By Jade McLean & Marla Orenstein
Published in the Regina Leader-Post, the Saskatoon Star Phoenix and The Province
The Clean Fuel Standard is coming to Canada — what does this mean for Saskatchewan?
While Saskatchewan grapples with the imposition of the national carbon tax, the federal government is rolling up its sleeves to release its latest and most ambitious climate policy yet — the Clean Fuel Standard (CFS).
In a nutshell, the CFS will require all suppliers (producers, importers, and distributors) of fossil fuels in Canada to reduce the carbon intensity (CI) of the fuel — that is, the amount of greenhouse gas emissions associated with producing and consuming the fuel.
The policy is being developed to support Canada’s efforts toward achieving a 30-per-cent reduction in total emissions from 2005 levels by 2030. Yet, this raises the question — isn’t that why we have a carbon tax?
The carbon tax is intended to reduce the amount of fuel consumed by making it more expensive; the CFS is intended to make the fuel that is used less carbon-intensive.
Implementation is to start in 2022.
Saskatchewan currently requires that all gasoline have a 7.5-per-cent ethanol content (compared to the national standard of five per cent) and all diesel a two-per-cent biodiesel content. But we know that biofuels have questionable environmental records.
The CFS partly avoids this issue by being technology neutral, meaning that CI reductions under the CFS can achieved in any way, and at any point in the life cycle, from “well-to-wheels.”
However, the CFS is wading into uncharted territory in that it will extend beyond transportation to include building and industry fuels, as well.
We support the intentions of the CFS; reducing global GHG emissions is critical. At the same time, we have seen the federal government struggle to get Canadians onboard with other environmental legislation.
There are several key lessons to be learned from these efforts that will be critical considerations for the ultimate success of the CFS in Saskatchewan and in the rest of Canada. They include:
— Involvement of the provinces. We’ve seen environmental policies founder when there is insufficient flexibility on how they are implemented across different provinces. The most obvious example of this has been the implementation of the federal carbon tax — where Saskatchewan, among other provinces, has repeatedly criticized the policy for encroaching on areas of provincial jurisdiction, and undermining the made-in-Saskatchewan “Prairie Resilience” plan for reducing emissions. If the CFS is to succeed, it will have to be responsive to different provincial contexts and Canada’s regional differences, and to be harmonized with legislation across all jurisdictions.
— Fairness. The CFS will create winners and losers — within and across sectors, within and across regions, and for the competitiveness of Canada in the global marketplace. This is important for Saskatchewan, where trade-exposed and emissions-intensive industries make up roughly 50 per cent of the economy. There is some concern that the policy may hamstring these sectors, as most producers cannot raise prices to offset any increased costs under the CFS.
— Regulatory burden. The implementation of the CFS will be complex, requiring substantial work on the part of both fuel suppliers and government agencies to demonstrate that compliance has been achieved. If the policy is to be successful, the administrative costs of the policy must not outweigh its benefits.
— Cost. A key question is what the CFS will cost. This is much more difficult to answer than for the carbon tax, where the price is clear and is borne by the end consumer. Under the CFS, any costs are borne by the fuel supplier. These costs may be low or high depending on the cost of the approach that the supplier uses to implement the CI reduction. In some cases, costs may be passed on to the end consumer, but the challenge is different for trade-exposed industries that have to compete with international imports.
Many questions remain as to how this policy will play out among Saskatchewan’s different 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.