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This week our guest is Doug Hooper, Director of Policy and Regulations at Advanced Biofuels Canada. Advanced Biofuels Canada is an industry association that promotes the production and use of biofuels and renewable synthetic fuels. 

One of the topics covered in the podcast is Canada’s Clean Fuels Regulation (CFR). The policy is nearing its first anniversary after coming into effect on July 1, 2023 (Canada Day). The rule requires Canadian refiners and fuel importers to reduce the carbon intensity of the gasoline and diesel sold by about 2% annually between 2023 and 2030.  By 2030, under the rule, Canada’s average gasoline and diesel fuel will be 15% less carbon intensive.  Biofuels will be a major compliance source for the new rule; emissions reductions are also expected in upstream oil and gas (for domestically consumed oil) and alternative transportation fuels, such as hydrogen and electricity.

The conversation considered Canadian competitiveness with the United States for liquid biofuel production. Doug explained how the Inflation Reduction Act (IRA) of 2022 put a chill on investing in biofuel production facilities in Canada. The recent Canadian Federal Budget 2024 introduced some new measures to help close the gap, but will this be enough? 

Research referenced in this podcast:

• The annual report from Navius Research called “Biofuels in Canada 2023”

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Episode 240 transcript

Announcer 1:

The information and opinions presented in this Arc Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.

Announcer 2:

This is the Arc Energy Ideas podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.

Jackie Forrest:

Welcome to the Arc Energy Ideas podcast. I’m Jackie Forrest.

Peter Tertzakian:

And I’m Peter Tertzakian. Welcome back. So big energy news, right?

Jackie Forrest:

Yeah.

Peter Tertzakian:

Like big.

Jackie Forrest:

May 1 was the day that the Trans Mountain pipeline started operating after over 10 years in the making.

Peter Tertzakian:

Yeah.

Jackie Forrest:

So that’s pretty exciting that it’s been a long journey, lots of ups and downs that we actually got the pipeline operating.

Peter Tertzakian:

Yeah, ups and downs in many dimensions over a couple of mountains, and also ups and downs in construction, and mostly ups on cost. So, let’s have a guest.

Jackie Forrest:

Well, we are going to have Dawn Farrell, the CEO of Trans Mountain pipeline come and join us in a few weeks, so we will hear from her about how the operations are going, and I’m excited about that.

But I do want to also talk one thing before we introduce today’s guest with a different topic is I wanted to do a clarification on our budget podcast from a couple of episodes ago. We talked about the investment tax credits that were coming. A couple of them are in Parliament, others are going to come over the course of this year. We described how the credit works a little bit wrong, so I want to clarify that. We described it as you get the credit, and then you have to work it off against your taxes in future years. Actually, you can use it against your existing taxes in that given year, but the rest is actually given as a cash refund in the same year.

So, let’s say you had $100,000 in tax credit, and you owed $30,000 in taxes, then $70,000 in cash would be given to you in that year. So, this makes this tax credit particularly valuable, because you get the money directly and quickly, and it really comes directly off the cost of the investment. So, I wanted to clarify that. In the US, not all of the tax credits have that feature. So, some do, or some have them for some number of years, but that’s an advantage for Canada. And so, thank you to our listeners for always correcting us and continuing to have us learn. So, we wanted to make sure that that was clarified for everyone who follows.

Peter Tertzakian:

Good. Well, let’s move on to today’s topic. And by the way, have you’ve watched those documentaries on ancient civilizations and stuff? I’m a sucker for that kind of thing, like how the pyramids were built and what the Incas did in Peru and things like that and the mysteries. Okay, I’ll admit it. I’m even intrigued by things like crop circles and how they’re formed. I know it’s a bunch of people with plywood, but still, some of these things are pretty interesting, and maybe we’ll do a show on ancient civilizations, mysteries, and their energy use at some point. But I thought about crop circles as I thought about our guest today. And no, we’re not going to talk about crop circles, but we are going to talk about crops, and I think it’s only appropriate that we welcome our guest to talk about biofuels. So, I think, Doug, we’ve had you on the show before, Doug Hooper, Director of Policy and Regulations for the Advanced Biofuels Canada. It’s an industry association that promotes the production and use of advanced biofuels in Canada. And so welcome, Doug.

