Overview of New Canadian Clean Fuel Regulations – Implications for Biofuel and Farmers

This overview is organized in two parts: The first involves the general nature of the Clean Fuel Regulations and its carbon credit requirements for fuel producers and marketers. The second part is specific to farmers supplying feedstock to bioethanol and biodiesel plants.

The overview is written, primarily, for those in Canadian agriculture seeking to know in simple terms what the Clean Fuel Regulations (also commonly called, Clean Fuel Standard) are all about and how it will affect them.


Image courtesy of Grain Farmers of Ontario

On December 18, 2020 the Government of Canada released details of its long-awaited Clean Fuel Regulations. This follows an announcement, one week earlier, on how Canada intends to meet its Paris Accord commitment for a 30% reduction in net greenhouse gas emissions by 2030 compared to the base year 2005 (details here and here).

Prior to the December 11 announcement, Canada had only announced a plan for a 19% reduction (more details here). The two December announcements are about the missing 11%.

The 11% gap equates to about 80 Mt of greenhouse gases (aka, GHG, measured as carbon dioxide equivalents, or CO2e) in 2030, of which up to 20.6 Mt CO2e – or one-quarter – is projected to be achieved through the new Clean Fuel Regulations.

The lengthy document published in Canada Gazette Part I on December 18 contains the proposed regulations, consisting of 160 sections and 19 schedules, and prefaced by an equally lengthy “Regulatory Impact Analysis Statement.” The following is a quick overview focused on how this affects biofuels and farmers who grow feedstock grain and oilseeds.

In simplest terms, the government has set a base for carbon intensity for liquid fuels which declines from 91.8 gCO2e/MJ in 2022 to 82.5 gCO2e/MJ in 2030. “Carbon intensity” means net CO2 released during manufacture of both the feedstocks and liquid fuels, and during combustion. (MJ means millions of Joules of combustible energy – 33.5 MJ/litre for gasoline and 38.4 MJ/litre for diesel.) On a per-litre basis, these carbon intensity targets equate to 3.08 and 3.53 kg of CO2e/litre for gasoline and diesel, respectively, in 2022, and 2.76 and 3.17 kg/litre MJ in 2030.

(Note that the Regulatory Impact Analysis Statement lists the carbon intensity range as 90.4 to 81.0 g CO2e/litre, versus the numbers shown in the previous paragraph that are copied from the Regulations themselves. I don’t understand why the discrepancy – quite possibly an error – and am using the values listed in the Regulations.)

For companies producing/marketing liquid transportation fuels, a quarterly calculation is made of the difference between the average carbon intensity of their products. Where this amount is below the carbon intensity target, the company must achieve/secure offsetting credits, each ‘credit’ being 1 tonne of CO2e.

During the initial two years of implementation, beginning in December 2022, the carbon intensity target is still quite high and many oil companies will accumulate credits during this period for the reason explained below. These credits can be banked and used to offset credit needs during a few years to follow. But additional C credits will be required starting in 2026 or 2027 as the banked credits are used up and carbon intensity requirements become more demanding.

This is illustrated in Fig 1 extracted from the Canada Gazette Part I Regulatory Impact Analysis Statement.

2020-12-26 09_44_59-Canada Gazette, Part 1, Volume 154, Number 51_

Fuel companies will be required to secure the credits needed by a combination of five routes.

One of these involves improvements in the GHG efficiency of fossil fuel production and refining. This also includes energy savings achieved by co-generation of heat and energy, and the sizeable amount of CO2 that will be pumped into oil-wells to increase crude oil flow. This unground storage of CO2 is the primary reason for the accumulation of credits for initial years shown in Fig. 1. However, the opportunity for CO2 storage is also expected to maximize by about 2024. The credit only applies for added capacity.

A second source of credits involves the usage of “low intensity carbon fuels,” including bio-based ethanol and biodiesel. The precise amount of the credit per litre/tonne depends on life cycle analyses still to be completed (an interim calculation lists the carbon intensity of ethanol and biodiesel as 49 and 26 g CO2e/litre, respectively).

The Clean Fuel Regs have included minimum contents of 5% bioethanol and 2% biodiesel, which are currently required for Canadian gasoline and diesel. Some provinces require more, or will require more by 2030.

