Canada lags the United States in climate accounting of biofuels

The Clean Fuel Standard (CFS), a major pillar of the Pan-Canadian Framework on Clean Growth and Climate Change, aims to reduce GHG emissions by 30 million tonnes of CO2e annually by 2030 by reducing the GHG intensity of liquid, gaseous, and solid fuels used in transport, buildings, and industry. However, Canada’s climate goals are threatened by an accounting error: ignoring emissions from indirect land-use change (ILUC) when quantifying the greenhouse gas (GHG) performance of biofuels. On its current pathway, the CFS could hit its target on paper but will fall far short in real GHG reductions.

ILUC is an unavoidable consequence of most types of biofuels. When commodities like corn, canola, and tallow are used for biofuel production, they are diverted from existing uses such as food, livestock feed, soap making, etc. In order to meet the growing demand for these resources, agricultural land expands. Even if the corn and canola used for biofuel does not come directly from recently cleared cropland, it still causes land clearing elsewhere and spurs the associated GHG emissions from deforestation and soil disturbance. There is a broad consensus among scientists that ILUC significantly undermines the climate benefits of biofuels.

While the CFS is expected to drive increased consumption of biofuels, biogas, and solid biomass fuels, the Canadian government has stated that it will not factor in the impacts of ILUC emissions in the standard. Instead, the proposed policy will only compare the direct emissions from feedstock and fuel production to the GHG intensity of fossil fuels. This flawed accounting methodology will substantially over-report the true GHG savings of biofuels and, as a result, Canada will claim 30 million tonnes CO2e savings in 2030 while actually delivering far lower. 

The graph below shows that the proposed CFS will actually deliver around half its target for GHG reductions. The column on the left side shows the GHG savings that the Canadian government will incorrectly calculate for each major type of fuel we expect to be used to comply with the CFS. In contrast, the right-side column shows the actual GHG savings of those fuels when ILUC emissions are included. We base our analysis on Canada’s current biofuel consumption, resource availability, and likely sources of biofuel imports. Our assumptions on direct and indirect GHG emissions from biofuel production are largely taken from California’s analysis for its Low Carbon Fuel Standard, supplemented by our own analysis on indirect emissions from wastes, residues, and wood following our previously published methodology.

Reported vs. Real GHG savings from the Canadian clean fuel standards in 2030

To put this problem into context, the lost climate benefits from failing to account for ILUC are almost equal in magnitude to the GHG savings from Canada’s 2025 vehicle GHG standards (19 million tonnes CO2e reduction on an average annual basis). This means that Canada’s efforts on improving vehicle efficiency could be wiped out by this single design flaw in its biofuel policy.

If Canada fails to change the way GHG emissions are calculated in the policy, it would stand alone in having a low carbon fuel policy that does not address ILUC. The United States and California both included ILUC accounting in the Renewable Fuel Standard (RFS) and the Low Carbon Fuel Standard (LCFS), respectively, starting in 2010. The European Union did not initially address ILUC when its Renewable Energy Directive (RED) was established in 2009 and has struggled with this decision ever since. When the European Commission proposed adopting ILUC accounting in the RED just three years later, the first-generation biofuel industry had already accumulated enough lobbying power to block the change. A compromise was reached to limit the contribution of food-based biofuels to the 2020 renewable fuel target in the RED and the Commission has proposed a recast RED for the period 2021-2030 with no target for food-based biofuels at all.The European Union has tread a painful road to sidestep ILUC, and should serve as a warning to Canadian policymakers. Canada has suggested that it may consider addressing ILUC at an unspecified future date, but, in doing so, would repeat all the mistakes the EU has made.

Lastly, there’s some irony in all this. Like California’s LCFS, the design of the CFS is meant to reward better performing fuels by awarding credits on the basis of GHG reductions. But without ILUC accounting, truly low carbon biofuels like those produced from sustainably harvested agricultural residues and municipal waste will be treated roughly the same as food-based biofuels with high land use change emissions, effectively eliminating the benefit of this kind of policy design.

So how can Canada get back on track? The ideal solution would be to conduct a new round of ILUC modeling specifically for the CFS with opportunity for stakeholder and expert involvement. Canada is running short on time though, with a draft regulation expected in late 2018. A practical solution would be to adopt California’s ILUC values as provisional values to be used until a thorough, Canada-specific analysis is completed. This would be the right way to protect the integrity of Canada’s GHG commitments and maintain its status as a world leader on climate change.

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