We are committed to working in partnership with the BC Government to resolve our concerns as summarized below:

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1 August 17, 2015 Climate Leadership Plan Discussion Paper Ministry of Environment Climate Action Secretariat P.O Box 9486, Station Provincial Govt Victoria B.C. V8W 9W6 Re: Climate Leadership Plan Discussion Paper Climate Action Secretariat, Overview The Canadian Fuels Association (Canadian Fuels) and members support BC s commitment to implement an enhanced, comprehensive Climate Change policy. We seek a policy approach that reflects best practice principles and duly balances GHG reductions with long-term competitiveness for BC industry. The BC economic and environmental agendas appear to be divergent, given the plans to develop and expand industry. However, there is an opportunity for the Province to address this gap through meaningful consultation, including a comprehensive cost-benefit analysis. Taking the time to get it right will be important. We are committed to working in partnership with the BC Government to resolve our concerns as summarized below: Actions balance outcomes across economic, environmental, and social objectives: We have concerns with core elements of the Climate Leadership Plan in the sections entitled - The Way We Travel, The Way We Work and What We Value discussed in more detail below. Prioritizing, pacing and timing of the agenda must give due consideration to the dual goals of economic growth and concurrent meaningful GHG reductions. Collaboration and partnerships are critical to long-term success: We value clarity on how best we can contribute our insights and expertise to the discussion. Our industry has a unique view on the practical implications of climate change policy s economic impact. We have global expertise in this arena that can make a meaningful contribution to BC getting it right. Decision making and reporting on progress are transparent: Competitiveness analysis will be essential. BC should only move forward with new measures once transparent cost-benefit and compliance analysis is completed. Pacing and timing of new measures need to be carefully considered. Page 1 of 4

2 Who are we our contribution to BC s economy: Canadian Fuels represents the downstream petroleum industry, encompassing all aspects of refining, distribution, transportation and marketing of petroleum products. Our BC members include Chevron, Husky, Imperial, Suncor, Parkland, Federated Co-op, and Shell. Our industry is integral to the efficient, cost-effective and reliable movement of people and goods in the Province and across Canada. In 2014, BC refineries contributed $190 million in direct GDP to the Province and generated another $545 million in indirect GDP. The Industry ensures BC residents have access to a reliable supply of fit-for-purpose, competitively priced transportation fuel products. BC refiners have reduced GHG emissions by 57% since 1990 and will continue to show leadership in this area. Canadian Fuels Perspectives: A revised carbon pricing policy for the Province must balance GHG reductions in the Province with the long-term competitiveness for businesses. This is especially critical for energy intensive trade exposed (EITE) manufacturing and processing sectors like refining, that faces flat to declining demand for refined petroleum products and whose members do not have the scale and cost advantages of many US and offshore competitors. Striking the right balance will be crucial to incenting action while minimizing economic disruption. This includes maintaining a level playing field and ensuring a flexible and gradual approach in the transition to a low carbon BC economy. Whatever policy enhancements BC chooses, the policy development process would benefit from taking into account lessons learned from key jurisdictions in which Canadian Fuels members currently operate. This includes a core set of principles that must underpin BC s policy decisions: GHG policy and complimentary measures must deliver on dual provincial objectives: economic growth and meaningful GHG reductions. Compliance pathways must be viable, readily available, accessible and cost effective. Ensure a level playing field for Industry, between sectors and between competing jurisdictions. Obligated parties should only be accountable for the emissions they control. No duplication of burden. Mitigate trade exposure before it occurs - avoid carbon leakage. Undertake competiveness assessments transparent cost-benefit analysis. Page 2 of 4

