New report shows Canadian biofuel consumption surges after implementation of Clean Fuel Regulations

Source: Advanced Biofuels Canada

Advanced Biofuels Canada (ABFC) announced Nov. 25 the release of the ninth annual Navius Research Biofuels in Canada report, the annual quantitative report on Canada’s renewable and low-carbon fuel markets.

The report’s highlights include:

• Biofuel consumption surged in 2023, with renewable diesel (RD) more than doubling to 1.2 billion liters (317 million gallons) per year, biodiesel consumption up 14 percent (530 million liters/140 million gallons per year), and ethanol up 13 percent (4 billion liters/1.06 billion gallons per year).

  
  

• Biofuel content in gasoline was 9.44 percent, and 6.23 percent in diesel (up 10 percent and 68 percent from 2022, respectively).

  
  

• In 2023, biofuels were responsible for 86 percent of Canada’s 2023 greenhouse-gas emission reductions from all clean transportation fuel use, which totaled 11.4 million metric tons of climate-change gases.

  
  

• In 2023, ethanol had 55 percent lower carbon emission than gasoline, and biobased diesel had 87 percent lower emissions than diesel.

  
  

• Electricity consumption by light-duty vehicles grew by 56 percent in 2023, on top of 41 percent growth in 2022.

  
  

• In 2023, biofuel blending lowered wholesale gasoline costs by 5.5 cents per liter (20.8 cents per gallon) and raised wholesale diesel costs by 5.1 cents per liter (19.3 cents per gallon).

  
  

• Biofuel blended in gasoline (ethanol) reduced gasoline wholesale costs by almost CAD$1 billion (USD$710.8 million) in 2023. Since 2010, ethanol has reduced wholesale gasoline costs by CAD$10.4 billion (USD$7.4 billion).

  
  

• Biofuels blended with diesel fuel (renewable diesel and biodiesel) increased diesel wholesale costs by CAD$1.5 billion (USD$1.07 billion) in 2023. Since 2010, biofuel in diesel has increased wholesale diesel costs by CAD$6.9 billion (USD$4.9 billion)—greater use of lower-cost biodiesel would have mitigated this premium.

  
  

• Since 2010, biofuels use in Canada has reduced wholesale fuel costs by CAD$3.4 billion (USD$2.4 billion). When biofuels are distributed at the retail level, however, over-taxation results in higher costs relative to gasoline and diesel.

  
  

• Taxing biofuel based on volume instead of energy content has the effect of overtaxing biofuels. Were biofuels taxed on energy delivered, biofuels would have saved consumers a total of CAD$2.5 billion (USD$1.78 billion), rather than costing them CAD$2.2 billion (USD$1.56 billion) since 2010.

  
  

• Canadians spent CAD$115.1 billion (USD$81.8 billion) on gasoline and diesel fuels in 2023. Biofuels blending of 8.1 percent in gasoline and diesel (weighted average volumetric basis) in 2023 added 1 percent to overall fuel-purchase costs. Had biofuels been taxed based on energy, costs would have increased 0.5 percent.

“After more than a decade of steady, modest growth in biofuels use, 2023 saw a 25 percent surge in demand for clean fuels,” said ABFC President Ian Thomson. “The federal Clean Fuel Regulations were a big driver, aided by a 28 percent increase in biofuels use under British Columbia’s Low Carbon Fuel Standard and a 52 percent increase in Québec’s use due to the implementation of its new low-carbon fuel regulation in 2023. In these regulations, biofuels are the most cost-effective way to reduce greenhouse-gas emissions, reducing gasoline costs at the pump and modestly increasing a truck’s annual fuel bill.”

Thomson noted that the greatest growth in biofuel use occurred in diesel-class vehicles.

“Notably, there was 21 percent reduction in the carbon intensity of these biofuels, highlighting the clean-fuel sector’s ability to apply innovations along the whole production value chain,” he said. “Overall, the 2023 outcomes demonstrate how performance-based fuel regulations are effectively providing millions of Canadians with affordable, low-emission transportation. Fuel regulations are very efficient and flexible, and they create new jobs and value-add manufacturing across the supply chain—they are proving their mettle in the battle to find climate-action solutions that are affordable and good for the Canadian economy.”

Thomson said that with the CFR now in effect, the report further clarifies the differences between a carbon tax and regulatory-compliance credits.

“It highlights that ‘the fuel price impact of the CFR is over 10 times smaller than that of a carbon tax with an equivalent dollar-per-ton CO2 price,’” he pointed out. “This aligns with findings from the Canada West Foundation’s December 2020 analysis. Biofuels are a highly cost-effective—and in some cases, even cost-negative—tool for reducing greenhouse-gas emissions. For example, ethanol delivers a net benefit (savings) of minus $116 per ton, meaning it reduces both emissions and fuel costs. Most Canadians already use ethanol-blended fuels seamlessly in their daily lives, saving money and cutting climate emissions with every fill-up.”

The report also highlights the significance of over-taxation of biofuels in Canada.

Fuel taxes are applied on a per-liter basis, disproportionately increasing the tax burden on lower-energy fuels, such as ethanol and biodiesel.

This volumetric taxation—spanning excise, motor fuel and carbon taxes—penalizes consumers for using low-carbon biofuels.

In 2023 alone, governments over-taxed Canadian consumers by CAD$560 million (USD$398 million) due to volumetric rather than energy-based taxation.

Since 2010, federal and provincial volume-based over-taxation of biofuels has added CAD$4.7 billion (USD$3.34 billion) to wholesale fuel costs, contributing to a net CAD$2.2 billion (USD$1.56 billion) cost for biofuel use over this period.

“Biofuels are already saving most Canadians money at the pump, but these savings could be even greater with fair taxation,” Thomson said. “Traditional transportation fuels have been taxed on a per-liter (volume) basis for decades but, with the growing use of biofuels and other low-carbon alternatives, this approach needs to evolve. The BIC 2024 report concluded that if taxes were charged on a per-unit-of-energy basis, biofuel consumption since 2010 would have saved consumers CAD$2.5 billion (USD$1.78 billion).”

Thomson added that advanced biofuels are fully compatible with existing vehicles and fuel infrastructure, and that even with ambitious efforts to electrify light-duty vehicles, millions of internal-combustion engines will still be on Canadian roads by 2050.

“Low carbon, nonfossil, sustainable liquid fuels—whether biobased or derived from renewable synthetic platforms—are essential to cutting emissions in light-duty vehicles and particularly in trucking, aviation, marine, rail and other hard-to-decarbonize sectors,” he said. “Producing these fuels domestically will maximize the use of Canada’s energy infrastructure, while fostering a robust and innovative clean-fuel economy. As Canada continues its transition to a low-carbon economy, advanced biofuels and fair policies are pivotal to achieving our climate goals while supporting economic growth. By adopting performance-based regulations, embracing innovation, offering fair taxation and investing in sustainable fuel solutions, we can deliver meaningful savings to Canadians, reduce emissions across all sectors, and strengthen Canada’s position as a global leader in clean transportation fuels.”

The data in BIC reports are also visualized on ABFC’s Canadian Transportation Fuels Dashboard and Clean Fuels Report Card.