On July 6, 2022, Canada will publish the final Clean Fuel Regulations (CFR) in the Canada Gazette Part II. The CFR imposed progressively strict regulations on gasoline and diesel producers and importers to lower the carbon intensity of their products. Once fully implemented, the CFR will help reduce up to 26.6 million tonnes of greenhouse gas emissions by 2030, which is about the amount of GHGs produced by the whole Canadian economy in two weeks.

The Clean Fuel Standard would compel liquid fossil fuel main providers (i.e., producers and importers) to decrease the carbon intensity of their liquid fossil fuels consumed in Canada compared to 2016 levels.

The carbon intensity reduction requirement will begin in 2022 at 2.4 gCO2e/MJ. It will steadily rise over time, eventually reaching 12 gCO2e/MJ in 2030. To do this, gasoline producers will need to supply customers with creative solutions and new fuel alternatives.

A credit market is established under the Clean Fuel Standard. To meet the reduction criteria, regulated parties (producers and importers of gasoline and diesel) must develop or purchase credits. Parties having a surplus of credits may either bank them for future use or sell them. The Clean Fuel Standard also allows non-regulated companies to generate credits.

The Clean Fuel Standard allows for three methods of generating credits:

Compliance category 1: conducting efforts to lower the carbon intensity of fossil fuels across their entire lifespan (e.g., carbon capture and storage, on-site renewable electricity, co-processing)

Category 2 compliance: providing consumers with low carbon intensity fuels (e.g., ethanol, bio-diesel)

Category 3 compliance: investing in innovative vehicle technology (e.g., electric or hydrogen fuel cell vehicles)

The Canadian government anticipates that the CFR will provide considerable economic possibilities in the development and use of clean fuels and technology.

The Clean Fuel Regulations will be implemented in lieu of the present federal Renewable Fuels Regulations. Canada is taking a similar strategy as British Columbia, California, and Oregon in adopting policies that concentrate on emissions throughout the lifespan of fuels.

In conjunction with the $1.5 billion Clean Fuels Fund established by the Government of Canada, the CFR will offer incentives for increasing domestic production of low-carbon-intensity fuels (such as ethanol). This will open up new business prospects for biofuel feedstock suppliers like farmers and foresters. It will also assist Canadian fuel producers in competing in the rapidly increasing global clean energy market.

The Clean Fuel Regulations, which will work in tandem with pollution pricing and the upcoming oil and gas emissions cap, will also help diversify energy options and promote faster adoption of zero-emission vehicles by incentivizing the deployment of vehicle-charging infrastructure, according to the government.

According to the CFR, about 2.2 billion liters (581 million gallons US) of more low-carbon-intensity diesel and 700 million liters (185 million gallons US) of additional ethanol will be required in 2030.

The Clean Fuels Fund of the Government of Canada will spend $1.5 billion to create new or expand existing clean fuel production plants. The Fund will assist the implementation of the Clean Fuel Regulations as well as the early initiatives identified in the Hydrogen Strategy for Canada.

Source: Green Car Congress

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