The Clean Fuel Standard is bad for Canadians & it won’t do much for the Environment

In 2016, the Federal Liberal government set in motion the proposal for a new Clean Fuel Standard (CFS) to reduce fuel emissions by 30 megatonnes per year in 2030. The standard covers all fossil fuels in use and will be rolled out in different phases, starting with liquid fuels.

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There are a wide host of implications that will come from the implementation of these new fuel standards. Many experts believe that these changes will only cause economic harm to Canada while doing little to help the environment.

The CFS’s first draft of regulations is expected to be dropped in late 2020 in the Canada Gazette. This will outline the fundamental elements of just what the regulation will be. The program will officially come into force in 2022.

The planned result of the CFS will be to reduce the emissions intensity of fossil fuels by 10-12% from 2016 levels. However, not all fossil fuels will immediately be subjected to the CFS. Starting with liquid fuels like gasoline in 2022, the CFS will gradually bring in gaseous fuels like propane and eventually solid fuels such as coal. The federal government is touting that there will be opportunities for companies to earn credits by reducing the intensity of their fuels beyond the set standards.

Despite the intent of the government to reduce emissions and try to reach its emissions goals, there are serious concerns that this change could impact Canadians, especially during the economic recovery from the COVID crisis. In the last few months, different organizations have done studies and looked at potential impacts of the CFS.

According to the Canadian Energy Research Institute the CFS is expected to increase gasoline costs by $0.11 per litre and energy costs as a whole by $1.88 per KJ. During our economic recovery, the last thing we want to be doing is putting more of a financial burden on companies and consumers. The government has acknowledged that producers’ costs will have to increase to meet the standard. These costs will be passed on to consumers, and the government expects consumers to feel the pressure.

The most recent independent study on the Clean Fuel Standard was commissioned by Canadians for Affordable Energy from LFX Associates. Their modeling shows that there could be a drop in GDP at $560 in lost nominal GDP for every tonne of emissions reduced. These are not insignificant numbers and can result in a steep economic loss. The damage? a 0.8% drop in real GDP, 1.4% decline in real household consumption, nearly 50,000 jobs lost nationally, a 1.4% drop in combined federal and provincial government revenue, and a $12 billion increase in the deficit.

The CFS is also being implemented in a manner that does not provide Emissions Intensive Trade Exposed (EITE) protection to Canada’s trade-exposed industries increasing the risk of carbon leakage to other countries. Some concerns have been raised by Navius Research, who found that the CFS might only achieve 7Mt’s of reduced emissions. A paltry sum compared to the 30Mt expected by the government. According to these studies, the risks to Canada’s economy are very real and the environmental rewards are by no means certain.

While everyone agrees that we must continue to make the environment a priority, the Canadian oil and gas industry is already at the forefront of emission reduction technology. We are the top-ranked country for ESG of the top 10 oil and gas producers. More so, we are on the cusp of beginning our economic recovery and need to find a balance between nurturing our economy and protecting the environment.

Instead of pushing a policy that might end up hurting Canadians, Canada’s government should be promoting Canada as a world leader and innovator. We should be focusing on providing reliable energy with the lowest environmental impacts on the world. That’s how we can make a difference in a global problem rather than punishing Canadians.

The Clean Fuel Standard will not help drive economic recovery or help the environment in a meaningful way.

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