Canada delays completion of clean fuel standard

Canada will not finalize its national low-carbon fuel standard before next spring, missing a December target, the country's environmental agency said today.

Environment and Climate Change Canada (ECCC) still expects trading and enforcement of the federal Clean Fuel Standard (CFS) to begin as planned in early 2023, the agency said in a call in which it also presented proposed changes to credit generation under the program. The country's Renewable Fuel Regulation, a set of renewable mandates, would also end as planned at the end of 2022.

But this year's snap election and subsequent cabinet change required a delay that will shorten the amount of time for participants to generate compliance credits ahead of the 2023 start, the agency said.

The shortened time between when the program is finalized and when enforcement begins could be significant for "individual companies" but would not meaningfully change the program overall, ECCC executive director Paola Mellow said.

"When you do the math, it comes out a bit in a wash," Mellow said. "It is not a significant change in stringency at the national, global level."

Canada's CFS would become the second largest low-carbon fuel standard in North America, following California. Such programs set a declining ceiling for the carbon intensity of transportation fuels distributed in their markets. Canada's draft CFS would by 2030 reduce the carbon intensity of its transportation fuels by 13pc relative to 2016 levels.

Conventional, higher-carbon fuels incur deficits that obligated parties must offset with credits generated from the supply of lower-carbon fuels to their markets.

Limiting generation

ECCC today also proposed limiting those credits to sources more directly tied to Canada's fuel supply and not required by other legislation. That proposal would narrow eligible carbon capture, utilization and storage (CCUS) projects to only those associated with fossil fuel production and in excess of other requirements.

Renewable fuel projects with CCUS components, including foreign projects, would instead gain benefits through an associated reduction in the carbon intensity of their products. Biofuel groups in particular worried that ECCC's original draft language would allow too much credit generation from sources unrelated to liquid transportation fuels.

British Columbia's LCFS program would continue to generate credits in addition to the national program under the new definition.

Canada plans to publish its lifecycle analysis methodology this fall, with training on the system available early next year. The system will determine how many credits and deficits each fuel will generate under the Canadian system. Each LCFS program so far has used its own, non-fungible system.

ECCC will separately develop a system to account for renewable natural gas used to produce low-carbon intensity hydrogen for use at fossil fuel facilities in summer 2022.

The agency restarted its stakeholder outreach for the CFS this month. Discussions with provinces resumed this week, with plans for additional stakeholder meetings in December, February and March.

Regulators originally planned to finalize the rule by the end of this year, with trading of credits to satisfy the new requirements beginning in 2023. The government said it does not expect deficit generation to outpace credits before 2027.

"I understand this is significant," Mellow said of the delays. "This is simply the best we could do."

By Elliott Blackburn