Doug Hooper:

Great to be here. Thanks for having me back.

Jackie Forrest:

It was actually 2020, so lots has changed us since you joined us last time, and we’re coming up to the one-year anniversary of the Canadian Fuel Regulations. I think we called it something different even back then when you came on the show. So, we want to talk about that, but first just remind people since it’s been a while, a bit about Advanced Biofuels Canada, and do you represent liquids, biofuels, RNG? What types of fuels do you work on?

Doug Hooper:

Advanced Biofuels Canada, or ABFC as I might refer to it, is a traditional industry association, and it’s working for the companies that produce and supply the fuels themselves, as well as the technologies and provide engineering lifecycle assessment services and things like that. The origins go back to pretty much my origins in this market, which is about 2005. We’re starting to introduce biofuels into the Canadian market and needed to address competitiveness of policies with provincial governments and the federal government.

So, the roots of ABFC actually go back to 2006. It was established as an industry non-profit association in the Province of Alberta, and we work primarily in Alberta. We expanded to Western Canada. We expanded from biodiesel into all forms of biofuels and synthetic fuels now. And although we’re primarily focused on the liquid internal combustion engine platform, given the nature of the technologies and the CI scoring of regulations, we are involved with clean hydrogen, blue or green, as well as RNG, biogas. All the platforms that can decarbonize transportation end up being a factor in our space.

Jackie Forrest:

Actually, maybe a good clarification, so e-fuels is often a term used today, we’ve never introduced that term, and describe what that is versus a biofuel. It sounds like you are covering both of them if you’re doing green hydrogen.

Doug Hooper:

I’m not a great expert on e-fuels, but the basic concept there is that you use electricity in order to drive a process which will synthesize a carbon chain that can replace gasoline, diesel, or jet fuel. And so, you can use renewable power, direct air capture. You can also use flue stack capture of CO2, break the carbon molecules off, and reset them. That’s why we say synthetic fuels now in addition to biofuels. It’s not all biomass-based in terms of the fuels that we’ll be working with in the 2030/2050 timeframe.

Jackie Forrest:

Yeah. And because the electricity is coming from renewable sources, people view that as a renewable fuel as well. That’s something I just learned in the last little while of that terminology change.

Peter Tertzakian:

There is a lot of jargon and the acronyms, and things always are changing, but at the core of it all, I think Canada is a vast country that has a lot of biomass, a lot of agriculture, and so let’s get a sense of the core what I would call biofuels, biofuels from agricultural processes and related. And you just commissioned an annual report from Navius Research called Biofuels in Canada 2023 that outlines the current stats. So, give us a snapshot of where these various biofuels come from, what percentage of the total energy mix they are, and those sorts of things.

Doug Hooper:

Sure. Look, caveat at the outset, the data in Canada lags a fair bit, so we don’t get regulatory information reporting out on our systems until well after the end of each calendar year. So, the Navius Research Biofuels in Canada 2023 report worked with hard data on 2021 and fairly well-informed but not finalized data for 2022, so call that an estimate year. But in 2022, we were blending 7.6% renewable content in gasoline and 3.8% renewable content in diesel. And if you total up the volumes associated with those percentages, it was just over 4 billion liters of demand in that period.

Jackie Forrest:

So, we have this Clean Fuel Regulations that’s, as I was saying, it started on July 1st, 2023, Canada Day, so coming up to the anniversary. Just for everyone’s reminder, we talked about this regulation quite a bit, but it’s been a while, that it requires blenders of fuel to reduce the carbon intensity of the gasoline and diesel they sell about 2% each year between 2023 and 2030. And by 2030, if all goes well, the average fuel consumed in Canada would be 15% less carbon intensive, and a lot of modeling has shown, and we talked to you, Doug, back in 2020, that biofuels would be a big part of this. So, a lot of people anticipated that growth and were building projects in Canada. However, there’s been some policy changes on the other side, the US side of the border, that has made it more compelling potentially to invest there.

