Here are common questions farmers have about biofuels and the Clean Fuel Regulations (CFR). Click on the questions below to jump directly to the corresponding answers.
1. How does increasing biofuels usage in Canada benefit farmers?
CCGA and the Canadian canola industry have been working for over two decades to modestly increase biofuel content and further open domestic market opportunities for canola. It is an option with benefits for the environment, farmers, and the economy.
- Diversifying markets and growing domestic demand reduces trade risk. Over 90% of canola production is exported as seed, oil and meal. Increasing domestic demand for canola as a feedstock for biofuels lessens the degree of dependency canola farmers have on exports and exposure to trade disruptions. For instance, blending at 5% biodiesel in Canada could use 1.3 million+ tonnes of seed, a domestic market similar in scale to Japan.
- Biofuels can provide a market for off-grade canola seed that may not be marketable into the food market. This creates a demand for seed that today may have limited sale opportunities.
- The canola industry's crush facilities have the capacity to process 11 million tonnes of seed into oil for a variety of uses, including biofuels. In 2021, a number of projects were announced that will increase capacity in Western Canada to crush approximately 16.5 million tonnes annually.
- Biofuel investments support more value-added agri-processing, which in turn provides additional marketing options and opportunities for higher returns at the farmgate.
- Canola biofuels are renewable, reduce GHG emissions and have several environmental benefits. There are also economic benefits for Canada, increasing the market for canola and encouraging investment in processing.
- Promoting canola as a feedstock for biofuels demonstrates farmer leadership in providing solutions to a greener Canada. Canada has set a bold target to reduce overall greenhouse gas emissions by 15% below 2016 levels by 2030. Due to its lower carbon intensity rating compared to petroleum diesel, if Canada had a 5% biofuel inclusion rate, the annual GHG emission reductions would be equal to removing 1 million cars off Canadian roads each year.
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2. Is the CFR a driver of sustainable demand?
Increasing renewable content could potentially require an additional 1 to 4+ million tonnes of canola seed annually, as the regulation requires continually lower carbon fuels to be placed in the Canadian market.
It is difficult to project the future annual demand for canola as a biofuel feedstock under the CFR due to its complexity and the variety of compliance options (beyond biofuels) available to the obligated parties (producers or importers of fuels in Canada) to satisfy the regulation. However, modelling suggests that under several scenarios the CFS could be a significant demand pull for canola seed as diesel fuel in Canada could approach 8-9% renewable content by 2030. The government's own regulatory impact analysis suggests diesel biofuel blends could reach 11% by 2030.
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3. Could the CFR financially impact my farm?
There are two ways in which the CFS could financially impact farmers, either through changes in the costs of diesel fuel or through the price farmers receive for their canola. We have used various projections and models (including our model canola farm) and our best estimates suggest that the financial impact of the CFR to a typical canola farm will be a net benefit.
This estimate is based on several assumptions which we detail below.
The CFR's cost impact
CCGA has looked at various analyses and our best current analysis estimates the cost impact of the CFR on diesel fuel prices is an increase of $0.034/litre (under 4 cents per litre). This equates to a 4.3% increase in the cost of fuel or approximately $2,000 per year for a typical 3,000 acre grain farm in Saskatchewan. While larger than the cost of the current renewable fuel blend mandates (wholesale fuel prices for 2% biodiesel are currently at par with prices for ultra-low sulphur diesel), it is within current normal fuel price fluctuations.
CCGA's analysis is based on research that tracks the consumption and cost impacts of biofuels. The 2020
Biofuels in Canada report assesses biofuel use from 2010 to 2019. Over this period, the average cost of biofuel blending impact is $0.0058/litre (under 1 cent per litre), based on a 1.91% average renewable blend rate. This equates to a 0.75% increase in fuel cost compared with a scenario without biofuel blending. This value is minor compared with fuel price fluctuations experienced at the wholesale and retail fuel level in Canada.
