New clean fuel regulations aimed at raising gas prices hit low-income Canadians the most

OTTAWA — New federal Clean Fuel Regulations will help eliminate millions of tonnes of greenhouse gases over the next eight years and encourage investment in renewable fuels, but could drive up the price at the pump for consumers up to 13 cents a litre, according to the government’s own analysis shows.

The regulations will require major fuel suppliers – primarily refineries and importers of gasoline and diesel – to reduce emissions from fuels throughout their life cycle, from extraction to processing, transport and disposal. end use.

An emissions cap will come into effect next July and increase slightly each year until 2030.

An impact assessment of the new regulations was released Wednesday alongside the final version of the regulations, which have been in the works since the Liberals’ first climate plan in 2016.

The assessment indicates that rising gasoline prices will have the greatest impact on low-income families, single mothers and seniors, who are most vulnerable to fluctuations in energy costs and are the least likely to be able to afford alternatives such as electric vehicles.

He said the total emissions reduced each year through the regulations could be around 18 million tonnes in 2030 if there were no big changes in fuel consumption, such as a sharp increase in use. electric vehicles. Incorporating more behavioral changes and lower fuel consumption as a result of these policies could reduce emissions by more than 26 million tonnes.

At the low end, that means regulations would represent seven to eight percent of the emissions reductions Canada needs to achieve from what they were in 2020, the most recent year for which data is available. are available. At the high end, this could be 10-12%.

Initially, the regulations were supposed to cover all fuels, but Environment Minister Steven Guilbeault said in an interview that a decision had been made to refocus them on gasoline and diesel only.

“What this policy or regulation is trying to do is ensure that the fuel we burn to get around is cleaner,” he said.

This will be done through actions such as reducing emissions during production through carbon capture systems, blending the end product with cleaner biofuels such as ethanol, or more indirect actions such as investing in the charging of electric vehicles or the production and distribution of low-carbon fuels.

Guilbeault said the main purpose of the regulations is to encourage greater production of cleaner fuels and he is “confident” that this will happen.

Andrea Kent, board member of Renewable Industries Canada and vice-president of Greenfield Global, Canada’s largest ethanol producer, said overall there are signs the new regulations will have a positive impact on its industry.

“When you look at a standard low-carbon fuel policy, biofuels are very convenient, they’re already in use, they’re an affordable option, and they’re also very, very sustainable,” she said.

The impact analysis indicates that it will cost refineries and other fuel suppliers between $22.6 billion and $46.6 billion to comply, an average of about $151 per tonne of emissions reduced. He suggests that the policy could have a $9 billion impact on Canada’s GDP, or about 0.3%.

The longer term effect will be lower costs for low carbon fuels and higher costs for gasoline and diesel. The impact analysis found gasoline prices could increase by 6 to 13 cents per litre, which would add between $76 and $174 to the cost of filling a car with gasoline each year.

NDP Environment Critic Laurel Collins called the discovery “alarming.”

“Hard-working Canadian families should not be paying the costs of emissions reductions while wealthy oil and gas companies are making record profits,” she said.

But Dan Woynillowicz, director of Polaris Strategy, which is a climate change and energy policy consultancy, said it was unclear how much of the cost will be passed on to consumers.

Since 2019, refinery profit margins have more than doubled. Government analysis indicates that in June 2019, when pump prices averaged nearly $1.22 per liter in Canada, about a fifth of that amount went to refineries.

In June 2022, when pump prices averaged over $2.10 a liter, refineries got about a quarter of that.

Woynillowicz said these profits can be used to cover at least some of the costs associated with these regulations, and he said refineries need to realize that the higher prices at the pump go, the faster Canadians will switch to electric cars. and other options. .

Right now they can raise the price because the gas companies have very little competition.

“Refineries are going to have to kind of say, ‘OK, well, now we have competition that we didn’t have before, so how much of that cost are we actually passing on,'” he said.

Woynillowicz also said the transition from fossil fuels will eventually protect Canadians from the spike in oil prices we’ve seen in recent months. Clean electricity and biofuels are not subject to the same global market forces as oil, he said.

This report from The Canadian Press was first published on June 30, 2022.

Mia Rabson, The Canadian Press