But let’s talk a little bit about the Clean Fuel Regulations. It’s been running for almost a year. Can you tell us anything about it? Is it pretty much in full swing? Are we still getting a lot of details? And you have several ways of reducing your emissions, biofuels being one of them. You could also reduce through reducing emissions in oil and gas and getting some credits for that or using alternative fuels, like hydrogen or electricity.

Doug Hooper:

There’s a lot there. Why don’t I start with just sort of context setting. The regulation itself was implemented, the first compliance period is July 1st, 2023, to the end of 2023. However, when the reg was finalized in June of 2022, that initiated the early credit generation period. So arguably, the regulation is now two years old. The market is definitely two years old. You mentioned blending fuels, Jackie. The way the federal regulations work in Canada on fuels are that the obligated parties are the producers of fuels and the importers of fuels. In our provincial regulatory environment, typically, the obligation is slightly different. It’s on the fuel suppliers, it’s the people who move fuels from the rack down into the market. But you asked about whether it’s up and running. Yes, it’s up and running, but there are still quite a number of details to work out. For example, a big one that’s coming next month is Environment and Climate Change Canada, ECCC, I’ll call them, is going to publish an update to the life cycle assessment model.

And this is the model that determines exactly what your full life cycle carbon intensity is to produce your biofuel from whatever feedstock, process it, transport it, and ultimately combust it somewhere. So, that scoring of carbon intensity has been done since the inception of the CFR using a brand-new tool that ECCC commissioned and published at the outset.

It’s been going through a number of reviews and updates. There’s a stakeholder technical advisory committee that works with the ECCC’s modeling team to update the data sets and improve the model. And they’ve said since the beginning that June ’24 is when they’re going to update that model and everybody has to go back, recertify their fuels using the new model and get what’s a more accurate, if you will, carbon intensity score.

Peter Tertzakian:

What’s your sense on this? You must sort of hear some rumblings with this new model. Is it going to turn out that biofuels are more carbon intense than first thought or less?

Doug Hooper:

Yeah, I haven’t really heard it debated in an up or down CI score context. It’s more that the data sets themselves measuring the agricultural processes, the conversion processes are just going to be that much more accurate and up to date. I just want to finish this point about the CI scoring. Everybody will have to recertify their fuel process and get that done before the end of next year. So, there’s quite a lag here, but that true up, that new score will true up your credit generation in 2023.

Peter Tertzakian:

So, I think the question in my mind and on the minds of many is, okay, so we’ve brought this complicated legislation in. There’s truing up and calibration, new modeling, and here we are halfway into ’24. We’ve got to be 15% less carbon intensive in the liquid fuels by 2030, which is only five and a half years away. I also heard you say, and I know this, that data lags by two years, so we’re sort of got this blind spot behind us for two years. We don’t know what’s going on. So, are we on track, I guess is my basic question? Do you think to reduce emissions or intensity by 15% by 2030?

Doug Hooper:

Yes. I think the regulation itself is well on track to achieve that targeted outcome.

Peter Tertzakian:

And if we don’t change the way we source our data, which seems frankly, this has always been something that annoys me is how long it takes for the data to be reported in this day and age of real-time monitoring. But we probably won’t know until 2032 unless something changes in the data gathering processes, whether or not we were successful in 2030.

Doug Hooper:

Yeah. Well, in terms of ECCC reporting out their data, we can hone in on that a bit. They anticipate now that they’ll publish the first preliminary data on the credit market and the activity under the whole CFR in June, so next month. And the point I was trying to make earlier is the market has to keep in mind that that is going to be preliminary credit information that will be revised under the existing terms of the statute. And we’re not sure how often ECCC will update their reports. British Columbia now has a system where they update their credit market activity fairly regularly. Took some time to get that running. I think ECCC is on track with what they forecast is as the rolling out of the CFR when it launched.