For the CFR, the government estimates there will be 11% renewables in the diesel fuel mix in 2030. Extending the cost impact of the 2010 to 2019 average blend rate of 1.91% to 11%, the estimated cost impact is $0.034/litre (under 4 cents per litre).
The
government's analysis suggests the CFR could increase diesel prices in 2030 by between 4 and 13 cents per litre. However, this analysis is purely based on three scenarios focusing on the total number of credits in the system, notional credit price levels, and how obligated parties choose to obtain credits. These cost estimates are higher than anticipated, in part, because they do not accurately reflect historic fuel price impacts of increased biofuel blends under policies in place since 2010 (BC, MB), 2011 (AB, Federal), 2012 (SK), and 2014 (ON).
The CFR's impact on canola prices
A complete financial impact of the CFR requires that the impact on cost be weighed against the expected benefits of increased canola demand. Analysis completed in November 2020 by the World Agriculture Economic and Environmental Services (WAEES) titled 'Analysis of the Implications of Canada's Proposed Clean Fuel Standard for Canadian Biofuels and Biofuel Feedstocks' more conservatively estimated there to be a nearly 9% biofuel blend rate in diesel in 2030 due to the CFS. The estimated price impact on canola was calculated to be a $48.55/tonne or $1.10/bushel increase.
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4. What is the Renewable Fuel Standard?
In Canada, the Renewable Fuel Standard (RFS) currently requires 2% (average) renewable content in the diesel that is sold in Canada. This is sometimes referred to as a biofuel mandate. Under the proposed CFS, the 2% requirement of the RFS will be retained, but will be housed within the CFS regulation. Biofuel policies have been implemented around the world as governments look for ways to reduce emissions from the transportation and liquid fuel sectors.
Many provinces have also enacted their own provincial RFS that vary in their requirements and policy details. These typically range from 2-5%. On January 1, 2021 the Manitoba RFS was increased, requiring a 3.5% blending rate, which will climb to 5% in 2022. Provincial polices are nested, meaning that obligated parties (producers and importers of fuel) can satisfy their federal obligations as they meet the provincial obligations. British Columbia's policy contains a RFS and a low carbon fuel standard (LCFS) that requires both volumetric blending and prescribed lowering of carbon intensity of fuel over time. More information on the status of Canada's renewable fuel policies is available from Navius Research.
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5. Is it safe to use biofuels in my tractor or other diesel-powered farm equipment?
Every original equipment manufacturer (OEM) of diesel vehicles approves blends of up to 5% (B5) in their engines. Nearly 80% of OEMs approve blends up to 20% (B20) in some or all of their diesel vehicles. Some even approve the use of B100 in certain types of farm equipment. Long-term tests on older equipment demonstrate no issues when using low-level biofuel blends. Owners should consult their operating manuals and keep in mind that biodiesel acts as a cleaning agent, so check gaskets, hoses and filters when first using biodiesel, as built-up engine sediment may dislodge. More information about safety and performance can be found from your engine manufacturer and from the Government of Canada.
Major farm implement manufacturers support (and encourage) the use of biofuels in their equipment as long as the fuel meets industry quality standards. See your equipment's operating manual or the manufacturer's website for detailed information on the specific engine you may have. Biodiesel-powered engines have been shown to deliver similar torque and horsepower as diesel-powered engines, with reduced engine-wear because of biodiesel's enhanced lubricity.
Canola biofuels are blended with diesel fuels to be used in all types of diesel engines (e.g. cars, trucks, heavy equipment, rail, etc.). Biofuels sold in North America must adhere to quality specifications to assure that industry-approved fuel operability and performance standards are met or exceeded. In North America, biofuels standards are accredited by the Canadian General Standards Board (CGSB) and the American Society for Testing Materials (ASTM).
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6. Is it safe to use biofuels in the winter?