The Clean Air Regs refer to three categories of “low intensity carbon fuels.” These are described in Section 33(1) of the regs as follows. Note that virtually all farm crops to be used to manufacture biofuel are in category (c). The regulatory requirements are substantially less stringent for categories (a) and (b).

From Section 33(1)

[A] quantity of a feedstock is eligible if the feedstock

(a) is not derived from biomass;

(b) is sourced from any of the following:

(i) animal materials, including manure,

(ii) used animal litter or bedding,

(iii) used or inedible organics from a residential area, a retail store, restaurant, a caterer or a food processing plant,

(iv) used fat and used vegetable oils,

(v) industrial effluents,

(vi) municipal wastewater,

(vii) used construction and demolition materials,

(viii) secondary forest residues that are byproducts of industrial wood-processing operations,

(ix) forest biomass from clearing activities not related to harvesting, including infrastructure installation, fire prevention and protection, pest and disease control, and road maintenance, or

(x) waste used to produce biogas from a waste processing facility; or

(c) is not sourced from a material or source referred to in paragraph (b) and is sourced from agriculture or forest biomass.

The additional demand for bioethanol and biodiesel created by this option is not expected to be substantial until about 2028. The Regulatory Impact Analysis Statement says that a substantial portion of this increased demand, especially for ethanol, is likely to be imported.

A third option for securing credits is through increased supply of non-carbon based energy sources. The document devotes a lot of text to describing how companies can obtain credits by augmenting home recharging capacities for electric motor vehicles.

And there are two other options: One involves buying credits at a cost of $350 per tonne of CO2e by contributions to new funds for developing/promoting new GHG-reducing fuel technologies. And the other involves buying credits from other companies with surpluses to sell, as made available through an auction process.

There are limits as to the quantity of offsetting credits that fuel suppliers can secure using most of the options described above.

Implications for Canadian Farmers

One of the stated goals of Clean Fuel Regs is to prevent/minimize harm to biodiversity and prevent the destruction of forests, wetlands and grasslands in the production of feedstocks for expanded biofuel production.

The regulations list some rather draconian procedures that farmers would need to follow, either individually or in groups, in order to supply crops for the manufacture of bioethanol and biodiesel. As initial plans for the Clean Fuel Regs were outlined to farm groups and others earlier in 2020, these were the only options for Canadian farmers. Absurdly, the proposed requirements were less stringent for imports from the United States which involve adherence to the US Renewable Fuel Standard.

Fortunately, this has been largely corrected in the Canada Gazette Part I wording (specifically, Section 40) released on December 18:

40 (1) A feedstock that is a crop, crop byproduct, crop residue or short-rotation woody biomass crop is also deemed not to have been cultivated on land referred to in section 38 if the Minister decides that

(a) the country in which it was cultivated has not exhibited a net expansion of cropland greater than 2% since July 1, 2020 and that it is not likely to exhibit such an expansion in the future; and

(b) it is unlikely that producers of the feedstock will use land that was not cropland on July 1, 2020 to cultivate feedstock in the future.

The wording is somewhat strange in that it seems to refer to imports from other countries. But this works for Canadian farmers if 1) the word “country” in 40 (1)(a) also includes “Canada,” and 2) the amount of cropland devoted to crops (principally, corn, soybeans, wheat, canola and barley) used to produce biofuels does not change much. (It hasn’t in recent years.)

It’s of interest that the Canadian Clean Fuel Regs refer to the need to preserve wetlands while the US Renewable Fuel Standard does not. But with the blanket Section 40 provision shown above, that should not a major competitive disadvantage for Canadian grain and oilseed farmers.

As one of those Canadian farmers, I express appreciation to farm groups including the Grain Farmers of Ontario who lobbied for needed changes. See the GFO statement here.

Here’s also a release from Renewable Industries Canada (formerly the Canadian Renewable Fuels Association).

Before closing, the following merit special mention:

  1. The market demand for bioethanol and biodiesel created by the new regulations will not materialize in sizable quantities until about 2028.  Much can change in the either years between 2020 and then (including at least two federal elections).
  2. The regs treat ethanol and biodiesel (and grains and oilseed used to produce them) equally whether imported from the United States or produced in Canada. This is as it should be in an open market environment. Unfortunately, the far greater subsidy support being provided to US grain farmers versus Canadian, at least as of late 2020 when this is posted, is of serious concern. Further, the possibility of countervailing duties to offset this differential is not a realistic solution.
  3. Further to point #2, when the life cycle analyses are completed of GHG emissions associated with the production of biofuels, there may be an advantage for ethanol produced from Canadian corn. Irrigation, which requires lots of energy, is used much more for corn production in the US versus Canada. Energy used in transportation may also be a factor.
  4. The third point is that what was published in Canada Gazette Part I on December 18 is a draft regulation. The final version will be published, after a 75-day comment period, in Canada Gazette II, probably sometime in late 2021. Changes are quite possible – indeed likely.

