Canada will publish the final Clean Fuel Regulations (CFR) in the Canada Gazette Part II on 6 July 2022. The CFR set increasingly stringent requirements on producers and importers to reduce the carbon intensity of gasoline and diesel. Once fully implemented, the CFR will help cut up to 26.6 million tonnes of greenhouse gas pollution in 2030, or roughly the amount of GHGs currently generated by the entire Canadian economy in two weeks.
The Clean Fuel Standard will require liquid fossil fuel primary suppliers (i.e., producers and importers) to reduce the carbon intensity of their liquid fossil fuels used in Canada from 2016 carbon intensity levels.
In 2022 the carbon intensity reduction requirement will start at 2.4 gCO2e/MJ. It will gradually increase over time reaching 12 gCO2e/MJ in 2030. To achieve this, fuel producers will need to provide innovative solutions and new fuel options to consumers.
The Clean Fuel Standard establishes a credit market. Regulated parties (producers and importers of gasoline and diesel) must create or buy credits to come into compliance with the reduction requirements. Parties with an excess of credits can bank them for use in later years or sell them. The Clean Fuel Standard also provides opportunities for non-regulated parties to create credits.
The Clean Fuel Standard provides three ways to create credits:
Compliance category 1: undertaking projects that reduce the lifecycle carbon intensity of fossil fuels (e.g., carbon capture and storage, on-site renewable electricity, co-processing)
Compliance category 2: supplying customers with low carbon intensity fuels (e.g., ethanol, bio-diesel)
Compliance category 3: investing in advanced vehicle technologies (e.g., electric or hydrogen fuel cell vehicles)
The Government of Canada expects the CFR to drive significant economic opportunities in the development and use of clean fuels and technologies.
The Clean Fuel Regulations replace the current federal Renewable Fuels Regulations. In moving to adopt regulations that focus on emissions throughout the lifecycle of fuels, Canada is following similar approaches that already exist in British Columbia, California and Oregon.
In combination with the Government of Canada’s $1.5-billion Clean Fuels Fund, the CFR will create incentives for the increased domestic production of low-carbon-intensity fuels (such as ethanol). This will create economic opportunities for biofuel feedstock providers, such as farmers and foresters. It will also help Canadian fuel producers to compete in the rapidly expanding global market for clean energy.
Working in tandem with pollution pricing and the forthcoming oil and gas emissions cap, the Clean Fuel Regulations will also help diversify energy choices and promote faster adoption of zero-emission vehicles by incentivizing the deployment of vehicle-charging infrastructure, the government said.
The Government estimates that about 2.2 billion liters (581 million gallons US) of additional low-carbon-intensity diesel and 700 million liters (185 million gallons US) of additional ethanol will be needed in 2030 under the CFR.
The Government of Canada’s Clean Fuels Fund will invest $1.5 billion to build new or expand existing clean fuel production facilities. The Fund will help deliver on early actions outlined in the Hydrogen Strategy for Canada and help support the implementation of the Clean Fuel Regulations.