Advanced Biofuels Canada releases policy brief, recommendations to grow Canada’s biofuel sector

Source: Advanced Biofuels Canada

Advanced Biofuels Canada released in early November its fiscal recommendations to attract CAD$10 billion to CAD$15 billion (USD$7.2 billion to USD$10.9 billion) of new clean-fuel capital investments to build new Canadian clean-fuel production capacity and infrastructure by 2030. The organization’s “Clean Fuels Strategy” report profiles fiscal measures that will assure that Canadian-based clean-fuel production remains competitive in the global market and, specifically, position the sector to compete against U.S.-based producers subsidized by the measures in the U.S. Inflation Reduction Act. “Canada needs a complete climate-action strategy to ensure that the conventional transportation has access to affordable, made-in-Canada clean fuels,” said Ian Thomson, the president of Advanced Biofuels Canada. “Our recommendations complement policies to transition to electric and clean-hydrogen mobility, with fiscal measures directed at non-ZEV transport in hard-to-decarbonize sectors such as long-haul trucking, aviation, marine and rail. These sectors are rapidly adopting low carbon-intensity fuels (LCIF), such as renewable diesel and sustainable aviation fuel (SAF). Total Canadian LCIF capacity is sufficient to meet about 75 percent of current market demand but, without new capital investment, this will shrink to less than 50 percent by 2030 and increase our reliance on imported clean fuels.” Thomson noted, “Canada has an abundant supply of sustainable clean-fuel feedstocks, such as canola and soybean oil, animal fats, crop and forestry biomass residues and wastes to support domestic production-capacity expansion to meet 2030 demand for LCIF. New clean-fuel refining capacity is under construction or approaching final investment decisions. Production in Canada is poised to double or triple in the next five years.” The analysis primarily focuses on expanding the production and use of renewable diesel and SAF. However, the fiscal measures will support the full range of clean-fuel feedstocks, technologies and clean-fuel types, including renewable methanol, renewable gasoline and biobased low-carbon hydrogen.

Turner Mason & Co. provided engineering services to support the detailed modeling of renewable diesel and SAF production facilities to analyze the feasibility of Canadian capital investments across a range of fiscal measures. Navius Research conducted an independent analysis of the economic and greenhouse-gas (GHG) impacts related to Adanced Biofuels Canada’s estimated LCIF capacity build-out and production estimates that result from the proposed clean-fuel fiscal policies.

The results are summarized in the attached table.

Clean-fuel growth impacts by 2030 (Source: Advanced Biofuels Canada)

The Navius evaluation estimated the cost of expanding eligibility to the federal Clean Technology Manufacturing Investment Tax Credit to clean-fuel investments would be CAD$1.55 billion to CAD$2.88 billion (USD$1.12 billion to USD$2.08 billion) over 2024-2030.

Further, implementing measures that would directly address the U.S. IRA subsidies that will be paid to U.S.-based biofuel producers would require an estimated CAD$4.77 billion to CAD$6.46 billion (USD$3.45 billion to USD$4.67 billion) over 2025-2030.

Thomson reflected on the Navius modelling results, saying, “Essentially, with CAD$8 billion to CAD$10 billion (USD$5.8 billion to USD$7.2 billion) in focused fiscal policies, Canada’s clean-fuel sector will more than double current capacity, add 20,000 clean-energy jobs, and return CAD$5 billion (USD$3.6 billion) every year in economic activity. These are smart investments with very strong payback—they transition our energy, agriculture, forestry and clean-technology sectors to be leaders in the low-carbon economy of tomorrow. And, in terms of climate action, these policies ensure that Canada will meet its 2030 and 2050 commitments with made-in-Canada clean fuels. Canada needs to catch up—the U.S., EU, and Asian markets are actively building out new clean-fuel capacity, it’s time to secure our place in the clean-fuel race.” In addition to new policies for clean-fuel developers and operators, the report also proposes measures that would directly reduce the cost of clean fuels for Canadian consumers.

Thomson continued, “We have long advocated for the removal of the carbon tax on clean fuels. Navius Research’s new Biofuels in Canada 2023 report stated that, ‘…[carbon taxes on low-carbon fuels alone] would have consumers pay an additional CAD$1.5 billion (USD$1.1 billion) per year in 2030.’ We are also calling on federal and provincial governments to reform excise taxation of transportation fuels—the current system is not keeping up with the pace of change in transportation. Eliminating the carbon tax and fairly applying transport-fuel taxes on all LCIF products would significantly reduce fuel costs for all Canadians.” The Advanced Biofuels Canada Clean Fuels Strategy report was developed to support the biofuels consultation mandated in the federal budget in March 2023.

Thomson noted, “Natural Resources Canada and Finance Canada led an effective and focused review of the biofuels sector over the spring and summer. The consultation affirmed the private-sector capital-investment potential and identified competitive gaps, primarily between Canadian projects and U.S.-based competitors. Discussions this fall moved to evaluate alternatives aligned with those identified in our report. Overall, we’re encouraged by the progress. The Canadian clean-fuels sector is looking to the fall economic statement and budget 2024 to define and implement new measures that support growth—there is no room for delay.”

The Advanced Biofuels Canada Clean Fuels Strategy report and companion reports are available here.