“That’s a different objective,” he says. “That’s actually not the way that the regulations are written. But it’s the way that certain people in Ottawa are administering the regulations.”
“My view is that’s not the right approach. If the objective is to reduce carbon in the economy and reduce carbon in fuels, we should be more flexible about how that’s done. We really shouldn’t care, particularly in the short term, about the way that those carbon efficiencies are gained.”
The Clean Fuel Regulations create another carbon-compliance market in Canada, applying to companies in Canada that produce or import gas or diesel fuel and taking “a lifecycle approach,” evaluating emissions associated with a fuel from extraction, processing, distribution, to end-use. The regulations create a credit market where regulated parties create and buy credits to comply with reduction requirements. Those with extra credits can accumulate them for later use or sell them.
There is a “volumetric requirement” in the regulations, according to which a certain percentage of gasoline and diesel must be blended with a low-carbon fuel. There is also a requirement to lower the fuel’s carbon intensity over time, establishing a benchmark for carbon intensity.
“That benchmark gets lower and lower over time,” says Duncanson, “which means companies needed to produce or create more and more compliance credits over time to bring their carbon intensity to the required level.”