As with regular diesel products, extreme cold weather requires that fuel manufacturers manage their product to maintain optimal performance, according to the accepted biofuel standards. Characteristics of retail diesel fuel change during the year and should pose no issue to consumers. In Minnesota, a cold-weather state, a 5% blend is required from October 1 to March 31, a 10% blend from April 1 to April 14, and a 20% blend from April 15 to September 30.
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7. Why is canola-based biofuel better for the environment?
Canola biofuels have excellent GHG reduction characteristics, emitting up to 90% less GHG emissions than conventional diesel fuel. This reduction is calculated on a lifecycle basis, which includes growing, processing and transportation. Info about biodiesel performance can be found
here.
Greenhouse gas (GHG) emissions are measured over the full life cycle of growing, harvesting, manufacturing, distributing, and using biofuels. A life cycle assessment (LCA) is performed following internationally accepted LCA guidelines to quantify the lifecycle GHG emissions from a fuel, usually described as its "carbon intensity" score.
While scientists and researchers look for cleaner technologies to power heavy duty vehicles in the future, today biofuel is the only viable, low-carbon energy alterative to power vehicles such as tractors, heavy-duty and transport trucks, buses, locomotives, and mining and forestry equipment. It's something Canada can do today to help meet our GHG reduction targets.
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8. Is there enough canola to supply both our food and fuel markets?
Biofuel is a great market for off-grade canola, unsuitable for food. Canadian farmers are also increasing the amount of canola grown on the same amount of land (e.g. increasing per acre yields) using modern agriculture methods, so increased biofuel production will not impact the food supply.
There is more than enough canola grown in Canada to meet increased demand. Canada currently produces approximately 20 million tonnes of canola each year with targets to grow production to 26 million tonnes by 2025. If canola supplied renewable content equal to a 5% biofuel blend, that would require 3.2 million tonnes of seed and reduce GHG by more than 4.5 million tonnes (C02-equivalent), an amount easily accommodated through projected increased production alone.
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9. Is biodiesel different than renewable diesel?
In Canada the term 'renewable alternatives to diesel' is typically used as a catch-all for the various types of renewable fuels that can displace fossil diesel. There are some important differences in the biofuel production processes, as the three major ways to manufacture canola-based biofuel have different chemical and environmental properties:
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Biodiesel (Fatty Acid Methyl Ester or
FAME) is typically produced by mixing a fat or oil feedstock (e.g. canola, soybean, rendered animal fat, used vegetable oil, etc.) with methanol and a catalyst to remove the glycerol (which is refined into glycerine and sold as a co-product). The mixture is further processed to achieve stringent quality standards. The biodiesel is then blended into diesel fuel to achieve a desired blend level (e.g. 2% biodiesel). The fuel will have specific chemical properties, such as cloud point, based on the feedstock.
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Renewable diesel (Hydrogenation-Derived Renewable Diesel or
HDRD), often referred to as a drop-in fuel, is produced in a process similar to petroleum refining where hydrogen and catalysts are utilized. The finished biofuel is chemically identical, regardless of the feedstock used. Compared to biodiesel, it has higher carbon intensity because it requires more energy inputs (hydrogen, heat) to produce. A benefit of renewable diesel is that it can be blended in high proportion with fossil diesel fuel as it is virtually chemically indistinguishable.
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Co-processing is fundamentally different from both FAME and HDRD in two ways. First, the biomass feedstock is introduced at the same time as the crude petroleum product enters the refining process, rather than being blended at the end stage. Second, co-processing is done in a traditional petroleum refinery rather than in dedicated biofuel production facilities. Co-processing has the potential to use large volumes of canola oil.
Currently, in Canada, only biodiesel is manufactured. There are several renewable diesel plants in the United States
and in 2021, several major refining companies
released plans to invest in renewable diesel production in Canada.
Co-processing is currently being tested in Canada.
Further information on the biofuel industry in Canada: Advanced Biofuels Canada.
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