3 Canadian Fuels offers the following comments on the four areas outlined in the Discussion Paper: 1) The Way We Live (BC s Goal 1): Communities are thriving and resilient in the face of climate change. We support transparency for energy performance and efficiency targets that enable informed decisions regarding energy costs and the carbon content of energy sources. 2) The Way We Travel (BC s Goal 2): People and Goods move efficiently and reliably, using clean transportation. Canadian Fuels supports the broad intent of Goal 2, but we remain concerned that objective 2.2 Almost all vehicles have no emissions, running on clean energy produced regionally is unrealistic and presumes the wide scale development and adoption of technology and infrastructure that currently does not exist, or is not yet technologically advanced enough to be economic and attractive for end-use purchasers. Canadian Fuels supports the use of market-based mechanisms as tools to achieve reductions. An appropriate price on carbon will allow markets to drive towards solutions, and is a recommended solution over regulations or incentives to increase the use of cleaner vehicles and fuels. 3) The Way We Work (BC s Goal 3): BC s economy remains strong, and jobs continue to be created, while GHG emissions fall. Canadian Fuels supports the broad intent of Goal 3. However, BC s aspirational goals of increasingly aggressive GHG emissions reductions while at the same time seeking economic growth, which could generate significant new GHG emissions, is misaligned. We are further concerned that the burden of GHG reduction targets may fall disproportionally on the transportation sector, which in turn would have profound impacts on the entire BC economy. 4) What We Value (BC s Goal 4): The cost of climate change for society is considered whenever British Columbians make important decisions. Canadian Fuels supports approaches that are transparent, uniform and predictable, thus enabling clear price signals across the BC economy. These approaches must also be cost effective, delivering tangible results that justify costs. We support a single carbon price to ensure a level playing field and do not propose that carbon prices should differ by group or sector to reach emission reduction goals while maintaining a strong economy. A single price should be equally applied broadly to drive the lowest cost solutions. BC must avoid the complexity and double cost burden of both a carbon tax and cap and trade system. Canadian Fuels strongly disagrees with BC s suggested approach under objective 4.1 Carbon prices may differ by group or sector to reach emissions reduction goals while maintaining a strong economy. We believe that costs of climate policy must be sector neutral, to avoid creating winners and losers, and maintain a level and competitive playing field for Industry, both between sectors and neighboring jurisdictions. This will enable BC to achieve its emissions reductions goals at the lowest possible cost. Page 3 of 4

4 Summary: All BC citizens will need to think and act in new ways. A 2013 series of Public Policy Forum roundtables on Transportation GHG emissions reductions highlighted that The consumer is central to transportation GHG reductions. Efforts to reduce carbon emissions from the transportation sector must generate action through consumer choices, and such demands will dictate success or failure in reaching reduction objectives. This reality underpins our recommendation for an economy wide carbon policy approach that is balanced and feasible and that enables robust economic growth. We have a role to play and stand ready to support your efforts in this regard. Our members have global expertise in this arena. Our members have been on a continuous path to improve our facilities and the fuels we produce tracking with the cleanest in the world. We appreciate the opportunity to provide input on the BC Climate Leadership Plan Discussion Paper and look forward to continued collaborative discussion. Sincerely, S. Brian Ahearn Vice President - Western Division Page 4 of 4

5 September 11, 2015 Climate Leadership Plan Discussion Paper Ministry of Environment Climate Action Secretariat P.O Box 9486, Station Provincial Government Victoria B.C. V8W 9W6 Re: Climate Leadership Plan Discussion Paper Climate Action Secretariat, Further to our August 17, 2015 public submission, The Canadian Fuels Association (Canadian Fuels) wishes to submit supplemental information in your review of BC s Climate Change policy. Our industry supports B.C. s goal to reduce GHG emissions, however we believe that carbon should be priced and targets should be set equitably across sectors. Given our member s lines of business, this submission will expand on our previous submission s comments on The Way We Travel section of the discussion paper. In particular, we would like to share our thoughts on policy options available for transportation GHG reductions and how to best reach the goal of moving people and goods efficiently and reliably without harming the competitiveness of B.C. Successfully reducing transportation GHG emissions is a complex challenge that requires comprehensive policy approaches for vehicle fuel efficiency, users, and fuel choice. There is no single solution, but rather progress will require a variety of initiatives, that go beyond a specific focus on fuels and vehicles. Consumer behaviour, infrastructure financing/logistics, public transit and land use planning are all part of the mix. The pivotal role that consumer behaviour plays underpins our support for a transparent, economy wide price on carbon. Vehicle fuel efficiency improvements are already being driven by regulatory action, such as the new Federal CAFE (Corporate Average Fleet Energy Efficiency) standards and by voluntary actions such as Natural Resources Canada s SmartWay program for commercial heavy duty vehicle operators. New federal regulations, effective 2017, will drive a 50% improvement in car and light truck fuel efficiency by 2025 (compared to 2008). In addition, the Federal government intends to develop more stringent standards to reduce fuel consumption from post-2018 model heavy duty vehicles. Government should carefully consider the costs and benefits of different policy choices aimed at increasing clean vehicle and fuel use. Consumer and commercial users may be influenced to make greener-transportation decisions, however, widespread consumer acceptance and adoption of new transport modes is expected to take time. Consumers may choose alternative fueled vehicles, but there are currently barriers to broad acceptance. Investments in public transit and robust consideration of Page 1 of 3

