Issue Statement

by Steve Tieulie

CFA statement on the Natural Resources Committee study of low-carbon and renewable fuels

 |  Uncategorized

I would first like to thank you for the hard work of the Committee with regards to your study on the low
carbon and renewable fuels industry in Canada. We appreciated the opportunity to appear before the
Committee on May 7 and offer the following brief as a supplement to our appearance, addressing some
questions which arose during that and subsequent meetings of the Committee.


The Canadian Fuels Association represents the producers, distributors and marketers of liquid fuels
including biofuels, gasoline, diesel, jet fuel as well as specialty fuels and lubricants. We meet 95 percent
of Canadians’ transportation fuel needs and produce more than 25% of Canada’s biofuels. Our facilities
also make asphalt and feedstock for chemical and lube manufacturing facilities. Together, our
members1 represent 117,000 workers who are on the job 24 hours a day, seven days a week, at
Canada’s 16 refineries, more than 90 fuel terminals and 12,000 retail sites.


Last Fall, we released Driving to 2050 in which we outline the role the transportation fuels sector can
play in Canada’s low-carbon economy and the significant opportunities we see to advance the
production and use of low-carbon liquid fuels in Canada and to accelerate large scale GHG reductions
starting today, using proven technologies.

We are pleased to see government funding to support the adaptation of low-carbon transportation fuels
through programs such as the Low-Carbon Fuel Fund. This funding will allow the transportation sector to
make real progress in Canada’s drive toward a low-carbon economy starting now while other low-carbon
technologies such as carbon capture utilization and storage and advanced biofuels scale up.

Reducing the carbon intensity of liquid fuels using the existing infrastructure also presents a unique opportunity to
make meaningful, cost-effective GHG emissions reductions that are compatible with the current vehicle
fleet. Over time, a wider range of vehicle types and fuels will be needed to meet Canada’s climate
change targets.


Hydrogen – the focus should be on reducing carbon intensity not the colour – All types of hydrogen will
have a role to play in Canada’s low-carbon future, and our focus should be carbon intensity of hydrogen
and its potential to reduce emissions across sectors of our economy. Moreover, a focus on ‘colour’ vs
carbon intensity could stifle innovation and infrastructure investments critical to unlocking the
the emissions reduction potential of all forms of hydrogen.


Decarbonization opportunities of hydrogen are likely to be realized on a longer timeline than those of
other low-carbon transportation fuels –
This underlines the need to use all available hydrogen sources
as early as possible to ensure supply chain resiliency as new hydrogen production is established. A
variety of hydrogen production sources will also best support the consumer confidence needed to
consider hydrogen-fuelled vehicles. This means producing grey and blue hydrogen to start lowering
carbon intensity while giving time for green hydrogen production to commercialize.


One common life cycle approach – All transportation fuel types must use a common life cycle analysis
(LCA) approach to ensure environmental goals are met efficiently and not at the expense of different
technologies. Careful adherence to technology-neutral, outcome-based solutions utilizing a robust LCA
approach will also ensure innovation and allow the market to determine the optimal pathways to lower
GHG emissions.


We would also like to take this opportunity to address the following topics that arose over the course of
this study:


Innovations in advanced biofuels mean that low-carbon fuel and robust food production are no longer
mutually exclusive –
For example, the ethanol produced from corn uses only the starch from the grain
while the remaining protein, fat and minerals are returned to the animal feed market in the form of
distiller’s grains which makes feed less expensive. In terms of grocery costs, these are largely driven by
energy costs and do not significantly increase with the price of corn which means that limiting ethanol
production would not meaningfully lower corn prices, but it would take away important revenue
streams and jobs away from rural Canada and Canadian farmers. Finally, innovative agricultural
practices are increasing yields and lowering carbon intensities of grains without compromising food
markets for grain.


All transportation fuel options will play a role – A wide variety of new and existing transportation
alternatives and fuels will be needed to meet Canada’s climate change targets while maintaining
reliable, affordable and efficient mobility for people, goods and services. Each option, whether
electrification, biofuels, hydrogen or lower carbon petroleum fuels has a meaningful role to play as fit for purpose low carbon fuels. At the same time, each alternative will be constrained by different factors and we recommend that governments adopt a technology-neutral approach and allow markets and consumer preferences to determine the best pathways to meet climate goals.


Finally, we would also like to take this opportunity to again provide the Committee three specific
recommendations which we believe to be critical to the success of the low-carbon and renewable fuels
industry in Canada.

  1. Align and integrate federal and provincial policies to accelerate production and use of low carbon
    fuels in Canada

    • Currently, there is an opportunity to collaborate with provincial governments to align, enhance
    and build on strategies/frameworks for low carbon fuels, hydrogen and electrification.
    • When it comes to regulations, tax incentives and funding programs to drive change with a
    the common goal of reducing emissions in both the short and long term, it is important that they
    share common structures such as quantification methodologies, targets (volumetric vs carbon
    intensity) and complementary credit generation and funding criteria.
    • We support the principle of a Clean Fuel Standard. Compliance will require high levels of
    investment so we need long-term regulatory certainty to support those investments.
  1. All programs and policies should support investments in production and infrastructure to ensure
    low carbon fuels are readily available to Canadian consumers
    • Canada’s existing refineries, fuel terminals and retail sites are strategic assets that can be
    leveraged and adapted to support the expanded use of biofuels across the country.
    • When looking at building new infrastructure, it is important to conduct a life-cycle analysis.
    • In order to meet our climate goals in a timely and efficient way and maintain reliable and
    affordable supply of low carbon fuels, all facets of the fuel supply chain must be considered
    from production to terminals and retail sites across Canada. Support for many of these smaller
    businesses will ensure broad availability of these low carbon products as they will need facility
    upgrades to provide these products to Canadians.
  1. Ensure North American alignment of biofuels policies
    • The North American Fuel Market is highly integrated. Canada-US biofuels policies must operate
    in unison.
    • As the Canadian demand for biofuels increases, we have an opportunity to produce and use
    Canadian-made biofuels. Incentive programs, feedstock eligibility and trading flexibility are all
    examples of measures that, if significantly different, will influence the flow of low carbon fuels
    between Canada and the US.
    • Discussion in committee around the California and British Columbia LCFS regulations and their
    capacity to build markets helped illustrate the need for North American regulation alignment.

We were pleased to see that Committee members and witnesses agreed with many of our
recommendations during the course of this study. Constructive discussions around leveraging existing
infrastructure and a wide range of hydrogen production support the critical pathways Canada will need
to reach its climate goals. While it has been said many times already, the key for us is a technology-neutral approach. When avoiding picking winners and losers, technology-neutral regulations will create an environment where Canadian innovators and industry can pave a path to a low-carbon economy without compromising our energy security or economic competitiveness.


Low-carbon liquid fuels could contribute more than a 50% emissions reduction in the transportation
sector by 2050. The only way to get to net-zero is to consider multiple pathways, such as ethanol, bio-based diesel, hydrogen and other advanced biofuels, as well as electrification. This will require significant investments of more than $20 billion to $30 billion and a strong supply chain for feedstock, production, refining, blending and retail access. Let’s all collaborate to ensure that these investments
occur in Canada, that the fuels are produced in Canada, and that consumers have access to these low-carbon fuels.


Thank you again for undertaking this important study and we look forward to the Committee’s final
report.


Sincerely,


David Schick
Vice President, Western Canada, Innovation and Regulatory Affairs
Canadian Fuels Association
davidschick@canadianfuels.ca

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