The renewable fuel industry says a stronger domestic market would ease challenges caused by export volatility
China’s canola export ban helps make the case for expanding consumption of domestically produced biodiesel and there are plenty of opportunities to do so, says an advocate of the alternative fuel.
“The current situation underlines, unfortunately in a rather acute way, the benefits of a domestic biofuel industry that isn’t at risk from trade action,” said Ian Thomson, president of Advanced Biofuels Canada.
He said large production facilities, like the Archer Daniels Midland plant in Lloydminster, Alta., reduce Canada’s reliance on export markets and set a floor price for canola in the surrounding area.
“Of course they are always going to have their seed and oil demand sensitive to global prices but demand won’t be shut off based on a foreign government action,” said Thomson.
The China situation highlights the exposure of having a single foreign market purchasing such a large portion of Canada’s canola production.
Canada’s biodiesel sector buys a fraction of what China does but it is a steady and reliable customer.
Consumption of canola-based biodiesel resulting from provincial and federal mandates was 211 million litres in 2017. That would require 443,000 tonnes of seed.
By comparison, China purchased 4.38 million tonnes of seed that year. However, now it is buying nothing.
“If you can get that domestic demand that isn’t so subject to the political risk that an export market is, it’s good policy,” he said.
And there are a number of opportunities to expand biodiesel demand in Canada.
First and foremost is the proposed Clean Fuel Standard. Final regulations for the liquid fuel stream of the standard are scheduled to be published in 2020.
“That could be very significant,” said Thomson.
If the standard follows the recommendations of clean fuel advocates, the demand for biodiesel and renewable hydrocarbon diesel could be as large as five billion litres by 2030.
Advanced Biofuels Canada estimates 1.5 billion litres of that could be canola-based fuels, requiring 3.17 million tonnes of seed annually.
Of course, the devil is in the details. It all depends on what is written into Environment Canada’s final regulations document.
There could also be some action with regards to provincial biodiesel mandates.
Ontario is contemplating increasing the renewable content of gasoline to 15 percent from 10 percent but there is no proposal to boost the four percent biodiesel mandate, much to the chagrin of proponents of the fuel.
“There’s a pretty big gap between 15 percent in the gasoline pool and four percent in diesel, especially when the diesel pool is arguably where you really need the help,” said Thomson.
Manitoba is holding consultations on a climate change proposal that includes increasing the biodiesel mandate to five percent from two percent.
Alberta’s two percent mandate expires at the end of 2019. The province has conducted a review that showed there were no technical reasons to prevent increasing the mandate to five percent.
Saskatchewan isn’t doing anything on the biodiesel file but given the situation with China, Thomson thinks it should be contemplating increasing the mandate to five percent from two percent.
Another potential biodiesel demand generator is the International Maritime Organization’s new rules to limit sulfur in ship fuel starting Jan. 1, 2020.
That will drive up demand for ultra-low sulfur diesel.
“Biodiesel and renewable diesel fuels can both backfill for the extra demand,” he said.
Lastly, renewable aviation fuels could take off because the aviation sector has committed to stable emissions starting in 2020.
Bio-jet fuel would be the low hanging fruit for the industry to meet its objectives and canola oil is one of the best ingredients for making the fuel.
“This is not future technology. It’s very much in place today,” said Thomson.
He could foresee construction of an aviation biofuel plant in Western Canada to meet the needs of Air Canada and West Jet, but that would require new government policies and programs, which can be a long time in the making.