By Ed White
WINNIPEG, Manitoba, Nov 2 (Reuters) – Canada’s biofuels industry warned that some gaps remain in the government’s proposed rules aimed at matching US incentives, and that the changes are unlikely to spur investment in the world’s top canola producer.
Under the proposed rules, unveiled over the weekend, Canadian biofuel producers would receive more credits from the government for producing biofuels in Canada. To meet low carbon emissions intensity limits, they can either produce low-intensity fuels themselves or buy credits from others.
The changes would replace a system in which only the use of biofuels earns credits, and foreign-produced fuels receive the same amount.
They are designed to “close the competitiveness gap facing Canadian low-carbon fuel producers so they can compete fairly with US producers,” Canada’s government said.
The industry has long complained that US subsidies are generally higher, discouraging production in Canada. At the same time, in order to earn the credits, some Canadian fuel blenders have been importing US product due to a shortfall in domestic production.
The rules include different rates for ethanol, biodiesel and other alternative fuels.
For ethanol, Ottawa is proposing a 1.3 times credit multiplier for Canadian production, compared to the 1.4 rate the industry had sought.
“Recognizing the problem and closing the gap (to US production subsidies) are two different things,” said Andrea Kent, a board member of Renewable Industries Canada. The proposed rules provide only about one-third of the value of support US ethanol producers receive, she said.
Mark Walker, executive director of the Canadian Oilseed Processors Association, said the changes are a step in the right direction, but would result in “net-neutral” demand for canola. The 1.4 times multiplier for biodiesel also falls short of US support and fails to improve competitiveness of Canadian production, he said.
The new rules face a 75-day review period.
Canola Council of Canada President Chris Davison said he supports the government’s decision to provide incentives for feedstock, such as corn, soybeans and canola used in biofuel, from Canada, the US and Mexico, rather than Canada-only origin, given the countries’ integration under the USMCA trade pact.
The US Renewable Fuels Association said it is pleased to see that Canada’s proposed regulations will not prevent imported US feedstocks from being processed to meet Canada’s biofuels targets. US regulations allow Canadian canola oil and other North American feedstocks to be used as domestic supplies in US biofuels production.
Renewable diesel will receive a 1.5 times credit multiplier.
While Imperial Oil has built a major renewable diesel plant in Alberta, another plant planned in neighboring Saskatchewan by Federated Cooperatives is on hold due to regulatory worries.
Imperial Oil CEO John Whelan said the company held talks with Ottawa as it developed these “tweaks” to the rules, and “we’re not uncomfortable with where this is headed.”
(Reporting by Ed White; Editing by Jonathan Spicer )
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