I express appreciation to Mr. Don O’Connor of (S&T)2 Consultants Inc., Delta, British Columbia, and Dr. Paul Hoekstra, Vice-president for Strategic Development, Grain Farmers of Ontario, for comments that were valuable in the drafting of this column. However, responsibility for errors or opinions expressed above is solely the author’s.

What Percentage of Canadian Net Greenhouse Gas Emissions are caused by Agriculture? It all depends on How They Are Calculated?

The percentage of Canadian greenhouse gas (GHG) emissions caused by agriculture is anywhere between 4 to 12% depending on what’s included, what’s not and the calculation method. The percentage even becomes negative when the photosynthetic carbon content of farm products is included. The calculation method has a direct bearing on how various corrective actions that are or might be adopted by farmers affect agricultural GHG statistics and balances. Details below:

With the election of Joe Biden as US president, and with the arrival of new vaccines to end to the Clovid pandemic, concerns about climate change and greenhouse gas (GHG) emissions will return to centre stage. Agriculture will be a prominent part of the discussion and anticipated government actions.

It’s critical that those of us who live in agriculture provide guidance and leadership. Because if we don’t, others will gladly fill the void.

The agriculture/GHG relationship is very complex. Proposed corrective solutions depend so much on what’s counted as an agricultural contribution. Official government reports to the United Nations, as done now, do not include some key sources and sinks for agricultural emissions. Examples of how several proposed agricultural ‘improvements’ could actually have no effect at all on reported agricultural contributions are described in this column. First, a quick look at the complications.

What’s in annual reports to the United Nations on Agricultural GHG emissions and what’s not

The annual national accounting of GHG emissions, called the National Inventory Report (NIR) that many countries including Canada submit annually to the United Nations Framework Convention on Climate Change (UNFCCC), is based on guidelines specified by the United Nations International Panel on Climate Change (IPCC). Included in the agricultural category of GHG emissions are methane (CH4) and nitrous oxide (N2O) emissions associated with livestock agriculture, manure, rice paddies (major source of methane), soil fertilization and management, and carbon dioxide (CO2) released during crop residue burning and with soil applications of urea and lime. Not included are: CO2 transformed into or released from farm soil organic matter; fuel/energy used on farms (eg., field operations, barn heating, electricity, crop drying, farm product transportation); CO2 sequestered as wood in orchard crops, woodlots, windbreaks and fence rows; emissions associated with the manufacture of fertilizer, other annual inputs and farm machinery; and biofuels. To enlarge on the latter: IPCC protocol states that countries do not need to include CO2 emissions associated with biofuel combustion, but the credit for that in NIR calculations goes entirely to the transportation sector, not agriculture.

When it’s all added up using IPCC calculation protocols, agricultural net emissions, reported as CO2 equivalents (CO2e), are about 8-10% of national totals for many developed countries including Canada. Some details and comparisons are provided in an earlier column. But the actual number may be significantly higher or lower, depending on what else is included.

Certain countries have included some of the additional quantities (both positive and negative) for agriculture in supplementary data submitted to UNFCCC. This often includes CO2 sequestered into or released from farm soils. Curiously, Canada does not do this. The only supplementary sum included in the Canadian NIR is the addition of fossil fuel consumption for farm operations. (A corresponding agricultural biofuel credit is not included.)

In the earlier column, I showed what the effect would be with the inclusion of soil carbon sequestration and biofuel credits in the Canadian agricultural totals. Table 1 from that article is copied below. (Note that LULUCF stands for the UNFCCC category – Land Use, Land Use Change and Forestry – that includes soil carbon sequestration.)

Table 1: Canadian agricultural GHG emissions (Mt CO2 equivalent) including credits and debits for LULUCF, on-farm fuel usage and Canadian biofuel consumption.

