The federal government is delaying new greenhouse gas emissions standards on gasoline and diesel by another year but will demand the oil and gas sector make bigger cuts to fuel emissions by 2030 given how much more money the companies are now making.
But the new rules adopted last week will also give fossils a double hit of revenue, allowing them a federal tax break for installing carbon capture and storage systems to generate emission credits that they can then sell to refineries and fuel importers, The Canadian Press reports. They also leave out aviation fuels that were included in an earlier draft of the regulations.
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Cabinet approved the final regulations for the long-awaited Clean Fuel Standard last week. CP obtained them Monday ahead of their intended publication on July 6.
A confluence of communications errors led to the regulations being distributed early upon request and the government was scrambling Monday to inform provinces as the news was about to leak, the news agency writes.
“The CFS will be a key tool that complements pollution pricing and the pending oil and gas sector emission cap, to cut emissions and drive the use of clean fuels and technology in Canada,” a statement from Environment Minister Steven Guilbeault’s office said Monday.
“Since the previous draft of the CFS, we’ve been working to make this as focused as possible on our end goal—driving down emissions and driving up innovation.”
The Clean Fuel Standard was first promised in 2016 as part of the Liberals’ original climate plan. At that time it was expected it would cut 30 million tonnes of greenhouse gases a year by 2030. A new analysis based on the final regulations is expected shortly.
The initial plan was to have draft regulations ready by the spring of 2020, but they weren’t published until December 2021, and were followed by a mandatory six-month comment period.
The draft regulations said the new standard would kick into gear in December 2022. The final regulations say the first compliance check will now be in December 2023.
The final regulations exclude kerosene, jet fuel, and fuel oil that were included on the earlier draft. But they do increase the expected cuts to emissions from both gasoline and diesel.
The draft regulations called for gasoline to drop carbon intensity 2.5% in December 2022 from a baseline number based on average intensity in 2016. The final plan adjusts that baseline slightly, and requires a drop of 3.6% for gasoline, 3.8% for diesel in December 2023.
The emissions intensity cap declines each year until 2030. Initially the plan was that both gasoline and diesel emissions intensities would drop 12.5% by 2030. The final regulations now say gasoline has to fall by 14.7%, diesel by 15%, by the end of this decade.
In June 2020, the federal government said it would scale back the standard in the early years as oil and gas companies reeled from a pandemic revenue hit. Guilbeault’s office now says companies are making record profits and “there’s no doubt there is the capacity to invest in clean options.”
“In fact, the future sustainability of the industry depends on investment in innovation.”
Most Canadian fossils reported massive profits in the first quarter as global oil prices surged, largely due to the Russian invasion of Ukraine. In May, Guilbeault told CP he expected companies to use those profits to invest in clean tech, after Cenovus Energy CEO Alex Pourbaix famously complained that Ottawa’s federal tax credit for carbon capture and storage was not generous enough.
The emissions intensity is calculated on life cycle emissions—every ounce of carbon dioxide, methane, or other greenhouse gases produced when oil and gas is extracted, processed, refined, upgraded, transported, and finally, burned.
There are multiple options to lower emissions intensity, CP explains: by replacing fossil fuels with clean electricity during the extraction or refining phases, distributing biofuels such as ethanol and biodiesel, or investing in electric or hydrogen vehicles.
This report by The Canadian Press was first published June 27, 2022.