Minister O’Regan Launches Call for Proposals under $1.5-Billion Clean Fuels Fund to Grow Clean Fuels Market across Canada DEADLINE: September 29, 2021

(Natural Resources Canada) The Government of Canada is building a low-emissions energy future to strengthen the economy, create good, middle-class jobs and support workers in our natural resource sectors. Producing and using cleaner fuels in our buildings, vehicles and industries is a key step to exceeding our 2030 climate target and reaching net-zero by 2050.

That’s why today the Honourable Seamus O’Regan Jr., Minister of Natural Resources, officially launched the $1.5-billion Clean Fuels Fund with a call for proposals for projects that increase Canada’s capacity to produce clean fuels.

Minister O’Regan made the announcement during the World Hydrogen Technologies Convention hosted by the Canadian Hydrogen and Fuel Cell Association and supported by the International Association for Hydrogen Energy. Introduced in the strengthened climate plan, A Healthy Environment and a Healthy Economy, and reaffirmed in Budget 2021, the fund grows the domestic clean fuels market, supports the implementation of the Clean Fuels Standard and delivers on early actions outlined in the Hydrogen Strategy for Canada.

The fund supports building new or expanding existing clean fuel production facilities, including hydrogen, renewable diesel, synthetic fuels, renewable natural gas and sustainable aviation fuel. It also supports feasibility and front-end engineering and design studies that will create jobs and enable the sector to grow at the size and pace required to contribute to Canada’s climate goals.

It will also establish biomass supply chains to improve logistics for the collection, supply and distribution of biomass materials, such as forest residues, municipal solid waste and agriculture crop residues, as well as the development of essential codes and standards. These investments benefit farmers, grain handlers, forest harvest operators, saw mills and municipal waste services by opening up new opportunities for both traditional feedstock products, like canola and forest feedstock, as well as new value streams from agriculture, forest and municipal.

The call for proposals for projects to increase domestic clean fuel production capacity is open until September 29, 2021. Natural Resources Canada will provide funding through conditionally repayable contribution agreements of up to 30 percent of the total eligible project costs, to a maximum of $150 million, per project.

Today’s announcement is one of a series of significant steps the government is taking to fight climate change, lower emissions and protect the environment. The Clean Fuels Fund addresses critical barriers to growth, such as upfront costs, in the domestic clean fuels market and lays the groundwork for the low carbon fuels of the future. This includes creating good, middle-class jobs for Canadians, and building a stronger and cleaner economy.

Excerpt from Reuters: One of Canada's flagship pieces of climate regulation has run into criticism from clean fuel lobby groups as Prime Minister Justin Trudeau prepares to start his third term in office, with industry advocates arguing it is out of step with Canada's goals to achieve net-zero emissions.

"The CFS as the draft is now proposed shouldn't go ahead," said Ian Thomson, president of Advanced Biofuels Canada, one of the organisations calling for a change.

"It has the potential to be a great regulation ... but the messaging right now is essentially going to defer by a decade the adoption of fuels that are critical to net-zero future."

Advanced Biofuels Canada and other industry groups have been lobbying the government privately for months to toughen up the regulation. They said so far the government has shown little inclination to do so, and risks missing an opportunity to boost Canada's clean fuel industry.

Major Liberal environmental policies include the CFS, a carbon tax and a pledge to cut greenhouse gas emissions to 40-45% below 2005 levels by 2030. But Canadian emissions have grown in the six years Trudeau has been in power, and research coalition Climate Action Tracker this month rated Canada's polices and actions as "highly insufficient" in tackling the climate crisis. read more

The CFS is modelled on similar regulations in the European Union and California and was first proposed in 2016. read more

It requires producers and importers of gasoline and diesel to reduce the amount of carbon in their product, and was meant to cut Canadian emissions by 20 megatons annually by 2030, although critics say the cut will be more like 15.5 megatons.

The clean fuel lobby says the regulation puts too much emphasis on giving credits for emissions cut during the "upstream" oil production and refining process, and does not incentivize fuel suppliers to switch to lower-carbon sources of energy like biofuels, hydrogen and electricity.

It wants the government to introduce a limit to how much fuel suppliers can rely on upstream credits to meet their CFS obligations, similar to EU regulations.

A recent slew of carbon capture and storage announcements from Canada's oil patch, which would allow producers to meet emissions targets by burying carbon underground rather than reducing oil output, increases the likelihood that upstream CFS credits will dominate the market, critics say. read more

If fuel suppliers can buy or generate cheap credits to meet their obligations, they may not switch to using lower-carbon fuels. That could in turn dent investment in Canada's clean fuel industry, said Bora Plumptre, senior analyst at the Pembina Institute clean energy think-tank. READ MORE