 200520182018/2015% of Cdn total
Total Canadian gross emissions730729100100
LULUCF (sinks), Canadian total-13-131010 
Canadian total, gross emissions plus LULUCF717716100 
Ruminant digestion, CH43124  
Manure management, CH4 and N2O99  
N2O from soil fertilizing, management1925  
Agriculture total, reported to UNFCCC6059988.1
Add LULUCF credit-10-6  
Agricultural total with LULUCF added50531067.4
Add biofuel credit-1-6  
Add on-farm fossil fuel usage1214  
Total, biofuel and farm fuel included61611008.5

Table 1 does not include GHG emissions associated with the manufacture of fertilizer, especially N-containing fertilizer ingredients. (Significant energy is required to convert N2 gas to NH4+ and NO3containing fertilizers, although modern N fertilizer plants are at least twice as efficient than those of a few decades ago. See recent review article here. A considerable amount of fossil-fuel energy is also needed to convert phosphate rock into phosphate fertilizers. Not so much for potash (potassium) fertilizers.)

Desjardin et al in a 2020 review entitled, The Carbon Footprints of Agricultural Products in Canada (available here), estimated the CO2e emission associated with manufacture of fertilizer and pesticides at about 1% of total Canadian GHG emissions with about another 1% for other items like machinery manufacture and electrical supply. Adding these to the quantities in Table 1 means the total GHG net emission contribution for Canadian agriculture could be anywhere between 7 and 12% of the national total – depending on what’s included and what’s not.

We also need to consider divergence advice on how to calculate methane emissions. As I’ve shown in another recent column (see the literature references provided therein), a more accurate recognition of methane’s comparatively short atmospheric life – and consequent short-term warming potential – means effective Canadian agricultural emissions may be as low as 4% of the Canadian total.

Finally, none of the above recognizes the carbon (and photosynthetically fixed CO2) contained in products that leave Canadian farms including those exported internationally.

This is of more than academic interest: considerations of what’s included and what’s not make huge differences in the effectiveness of various proposed/recommended strategies for reducing reportable GHG emissions for agriculture.

Why agriculture will get no credit for many actions taken to reduce agriculturally linked GHG emissions

Let’s now consider some examples, beginning with a well-documented plan published in 2019 by the National Farmers Union (NFU) in England. It’s called Achieving NET ZERO, Farming’s 2040 Goal and is available here. Ignoring the question of whether the proposed measures are likely to be implemented or even implementable by 2040 (beyond the scope of this column), a key question is whether, even if achieved, the result would be any improvement in agricultural sum to be reported in the UK 2040 NIR to UNFCCC.  I believe the answer is “mostly not.”

The NFU plan does include reductions in both methane and N2O, the result of new technologies and improved management for animal feeding, manure and fertilizer N application. These would affect the agricultural total. But a large portion of the measures proposed by NFU England involve carbon sequestration – C sequestration in soil, C sequestration in fence row shrubs and trees, and biomass conversion into biofuels with the CO2 emissions produced during biofuel manufacture captured and stored underground using mostly-still-to-be-developed Carbon Capture and Storage (CCS) techniques.

With present IPCC calculation protocols, the C to be sequestered by soil and vegetation would be credited to LULUCF and not agriculture. In addition, the C captured by biofuels and CCS would be credited to the energy/transportation sector. The same applies for reduced energy/fuel usage for farm operations like tillage/no-tillage, heating and crop drying.

Official recognition of these agricultural sources and sinks for GHG emission seems essential as world agriculture strives to reduce net GHG emissions from all farm sources – and to have these contributions credited to agriculture.

Calculations involving the carbon content in agricultural products that leave the farm are more complex. I give credit to Fraser McPhee, a Manitoba farmer (no web site but his Twitter address is @FarmerFrase), for publicizing this issue within the Canadian agricultural community. If the carbon contained in farm products were to be included as a credit in agricultural GHG calculations, agriculture would be a major net sink rather than source for greenhouse gases. Per Frankelius has made the same point in a recent peer-reviewed article, A Proposal To Rethink Agriculture In The Climate Calculations.

To illustrate the significance:  Canada produces about 60 million tonnes annually of grain crops alone (oilseed crops and other farm products not included); if it’s assumed the grain is 42% carbon and 14% moisture, this equates to about 80 million tonnes of CO2 equivalent, or more than all emission sums shown in Table 1.

