Canada Releases California-Style Fuel Rules to Cut Emissions

Source: By Robert Tuttle, Bloomberg • Posted: Thursday, June 30, 2022

New regulations aim to reduce motor-fuel emissions by 2030 Plan issues credits like California’s Low Carbon Fuel Standard

Canadian Prime Minister Justin Trudeau’s government released a long-anticipated plan to slash motor fuel emissions, setting up a potential clash with the country’s hydrocarbon producing provinces.

The Clean Fuel Regulations aim to reduce emissions from motor fuels by 26.6 million metric tons by 2030, according to a statement from the Minister of Environment and Climate Change. The measures are similar to a program spearheaded by California decades ago, known as the Low Carbon Fuel Standard, that has also been adopted by Oregon and the province of British Columbia.

The program is the latest initiative by Trudeau’s government to fight climate change while maintaining Canada’s position as one of the world’s biggest producers of oil and natural gas. The government plans to make Canada a net zero emitter by 2050 even as it pushes forward with plans to build a new oil pipeline from the Alberta’s oil sands to the Pacific as well as new liquefied natural gas export terminals.

The clean fuel program has drawn opposition in Canada’s oil-producing provinces. Jason Kenney, Alberta’s premier, has previously tweeted that the clean fuel standard would constitute a “second carbon tax” and raise prices for consumers.

The regulations announced Tuesday will go into effect next year to avoid any immediate impact on fuel prices, Steven Guilbeault, minister of environment and climate change said by phone. They will require the carbon intensity of gasoline and diesel to be reduced by about 11% between 2023 and 2030.

That will add an estimated 6 cents to 13 cents per liter to the cost of gasoline by 2030, said the minister. That price increase will be much less than the rise in profits earned by refiners, which have gone up more than 100% in the past year, he said.

“Oil companies have a lot of money now and they should be investing some of it to ensure they reduce their greenhouse gas emissions,” he said.

About 2.2 billion liters of additional low-carbon diesel and 700 million liters of additional ethanol will be needed in 2030 under the new program, the ministry said.