Canada s Clean Fuel Standard The role of low carbon fuels in decarbonising transport: the emerging consensus from international initiatives

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1 Canada s Clean Fuel Standard The role of low carbon fuels in decarbonising transport: the emerging consensus from international initiatives Lorri Thompson Manager, Clean Fuel Standard Development Oil, Gas and Alternative Energy Division April 10, 2018, Brussels

2 Canadian Context The Pan-Canadian Framework on Clean Growth and Climate Change Clean Fuel Standard Annex: Carbon Pricing in Canada Page 2 April-9-18

3 Canada s GHG 7% Emissions (2015) 10% 12% 36% 2015 TOTAL 723 Mt 2030 TARGET 517 Mt 24% 11% Industry (incl. Oil & Gas) Electricity Transportation Buildings Agriculture Waste and Other 3

4 The Paris Agreement and Canada s Commitment National targets, updated and tightened every five years Collaborative approach across governments, communities, peoples Transparency, accountability and stock-taking Cut GHG emissions to 30% below 2005 levels by 2030 Work with provinces, territories, Indigenous Peoples, stakeholders, and international partners Report annually on progress, with a view to increasing ambition over time Years from now, today may very well be the day our children look back to as the beginning of an ambitious global effort to finally fight climate change. I am proud of the role Canada is playing in reaching this historic and balanced agreement, and I am confident that the world will rise to the challenge of addressing climate change. Prime Minister Justin Trudeau, December

5 Pathway to Canada s 2030 target 5

6 Pricing Carbon Pollution Complementary mitigation actions across all sectors Adaptation and climate resilience Clean technology, innovation & jobs 6

7 Complementary Actions to Reduce Emissions CLEAN ELECTRICITY Phase out coal, increase renewables Transmission lines, smart grids Reduce diesel use ENERGY EFFICIENCY Building codes, appliances Industrial energy management Vehicle emission standards Rail, aviation, off-road sectors CLEANER FUELS Clean Fuel Standard Zero-emission vehicle strategy Charging/fuelling infrastructure Renewable fuels and bioproducts FEDERAL INVESTMENTS CAD $2B Low Carbon Economy Fund CAD $21.9B for Green Infrastructure 7

8 Clean Fuel Standard Announced by the Honourable Catherine McKenna, the Minister of Environment and Climate Change on November 2016 The objective is to reduce the carbon intensity of fossil fuels using a lifecycle approach, to achieve 30 megatonnes of annual GHG emissions reductions in Canada by 2030 Long-term goals for 2050 will also be considered in the development of the Clean Fuel Standard Performance-based approach will incent innovation, development and use of a broad range of low carbon fuels, energy sources and technologies Achieve emission reductions from fuels used in transportation, industry and buildings Page 8 April-9-18

9 Consultations to date and timing Consultation held throughout 2017 January April 2017 Discussion Paper released in February, followed by workshops and webinars November 7, 2017 Summary of written comments to the discussion paper released The Clean Fuel Standard Regulatory Framework was released in December, Outlines key design elements of the regulation Consultations on the Framework and regulatory design are ongoing Planned publication of the regulations: Draft regulations in Canada Gazette, Part I in 2018 Final regulations in Canada Gazette, Part II in mid-2019 Page 9 April-9-18

10 Scope & Exclusions The Clean Fuel Standard will apply to liquid, gaseous and solid fuels combusted for the purpose of creating energy Fuels excluded from the requirements of the Clean Fuel Standard: Fuels exported from Canada Fuels in transit through Canada, and Coal combusted at facilities covered by coal-fired electricity GHG regulations Other exclusions- To be confirmed Page 10 April-9-18

11 Renewable Fuel Content Canada currently has federal requirements for renewable fuel content in gasoline (5% by volume) and diesel fuel (2% by volume) under the Renewable Fuels Regulations The minimum requirements will be maintained in the short term In the longer-term, the Clean Fuel Standard will supersede these requirements and they will be removed Page 11 April-9-18

12 Obligated Parties Liquid Fossil Fuels: producers or importers of petroleum liquid fuels (e.g. gasoline, diesel, and heavy fuel oil) Gaseous Fossil Fuels: For natural gas it is proposed to be gas processors, as well as transmission and distribution pipeline companies For each specified natural gas liquid (e.g. as ethane, propane and butane) it is proposed to be the importers, gas processors, stand alone fractionators, refiners and upgraders Solid Fossil Fuels: producers or importers of the fuel (e.g., coal and petroleum coke) Page 12 April-9-18

13 Setting Carbon Intensity Requirements The Clean Fuel Standard regulations will set carbon intensity requirements expressed either as absolute values or as percent reductions from relevant baselines Separate carbon intensity requirements for liquid, gaseous and solid fuels streams will be set Will achieve reductions from each of the transportation, building and industry sectors Obligated parties will need to meet requirements for the fossil fuels that they produce, import or distribute Carbon intensity requirements will become more stringent over time, with the goal of achieving at least 30 Mt CO 2 e of emission reductions annually commencing in 2030 Page 13 April-9-18

