Q&A on the CFS with Fairness Alberta’s Executive Director Dr. Bill Bewick.
By Caroline Fyvie
As Canada’s Federal Government, and many provincial governments alike, implement new legislation to reduce greenhouse gas emissions, the Clean Fuel Standard (CFS) is another program aimed at making the country a greener place. The Clean Fuel Standard was originally proposed over five years ago, and has gone largely unnoticed until recently, as many Canadians have begun sharing their concerns about the CFS, and its potential unintended consequences.
The Federal Government believes the CFS will, “help drive innovation and create job opportunities across multiple sectors, including clean technology, agriculture and low-carbon energy sectors, such as biofuels and hydrogen.” However, many of the plan’s observers, such as the Canadian Energy Research Institute (CERI), calculates the CFS will also cost families an extra $1,400 per year and will result in 30,000 job losses nationally, risking a further $22-billion of capital leaving the country to avoid investment loss.
The goal of the CFS is to reduce pollution by making fuel cleaner over time. It will require liquid fuel suppliers (gasoline, diesel etc.) to gradually reduce the carbon intensity of the fuels they produce and sell in Canada. How the government will achieve this is by making regulated parties (mainly refineries) create or buy credits to come into compliance with performance standards. This, however, comes at a cost to consumers; the Canadian Chamber of Commerce estimates a 30% increase in fuel costs to consumers.
Originally, the government included natural gas on their CFS list, an idea that was met with much criticism, since natural gas is already known as a relatively clean fuel that can lead to decarbonization abroad, vastly reducing global GHG emissions. Applying the CFS to natural gas would put Canadian producers at a competitive disadvantage at a time when demand for the product is increasing. Fortunately, on December 11, 2020, Prime Minister Justin Trudeau and Canada’s Minister of the Environment and Climate Change announced the CFS would not apply to natural gas. Yet, there are still many unknowns that surround the policy, and industry players remain concerned over its impact on costs and competitiveness.
Dr. Bill Bewick is Executive Director of Fairness Alberta, an organization with a mission to ensure future generations of Albertans have the opportunity to work at good jobs, generate wealth, and have a good quality of life. They also educate the public on the contributions Alberta has made to Canada, showing Canadians how much Alberta’s prosperity has benefitted the rest of Canada. In November of 2020, Bewick wrote an op-ed in the Calgary Herald, sharing his point of view that now is absolutely the wrong time for Canada to implement the CFS, stating: “Driving up costs on transportation and heating fuels will obviously slow our overall economic growth when we can least afford it.” In December, Bewick followed up by speaking to the House of Commons Standing Committee on Finance, explaining how natural gas needed to be removed from the CFS. The Hitch caught up with Bewick in December to ask his thoughts on the CFS.
Caroline Fyvie: For those who don’t know, what is the proposed Clean Fuel Standard?
Bill Bewick: It’s a nation-wide standard set on fuels in terms of emissions. Costs will be generally much higher than they have been for the current carbon tax – and they will also be on top of (the carbon tax).
CF: How will this regulation reduce emissions?
BB: It’s partly the idea, if you make something more expensive, people will find ways to use less of it. The government is also hoping a lot more renewable fuels get added to the mix. There’s even renewable natural gas, it’s expensive, but it’s possible. Certainly, with diesel and regular gas, they’re expecting to see a lot more ethanol and renewable diesel used. There’s an issue there because Canada currently only produces about 60 per cent of the ethanol that we use, and much less on renewable diesel. So, the costs on regular fuel will go up, and it will be money that we’ll have to send mostly to the United States and other countries to get those biofuels. Renewable diesel made of biofuels is expected to go up 20 to 30 per cent, depending on what sort of levels the Federal Government asks for, because renewable diesel is something we import entirely, and so that’s a pretty big expense to reduce the emissions from diesel.
CF: The Canadian Energy Research Institute calculates the CFS will cost families an extra $1,400 per year. Does this mean the costs of the CFS will trickle down to essentials like groceries?