Jackie Forrest:

One more question on the reporting. I thought we were supposed to have transparent pricing in terms of what these carbon credits are worth and what they’re trading for. I couldn’t find anything about that yet. Is that still coming?

Doug Hooper:

Yeah, that’s the report that I was referring to earlier. When ECCC publishes their first CFR market report or a credit market report, I’m not sure what they’ll title it, it will have the information that they’ve received on pricing, volumes, registered parties. There’ll be quite a lot of information in there. They consulted on the content of the report last month. So, everybody’s had some time to put their input in as to what they would like to see in a credit report. But we’ll get the first draft of it out hopefully next month.

Peter Tertzakian:

Doug, last time we spoke with you, we brought up the issue of food versus fuel. And since 2020, it’s no secret that a bag of groceries has gone up dramatically. And so, we reach 15% by 2030 as projected, but then we’ve got seven times as much to go to get in terms of net zero in our fuels by different methods. But I guess the question is to what extent is the increasing use of biofuels competitive with a bag of groceries and what are the views on that now that we have the situation evolved to where it is since we spoke with the last?

Doug Hooper:

I don’t know if I can tie a litre of biofuel to a bag of groceries directly, but it’s still a dominant topic, food versus fuel and what is the availability of supply and where does that supply come from? I’ll take it from a couple of levels. At the domestic level in Canada with the CFR, what ECCC embedded in this regulation was direct measures, regulatory measures to protect the environmental attributes and the sustainability of the biomass that’s used to produce low carbon intensity fuels under the regulation. And they’re called land use and biodiversity criteria. And they assure that any of the biomass that’s going into fuels that are consumed under the reg are done in an appropriate manner that safeguards environmental attributes. So, there’s that aspect that’s built in.

I’ll go up to the global level though and just maybe give some context as to where does this all supposedly end up in 2050 for a net-zero transportation energy system. And I was just at the G7 meetings in Turin, Italy last weekend before last. They had a clean energy ministerial there for energy and climate ministers and they were focusing on a joint statement. There’s an international forum on sustainable biofuels. And so, the folks at the table there are the head of the IEA, the International Energy Agency, UN’s Food and Agricultural Organizations, Global Bioenergy Partnership, the G20 Global Biofuels Alliance that was just launched at the India G20 meetings last year. And then of course the G7 biofuel platform group.

Their conclusion on this is that biofuels must be part of the 2050 net-zero energy mix and in order to safeguard these environmental attributes that they have these certification and sustainability attributes to them. The estimate that one of the groups put on the table was that about 20% of the transportation mix would be biomass derived fuels in that 2050 context.

We’re not talking about today’s suite of biofuels completely replacing gasoline, diesel, and jet fuel. It’s taking up a piece of it. Lower carbon intensity fossil fuels play a part, getting to 2050. Of course, electric vehicles play a part. Hydrogen plays a part. These synthetic fuels that we talked about earlier, they’re all part of the mix, but I think that the punch line is we can’t get there on any single platform. We can’t electrify everything. Hydrogen is not going to show up in time and be cost-effective to scale. We got to do it all is sort of the bottom line.

Jackie Forrest:

All right, so that’s great context in that that kind of ratio many people feel is sustainable in terms of the amount of food it would require. Let’s come back to the Canadian situation. I think anyone who’s listened to the podcast so far can understand that the Clean Fuel Regulations is a highly complex policy. For those that haven’t been following it as closely as you and I, Doug, I think it’s been six years of work in the making, if not more at this point.

And now we have the Conservative Party of Canada with polling very strongly in Canada, that they may become the actual leader of Canada here in the next election. Is there a risk, do you think that they would scrap this policy and we wouldn’t have it after all these years of developing it? Such a complex policy?

Doug Hooper:

Yeah, climate policies have an inherent political risk for sure. At any time, there’s a change in governments, particularly the climate policies seem to have attracted a lot of attention and partisan debates.