14 Calculation of Lifecycle Carbon Intensities of Fuels Carbon intensity values will: Be expressed in grams of carbon dioxide equivalents (g CO2e) per unit of energy in megajoules (MJ) Account for GHG emissions over the lifecycle of a fuel A Canadian-average default carbon-intensity for crude oil produced and imported and consumed in Canada will be used Consideration is being given to whether the approach for crude oil based fuels should be applied to other fossil fuels Carbon intensities for renewable fuels, other low carbon fuel energy sources and technologies: Will take into account the type and origin of the fuel to reflect the GHG emissions associated with different feedstocks and technologies will not initially include an estimate of the impact of indirect land use change on GHG emissions. This issue will be revisited during a review period. Page 14 April-9-18

15 Compliance Pathways Compliance with the Clean Fuel Standard can be achieved by 1) Reducing the carbon intensity of the fossil fuel throughout the lifecycle of that fuel 2) Using renewable or low carbon fuel, including refinery coprocessing of bio-crudes 3) Limited or specified end-use fuel switching 4) Credits market, where credits are generated from one of the above actions and tradeable Consultations are ongoing to determine what actions would be a compliance pathways Boundaries for what end-use fuel switching would be permitted, including considerations for limiting fossil to fossil fuel switching Minimum thresholds for emissions reductions Boundaries for inclusion, if any, for energy efficiency improvements by the end-user Page 15 April-9-18

16 Credit Market A credit trading system will be the link between actions that create a compliance obligation and actions that reduce that obligation Regulated parties will be able to trade credits with other regulated parties in the same fuel stream (liquid, gaseous or solid) Credit banking and expiry is under consideration Compliance will be required within a fuel stream Some trading of credits between fuel streams will be considered Page 16 April-9-18

17 Review and Update Review of the Clean Fuel Standard will include: Future treatment of renewable fuel requirements Accounting for the impacts of indirect land use change Consideration of other sustainability issues The following will also be updated and revised periodically: Lifecycle GHG emission models Carbon intensity values Page 17 April-9-18

18 Timing of Requirements Planned publication of the regulations: Draft regulations in Canada Gazette, Part I in 2018 Final regulations in Canada Gazette, Part II in mid-2019 Coming into force of the regulations still to be determined Carbon intensity requirements for liquid, gaseous and solid fuel streams will come into force at the same time Lead time will be provided: For industry to prepare to meet requirements For carbon intensity requirements to achieve the required 30 Mt of GHG reductions by 2030 Page 18 April-9-18

19 Contact us for more information Environment and Climate Change Canada s Clean Fuel Standard Team at: ec.cfsncp.ec@canada.ca Page 19 April-9-18

20 ANNEX Page 20 April-9-18

21 Carbon Pricing Across Canada YUKON HYBRID B.C. TAX NORTHWEST TERRITORIES TAX ALBERTA HYBRID SASK NUNAVUT TBD MANITOBA HYBRID ONTARIO CAP & TRADE QUEBEC CAP & TRADE FEDERAL BENCHMARK $10/TONNE IN 2018, RISING TO $50/TONNE IN 2022 NEWFOUNDLAND AND LABRADOR TBD PRINCE EDWARD ISLAND TBD NEW BRUNSWICK NOVA SCOTIA CAP & TRADE

22 Existing Provincial Carbon Pollution Pricing Systems Provinces British Columbia Alberta Quebec Ontario System type Explicit price Explicit price Cap-and-trade Cap-and-trade System start Emissions covered Description ~ 70% ~ 70-90% ~ 82% ~ 85% Revenue neutral carbon tax Currently $30/t CO 2 e (rising to $35/t in 2018) Carbon levy of $20/t on transport & heating fuels (rising to $30/t in 2018). Output-based pricing system for large facilities over 100 kt CO 2 e Industrial, electricity, fossil fuel distributors above 25kt CO 2 e threshold Linked with California Facilities above 25kt CO 2 e threshold including electricity importers and fuel suppliers Linked with Quebec and California in 2018 Other initiatives Industrial control regulations for LNG (additional price signal of $25/t) 93% clean and renewable energy target Carbon neutral government Emission limit on oil sands of 100Mt Reduce methane from oil and gas by 45% by 2025 Phase-out coal-fired electricity by 2030 Page 22 April-9-18 Transportation electrification action plan ZEV mandate Phased-out coal in 2004 Clean technology

23 Pricing Carbon Pollution Oct. 2016: Pan-Canadian Carbon Pricing Approach ensures carbon pricing applies to a broad set of emission sources throughout Canada with increasing stringency over time Technical paper released May 2017 Draft Regulatory Framework paper released January 2018 Provinces and territories have the flexibility to implement either: an explicit price-based system with a minimum carbon price of $10/tonne in 2018, rising $10/year to $50/tonne in 2022; or a cap-and-trade system with a 2030 reduction target of at least 30% from 2005 levels and declining annual caps to 2022 that reflect projected emissions reductions from the benchmark carbon price The federal government will implement the backstop system in jurisdictions that request it or that don t have a system that meets the benchmark in 2018 Page 23 April-9-18