Photo - Jack Moreh/Freerange Stock
Advanced Biofuels Canada Association (ABFC) released a statement by Fred Ghatala, President, sharing recent analyses on fuel costs.
“Amidst ongoing challenges to affordability for many Canadian households, we are addressing inaccurate statements relative to the Clean Fuel Regulations (CFR). Parties calling for the end of the Clean Fuel Regulations are relying on deeply flawed estimates and are failing to account for biofuels’ irreplaceable benefits to Canada’s economy.
“Many of the claims rely on a May 2023 report by the Parliamentary Budget Office (PBO). ABFC’s May 2023 press release details gross errors in the PBO’s calculations. The PBO’s projections of CFR costs are based on an impossible, upper-bound scenario that causes a significant overstatement of CFR costs.
“The PBO’s report relies on an assumption that obligated parties would acquire 100% of the compliance credits they need from third parties. This scenario is contradicted by the well-established practice of obligated parties (Canadian refiners and fuel importers) directly generating the majority of compliance credits through their own biofuel production and blending. BC’s Low Carbon Fuel Standard is similar to the CFR design and was implemented July 1, 2013. Compliance reporting by the BC Low Carbon Fuels Branch has shown that, over the past 10 years of its credit market, an average of 24% of compliance obligations have been purchased on the BC LCFS credit market.
“Secondly, the PBO report also assumes that all of these credits will be purchased at the full credit market price. This approach significantly overstates compliance costs since credit market trades represent the marginal cost of the next available credit (neither the average cost nor the intrinsic cost of biofuel blending to generate credits). Credit markets deliver the most expensive compliance, which is why obligated parties seek to internally generate compliance through activities such as biofuel production, co-processing, and blending.
“To model CFR costs based on 100% credit purchasing at the marginal credit market price would be like projecting your annual food budget based on 100% use of expensive restaurant meals and food delivery services with zero grocery store purchases or cooking at home.
“The PBO errors are evident when considering the case of ethanol, which all obligated parties blend with gasoline. Gasoline fuel use represents approximately 55% of CFR obligations, and the wholesale cost of ethanol has been cheaper than gasoline for years, making ethanol blending an attractive compliance strategy. As a result of this market pricing, more than 50% of CFR obligation costs are zero or less than zero. This makes clear the scale of the PBO’s miscalculation when they forecast that CFR compliance costs could be up to 17 cents per litre by 2030.”
