The industry calls the Ecofiscal Commission’s report on the cost of biofuel support ‘skewed, flawed and unacceptable’
Canada’s biofuel industry is outraged by a report calling for an end to government subsidies and mandates for the sector.
Canada’s Ecofiscal Commission, a group of independent economists promoting fiscal policy reform, said the country is on the verge of a significant shift in climate policy and it is time to examine older policies to see if they make sense.
“Our research finds that biofuel policies don’t pass this test and that it’s time for governments to correct course and shift to more cost effective policies,” commission chair Chris Ragan said in a news release.
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The commission wants the provincial and federal governments to focus on carbon pricing. An estimated 60 percent of Canadian greenhouse gas emissions will be covered by provincial carbon pricing regimes by next year.
It claims biofuel policies have had limited success at high costs. Average annual emissions reductions between 2010 and 2015 were three million tonnes, or .4 percent of Canada’s total emissions.
The cost of achieving those reductions was $180 to $185 per tonne for ethanol and $128 to $165 per tonne for biodiesel, which is more than five times the current carbon tax in British Columbia.
It is a combination of consumer and government costs.
The commission says consumers have paid more for fuel be-cause the wholesale prices of ethanol and biodiesel have traditionally been higher than gas and diesel, adjusted for fuel efficiency. Total consumer costs were more than $500 million over the 2012-15 period.
Total government costs over the same period were $607 million in the form of production subsidies.
Renewable Industries Canada said the Ecofiscal Commission report is “skewed, flawed and unacceptable.”
It said the report ignores independent cost benefit analyses, omits current government data and makes recommendations based on erroneous assumptions.
“There is no way that we can really accept any of their recommendations as reasonable,” said RICanada president Andrea Kent.
She said one of the sponsors of the commission is Suncor Energy, a major oil company, and that the report was peer reviewed by a climate change denier.
Kent said the cost-benefit analysis ignored the fact that biofuel boosts the octane level of fuels, which adds value to the blend.
As well, she said ethanol is traditionally about 20 cents a litre cheaper than gasoline, so consumers are paying less for their fuel.
RICanada said the biofuel sector has contributed more than $5 billion and 14,000 jobs to the Canadian economy since the mandates were implemented in 2007.
The commission said first generation biofuel companies have received more than two decades of public support, and it is time to wean them off.
Kent said she is perplexed by that recommendation because subsidies ran out for most of Canada’s 26 biofuel facilities last year.
“This struck me as odd because we have not been advocating for the continuation of these subsidies,” she said.
The recommendation she finds far more disturbing is the one calling for an end to ethanol and biodiesel mandates.
The commission said the mandates have inhibited the development of other technologies.
“Instead of providing equal incentives to any and all emerging technologies, existing renewable fuel mandates only benefit the biofuels sector, a subset of available and potential technologies,” the report said.
Kent said now is not the time to get rid of the mandates, which have led to the largest guaranteed source of emissions reductions for Canada’s transportation sector.
RICanada is asking the federal government to double the ethanol mandate to 10 percent by 2020.
Oil companies are already voluntarily exceeding the five percent mandate, especially during periods of high gasoline prices because ethanol is the less expensive fuel.
The oil companies are blending at a rate of 7.5 to eight percent.
“We don’t think (10 percent) is an unrealistic target,” said Kent.
RICanada also wants Ottawa to boost the biodiesel mandate to five percent from two percent by 2020.
Much of Canada’s biodiesel production is exported to the United States, where it receives a generous subsidy and then is re-exported back to Canada for blending.
RICanada wants to stop that practice by applying minimum greenhouse gas emissions reduction criteria to the proposed five percent mandate.
