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The federal government published Renewable Fuels Regulations under the Canadian Environmental Protection Act, 1999 on September 1, in the Canada Gazette, Part II. The Regulations require an average renewable fuel (ethanol) content of five per cent in most gasoline beginning on December 15, 2010. A trading system is permitted to reduce the cost of compliance. “Subject to technical feasibility”, an average annual 2 per cent renewable requirement may also be added for diesel fuel and heating oil. If so, the government predicts that up to 4 Mt of reductions in greenhouse gas (GHG) emissions and some tailpipe gases (e.g., carbon monoxide, benzene and 1,3-butadiene) could occur in 2012.
The actual benefit from the regulations its harder to predict. First, the 5 per cent renewable fuel content requirement in gasoline will require 2 billion litres of renewable fuel each year. Due to the lower energy yield2 from the ethanol-blended gasoline, the total demand for gasoline will increase by 4.4 billion litres over the 25-year period. As a result, consumers will experience an increase in gasoline purchases of approximately $23 for 2011, and petroleum consumption will go down by much less than 5%.
Second, the predicted benefits are based only on emissions from transportation fuels at the point of use, and ignore the environmental costs of producing the fuel. The government expects ethanol in eastern Canada to be made from corn, and ethanol in western Canada to be made from wheat. It is highly controversial whether burning corn or wheat-based ethanol provides any environmental benefits, when you take into account the large amount of fossil fuels used to grow the food. There could also be significant economic and social impacts from burning large amounts of food as transportation fuel. Ethanol has clear environmental benefits only when it is based on waste materials, such as cellulose left over from other processes, but this is not yet economic.

The regulatory impact statement also reveals some questionable manipulation of the government numbers. For one thing, the 4 Mt GHG reduction assumes that government will mandate a renewable content of diesel and heating oil, which it has not committed to do. For another, the costs of the regulation have been calculated using an 8% discount rate, which minimizes the importance of future costs. Benefits, however, have been calculated using a 3% discount rate, which makes distant future benefits look much more substantial.

Bottom line: the renewable fuels regulation is a better win for the agricultural lobby than it is for those concerned about climate change.
Dianne Saxe and Jessica Yuan

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