The Clean Fuel Standard: Separating Fact From Fiction

Updated: Aug 3, 2021

Canada has proposed an environmental regulation on fuel within the country, entitled the Clean Fuel Standard. This regulation aims to facilitate a shift toward clean energy alternatives and incentivize companies to develop technologies that reduce the carbon intensity of fuels. This proposal plays off the government’s other carbon-related initiatives, such as the currently implemented carbon tax. One goal for the government is to have net-zero emissions by 2050, and this target has been the benchmark for establishing the timeline, expenses and content of the Clean Fuel Standard proposal.

The Clean Fuel Standard will require a 13% reduction in fuel carbon intensity over the next nine years. By decreasing the proportion of carbon in fuels, there will be a reduction in pollution and a motivation to develop natural energy infrastructure within the country. Though the original draft of this regulation related to liquid, solid and gaseous fuel sources, the revised proposal has limited the scope to liquid fuels only. The government believes this change will help the country direct its focus on the most severe contributors of carbon release, including gasoline, diesel and oil. One goal of the Clean Fuel Standard is to make Canada a world leader in hydrogen production—reducing reliance on high-carbon energy, increasing Canadian exports and creating domestic jobs. The government will also offer a credit market; Companies taking environmentally conscious steps will be awarded credits that can be used or resold. When companies switch to renewable fuel sources, invest in low-carbon transportation or participate in carbon-reducing initiatives, they receive credits. These credits can be bought by other companies, which leads to more economic activity. Companies that do not meet their carbon-reduction obligations can purchase Clean Fuel Standard credits to offset the carbon they release, similar to how companies can offset their emissions through Freighty’s carbon offset program. After reading through many Canadians’ perspectives of this plan, it is difficult to determine whether it is promising or detrimental to Canada. Though this plan is rooted in bettering the country’s environment, some aspects are criticized by Canadians.

There is skepticism concerning the trustworthiness of this plan, as most of the targets are contingent on external participation. The regulation states that “fuel producers will need to provide innovative solutions and new fuel options to consumers.” The government expects fuel companies to invest time and money in reconfiguring their operations. Instead, the government should be utilizing its resources to derive solutions to ensure reasonable control and regulated pricing. Suppose the companies decide to switch their processes to accommodate the decreased carbon intensity, and the techniques prove to be costly. In that case, those costs would be distributed through the supply chain and end up in the hands of consumers. With the Liberal Party’s current carbon tax, consumers are already spending more on fuel than is comfortable. A second price increase from the Clean Fuel Standard would considerably impact poorer Canadians, especially larger families. The other concern is that companies may relocate elsewhere—to countries that are more lenient in their environmental laws. These companies would then emit carbon at their current rate during production and when exporting to Canada. Further, this shift would result in job loss for many Canadians within the fuel production sector. The party has attempted to ease these concerns by ensuring that all fuel-related costs would be redistributed to consumers. However, people argue that if they lose their jobs, the reimbursements would not be enough to recover the emotional and physical losses they have incurred, especially following a life-altering pandemic. Those who see the harm in this proposal believe Canada is trying to handle an issue they play too small a role in. Canada emits only 1.5% of all global greenhouse gas emissions. Therefore, many believe that the government’s magnified efforts are disproportionate to the level of carbon emitted by the country, and the local economic losses will overshadow any global environmental benefits realized by this proposal. People argue that the government should instead apply pressure to more dominant carbon-emitting countries to lessen overall global emissions, rather than indirectly costing and further burdening Canadians.

There is enough evidence to prove that the Clean Fuel Standard could be incredibly successful in lowering Canada’s overall carbon emissions and providing a framework for other countries looking to minimize their environmental impact. However, it also seems that this regulation could severely affect the Canadian population and economy if the government’s projections and expectations are not met. The concern is not about feasibility; It is about the uncertainty of whether the environmental benefits will outweigh the expenses for Canadian consumers.