Not the time for costly Clean Fuel Standard
The Atlantica Centre for Energy has issued letters to the premiers of the Atlantic Canadian provinces and to the federal government warning that as the region struggles with the impacts of the pandemic, it is not the right time to impose the Clean Fuel Standard.
The federal government is expected to reveal details of the fuel standard in the coming weeks, but it’s already known that the regulatory regime will require all supplies of fossil fuel to reduce carbon content. Significant compliance costs will be incremental to existing federal and provincial regulatory streams and are estimated to be 10 to 15 times higher in terms of direct consumer energy costs.
The extra charges to consumers will be costly, as home-heating bills and the price at the pumps rise significantly. Businesses are potentially looking at double-digit percentage increases in energy costs.
“It is our collective view that during the current COVID-19 pandemic there are extremely limited resources available for investment or implementation of the proposed Clean Fuel Standard,” states the letters to the premiers and to Jonathan Wilkinson, Minister of Environment and Climate Change, signed by Atlantica Board Chair Stephen MacMackin and President Colleen d'Entremont. “It simply is not the time to introduce this program.”
Very little information exists on direct impacts the Clean Fuel Standard will have in Atlantic Canada, a serious concern given the region's high level of dependency on refined petroleum products, propane and natural gas that are used for home heating, transportation, electricity production and commercial / industrial purposes.
The Atlantica Centre for Energy is urging the governments to undertake a detailed cost/benefit analysis looking at the impact the fuel standard will have on Atlantic Canada. It also urges that, upon completion of the analysis, there needs to be a “comprehensive Clean Fuel Standard stakeholder education, awareness and engagement process.”
Finally, the centre recommends a phased implementation tailored to the region and, if compliance pathways are not economically viable, the region should be exempted from the Clean Fuel Standard.
“CFS cost recovery is essential in regulated markets. If costs are not recoverable, it could have a critical impact on security of supply for the entire region,” the Atlantica letter states.
The CFS has been in the works since the Liberals came to power in Ottawa but the crucial details in the draft regulations were delayed by COVID and are now expected to be published in the Canada Gazette in a matter of weeks.
While the federal government says the fuel standard is complementary to the carbon tax, it is an addition to existing carbon pricing. It is a second cost layered on the same emissions, over which many companies that use fossil fuels in their production processes have no control.
Unlike the carbon tax, the CFS offers no exemptions for large emitters in trade-exposed industries. That’s because the government assumes regulated entities will simply pass on the costs downstream to producers and consumers.
The fuel standard is part of the federal government’s plan to reach net zero emissions by 2050 and has attracted media attention, including a recent front-page commentary in the National Post.