Challenges and Opportunities for B.C. Biofuels

November 13, 2024

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by Nelson Bennett (Delta Optimist) Biofuels' environmental and economic opportunities for Canada: C.D. Howe -- Canada is well-positioned to profit both environmentally and economically from a growing biofuel industry, but faces risks in scaling up biofuel production in a way that is sustainable and competitive, warns a new report by Werner Antweiler at the University of B.C.’s Sauder School of Business.

While biofuels can play a significant role in decarbonizing transportation, there can be negative environmental impacts and impacts on food production, Antweiler notes in a t for the C.D. Howe Institute.

On the other hand, biofuels could benefit farmers in the prairie provinces with the production of energy crops, like canola, on marginal farmland, foster new biofuel refining businesses, such as the Tidewater Renewables refinery in Prince George, and make significant emissions reductions in transportation.

Biofuels can be made from food crops, like corn, animal fats, biological waste, and non-food crops such as wood waste.

Antweiler notes in his report that biofuels production can “either shift or increase the use of agricultural land, which can have negative impacts, including deforestation, which can shrinks natural carbon sinks. Expanding frontiers of agricultural production can also develop new land conflicts with local or Indigenous communities.

“On the upside, it creates a new market with new employment opportunities and potential for economic growth, and it can help reduce carbon dioxide emissions. It can also improve Canada’s energy security and stabilize energy prices.”

Biofuels could provide prairie farmers with new markets for energy crops such as canola, which can be grown on more marginal farmland.

Antweiler noted that China is a major importer of Canadian canola oil, but increasing trade restrictions could result in the loss of that market.

“Canola imports that Chinese have from Canada are under the highest threat of retaliation, and so developing a new market for canola that is domestic would really help the industry make sure that they’re not at the vagaries of trade retaliation,” he said.

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A number of new biofuel refineries are either being built or planned in both B.C. and Alberta.

Imperial Oil is building a $720 million renewable diesel refinery in Edmonton at the Strathcona refinery that will use canola, soy, sunflower oils and hydrogen -- produced from natural gas with carbon-sequestration facilities -- to make renewable diesel.

In Prince George, Tidewater Renewables has built a new refinery that will make renewable diesel from canola, tallow and tall oil (a byproduct of kraft pulp making).

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Parkland Fuel Corp. (TSX:PKI) also has a small biofuel facility that makes its fuel from products like animal waste.

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Antweiler said policy harmonization between the U.S. and Canada, and within Canada as well, will be needed to support Canada’s biofuel industry.

Because of the oversized impact biofuels could have as a climate action tool, it’s important that the low carbon and clean fuel standards that have been adopted federally and provincially not only be maintained, but harmonized.

In the lead-up to the recent provincial election in B.C., B.C. Conservative Party Leader John Rustad pledged to scrap not only B.C.’s carbon tax, but its low carbon fuel standard, as well.

Antweiler said he hopes federal Conservative Party Leader Pierrie Poilievre will have “a more nuanced view” of these policies than Rustad. READ MORE

Related articles

Oh, Canada, What just happened to your carbon tax? (Energy Institute at HAAS)

Excerpt from Energy Institute at HAAS: The BC carbon tax has been working well…

Disentangling the effects of this well-designed carbon tax from all the other factors that determine outcomes we care about (e.g. GHG emissions, employment, etc.) is notoriously difficult. Economists have been working hard to isolate and estimate these impacts.

GHG emissions: In this 2022 paper, Felix Pretis estimates that the tax has led to significant emission reductions in some sectors (e.g. a 5-19% decrease in transportation-related emissions) but no detectable effects (yet) in others.

Jobs: Researchers are finding that employment has not been negatively impacted overall. This paper finds some job losses in large emission-intensive manufacturing operations that are offset by job gains in service sectors.

Transportation: There are signs that the tax is encouraging Canadians to reduce gasoline consumption (by 5-8%) and buy more fuel-efficient cars (see here and here for examples). This study finds that urban households in Vancouver and other cities reduced gasoline demand in response to the carbon tax, whereas households in small towns and rural areas did not.

Natural gas consumption: This 2018 study estimates that the BC carbon tax reduced per capita residential natural gas consumption by approximately 7%.

Impacts on lower-income households: This 2021 study models household economic impacts across the income distribution. Authors find that targeted rebates leave households in the lowest income categories with higher levels of income than without carbon pricing.

With so much going right, what went wrong?

Economists, armed with 15 years of data and careful analysis, see GHG reductions, more sustainable consumption patterns, and progressive redistribution of tax revenues. BC Conservative leader John Rustad sees “an economic disaster and an environmental failure…hitting families and businesses hard while doing absolutely nothing to lower emissions.” For context, this is the same John Rustad who was ousted from the BC Liberal party in 2022 for questioning climate science.

Ask a Canadian on the street which narrative seems to resonate, and a majority seem to choose the gloomier picture. What’s going on? Here are some of the factors we think are important:

Visible costs, invisible benefits. The very thing that makes the carbon tax effective—putting a price on pollution so households and businesses can factor these real costs into their decision-making—also makes it highly visible and thus politically vulnerable. Economists can econometrically estimate GHG reductions and forecast long-term climate benefits. Canadians can see rising energy prices. In-your-face costs and invisible benefits are not a great recipe for political success.

Increasing carbon taxes have added insult to inflation injury. Canadians are feeling the pain of inflation and rising energy prices. Between 2022 and 2024, the BC carbon tax increased (as planned) by $40/tonne. This gave Conservatives the opportunity to blame the tax for higher prices at the pump and on the grocery shelf. The truth, of course, is more complicated. Other factors—global oil markets, supply chain chaos, and geopolitical turmoil have also played a significant role. But nuance doesn’t win elections; a convenient scapegoat does.

Revenue recycling is not having the intended political effect. Progressive revenue recycling was supposed to be the ace in the hole. The theory is simple: raise the cost of GHG emissions, and then return the money to households. Canadians would have an incentive to make greener choices without losing much in the way of purchasing power.

This has not worked as planned. Recent studies are finding that Canadians either don’t know they’re getting rebates or think they are getting less than they actually are. Even those who do understand the concept don’t seem thrilled about it. As one Alberta focus group put it: “Why the hell are you collecting it and then giving it back? What’s the point?” People don’t see the elegance of the policy; they just see bureaucracy and high gas prices.

A Canadian Cautionary Tale

The BC carbon tax is not dead yet. Back in 2018, Canada required all provinces and territories to implement some form of carbon pricing. On the campaign trail this year, the BC NDP Premier said he would “end the consumer carbon tax in British Columbia” if the federal requirement is removed. With a federal election just around the corner, the only major defenders of federal carbon pricing left are the incumbent Liberals and the Green Party.

If Canada axes the tax, it would severely undermine progress toward the country’s GHG reduction goals. Carbon pricing was meant to do a lot of the heavy lifting. Without it, those targets become much harder—and much more expensive—to hit. READ MORE

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