Global Courant
OTTAWA –
On Saturday, the federal government’s long-promised clean fuel rules will go into effect across Canada. Here are five things you need to know about what they are, how they will affect you and why they differ from the carbon price.
WHAT ARE THE REGULATIONS FOR CLEAN FUEL?
First promised in 2016, but only finalized last year, the clean fuel regulations are designed to reduce emissions at every stage of the production, processing, transportation and use of gasoline and diesel.
It is also intended to stimulate investments in biofuels and charging infrastructure for electric vehicles.
The regulations will be phased in over seven years. The goal is for emissions from each fuel to be reduced by about 15 percent by 2030 compared to 2016.
The regulatory impact analysis said they could lead to a reduction of 26.6 million tonnes of greenhouse gases by 2030, or roughly what is produced from six million passenger cars in a year.
That accounts for 10 to 12 percent of the emissions needed to meet Canada’s current 2030 climate target.
The regulations are similar to what the states of California, Oregon and Washington, as well as the European Union, have already put in place.
WHO SHOULD COMPLY WITH THE REGULATIONS AND HOW?
The regulations apply to refineries and importers of petrol and diesel. They must reduce the emissions of their products by either producing their own credits by reducing emissions or buying them elsewhere.
One way to create credit is to invest in technology that directly reduces gasoline and diesel emissions, such as installing carbon capture and storage systems at an extraction site, or using zero-emission electricity such as wind or nuclear instead. of coal or natural gas to power a refinery.
Companies can also get credits to produce or import low-carbon fuels such as ethanol, which are added to gasoline or diesel to lower their emissions.
The third way to create credits is by investing in electric vehicle charging stations or hydrogen fuel cell stations.
Every province except Newfoundland and Labrador already mandates blending biofuels with gasoline and diesel, so most companies affected by the new regulations are already producing enough credits to comply for at least the first two or three years.
WHY WILL THEY INFLUENCE ATLANTIC CANADA MORE THAN OTHER REGIONS?
The cost of regulation should be lower for companies that create their own credit than for companies that rely heavily or entirely on buying it. In Atlantic Canada, there are fewer opportunities to create such credits, in part because the region’s geology does not allow for carbon capture and storage. There is also slower adoption of electric vehicles and biofuels.
Because Newfoundland is exempt from current biofuel requirements, companies there are not yet meeting the initial regulatory requirements and will need to buy credits more quickly to comply.
HOW DOES THIS DIFFER FROM CARBON PRICES?
Both carbon pricing and clean fuel regulations are climate policies designed to reduce greenhouse gas emissions in Canada.
Carbon pricing is a fee charged directly to the purchase price of 22 different fuels, including gasoline, diesel, propane and natural gas.
The idea is to increase the cost of those fuels so that people are motivated to use less of them.
This can be done by driving less, using an electric car, upgrading your heating system or insulation in your home to use less heat, or taking other measures to cut back on fossil fuel use.
Clean fuel regulations instead force refiners and importers to make changes to their processes to reduce emissions from their products directly, or indirectly by buying credits from others who have.
The costs are not directly passed on to consumers, but the refiners and importers who have to pay for them could pass them on indirectly.
The more refiners and importers invest themselves to comply with regulations, the lower the costs will be. The more they depend on buying credits from others for this, the higher the costs will be.
Unlike the carbon price, the rules only apply to petrol and diesel. Initial plans to also apply them to kerosene, jet fuel and heating fuel were abandoned after consultation.
HOW MUCH WILL THIS POLICY COST CONSUMERS?
At current levels, the carbon price adds about 14 cents to a gallon of gas. That will increase by 3.3 cents per year until 2030, when an additional 37 cents will be added.
HST and GST are charged on top of this, this varies by province. The additional sales tax due to carbon prices in 2023 ranges from 0.7 cents in the Prairies to 2.15 cents in the Atlantic. In 2030 it will range from 1.85 cents in the Prairies to 5.56 cents in Atlantic Canada.
The cost of clean fuel regulation is more unclear because it is not a direct reimbursement. It will depend on what refiners and importers do to comply with regulations and how much of the cost they pass on to consumers.
The costs are expected to be low initially, as most companies will not have to do much to comply in the first few years.
By 2030, costs are expected to range from six to 13 cents per liter for gasoline and seven to 16 cents for diesel, depending on how the companies decide to comply.
But the energy boards of two Atlantic provinces have already decided to start passing the costs on to consumers at different levels.
New Brunswick raises prices by eight cents per liter on July 7 and Nova Scotia by 3.74 cents. Prince Edward Island and Newfoundland and Labrador are still deciding whether to raise prices immediately.
Other provinces don’t have energy boards that set gas prices, so it’s up to the fuel suppliers to decide whether to change.
Ultimately, next month the cost will range from 15 cents per gallon of gasoline in the Prairies to as much as 24.45 cents in New Brunswick.
By 2030, the carbon price and clean fuel regulations could add up from about 45.15 cents to about 56.2 cents per liter together.
The federal government is reducing the cost of the carbon price through quarterly checks in the eight provinces that use the federal system instead of their own provincial equivalent.
The parliamentary budget officer says the rebates exceed the direct costs of the carbon price for most households.
This report from The Canadian Press was first published on June 29, 2023.