In terms of where we are with the Conservative party of Canada, we have discussed with them their position on both the carbon tax on fuels, which is very clear that they intend to eliminate that immediately, and on the regulatory side, they’re reviewing how the reg is operating and whether it meets with their policy structure and the approach that they would bring forward if they took over government.

I can reflect on a couple of things, though, in that discussion. First of all, the full fuel supply chain, including some of the climate and energy NGO sector members, are strongly supportive of the CFR. That includes the agricultural forestry waste management folks, it includes the biofuel processors themselves, of course, but it also includes the refining sector in Canada. The Canadian Fuels Association is strongly endorsing the CFR and there’s a couple of reasons for that that I think appeal to Conservative policy frameworks.

One is that the regulation is market-based, and so what that means is the obligated parties, the refiners and the importers, they have a myriad of ways they can meet compliance and reduce their costs and protect their competitiveness. The other aspect of the CFR is that, and by that we’re just looking at the carbon emissions of all fuels, electric fuels, CCS, biofuels. They’re all measured on the same metric of carbon intensity. And that system was leading to what you were referring to earlier, Jackie, the transparent national credit market. Canada’s doesn’t have very many people. We don’t have a lot of fuel, really, at the end of the day. So having a national credit market with a transparent pricing system allows everybody to factor their decision-making in capital assets and operating plans, and so it’s really a strong policy.

Peter Tertzakian:

Yeah, I don’t think that governmental change will lead to shredding of the policy outright. I can see elements of it being tweaked, and also because several biofuel facilities have been built over the last while that have depended upon policies like that, and it gets entrenched. But having said that, there’s some projects that have been put on hold as well. Earlier in ’23, Parkland scrapped a $600 million renewable diesel project in Burnaby, there was all sorts of factors including competitiveness and on.

Can you talk a little bit about maybe now the resistance to building more biofuel facilities or why some of these companies are potentially putting on hold some of their decisions despite the fact that this policy, CFR, is coming into play, getting calibrated, getting some momentum?

Doug Hooper:

I think the top two risks in the biofuel, or the clean fuel sector are policy-based risks. And by these, I mean fiscal policies, regulatory policies, the stability of policy like we were just talking about in terms of regime change and the fact that it’s become quite partisan. So, policy risk is a number one influence.

Peter Tertzakian:

Do you think that some of these companies are basically saying, “I’ll wait until after the next election and then I’ll make my decision?” You think that that’s what’s happening?

Doug Hooper:

Well, I think top of the list in the policy risk is what the US Inflation Reduction Act did to clean energy markets writ large. One of the folks at the G7 meeting said, “The Inflation Reduction Act said go out and score a goal.” So, the US took approach of putting a lot of stimuluses into all forms of clean energy, not just our transportation fuel side. So that’s really been a bit of a game changer and that definitely put a chill in the Canadian market. When IRA came out in August of 2022, it really moved the needle towards locating assets in the US

Peter Tertzakian:

And it was very broad based, like a shotgun approach to all sorts of clean energy technology and industry development. Whereas here the government stated policy was, “Okay, we can’t do that. We have to be more focused. So we’re focusing on areas like batteries,” which we’re seeing announced multi-billion if not of multi tens of billions of dollars announcements. So that’s an area of focus. It seems surprising to me that as a country with such a large agricultural basket that we’re not actually going hard at that as well. I mean, given that, it seems to me like that’s a resource advantage that we have.

Doug Hooper:

And we would agree with you in multiple reasons, not just the agricultural supply, but we’ve got the refining and fuel distribution assets. We can move products to market very efficiently and we can generate, create low-carbon products and get them to market. And so there’s those, and we’ve got energy security issues. Right now in Canada, we import diesel fuel and jet fuel in our two primary economies, Alberta and BC, the Western focus, and then Ontario and Quebec. And so even though we’re a net exporter of refined petroleum products, that largely attaches to Irving’s facility and those fuels all move down the eastern seaboard. So our economy is import dependent. Now we’re shifting to these clean fuels and if we don’t scale up capacity at the refining complexes, near the refining complexes and get them into the fuel distribution system, we’re going to become increasingly import reliant.

