Winning the battle against climate change

FROM THE JULY ISSUE: Governments in Canada appear poised to take the steps necessary to provoke further reductions in greenhouse gas (GHG) emissions, and Canada’s ethanol industry is likely to have a feature role in the policy response.
By Jim Grey | June 16, 2017

Ethanol producers can take heart: Governments in Canada appear poised to take the steps necessary to provoke further reductions in greenhouse gas (GHG) emissions, and Canada’s ethanol industry is likely to have a feature role in the policy response.

Canada’s transportation sector is the country’s second-largest GHG emitter, after manufacturing. But, the mandated use of ethanol and biodiesel already has proven to be a big part of the solution, resulting in the reduction of 4.2 megatons of GHG emissions each year. That’s the equivalent of 1 million cars taken off the road every year. 

The existing national volumetric requirement (5 percent ethanol) has yielded great results without placing any burden on consumers—no additional costs have been incurred and no changes in consumer behavior have been required. In the government’s broader battle to bring down GHG emissions, the renewable fuel mandates likely have proven to be the easiest and most effective tool. It is quite likely that recognition of these factors was a key consideration in Canada’s decision to exempt the biofuel portion of blended fuels from its recently announced carbon levy.

In all our interactions with legislators and policymakers, Renewable Industries Canada recommends Canada raise the required volumes to 10 percent ethanol and 5 percent biomass-based diesel. If adopted, these changes would deliver additional GHG emission reductions of approximately 4.5 megatons per year.

In recent meetings with parliamentarians and senior officials in Ottawa and at the provincial level, we also have stressed that renewable fuels offer not only the ability to reduce GHG emissions substantially, but also an opportunity to create new jobs and foster economic growth. Canada’s renewable fuels sector already has a significant place in the economy, generating CA $3.5 billion ($2.6 billion) worth of activity. To support the 2016 production of 1.7 billion liters (449 million gallons) of fuels at a value of CA $1.1 billion, 4.2 million metric tons (4.6 million tons), or CA $800 million worth, of feedstock was purchased, providing a significant and predictable revenue stream to thousands of Canadian farmers. Additionally, as a byproduct of ethanol production, a further $260 million of distillers grains were sold.

As an industry, we are more than just talk. Canadian ethanol production is currently experiencing a growth phase. Many companies are already in the process of expanding production. It is an exciting time to be in the business.

But increasing production capacity requires significant financing. IGPC Ethanol’s expansion that will double its capacity has required a $120 million investment. RICanada has conveyed to decision makers that any uncertainty around the future demand for biofuels will hinder investment and curtail production growth.

Environment and Climate Change Canada is in the process of weighing options for the implementation of a new Clean Fuels Standard that would stipulate specific GHG emission reductions to be attained in the liquid fuels sector. RICanada has welcomed this initiative, but has recommended the retention of required volumes as a complementary measure. It is our view that any new policy must not leave behind the policy lever that has played such a critical role in fostering growth in renewable fuels and reductions in GHG emissions. In other words, if governments want to maximize GHG reductions, volumetric requirements must be retained.

Valuable lessons can be learned from jurisdictions that have implemented policies similar to the proposed CFS. British Columbia, California and Oregon all introduced CFS-styled programs in conjunction with volumetric renewable fuel contents. As a result, each has achieved significant GHG reductions. 

On the other hand, when Germany followed a different approach—opting to abandon the volumetric program in favor of a carbon-intensity program—emissions rose. Germany’s approach resulted in a drop in the volume of renewable fuels used in 2015, and a corresponding—and predictable—increase in transport sector GHG emissions, proving that implementing a CFS without complementary volume requirements presents a very real risk of backsliding.

The federal government, Ontario and Quebec are all developing policy related to the use of renewable fuels. As they do, they must be reminded of the risks of losing the economic and environmental gains that have been achieved under the existing ethanol and biodiesel mandates.

Author: Jim Grey
Chair, Renewable Industries Canada
CEO, IGPC Ethanol Inc.