With the Trudeau government’s national carbon pricing scheme now facing a two-pronged attack from Saskatchewan and Ontario, Canada may need a national low-carbon fuel standard after all.
But if Ottawa prevails on carbon pricing, it should abandon its national clean fuel standard, says a researcher with the C.D. Howe Institute.
Ottawa plans to implement a national clean fuel standard in 2019 that would require all gasoline and diesel fuels to have lower carbon content.
The plan is seriously flawed and uncosted, says C.D. Howe research director Benjamin Dachis.
Carbon pricing would be far far less costly and far more effective in reducing greenhouse gases from transportation, he says in a new report.
B.C. already has both a carbon tax and a low carbon fuel standard, so neither federal programs are likely to have much of an impact in B.C. the way they will in other provinces, like Saskatchewan, which is challenging the federal carbon pricing scheme in court. Ontario has now joined in the fight as an intervenor.
A clean fuel standard requires refineries to calculate the emissions intensity of all their fuels.
“These companies have to figure out, for every single bit of fuel they get into their system, what the emissions profile of the entire life cycle of that fuel was,” Dachis said.
Once they figure out their fuel’s intensity, they then have to try to essentially dilute it with a range of biofuels or renewable fuels, like ethanol. And if they can’t get their fuel’s emissions intensity down to meet the national standards, they end up having to pay an offset. In that sense, it’s like a cap-and-trade system, but without the cap, Dachis said.
“If you look at the cost per tonne (of CO2) reduced, it’s substantially higher than from pure carbon price," Dachis said. "Carbon price has an economic cost, no question. But clean fuel standards have even higher economic costs. So why are we going to do the policy that has even higher economic cost when we haven’t even fully exhausted the potential of a carbon price?
“A clean fuel standard only makes sense if a price of carbon that’s going to be at a sufficient level to really reduce emissions isn’t feasible. And we’re seeing that fight right now. We’re seeing a world in which a carbon price is under attack. Obviously, if a carbon price isn’t politically feasible, then we’ve got to start to think about these higher-cost, but more invisible, policies.”
The additional cost of a clean fuel standard is partially borne by consumers, but energy-intensive, trade-exposed industries are especially hard hit, Dachis’ report warns.
If Ottawa has calculated the economic costs of its clean fuel standard, it hasn’t released it. C.D. Howe is calling on Ottawa to produce and release a cost benefit analysis to explain just how much the clean fuel standard will cost Canadians.
“If the economic cost of the proposed CFS plan is higher than a price on emissions, the federal government should have specific cost/benefit reasons to justify a CFS in addition to a price on emissions,” the report states.