Peter Tertzakian:

Yeah. So what I’m hearing you saying is the IRA, Inflation Reduction Act, in the United States came and basically was a huge competitive challenge to the point where we now have to import things like biofuels, which seems absurd given the seeming advantage we would have with our agricultural base and refining and pipes and distributions and everything else.

Jackie Forrest:

To make it worse, Peter, we’re backing away domestically produced petroleum coming from our own only to substitute that with the dependence on imports. So from an energy security perspective, we’re putting in a policy that’s incentivizing more consumption of this stuff, but we don’t have the policies to also incent people to build the projects here.

Now, Doug, there was some good news in budget 2024, and we did touch on it a couple of weeks ago, that said, up to 500 million per year from the Clean Fuel Regulations could support Canadian biofuels production. Do you think that went far enough to incent people to try to build projects here, or do you think they’re still going to make more money by building those projects in the US?

Doug Hooper:

To be determined, is the short answer. The tools are in the box is the way we phrased it. I think when budget came out to address competitiveness, both on the operating side, which is what the IRA 45Z Clean Fuel Production Credit does, it pays for producers, but also on the capital side. So the budget’s got a couple of measures around the Canada infrastructure bank, $500 million and retooling the Clean Fuels Fund of $776 million of that pool left. Both of those measures really go after helping support capital investments of new capacity. That first fund, though, that you refer to the CFR Production Fund, that’s the one that could, the details of the design remain to be determined, but it could address the 45Z PTC.

The other issue beyond the design is the source of funding the budget points to the Emission Reduction Fund payments that the federal government receives, and their Emission Reduction Funds can be established by any level of government or non-government entity. We’ve seen Newfoundland and ECCC both create funds, New Brunswick, Alberta, and other jurisdictions will as well. And there’s definitely not secure funding for that budget item and definitely would not be in place by January 1st of 2025, which is when the IRA 45Z kicks in. So there’s some details to work out.

I’ll raise a flag here for other fiscal measures, though. Quebec has a biofuel production credit for certain types of biofuels in their budget. They revised that this year, and it’s a very effective mechanism to help attract production in the province. And on the other side, in British Columbia, we’ve got a low-carbon fuel standard with a self-funding mechanism called Initiative Agreements. And these are BC LCFS credits that have gone to Imperial Oil to support their Strathcona project, Tidewater and Parkland. And so it’s been an effective mechanism to help attract capital as well. So there’s other measures out there.

Jackie Forrest:

Right, if the provinces add some more benefits on top of the federal system, maybe we can get into a position. It is frustrating though. There’s certain areas where we’re not competing with the IRA, and I know we can’t do it all. We had Minister Wilkinson on telling us that about a year ago. But this is one where we’re putting in a policy that’s saying we’re going to consume more of this stuff between now and 2030, and then we’re not putting the policy in that allows us to build the manufacturing capacity and the jobs and the economic benefits that come with that, right?

Peter Tertzakian:

Well, the domestic supply chains from beginning to end. I mean, we’ve got it all here. It seems ridiculous that it would go out of the country and back in and we’re competitively disadvantaged because we’re not focusing on it.

Doug Hooper:

Yeah. In our view, it’s been a gap in the Emission Reduction Plan. That we’ve got this strategy towards decarbonizing the electricity grid, a strategy towards electric vehicles and hydrogen, and as I said earlier, all of the above is definitely needed, but there is no energy modeling scenario to 2050 that gets us off of the internal combustion engine. We will be flying planes, moving ships, long haul rail and trucking and off-road equipment will rely on liquid fuels. And so to hit our 2030 target, let alone reach these 2050 goals, we really have to focus in on decarbonizing those liquid volumes, partly by decarbonizing the fossil fuel side, but over time, that scales out and clean fuels move in. And I agree with you, Peter, we haven’t paid as much attention to decarbonizing this part of our transportation system.