IPCC’s rationale for not doing this includes the fact that the carbon stored in most agricultural products is only fixed temporarily and is returned to the atmosphere as CO2 via respiration or combustion within a few weeks or months. If agriculture were to be given a credit for this, there would need to be a corresponding national offset for CO2 emissions by food processors and consumers. That’s not impossible: the United States in its NIR includes a category called ‘Residential’ in allocating CO2 emissions from fossil fuel consumption. But it adds complexity.

As Fraser McPhee has noted, an equivalent calculation is now done for fertilizer where the CO2 added to ammonium to make urea is classed as a CO2 sink for fertilizer manufacturing and as a CO2 source for agriculture when the urea breaks down in soil to CO2 and ammonium.

A similar reallocation occurs with biofuels, as noted earlier.

An exemption to the need to calculate emissions associated with Canadian food consumption could occur more easily with agri-food exports – presumably a net calculation after accounting for imports.

One can understand why the IPCC opted for the protocols now used. They are simpler. And since the UNFCCC goal is an overall reduction in net global GHG emissions (or, more properly, the global warming caused by those emissions) – and with corrective actions to be taken at the national level – it matters not to the national total whether agri-food emissions show up as ‘agriculture,’ or ‘energy,’ or ‘consumer consumption’ or whatever. Hence, the approach now used.

However, it does have a critical effect in other ways.

Why this has negative implications for agriculture and future food supply

The first of these involves finger-pointing which is important when government policy is set so much by public opinion.

“Who is to blame for big emission numbers?”

Agriculture is already a popular target for journalists and advocacy groups.

Second, it matters in considering the relative merits of different options for improvement. If ‘agricultural’ money spent on reduced farm fuel consumption means credits to the energy sector but not agriculture, will there not be a greater incentive in agriculture to focus on other measures that directly affect the reported agricultural sum?

The third reason involves the direct implications to decisions about farm productivity and Canadian food supply.

Consider, for example, a case where increased N fertilizer usage results in greater N2O emissions but also more photosynthesis and more soil carbon sequestration. With the present system, increased N2O emissions increase reported agricultural GHG emissions, while the increased C sequestration shows up as LULUCF rather than agriculture in the annual report.

Another example: Low-input-low-output agricultural advocates, including some in the organic industry (example here), have emphasized how agricultural GHG emissions can be reduced by reducing/eliminating usage of inputs like fertilizer and pesticides. And they are right; with present calculation protocols, agricultural output and food supply are not considered, only inputs. Organic agriculture generally means fewer GHG emissions per hectare of farmland, but not per unit of production. A good review article is here (even if it, unfortunately, ignores the forest and grassland that would need to be converted to farming to produce food if organic technology were to be adopted on large-scale globally).

Indeed, the most effective way to reduce agricultural GHG emissions is to go beyond ‘low-input-low-output agriculture – to ‘no-input-no-output’ agriculture. To a nation choosing this option, it would mean importing all food, but it would also mean eliminating all agricultural GHG emissions in that country’s annual reporting to UNFCCC.

Realistically, any global strategy for agriculture and GHG emissions must include the need to produce more food for a world human population soon to be 10 billion people, even if a narrow interpretation of UNFCCC/IPCC/NIR numbers and some organic advocates recommend the reverse.

Because of this flaw, some analysts prefer to present agricultural GHG statistics on a per-unit of output basis – eg, amount of CO2e per tonne of grain, litre of milk, or kg of meat. An example is here. However, if, despite the improved efficiency, the result is still increasing GHG emissions for this sector of agriculture, then that does not adequately address the global need to reduce total GHG emissions – including those from farming.

So what’s the conclusion from all of the above – other than the obvious one, “It’s complicated”? 

I would personally like to see a supplementary addition to the annual national reporting protocol for agriculture, at least for Canada, to include all annual GHG-linked input usage (eg., fuel, energy, fertilizer, pesticides), also including a credit for reduced GHG emissions permitted by biofuel usage. A further improvement would include a credit for the CO2e in farm-gate exports. Perhaps a simple illustrative calculation and publication of this statistic would suffice – to illustrate that, unlike for all other Canadian economic sectors except forestry, agriculture represents a net sink for greenhouse gases.

And we need to expose low-input-low-output agricultural systems for what they are: a strategy to replace one challenge for agriculture – GHG emissions – with an even greater problem for society – how to produce enough food to feed the 840 million or more people who are already food deprived, and the several billion more humans to be added in coming decades. For more detail, read here.