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Q&A: British Columbia LCFS showing results

02 Apr 2018 15:52 (+01:00 GMT)
Q&A: British Columbia LCFS showing results

San Francisco, 2 April (Argus) — Fred Ghatala is the director for carbon and sustainability at Advanced Biofuels Canada, a national trade association. In this interview, edited for length and clarity, Ghatala explains why British Columbia can push for a more aggressive Low-Carbon Fuel Standard (LCFS) target and looks ahead to the development of a federal clean fuel standard.

Tell me about the work of your organization.

Advanced Biofuels Canada is a national trade association that promotes the production and use of advanced biofuels in Canada. We define advanced biofuels as having at least 50pc greenhouse gas reductions and produced from sustainable biomass.

We collaborate broadly to expand market access for sustainable low-carbon biofuels in Canada. Our members are involved in biodiesel, renewable diesel, municipal solid waste derived ethanol and other low carbon fuel pathways.

What are the major policies that are driving the biofuels industry in Canada?

Currently in place at the federal level, we have a 2pc and 5pc renewable fuel standard (RFS) — in the diesel and gasoline fuel pools. Much of the renewable fuel demand is driven by provincial renewable and low-carbon fuel policies, the key ones being British Columbia's LCFS and Alberta's renewable fuel standard, which has a minimum greenhouse gas threshold. Saskatchewan and Manitoba also have policies in place and Ontario's greener diesel regulation is also a driver of renewable fuel demand.

On the horizon is an update to many of the renewable fuel policies where the majority of fuel — both on-road and off-road — is consumed in Canada, which is British Columbia, Alberta, Quebec and Ontario.

How well has British Columbia's LCFS program functioned?

British Columbia's regulation is unique because within one regulation is contained a volumetric renewable fuel standard and a carbon intensity-based low-carbon fuel standard. They are both under the Low Carbon Fuel Requirement Regulation. The RFS portion of it came into place earlier than the low-carbon fuel standard portion, which actually only came into force as of July 2013.

The LCFS has certainly been providing results that show an increase in renewable fuel use beyond the minimum RFS blend requirements and decreasing fuel carbon intensity, which means that the market is responding to the signals of the policy. I think most would call the BC policy a success. Certainly there are areas for improvement, and that is part of the consultation work that is going on currently, just as California is, to look beyond the 2020 timeframe.

The provincial government in December said that it would consider a more ambitious 20pc by 2030 target for the LCFS, up from the existing 10pc by 2020. What is the status of that process?

Consultations are under way, so that really is the question of the day. The previous Liberal government announced in the summer of 2017 a proposed increase in the standard to 15pc by 2030. Currently, that is the topic of the consultation — to understand whether the available compliance pathways achieve the current regulation of 2020 and ask what is feasible going out to 2030.

We think that there are sufficient low-carbon fuel pathways to enable deeper carbon reductions than 15pc by 2030.

Do you have any sense of the timeline for finalizing the new LCFS target?

When the current consultation concludes, we expect that we will have visibility on what the obligations are out to 2030. We expect that review to be complete sometime this summer.

However, it will be determined based on the priorities of the government, but we are expecting that the 2030 targets will be established at the conclusion of this review.

What stands in the way of British Columbia linking with the equivalent programs in California and Oregon?

There is no question that all of these policies are pulling in the same direction, which is to lower the carbon intensity of transportation fuels.

There has definitely been a sharing of information, of strategies, of experiences between the jurisdictions — both on the regulators' side, but also on the side of the low-carbon fuels industry, the civil society advocates that are each participating in the different jurisdictions.

When you get down to the details of the regulatory structures, you will find that they reflect the fuel market and the status of the renewables industries in each of those jurisdictions. The California market is different than the British Columbia market in terms of the number of obligated parties, how the supply chains are organized in terms of fuel retailers, fuel distributors, independents — it is a different constellation of organizations than in British Columbia. Oregon is also different, partly because there are no in-state refineries. There are certainly differences in the way Canadian provinces organize their energy and environmental policies, versus the way states do in terms of jurisdictional authority.

Short of linkage, what other opportunities exist?

Where I see one of the key areas of alignment is on the verification side. Certainly all of the policies want to ensure that carbon intensities accurately reflect the fuel pathways that they are assigned to and want to be sure that fuels that are provided in one jurisdictions are not being double-counted anywhere else. Sharing best practices for verification can help ensure the veracity of fuel supply chains.

Outside of California, it was exciting to see Washington almost get the enabling policy for their clean fuel standard in place in the 2018 legislative calendar. We were extremely close to having the entire west coast under clean fuel standard or or LCFS type programs. I have no doubt that we will get there, and that will be extremely exciting.

You can definitely tell that there are benefits to having all of the jurisdictions interacting with one another. The peloton moves faster than individual riders.

When will we see the federal clean fuels (CFS) standard finalized, and what are your organization's priorities as it gets developed?

The federal Clean Fuel Standard consultation is well under way. Following the winter 2017 release of the regulatory framework by Environment and Climate Change Canada, it has now progressed to the multi-stakeholder working groups and technical working groups that are in the process of ironing out the details.

It is very clear that a regulation of this scope that is proposing to include sectors outside of transportation adds a level of complexity beyond what would be the case if it were just transportation fuels. You are including liquid, gaseous and solid fuels. It is multiple sectors, each of which have distinct mitigation cost curves and each have different degrees of experience with incorporating renewables.

Broadly, what the CFS is going to do is put in place a signal to decarbonize fuels. All of the efforts in getting the details of the regulation right should enable clarity of that market signal. It is clear that capital markets now understand how low-carbon fuel standards work. They understand the benefit of volumetric certainty that comes from renewable fuel standard-type regulations. A good guiding principle for the clean fuel standard is to use what works, avoid letting the unobtainable perfect supersede the ability of getting something that works in place, and to ultimately create a policy to drive demand and create the incentive for in-country production of renewable fuels.

We expect that, in late 2018, for the proposed regulation to be published in Canada Gazette part one, and then by the middle of 2019, the publication of the final regulations, which is called Canada Gazette part two.

Once the Canada Gazette part one is published and the regulatory impact assessment study is published, then the complete focus will be on ensuring that those create a workable regulation.

The federal carbon tax has been taking some political heat recently. Could the clean fuel standard get caught up in the debate, or will it maintain a lower profile?

Carbon pricing and the federal carbon pricing backstop is certainly playing higher in the news than the Clean Fuel Standard, simply because of the requirement that all of the provinces sign up with their own system or accept the federal system or, in the absence of that, they are not able to have the federal carbon tax funds devolve back to the provinces.

Having carbon pricing on fuel, having clean fuel standard-type policies, and then having an output-based allocation system that will treat upstream processors of biomass and producers of renewable fuel, creates an extremely dynamic policy framework that we have not seen in decades in Canada. It is exciting. It is going to be years of having our sleeves rolled up to get the policies in place.