Atlantic premiers ask federal government to delay clean fuel regulations

Atlantic Canadian premiers requesting a delay on adopting countrywide regulations aimed at curbing greenhouse gas emissions received a quick clapback from the federal government on Thursday.

The four premiers — from New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador — put out a statement saying federal clean fuel regulations, which are set to come into effect July 1 along with the carbon tax, place an unfair burden on the region. They said the regulations should not be implemented “until a plan can be developed to address the disproportionate impact of the regulations on Atlantic Canadians.”

Hours later, Environment and Climate Change Minister Steven Guilbeault said the clean fuel regulations are critical to Canada’s emissions reduction plan. They require companies to gradually reduce the carbon content of their fuels, leading to a decrease of approximately 15 per cent below 2016 levels in the carbon intensity (how much carbon is released during production and consumption) of gas and diesel by 2030. The feds say the approach is similar to British Columbia’s low-carbon fuel plan and “will increase support for domestic production and adoption of low-carbon fuels, such as hydrogen and biofuels.”

Producers of liquid fossil fuels who sell to the Canadian market will have to reduce the carbon intensity of their fuel by blending ethanol — also known as biofuel — with regular gas, for example. In B.C., gasoline must be five per cent ethanol, while diesel must be four per cent.

The other portion of the plan is a credit market, where producers and importers of fuel have to either create or buy credits to meet the carbon reduction targets. If a company is exceeding the target, they have credits they can either sell or bank for future years. The carbon credits are supposed to contribute to the growth of the renewable fuel sector, such as electric vehicle manufacturing.

According to Guilbeault, the regulations translate to an eight per cent overall reduction of the country’s total greenhouse gas emissions. This is needed to help meet Canada's goal to cut emissions by 40 to 45 per cent of 2005 levels by 2030.

The premiers insist Atlantic Canadians will struggle with increased gas and diesel prices at the gas pump, along with “inflationary pressures that will increase the costs of other goods imported to the region.” But Guilbeault said that’s not the case.

“Under the clean fuel regulations, oil companies and refiners have the time and the ability to invest to update their operations to meet the very small, incremental costs that the clean fuel regulations require. There is simply no reason that they need to push costs onto consumers on July 1.”

Guilbeault noted refineries in Atlantic Canada are reaping “whopping new profits and have the ability to be part of the solution.” Between 2019 and 2022, the margins of refineries in Atlantic Canada went from just over 10 cents per litre to almost 50 cents per litre, he said.

He expressed the same sentiment in a letter to the chairman of the Nova Scotia Utility and Review Board. According to CBC, Guilbeault said regulators capable of hiking fuel prices should first look at the profit margins of oil companies, specifically Irving Oil.

The call from the premiers follows a heated debate in the region around the federal carbon tax, also set to be implemented July 1. In November 2022, it was announced the federal government will impose fuel charges on gasoline, diesel and home heating in Nova Scotia, Newfoundland and Labrador, and Prince Edward Island, provinces that failed to propose their own plans that meet climate standards.

Similar affordability concerns were raised when that measure was taken, even though rebate cheques will be mailed to families before the tax is imposed to offset price increases. Eight of 10 households will receive more money back from rebate cheques than they pay, Guilbeault said at the time.

Last week, the Parliamentary Budget Officer released an analysis of the clean fuel regulations, which concluded the rules could tack up to 17 cents per litre on fuel by 2030 and cost Canadian households between $231 and $1,008 a year, depending on income. The report was criticized by the Liberals, the NDP and the Greens for ignoring the cost of climate change impacts. Jason Dion, the Canadian Climate Institute’s senior director of research, tweeted that the PBO “compares the costs to a scenario that does not exist: where Canada does nothing about climate change and faces no trade or competitiveness consequences for doing so.”

‘The transition is coming’

While environmental and policy groups have criticized the clean fuel regulations for not going far enough, Evan Wiseman, senior manager of climate policy at the Atmospheric Fund, said the policy should still be in full swing by July.

While July is the official start of the regulations, Wiseman notes the past year has been a “compliance period” to prepare for credit trading.

“In order to start a market, you have to have credits for the market. So you have to have a period of compliance, which is just about over now… The July 1 date is not the date of it starting. It’s started,” he said.

Development of the regulations started in 2016, and they have been watered down since, explained Wiseman, who notes that many climate-focused groups are “not terribly happy with the ambition of this program.” Notably, the regulations initially included natural gas and home heating oil, which were eventually excluded, making transport fuels the focus of the final regulations.

Meanwhile, the regulations also encourage growth in the biodiesel sector and other lower-carbon fuels. Guilbeault said a refinery in Come By Chance, N.L., for example, will be supported by the regulations. The refinery was retrofitted from an aging oil operation to one that will produce diesel and aviation fuel made from plant-based waste oils and animal fats.

Early analysis of the regulations from clean-energy think tank Pembina Institute, which have since changed, found the regulations will create as many as “30,000 jobs as new clean fuel facilities are built, supplied and operated.” While Wiseman said that number isn’t as high after the changes, more innovation in the clean fuel sector will lead to new jobs and presents an opportunity for Canada to kick-start local fuel industries, rather than relying on imports.

“It's important to know that the transition is coming... It's meant to target a very hard-to-decarbonize sector, but the sector is decarbonizing, and we need to build infrastructure to accommodate this massive change that is occurring globally,” said Wiseman.

Cloe Logan / Local Journalism Initiative / Canada’s National Observer