Clean Fuel Standard promises canola boom

Canada’s proposed Clean Fuel Standard has the potential to create a new market for canola rivaling the size of one of Canada’s top export markets, says the Canola Council of Canada.

The federal government released its proposed rules for the standard in December.

Government modelling shows that under the proposed standard biofuel content in diesel could increase to 11 percent by 2030, up from the current two percent national mandate.

“At this level, the CFS could create a market the size of Japan for Canadian canola growers,” the council said in a news release.

“In doing so, it would help diversify markets for the industry and reduce canola’s exposure and reliance on unpredictable markets.”

Japan alternates with China as Canada’s top export market for canola. It purchased 2.02 million tonnes of the crop through the first 10 months of 2020, slightly behind China’s 2.07 million tonnes.

The council is also pleased with the CFS feedstock sustainability requirements announced by Ottawa. There will be no further compliance, audits or certification of feedstocks in the proposed standard.

That is because Canadian farmers have not been increasing net land use for agriculture. That is enough to satisfy the government’s sustainability criteria.

“We’re pleased to see the proposed CFS allows canola to be used for biofuel without complex and costly on-farm regulatory burden, in line with U.S. biofuel regulations,” council president Jim Everson said in the release.

Ian Thomson, president of Advanced Biofuels Canada, agreed that the CFS could be a big boon for the canola industry depending on how obligated parties decide to comply with the standard.

“I would say it’s pretty bullish on canola use from 2025 onward,” he said.

Advanced Biofuels Canada commissioned a study by World Agricultural Economic and Environmental Services (WAEES) to model the impact of the CFS on Canadian biofuel production and consumption as well as feedstock use.

The study is based on the preliminary CFS details released in June 2020, so there might be some subtle changes in the numbers but the general direction and magnitude still hold true.

WAEES employed four different scenarios. One of the scenarios involves the heavy use of biofuels to meet the CFS. Thomson thinks that is a likely scenario because it meshes well with the business models of Canada’s refiners.

Under that scenario there will be tremendous growth in biodiesel and renewable diesel (HDRD) consumption and consequently in the demand for the feedstocks used to make those fuels.

WAEES is forecasting that canola oil use in biodiesel will expand to 583,000 tonnes by 2030, up from 226,000 tonnes in 2022, which is the year the CFS is scheduled to implemented.

Canola oil use in renewable diesel is expected to grow to 1.31 million tonnes from nothing at all over the same time frame.

The demand for canola oil also grows substantially under the other three scenarios that WAEES considered, but not to the same extent.

The real growth is expected to occur in the 2026 through 2030 period. The first few years there will be very little increase because Environment Canada agreed to a slower phase-in period in exchange for even more total greenhouse gas reductions by the end of 2030.

“Through the second half of the decade it has the potential to add substantially to canola demand domestically,” said Thomson.

In its December update of the CFS, Ottawa decided to drop the solid and gaseous fuel component of the standard and focus solely on the liquid fuel component.

“I think it has taken a lot of the heat off of the CFS,” said Thomson.

There was plenty of opposition to the standard from fertilizer and chemical companies that use natural gas as a feedstock in their manufacturing processes.

Implementation of the standard was also pushed back to December 2022, which is more than a year later than what was originally proposed.

Thomson said there have been enough concessions from the clean fuel sector and it is time for the rubber to hit the road.

“It has been nothing but going backwards since the first details were announced,” he said.

“We have given enough and it’s time for Environment Canada to hold the line and not delay it any further.”

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