Tapping U.S. tax credits | While domestic fuel heads south, Canada imported 520 million litres to meet the biodiesel mandate
Hardly any of Canada’s biodiesel mandate is being filled by domestically produced product.
“Last year we exported 100 percent of our production and then imported the equivalent to meet our mandate,” said Scott Thurlow, president of the Canadian Renewable Fuels Association (CRFA).
Canada’s two percent mandate, which requires diesel to contain two percent fuel from renewable sources, requires about 520 million litres of annual renewable diesel consumption. The vast majority of that is being filled by imported biodiesel from the United States.
Meanwhile, the 300 million litres produced in Canada last year headed south.
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“It was exported to the United States to take advantage of very rich tax credits,” said Thurlow.
The U.S. has a $1 per gallon blender’s tax credit that expired on Dec. 31. U.S. Congress is contemplating extending the tax credit, which would be retroactive to Jan. 1, 2014, and last through Dec. 31, 2015.
John Bennett, executive director of Sierra Club Canada, said transporting Canadian biodiesel south and importing U.S. biodiesel to fill the void reduces the fuel’s environmental benefits.
“This kind of thing brings the whole concept of trying to introduce renewable fuel into the mix into disrepute,” he said. “Environmentalists believe that we should do things as locally as possible because it reduces the emissions and pollution associated with transporting materials.”
Bennett believes there is a simple solution.
“This is clearly an argument why Canada should have at least as good incentive programs for the production of biofuels as the United States so that this anomaly wouldn’t take place,” he said.
Don O’Connor, president of S&T Squared Consultants and developer of the GHGenius calculator that the federal government uses to determine the life cycle assessment of transportation fuels, said the situation isn’t as stark as portrayed by Thurlow.
Some Canadian biodiesel stays in the country to meet the federal mandate, but the vast majority is exported to the U.S. to collect the tax credit.
Canadian biofuel is also exported to the U.S. because it is a year-round market for biodiesel while in Canada most of the blending takes place between April and October.
O’Connor said the GHGenius calculator was recently updated to more accurately reflect the emissions associated with growing canola. The updated calculator shows Alberta biodiesel reduces greenhouse gas emissions by 90.5 percent compared to regular diesel.
However, that is for canola bio-diesel that is produced and used in the province.
The number would be lower if the biofuel is shipped out-of-country and replaced with imported U.S. biodiesel, although there wouldn’t be a huge reduction be-cause fuel transportation isn’t a big factor in calculating greenhouse gas emissions.
“Rail is a pretty GHG efficient means of transporting products,” said O’Connor.
