Canada implements national RFS, allows open mandate for blenders

By Kris Bevill | September 23, 2010
It's been years in the making, but Canada's first national renewable fuels standard (RFS) is finally in place. The mandate to require refiners to blend 5 percent renewable fuels into their gasoline supplies went into effect on Sept. 1 and was met with enthusiastic optimism from members of the nation's ethanol industry, according to Canadian Renewable Fuels Association President Gordon Quaiattini. "This has been a long time coming and there've been some dedicated folks in the ethanol market in Canada who have waited a long time to see this national mandate come into force," he said. "We're no longer an industry in its infancy. I think it's fair to say that we've achieved an adolescent stage and there's more to come."

The initial RFS allows refiners to use fuels derived from any of the rule's defined fuel pathways to comply with the 5 percent blending mandate. Ethanol, biodiesel and petroleum-based biofuels all qualify as renewable fuels, so if an oil company is blending biodiesel into its supply, for example, that amount can be counted toward the company's overall requirements. Quaiattini said ethanol is expected to be the prominent renewable fuel used, however. "Given the viability of what's in the marketplace, we fully expect that the vast majority of the renewable fuel content will be ethanol," he added.

While biodiesel and other renewable fuels can be used to meet the RFS for the current time, the final rule contains an amendment for a 2 percent renewable diesel mandate to go into effect in 2011. When that happens, refiners will no longer be allowed to use biodiesel and other renewable diesel fuels to meet the 5 percent RFS.

Canada's total gas pool is approximately 40 billion liters per year (11 billion gallons), so the 5 percent mandate will require 2 billion liters (528 million gallons) of renewable fuel to be blended into the nation's fuel. According to Quaiattini, the Canadian ethanol industry currently produces a total of 1.7 billion liters of fuel. This puts Canadian ethanol producers in the enviable position of needing to build out its supply to meet demand. In early September, Quaiattini said the industry was awaiting final decisions from Natural Resources Canada on its biofuels program, which is the source of incentives for new biofuels production capacity, and anticipated that ethanol projects would be chosen for financial support in order to bring the industry capacity up to 2 billion liters.

A unique aspect of Canada's RFS, according to Quaiattini, is that it is an "open mandate." This allows refiners to blend more ethanol in some areas and still be compliant with the RFS as long as the company's average amount blended is at least 5 percent. While this will likely initially be illustrated in reports of over blending in some areas and very little blending in remote areas, Quaiattini expects it to quickly level out. "We will see ethanol in all regions of the country now because of the national mandate," he said. The decision to allow refiners some flexibility in where they blend renewable fuels into their supply was a nod to the geographic complexity of a nation that has a very large refining industry. "We recognize that, in the end, these are our customers," Quaiattini said. "So we've worked cooperatively with the oil industry and government to insure that as we bring renewable fuels into the Canadian market through a national mandate, it recognizes how the industry works here and ensures the best transition possible in terms of ensuring that as much ethanol can find its way into the marketplace."

Of the provinces that already have blending requirements, Manitoba has the highest mandate and requires all gasoline to include 8.5 percent renewable fuels. Saskatchewan has a 7.5 RFS, while Ontario and British Columbia each have 5 percent mandates. Alberta will implement a 5 percent RFS beginning next year. The national mandate doesn't override these requirements.

Looking ahead, the CRFA has already begun talks with industry members to discuss the industry's logical growth pattern and what needs to be done to continue to increase demand for their products. There is "no question" that cellulosic ethanol will play a role in future renewable fuels mandates, according to Quaiattini. But whatever steps are taken to include cellulosic biofuels in a Canadian RFS, they are likely to be as measured as the initial move was to establish a national mandate. "We are absolutely looking at not only having commercialization happen here but, different from the U.S. experience, we are quite keen to talk to the government about an appropriate regulatory mechanism that ensures there is a market for that fuel," he said. "We are looking at insuring that there is both a linkage between the government's existing next-generation biofuels fund and timing it to what would be an appropriate mandate to have that fuel actually used."