Canada’s main biofuel lobby group has proposed an extensive series of tax incentives, regulatory changes and government supports that it says could help create a biofuel industry.
The Canadian Renewable Fuels Association says when Ottawa produces a promised biofuel strategy this autumn, it should drop the existing 10 cents per litre excise tax exemption at the retail level and replace it with a 10 cent per litre income tax credit for ethanol producers and 30 cents per litre for biodiesel producers.
It said Ottawa also should offer a production incentive of 10 cents per litre for the first year of an ethanol plant’s production and 30 cents for biodiesel plants.
Read Also
Canola oil transloading facility opens
DP World just opened its new canola oil transload facility at the Port of Vancouver. It can ship one million tonnes of the commodity per year.
For smaller plants producing less than 150 million litres, an additional three cents per litre incentive should be offered on the first 60 million litres produced.
“These two measures would address the U.S. small producer income tax credit and the learning experience issues,” said the report.
Many of the association’s recommendations are aimed at matching American incentives. It said the Canadian policy should be based on the idea that “federal and provincial government regulations and tax treatment (should) be competitive with those offered in the United States and elsewhere.”
It recommends government matching grants up to $75,000 for primary producers investing in a plant, to a maximum government investment of $20 million in an ethanol plant and $10 million in a biodiesel project. It also calls on governments to give the industry a boost by adopting their transportation fleets to biodiesel.
To support both ethanol and biodiesel, the association said the five percent mandate for biofuel use the federal government has promised by 2010 should specify that each branch of the industry should have at least a two percent mandate.
The association said the federal government should end the Canadian Grain Commission requirement that ethanol plants must be designated licensed process elevators before they can buy grain from producers and should end Canadian Wheat Board involvement in export of dried distillers grains.
And it predicted that implementation of the government promise will create demand for three billion litres or more of biofuel, production of which will create a market for at least 240 million bushels of farm crops and create 10,000 direct and indirect ongoing jobs in addition to 14,000 jobs to be created during the plant building phase.
Kory Teneycke, executive director of the CRFA, said its strategy “is designed to act as a guide to policymakers” as they figure out how to implement the Conservative election promise of a five percent biofuel requirement.
Reaction to the proposed strategy from other industry players interested in biofuel was generally positive.
Canadian Federation of Agriculture leaders, gathered in St. John’s, N.L., for the semi-annual meeting, called the proposal a significant step forward.
President Bob Friesen said he particularly liked the proposal for government matching investment when farmers put money into a plant.
However, CFA also is calling for subsidies to farmers growing grains and oilseeds that will be biofuel feedstocks because American competitor plants can take advantage of cheaper subsidized grain.
“Our policies have to be competitive with what the Americans have access to,” he said.
Friesen also said that Canada has to move more quickly in developing the biofuel industry. The U.S. is far ahead and industry leaders say agriculture-based biofuel production will be replaced in years ahead with new technologies and feedstocks.
“I have this image of Canada embracing ethanol just when the next stage is happening,” he said. “So we’ll have a lot of ethanol plants 51 percent producer owned and they’ll lose their money.”
Much of the proposal is positive, said Lynne Markell, interim director of government affairs and public policy for the Canadian Co-operative Association. However, she said it does not put enough emphasis on the potential of the co-op model as a way to build required production capacity.
She noted that a proposal to change the Income Tax Act to allow companies to issue flow-through shares as a way to help raise capital is not accompanied by incentives for co-ops.
The CCA proposes an investment tax credit for investors who buy shares in a co-op biofuel plant.
“We also are recommending a loan guarantee program to help secure financing,” she said.
And federal support should be biased toward plants that are at least 51 percent owned by producers.
