Biofuel companies anticipating big boost to demand with Clean Fuel Standard

Canada’s biofuel industry is very optimistic about the federal government’s proposed Clean Fuel Standard (CFS), which could potentially create significant new domestic demand for Canadian crops depending on how the regulations are drawn up.

The goal of the policy, which has been in the works for several years, is to reduce the intensity of carbon in fuel. The federal government is looking to introduce the regulations for consultation before the end of this year.

“The Clean Fuel Standard is a critical signal to companies that produce feedstocks — farmers, forest companies, a wide range of people who produce feedstocks,” says Ian Thomson, president of Advanced Biofuels Canada — a national industry association representing biofuel makers.

As of 10 years ago, not many fuels could substitute for gasoline, diesel, or jet fuel, but now the options, including different feedstocks, are a “dizzying array,” says Thomson, in the interview below. In terms of agricultural commodities, canola, corn, soybeans, wheat, and tallow are among the main feedstock options.

Some are concerned the CFS will create false demand, but that’s not possible for two reasons according to Thomson. The first is that fuels are a monopoly in Canada — only a small number of companies control the market and the access to fuels. The second is fossil fuels got a free-ride on carbon emissions, but now the world is waking up to that, he says. Even if biofuels were cheaper, biofuel companies still require regulated access to market because of the way fuel distribution occurs, says Thomson.

Currently, about two per cent of diesel is blended with biodiesel, and from Thompson’s perspective, the CFS is a smart regulation because at the end of the day it will be up to obligated parties, the refineries and those who import a large amount of fuel, to decide what they want to use to meet the reduced carbon criteria, whether that’s ethanol, biodiesel, renewable diesel, pay electric charging companies to purchase their carbon credits.

Blending rates will go up significantly, even if refineries are slow to adopt certain blends, based on trends in California and B.C., says Thomson, noting last year in the state of California, 23 per cent of all diesel sold was biodiesel.

“In the North American market there’s plenty of production capacity for the levels that the mandate requires, and if we have a good mandate here in Canada under the Clean Fuel Standard, you will see companies building production plants, and we know from our membership that they have very clear intentions to add to existing production capacity and to build new production capacity, if the standard is clear in signalling that more renewable content is required,” says Thomson.

As for concerns, Advanced Biofuels Canada’s biggest worry regarding CFS is misinformation, he says.

“Right now people are suggesting it’s a second tax or a secret tax. Nothing could be further from the truth,” says Thomson. “It’s been out in the open for four-plus years and it’s not a tax, unless you considered it a tax when we took lead out of gasoline or sulphur out of diesel and gasoline.”

While the proposal has been public for several years, the actual regulations for the Clean Fuel Standard have not yet been introduced. The federal government says it intends to bring the new rules for liquid fuel into force in 2022.

Listen in to the full conversation with Ian Thomson, discussing the potential impact of the CFS:

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