Peter Boag
President and CEO, Canadian Fuels Association

May 2020

Cost effectiveness will be key to success for the Clean Fuel Standard

The economic shock of the COVID-19 pandemic has been deep and broad.  Millions of Canadians’ financial circumstances have been affected – with many now struggling to keep a roof over their heads and food on the table.  Thousands of businesses are struggling for their very survival – many will not make it.  While there is reason for optimism that the worst may be over, Smart Prosperity staffers Mike Moffatt and John McNally have compared the economic road ahead to climbing a mountain. 

Before COVID-19 disrupted almost every aspect of our lives, we were already on a path to tackle climate change.  The summit of this expedition was defined as deep emissions reductions achieved through solutions that decrease domestic greenhouse gas emissions while creating a strong and resilient Canadian economy.  Now three months into our response to this global pandemic, it’s clear that the path to the summit is far steeper than when our climate change journey began.

With this in mind, governments need to ensure that their decisions and actions do not unintentionally further increase the slope of our climb, by imposing new, higher than necessary costs on our economy and society.  Now more than ever, all new climate policy initiatives must be viewed through the lens of cost-effectiveness. 

The proposed federal Clean Fuel Standard (CFS) is a case in point.  The CFS is a highly complex policy proposal that aims to eliminate 30 MT of annual greenhouse gas emissions by 2030.  The Canadian Fuels Association and its members have supported the CFS concept since first proposed.  As the primary obligated parties for the liquid fuel component of the CFS, our members are keenly interested in working with the government to ‘get it right’ – a workable, cost-effective regulation that delivers real emissions reductions while minimizing the CFS cost impacts on fuel consumers (the government’s own cost-benefit analysis framework acknowledges that compliance costs would likely be “passed onto fuel end-users [i.e., households and industrial users])”.  This outcome is especially important now given Canada’s new post-COVID-19 economic circumstances. 

The government’s recent decision to extend the consultation period prior to publication of a draft CFS regulation creates an important opportunity to complete the additional due diligence and consultation essential to creating a CFS design that delivers a successful policy outcome.   Several critical information and analysis gaps – some predating COVID-19 and others arising from significant COVID-19 disruptions affecting the transportation fuels sector, and for which the long-term implications are not yet clear – must be addressed before a draft regulation is published.  Most important, it’s an opportunity to make ‘cost effectiveness’ – achieving significant emission reductions at lowest societal cost – an underpinning principle of CFS design.  This cost effectiveness will be critical to building a resilient post-COVID-19 economy and to CFS success in reducing emissions. 

Canada’s new and uncertain economic circumstances make ‘getting it right’ more important than ever.  As Moffatt and McNally noted “We need to prepare for the climb – it’s going to be rough.”

Canadian Fuels Association