By Jade McLean & Marla Orenstein
Published in the Vancouver Sun
B.C. has been a champion of the climate-change movement in Canada — in fact, it is the only province to produce fewer greenhouse gas emissions today than it did 10 years ago. So when the federal government rolls out new legislation on carbon emissions (in addition to the carbon tax) later this month, what will it mean for the province?
In the coming weeks, the federal government will release the details for the clean fuel standard — its latest and potentially most ambitious climate policy yet. The standard will require all suppliers (producers, importers, and distributors) of fossil fuels in Canada to reduce the carbon intensity of the fuel over its life cycle — that is, the amount of GhG emissions associated with producing and consuming the fuel.
For B.C., this will sound familiar.
The province — the only jurisdiction in Canada so far — already has a low-carbon fuel standard that applies to transportation fuels such as gasoline and diesel. The standard has been a success, resulting in the avoidance of more than 7.7 million tonnes of CO2 emissions between 2010 and 2017. As a result, the provincial government has recently committed to extending the low-carbon fuel standard past current requirements of a 10-per-cent carbon intensity reduction by 2020 to require a 20-per-cent reduction by 2030.
In terms of requiring a reduction of carbon intensity from transportation fuels, the two policies — national and provincial — are similar.
In addition, both the low-carbon fuel standard and the federal clean fuel standard involve a credit-trading scheme that allows fuel suppliers to earn credits for achieving compliance or, alternatively, to purchase credits for under-compliance. Also, both policies are technology-agnostic, meaning that carbon intensity reductions can be achieved in any way and at any point in the life cycle, from “well-to-wheels.” This is a departure from Canada’s existing transport fuel regulations, as well as those of several provinces, which require minimum biofuel content.
Yet although these two policies are similar in theory, their compatibility is still up in the air.
B.C. has been ironing out the details of its low-carbon fuel standard for nearly a decade. Clearly, the rest of Canada stands to benefit from its lessons and successes. However, it remains to be seen whether the federal government will harmonize its approach with B.C.’s existing policy framework, or if the province will be given an equivalency exemption. If not, this could open the door to many practical complexities and inefficiencies.
The development of the national clean fuel standard has been in the works for more than two years. The details of the policy will be released in the coming weeks, with implementation starting in 2022. But we know that when it comes to environmental policies, the best of intentions don’t necessarily translate into operational success. There are several considerations that will be critical for the ultimate success of the clean fuel standard in B.C. and in the rest of Canada. Here’s what we will be looking for when the detailed regulations are announced:
Involvement of the provinces: We’ve seen environmental policies founder when there is insufficient flexibility on how they are implemented across different provinces. So far, there is little evidence to suggest that the federal fuel standard will integrate with the efforts already made under B.C.’s standard. For the federal standard to be successful, it will need to be responsive to different provincial contexts and legislation. This includes consistency for how life cycle emissions are measured. Where B.C. has been using a widely accepted model, GHGenius, for several years, the federal government has indicated that it will be building its own separate model, instead. Will these two models be consistent and compatible? Will the federal fuel standard recognize the accomplishments made in B.C.? Collaboration with the provinces and respect for their distinct challenges and policy approaches will be critical.
Regulatory burden: The implementation of the federal fuel standard will be complex, requiring substantial work on the part of both fuel suppliers and government agencies to demonstrate that compliance has been achieved. For instance, who will be on the hook for carbon intensity compliance along the value chain and how will the compliance costs be shared? If the policy is to be successful, the administrative costs of the policy must not outweigh its benefits.
Smart approaches to the unknown: The federal standard is wading into uncharted territory in that it will extend beyond transportation fuels to include building and industry fuels, as well. This means there is little previous experience to guide implementation in these sectors, and no existing evidence to demonstrate benefit. Will the approach outlined by the federal government allow for pilot projects or other methods to weigh the costs and benefits, and adapt the program as a result of the findings?
Cost: B.C. is already struggling with high fuel prices. Although the province’s existing low-carbon fuel standard has had only a minimal cost impact (estimated to be around a penny or two per litre of fuel), the cost of the national policy is unknown, and will depend highly on the rules around implementation. The cost impact of the federal standard extending to building and industry fuels in B.C. — and across the country — will be of particular interest to the political palatability of the policy.
Many questions remain as to how this policy will play out among B.C.’s different policies and sectors over time. The details provided by the federal government in June will help establish how successful — politically, economically and environmentally — the policy is likely to be.
Jade McLean is a policy analyst and Marla Orenstein is director of the Natural Resources Centre at the Canada West Foundation.