On Dec. 15, Canada will finally implement a five percent renewable fuel mandate coast to coast. The recently announced federal mandate makes good on a four-year old promise by the Conservative government.
It is the next piece of the policy framework that includes other federal and provincial incentives and requirements that are helping to build a small but important renewable fuel industry that benefits Canada in several ways, including reducing greenhouse gases, creating jobs in rural areas and providing a local market for farmers.
The federal incentives include the four-year, $200 million ecoAgriculture Biofuels Capital Initiative that provides up to $25 million in repayable contributions to farmer-led ethanol plants and the nine-year $1.5 billion ecoEnergy for Biofuels initiative providing biofuel producers with up to 10 cents per litre for three years.
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There is also $500 million to help encourage development of large scale next generation biofuel plants using nonfood feedstock and $10 million to fund research to assess the feasibility of biodiesel in Canadian conditions.
Unfortunately, Canada’s relatively modest biofuel policy tends to be oversold regarding its benefits to the environment and to farmers, while at the same time unfairly criticized for contributing to starvation among the world’s poor.
While positive for the environment and the farm economy, biofuel is not their salvation, nor is it the cause of hardship among the poor.
A federal review of the five percent renewable fuel mandate says it will reduce greenhouse gas emissions by the equivalent of taking 225,000 vehicles off the road. That sounds like a large number, until you consider that there are 26 million registered vehicles in the country.
The same report says the mandate is expected to have “minimal impacts on the primary agriculture sector and no measurable downstream impacts.”
The reason is that Canadian crop producers are mainly price takers in the world market. The small amount of grain diverted to Canadian biofuel production does not influence world prices.
In 2008 in Canada, 571,000 tonnes of wheat went into industrial use including ethanol production. That was less than two percent of the Canadian wheat crop. Even with more grain going into ethanol to meet the new federal mandate, it will likely still use less than five percent of the crop. Livestock feed prices should not rise significantly because of Canadian ethanol production, according to the federal review.
An industry-funded study of the 28 biofuel plants operating or planned in 2010 showed that they would create more than 14,000 direct and indirect jobs during construction and the net economic activity generated from the construction was close to $3 billion.
Annually, their operations generate 1,038 direct and indirect jobs and an annual net economic benefit of $1.47 billion. A significant portion of that money goes to municipal, provincial and federal governments in taxes, in a sense paying back the original taxpayer investment.
A large portion of these jobs and economic activity are generated in smaller towns close to where the plants’ agricultural feedstock is created. Such communities normally have limited options for attracting jobs and investment.
While the biofuel industry does not drive up the price of grains nationally, the plants provide a welcome local market for nearby farmers who benefit from lower transportation costs.
The incentives also benefit Canada by creating the infrastructure for future biofuel industry growth. The next generation of biofuel coming from non-food sources such as cellulose will have much greater GHG reductions and the system will be in place to rapidly put them into vehicles and reap the environmental benefits.
Bruce Dyck, Terry Fries, Barb Glen and D’Arce McMillan collaborate in the writing of Western Producer editorials.
