WPAC Report Advocating for solid biofuels WPAC argues for end-use fuel switching under proposed CFS regulations By Gordon Murray ince 2017, the Canadian govern-ment has been developing the Clean Fuel Standard (CFS), a low carbon fuel standard-type policy, to reduce the lifecycle carbon intensity of fuels and energy used in Canada. The CFS aims to achieve 30 million tonnes carbon dioxide equivalent (CO 2 e) of annual reductions in GHG emissions by 2030. The CFS regulations will cover all fossil fuels used in Canada but will set separate requirements for fuels based upon their state of matter: liquid, gaseous, or solid. The CFS is being developed in a phased approach. Regulations for the liquid fos-sil fuel class are currently under develop-ment, with draft regulations planned for publication by early 2020. PROPOSED REGULATIONS S fossil fuels they supply; 2. By blending lower CI fuels, such as liq-uid biofuels, with fossil fuels; or 3. By fuel switching in the transportation sector (e.g., replacing internal combus-tion vehicles with electric or hydro-gen-powered vehicles). The CFS would establish a compliance credit trading system whereby obligated parties could purchase compliance cred-its from credit generators (e.g., electric vehicle manufacturers) or other obligated parties. At the end of the year, they would need to show that their compliance cred-its result in a CI of the fuel they supplied equal to or better than the regulatory re-quirements, or else pay a significant fine. WPAC’S POSITION Together with other energy stakeholders, WPAC has been providing input to En-vironment and Climate Change Canada (ECCC) as it works to design and shape the CFS. In June 2019, ECCC released the federal government’s proposed regulatory approach for liquid fuels. The CFS will set performance standards for liquid fossil fuels based upon their life-cycle carbon intensity (CI). Each liquid fossil fuel will be assigned a target carbon intensity to be expressed in grams of CO 2 equivalent per megajoule of fuel energy (g CO 2 e/MJ). Obligated parties – finished fos-sil fuel producers and importers – must re-duce the carbon intensity of fuel over time. For example, ECCC proposes a heating oil 2016 baseline CI of 84 g CO 2 e/MJ must be reduced to 80.4 g CO 2 e/MJ by 2022 and to 74.0 g CO 2 e/MJ by 2030. Under the ECCC proposed regulations, obligated parties would have three ways to comply with the CFS: 1. By reducing the carbon intensity of the Upon review of ECCC’s proposed regulato-ry approach, WPAC is seriously concerned that the government will not allow end-use fuel switching in the buildings/stationary fuel use sector. We believe that it is unfair for ECCC to recognize fuel switching from gasoline to electricity or hydrogen in trans-portation, but not to recognize switching from heating oil to solid biofuels. To this end, I wrote to ECCC describ-ing WPAC’s position on the current CFS regulatory design, recommending how the regulations could be modified. I, along with technical and policy consultant Dr. Jamie Stephen of TorchLight Bioresources, met with ECCC representatives in Ottawa on Aug. 21, 2019. WPAC made the fol-lowing arguments: • One of the CFS’ primary objectives is low-cost compliance. By prohibiting rec-ognition of fuel switching for stationary applications, ECCC will actually increase the cost of CFS compliance, exclude the forest sector from participation in the short-term, and inhibit investment in wood pellet and chip boilers. • Canada consumes approximately three billion litres of heating oil per year. The majority of heating oil is consumed in rural and Atlantic Canada. Rural and Atlantic Canada have among the lowest per capita income in Canada. ECCC’s proposed regulatory approach will make CFS compliance for these low-income areas significantly more expensive than for those living in cities. • Under ECCC’s proposed regulatory ap-proach, the principal mechanism for en-suring compliance from heating oil sup-pliers will be to blend renewable diesel with heating oil. The 2030 target of 74 g CO 2 e/MJ is less than heating oil com-bustion emissions, meaning upstream efficiency improvements will be insuffi-cient. The only heating oil-miscible fuel that can also be stored outside in winter is renewable diesel. Renewable diesel is currently trading for $2.00-$2.50 per li-tre in the U.S. An 18 per cent renewable diesel blend rate – the required rate to meet the 74 g CO 2 e/MJ target – would increase heating costs by 33 per cent. In addition to a 15 per cent increase asso-ciated with the carbon levy, real heating costs will increase by 50 per cent. • Renewable diesel, at $2.00-$2.50 per litre, has a useful heat fuel cost of $65-$82 per gigajoule (GJ). In contrast, wood pellets, at $300-$350 per tonne for residential sales, have a useful heat fuel cost of $20-24 per GJ. Wood pellets also have half the carbon intensity of de-fault renewable diesel (29 g CO 2 e/MJ). Wood chips are half the carbon intensity of wood pellets. This means, on an im-plied carbon price basis and assuming wholesale $0.75 per litre for heating oil, blending renewable diesel with heating oil has a fuel cost of $630 to $884 per FALL 2019 8 Canadian BIOMASS
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