Saskatchewan and Canadian biofuel policies are not working, said a report released last week by the Canadian Centre for Policy Alternatives.
The report written by Ted Boyle, former executive director of communications for the Crown Investments Corp., said the policies are failing as rural economic development and environmental protection vehicles.
“They were based on faulty assumptions and derailed by changes in grain prices and markets that were apparently unforeseen when these policies were developed,” said the report, entitled Biofuels: Bonanza or Boondoggle for Saskatchewan?
The report cites limited farmer investment in smaller operations as another example of failure. It also says the environmental benefits of biofuels are “illusory.”
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Saskatchewan’s enterprise and innovation minister, Lyle Stewart, said it’s true that grain prices are much higher than when the previous NDP government implemented its biofuel mandate. However, he said prices could moderate over the next year.
Stewart said the positive environmental benefits are proven.
“We still believe in the industry,” he said.
Saskatchewan phased in its biofuel mandate and since January 2007 has required an average 7.5 percent ethanol content in gasoline. That amounts to about 135 million litres of ethanol in the annual provincial market.
By law, 30 percent of that is to be produced at smaller facilities defined as those that produce 25 million litres or less.
The province will soon have five plants in operation, but only two are considered small.
Stewart said the government may have to look at that requirement.
“I guess if it absolutely isn’t doable then we’ll have to make other arrangements,” he said. “We can’t be in violation of our own legislation.”
The minister said there may be an advantage to building smaller facilities given the difficulty attracting investment and high construction costs.
“We still hope we can meet the targets,” he said.
In late February, Stewart announced less stringent requirements to participate in the $80 million Saskatchewan Biofuels Investment Opportunity program, which encourages investment in and construction of more plants. The program provides repayable loans to assist with building or expansion of facilities.
Boyle’s report said the changes suggest the program has not been popular.
“With grain prices high and the livestock industry in the doldrums, farmers are understandably focused on their core business of growing food,” the report said.
The federal government has announced a mandate of five percent ethanol in gasoline and two percent biodiesel by 2010. It offers several programs to encourage biofuel development, including a $200 million ecoAgriculture Biofuels Capital Initiative program similar to Saskbio, and a 10-cent-per-litre subsidy to ethanol producers.
The province’s ethanol grant program pays ethanol producers 15 cents for every litre produced and sold in Saskatchewan.
Boyle’s report said ethanol plants don’t employ many people and that fewer than 90 jobs have been created in the province at a cost of $20 million in annual subsidy for production, plus the capital grants.
Stewart said there has been no discussion in Saskatchewan about changing the production rebate.
