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Clean fuel regs backlash blamed on flawed assumption: industry group

Feds pressured to ‘rethink’ program, but biofuel sector points finger at faulty economic assessment that inflated costs
Canada’s new Clean Fuel Regulations were implemented on July 1 as scheduled. But it was unveiled under a firestorm of criticism by the six provinces and others.

Advanced Biofuels Canada said Canada’s new Clean Fuel Regulations are unfairly under attack.

“There is a massive pushback on the Clean Fuel Regulations based on highly inaccurate information,” said president Ian Thomson.

The Parliamentary Budget Officer (PBO) released a report in May forecasting the impact of the CFR on average households.

The report relies on estimates supplied by Environment Canada showing that the CFR will increase the price of gasoline by 17 cents per litre and diesel by 16 cents per litre once fully implemented in 2030.

The annual cost of the CFR to households will range from $231 for lower income households to $1,008 for higher income households.

“At the provincial level, households in Saskatchewan, Alberta and Newfoundland and Labrador will have the highest cost, which reflects the higher fossil fuel intensity of their economies,” PBO Yves Giroux said in a news release.

But the analysis was based on the assumption that refiners will purchase 100 percent of their credits from the marketplace rather than taking their own actions to reduce emissions.

That is by far the costliest approach to compliance, and the most unrealistic, said Thomson.

“I’m out of words for how misguided it is,” he said.

“It’s a bogeyman that doesn’t exist.”

He noted that in the real-world case of British Columbia’s Low Carbon Fuel Standard, refiners are buying 15 percent of their credits from the marketplace and producing 85 percent on their own, primarily by blending biofuels.

Even Environment Canada admits that its economic impact assessment was flawed because it was based on the most extreme of three scenarios considered in an earlier report.

“They’ve acknowledged it was the wrong one to use,” said Thomson.

“I wouldn’t say garbage-in, garbage-out, but that’s pretty much what it is.”

The PBO report sparked a political uproar. The Council of Atlantic Premiers launched a campaign calling on the federal government to “rethink the implementation” of the CFR.

Saskatchewan Premier Scott Moe joined the Atlantic premiers, pushing for a delay in implementation and citing the need for “proper and appropriate consultation.”

Alberta environment minister Rebecca Schulz piled on, sending a letter to her federal counterpart calling for an “immediate halt” to the implementation of the CFR.

“Now is not the time to drive up prices at the pump and increase expenses for vulnerable households, businesses and industries,” Schulz said in her letter.

The halt did not happen. The CFR was implemented on July 1 as scheduled. But it was unveiled under a firestorm of criticism by the six provinces and others.

Thomson said the biofuel sector is concerned about how the flawed PBO report may sway public opinion about the CFR.

He doesn’t think the CFR is in immediate jeopardy of being repealed. However, in his 20 years in the business he has witnessed snowballs quickly become avalanches.

Thomson wonders if it could become an issue in the next federal election.

“Any regulation can be undone if somebody dislikes it enough,” he said.

Thomson noted that the reason the CFR will hurt Atlantic Canadians more than other regions is that they have no provincial renewable fuel regulations.

“They’ve had a free ride for years, so of course it’s going to be a bigger impact,” he said.

By contrast, British Columbians have been footing the bill of that province’s Low Carbon Fuel Standard for 13 years.

Thomson also scoffs at the notion that there was inadequate consultation about the regulation. He said it was seven years in the making and was often delayed by excessive consultation.

He also wonders if the premiers of Alberta and Saskatchewan have thought through what the CFR could mean to farmers in those provinces.

Advanced Biofuels Canada commissioned a study showing it could create a new market for 1.5 million tonnes of canola oil, or 3.4 million tonnes of seed.

The two-year-old study estimated that the extra demand would boost canola prices by $1.10 per bushel, more than offsetting higher diesel costs for farmers.