it more than decade ago, and it has played a big role in the state exceeding its GHG targets. British Columbia, the one Canadian province to follow California’s lead, saw a significant drop in average fuel emissions.
Ottawa’s plan ostensibly goes beyond those two by targeting not just liquid fuels used primarily for vehicles, but also gaseous fuels used mostly for buildings. (It’s the liquid regulations, accounting for 23 of the 30 megatonnes in promised GHG reductions, that are set to be released; the others are supposed to follow.)
But environmental groups worry about a couple of key ways the regulations may have been watered down during lobbying by oil and gas providers.
One concern is about timelines. The industry doesn’t seem to have succeeded in its efforts to have the CFS’s implementation date delayed from 2022. But it does appear to have persuaded the government to backload the required emissions reductions, with modest cuts at first and steeper ones toward 2030. If so, cumulative emissions over the next decade will be higher than originally planned, and there is risk of overreliance on technologies yet to be developed.
Another is about overlap with existing programs. In theory, companies shouldn’t be able to get CFS credit for measures taken to comply with other federal policies, such as industrial carbon pricing. But there is some suggestion that the CFS has been watered down enough to allow requirements to be met through upgrades on the extraction or refining side that would happen anyway.
It’s impossible to know whether that concern is justified until the regulations are published, and even then it will be difficult to quickly decipher. It may be that a government committed to making the CFS work will have to make some tweaks after implementation, once it’s clearer how it works in practice.
First, it has to get to that point. Quiet effectiveness is a noble goal from a government too often prone to the opposite. But the Liberals will need to be careful they don’t allow the framing of this policy to get away from them, such that they’re forced to backtrack. That plan they’re set to announce, for hitting new 2030 targets, would fall apart without it.
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Adam Radwanski