Canada’s biofuel trade is seeing a serious uptick in funding spurred on by rising world demand for biofuel and, specifically, the implementation of the nation’s new Clear Gas Laws.
Lately, a lot of the funding in Canada’s biofuel sector has focused the manufacturing of renewable diesel, a biomass-based gas that’s chemically equal to petroleum diesel and might both be blended with it or used as a alternative gas.
As that trade grows, so does Canada’s canola processing sector. Canola is a well-liked low-carbon feedstock for renewable diesel that may be grown in giant portions, usually close to the refineries the place it’s being processed.
However the growth occasions may finish as rapidly as they started because of a brand new tax credit score coming by the U.S. Inflation Discount Act (IRA). A producing vacuum that’s already sucking funding in clear tech down south may declare Canadian biofuel manufacturing as its subsequent sufferer.
“If [the credit] goes forward as proposed, it’s a full-on wrench [in the Canadian industry],” stated Ian Thomson, president of Superior Biofuels Canada, a foyer group.
Rising funding
Simply this yr, building wrapped up on Canada’s first renewable diesel refinery in Prince George, B.C., Saskatchewan’s Covenant Power introduced plans to maneuver forward with a renewable diesel facility on the sting of Lloydminster and Imperial Oil dedicated $720 million to construct a renewable diesel venture close to Edmonton.
Funding has been pushed partially by provincial insurance policies, like B.C.’s low-carbon gas requirements, and by Canada’s Clear Gas Laws. The federal rules got here into impact this month and require liquid fossil gas suppliers to progressively scale back the carbon emissions from the fuels they produce and promote over time.
Corporations can select for themselves how they meet these targets — reminiscent of by constructing a carbon seize and storage (CCS) facility at one among their refineries or providing electrical car charging. One of many fundamental methods transportation gas suppliers plan to take action is by mixing biofuels into their product.
“That’s a major subject proper now,” stated David Schick, vice-president of Western Canada and regulatory affairs for the Canadian Fuels Affiliation, which represents firms that course of crude oil and produce merchandise to the market.
“Our members who present many of the transportation gas in Canada, as much as about 95 per cent are arising with methods to have extra biofuels within the gas combine with a purpose to meet compliance obligations.”
Curiosity in renewable diesel can be rising south of the border, because of the U.S. Renewable Gas Customary and state-level insurance policies in California, Washington and Oregon.
Canola crush crops within the works
All that demand has been excellent news for Canadian canola producers. Whereas renewable diesel may also be made with soybeans, animal fat, used cooking oil and even algae, the canola trade has been an enthusiastic supporter of the renewable gas sector as a marketplace for canola.
Since 2021, there have been 5 main canola crushing bulletins within the Prairies. Collectively, they’re anticipated to extend the nation’s canola crush capability by seven million metric tonnes — about 60 per cent above present ranges, in response to the Canola Council of Canada.
At the very least a kind of crops, in north Regina, is slated to be co-located with a renewable diesel facility.
Jeff Nielsen, who farms canola, wheat and barley close to Olds, Alta., says that’s excellent news for his enterprise.
He sees the Clear Gas Laws as a step in the appropriate route: a method to scale back the carbon emissions from the diesel he makes use of in farming whereas probably making use of the canola he grows on the farm.
If the canola may also be processed and refined in Canada, a lot the higher, he stated.
“The extra we will preserve right here and crush right here, we add extra jobs right here,” stated Nielsen. “So it’s an important value-added proposition.”
IRA will probably be ‘double hit’
The looming menace on the horizon is a brand new U.S. tax credit score that would pull funding down south.
Beginning in 2025, the Clear Gas Manufacturing Credit score, a part of the IRA, will supply a major tax incentive to U.S. producers of unpolluted transportation fuels, even these sure for export.
On the identical time, the U.S. will section out a blenders’ tax credit score that Canadian producers may beforehand entry, Thomson stated.
“It’s a double hit,” stated Thomson. “Not solely do Canadians lose entry to the American market as a result of they will’t compete, Canadian producers are extremely more likely to not have the ability to compete in our personal yard as a result of, primarily, backed American product will probably be coming into our market and undercutting Canadian producers.”
Already, Calgary-based Parkland Company has scrapped plans to construct a standalone renewable diesel advanced at its refinery in Burnaby, B.C., and blamed the choice, partially, on the IRA and the best way it “benefits U.S. producers.”
The trade is hoping Canada’s subsequent federal funds, or, ideally, the autumn financial assertion will embody incentives to maintain biofuel manufacturing north of the border.
Schick, with the Canadian Fuels Affiliation, stated many gas firms may simply construct tasks in Canada or the U.S., however will select the choice that makes essentially the most financial sense.
“What’s at stake is that if we don’t produce these merchandise in Canada, we’re sending our feedstocks to the US and shopping for these merchandise again,” he stated.
“That reduces the reliability of provide, probably will increase the price, and it’s actually a misplaced alternative for Canada to take all of those pure benefits we now have to provide these fuels within the nation that the world needs.”
Export ‘lure’
Growers and processors will proceed to provide canola and canola oil whether or not it’s getting used domestically or exported south of the border.
However that trade additionally hopes to maintain biofuel manufacturing in Canada as a lot as potential. The home market is extra sure, much less topic to the instability that comes from promoting to the export market and higher for the general financial system to have your entire manufacturing cycle happen in Canada.
“We shouldn’t fall into that lure, if I can name it that, close to simply delivery uncooked product out of our nation after which bringing completed product again,” stated Chris Vervaet, govt director of the Canadian Oilseed Processors Affiliation.
“What’s that saying about ‘hewers of wooden and drawers of water?’ That’s type of been Canada’s historical past, and there’s many various explanation why that’s nonetheless the case immediately — however once more, right here’s a possibility in entrance of us to alter that narrative.”