6 transportation in community design can substantially influence consumers transportation mode choices and the distance they travel, measurably reducing vehicle miles travelled. Finally, fuel carbon intensity can be reduced through the use of alternative fuels, such as electricity, LNG or second generation biofuels, which are less carbon intensive than petroleum fuels. Government should carefully consider compliance feasibility with alternative fuel mandates. Wide adoption of alternative vehicles will take technological breakthroughs to improve reliability and cost-effectiveness. BC s Low Carbon Fuel Requirements Regulation (LCFRR) requires obligated parties, fuel suppliers, to substitute gasoline/diesel with alternative lower carbon fuels (such as biofuels, electricity, LNG). This regulation is non-transparent, costly for the consumer and administratively complex for fuel suppliers and the B.C government. Further, biofuel blending is currently the only practical compliance path within the fuel suppliers control and the technical and supply limits of drop-in biofuel blending will not enable sustainable compliance with the 10% carbon intensity reduction by Further, the significant consumer adoption of alternative fuel vehicles, expected by the government at the time the regulations were adopted, has not materialized. As a result, these alternative fuel compliance pathways are not available to the obligated parties. Substantial market penetration of alternative fuel vehicles is essential to achieving the current regulated requirements. This will not occur, nor is it now possible by 2020, to a degree that would support the material credit generation necessary for compliance with the 10% reduction requirement. It is important to note that fuel suppliers have no control or influence on consumers adoption of alternative fuel vehicles. We are concerned that climate policy targets are aspirational in that they lack consideration of cost and the current realities of the transportation sector. There are fundamental constraints to transforming transportation over the described timelines. Aspirational targets with assumptions that technically feasible transportation alternatives are automatically commercially viable put the competitiveness of the entire economy at risk. While we understand BC s desire to maintain its 10% carbon intensity reduction target, we believe that 2025 is a more appropriate date. We acknowledge that BC Energy has recently announced that they will complete a review in 2017 on compliance feasibility. We believe that BC Energy s recent compliance study was well supported by the high quality of technical input received through the stakeholder consultation, and we look forward to the next review, with the hope that it will focus on the need for practical, available compliance pathways. Furthermore, the realities and needs of compliance in BC are not the same as California, given the differences in size of market, climate, logistical infrastructure, and credit market development. Power generation is renewable in BC so it is not an available lever to lower GHG emissions as is common in other jurisdictions, so there is an implied expectation that the transportation sector will be heavily relied upon to meet current or new GHG reduction targets. This concern is compounded by the retention of existing 2020 GHG reduction targets while economic plans indicate a significant increase in emissions from new industry. Even without an increase in new emissions our industry would not be able to meet 2020 LCFRR targets as noted above without significantly compromising economic competitiveness and imposing high costs on the consumer. In order to maintain a business climate that supports capital investment, compliance pathways need to be visible and achievable. Regulations need to consider cost to the economy. The current regulatory environment is constraining investment in BC for the resource sector, and BC s economy could benefit from contributions from the resource sector for the foreseeable future. Page 2 of 3

7 BC deserves credit for having one of the lowest energy costs and GHG emissions per capita in Canada. Additional cost-effective progress in the transportation sector is achievable through measures such as continued fuel efficiency through federal regulation that will require vehicle technology innovation, and through programs for consumer/commercial users. Progress towards reducing the GHG footprint of transportation is being achieved. Further progress can best be achieved when government and industry work together. Sincerely, S. Brian Ahearn Vice President - Western Division Page 3 of 3