BB: Combined with the hike to the carbon tax it’s a significant increase to the costs of heat and transportation fuels, so it’s really not just on the energy sector, it will be across the country on anything that gets transported or heated. We are a cold weather, very spread-out industrial country – pretty much everywhere you look there will be increased costs, and that will of course partly get taken out of profits and partly get passed on to consumers. When you hear about rebates for individuals, rarely are all these increased costs getting passed down factored into that.
CF: How would the CFS impact the operating costs of oil and gas drillers and service companies?
BB: It will affect every aspect of the oil and gas field services supply chain. There’s the heavy equipment like drilling rigs, service rigs, heavy hauling trucks to move equipment in and out. Loads and loads of heavy equipment going to and from the field, all powered by diesel fuel. And because all the operations take place in remote locations away from towns and often even the electricity grid, all the transportation for rig crews is done primarily by larger, four-wheel drive pickup trucks. Some gas, some diesel, but all affected by the CFS. Fuel is one of the most significant direct costs of all oil service operations and the cost will either have to be passed along to the oil company customers or absorbed by an industry that hasn’t had a reasonable return on invested capital in many years. The studies suggest a 20 to 30 per cent increase in diesel prices because of this.
The other concern is the overall petroleum industry in Alberta. The provincial government is trying to do a natural gas strategy that creates some hubs with recycling plastics and generating hydrogen and petrochemicals with all the by-products. It’s a real opportunity for us to take advantage of our abundant natural gas and become even more of a world leader in some of these industries that spin off from it, because there are so many connected to natural gas. It’s already hard enough sometimes to get development and building approvals for things that are related to petrochemicals; the CFS and increased carbon tax are just going to put the chill on the whole sector which then trickles down to how much people want to drill.
CF: Why did you feel the need to get involved and write an op-ed on the CFS?
BB: Mostly because most people don’t know about the CFS, it’s really gone under the radar. We feel like it’s totally misguided and is completely at odds with how much we need to focus on competitiveness to get out of this COVID-19 induced economic collapse. Most Canadians want the government’s top priority to be job creation and getting the economy back on track. It seems like the government has different ideas, because this is clearly going to undermine economic recovery and it’s particularly important to Alberta, given the amount of industry we have, that relies on fuels. It’s a bad economic policy for all of Canada and it’s just going to make things even tougher for Albertans.
I think most Albertans are tired. The international market is plenty competitive already, Albertans are tired of municipal and provincial and federal governments layering cost and cost and cost on top of each other and it’s making it so hard to compete. This looks like one of the biggest and certainly the next legislation that’s potentially going to hit us.
CF: What are some of the other ways Fairness Alberta is advocating for Albertans?
BB: In my remarks to the House of Commons Standing committee on Finance in December, I did mention CFS but I also talked about recognizing how critical Alberta’s economy has been to Canada’s well-being the last 20 to 50 years. Alberta’s net contributions have been keeping the country afloat, certainly for the last 20 years. Since 2000 Alberta companies and taxpayers sent $324 billion more to Ottawa than what the Federal Government spent back in Alberta. So that’s $324 billion that went from Albertans’ taxes to help fund services, infrastructure, and debt repayment in other provinces.
If Ottawa thinks that we can dig out of this sort of debt and jobs crisis, while also keeping Alberta down, I think they’re obviously mistaken and it makes no sense not to get the most productive part of this country back on track to help with the whole country. And then also the recent fiscal stabilization changes were very disappointing. There’s a lot of federal transfers that could be more beneficial to Albertans and help reduce the amount that we transfer to the rest of the country in good times and bad. The priority right now, though, is to get back to generating enough wealth and prosperity in Alberta that there is anything to debate over.
CF: What can Canadians who don’t support the CFS do to help prevent this regulation from being passed?
BB: We have a petition and more materials available at FairnessAlberta.ca. We will be passing that on to members of parliament from all parties. You can always of course send an email to your MP or the Finance Minister and let them know you really don’t support this and want them fully focused on economic recovery.
According to the Government of Canada, the proposed regulations for the CFS were published in Canada Gazette, Part I, on December 18. The draft regulation is available for a 75-day comment period. Following publication, Environment and Climate Change Canada will continue consultations with interested parties. Final regulations will be published in late 2021, with coming into force of the regulatory requirement in December 2022.