Peter Tertzakian:

I was in the UK, I don’t know, it was like five, six weeks ago, and they were doing some intriguing things, the refining space. I think there’s a small fleet of trucks that goes around to all the restaurants and gets the cooking oil, the waste cooking oil brings it back, and then they throw it in the refinery and make sustainable aviation fuels.

So can you talk about the… I mean, obviously we’re not going to run the world’s airplane fleets on sustainable cooking oil, but recently we had an announcement here from WestJet that they’re going to buy Shell’s first sustainable aviation fuel. Maybe you can talk about what is sustainable aviation fuel, where does it come from, and what is the meaning of the context, the meaning of this WestJet/Shell association?

Doug Hooper:

Yeah. Sustainable aviation fuel is predominantly bio-based replacements for jet fuel, and so it’s refined to a standard where you can mix it in with jet fuel. 50% is the blend level for some of the technologies, and I think they’ve been flying test flights at 100% renewable, so it’s effectively just jet fuel. It can survive at minus 40 C or whatever you need up at 30,000 feet.

There are two primary platforms for producing it. One is a hydro-treating process. The other converts ethanol to an alcohol to jet fuel process to a jet. The hydro-treating process, just so it follows more of a refining type model. It’s called HEFA, hydro-treated esters and fatty acids. The market is relatively nascent. Most of the SAF utilization right now is voluntary, and so airlines that have book and claim systems where they offer their clients lower carbon seats or lower carbon freight can participate.

British Columbia, notably, just revised its Low Carbon Fuel Act and its regulation effective the start of this year, and they’ve now initiated the first mandate in North America for the inclusion of SAF fuels. And so there’s a blend requirement that comes in towards the end of the decade, goes from 1 to 3%, and there’s a carbon intensity reduction requirement that kicks off in 2026 and gets down to 10% below by 2030. Those are big drivers.

Peter Tertzakian:

Yeah, they’re big drivers. My understanding from a fairly recent presentation I went to is that sustainable aviation fuels cost, I think, like six times as much as a regular aviation fuel. I don’t know if that number resonates with you, but whatever it is, it’s more expensive. So how can we get the cost down to be competitive?

Doug Hooper:

I can’t attest to that number. I haven’t heard anything that high. There’s a couple ways. The first one is just the trajectory that the biofuel markets have taken over the last 20 years of my career is you scale things up, the unit costs go down. It’s the same with almost any manufacturing type process, and we’ve definitely seen ethanol and biodiesel and now renewable diesel in the last couple of years with the U.S. expansion, guess what? Market competitiveness increased and prices have dropped. And that’s not just the competitive part. That’s also scaling up the availability of the feedstocks and the efficiency of the conversion processes.

I think the other aspect goes back to this regulatory question and do we need regulations and what’s the role of them? One of the really important things that the CFR credit structure does, or in the U.S., the RIN credits or the LCFS credits, is they internalize the compliance and the cost of compliance amongst the whole supply chain. For example, if you’re an airline and you’re obligated to reduce your carbon intensity by 10%, you don’t have to do it with aviation fuel, you can do it with other forms of credit generation. And so the market then mediates the least cost of compliance to hit that objective of reducing emissions. And so that’s a very important aspect of how the cost gets mediated.

If you go right back to the start of our conversation today in the Navius report on biofuels in Canada, you see that the data out to 2022 is that consumers have saved money writ large across the gasoline and diesel pool from the regulations that have been in place.

Peter Tertzakian:

Well, yeah, we’ve covered a lot of material and a lot of acronyms and jargon. So, Doug Hooper, we’ve talked about SAF, CFR, LCFS, ITC, IRA, RNG, you name it. The list is long, but you’ve led us through it with a greater understanding. So, Doug, Director of Policy and Regulations at the Advanced Biofuels Canada

Industry Association, thanks so much for joining us. I let you off a little easy by not asking you about crop circles. Maybe next time we can do that, but in the meantime, thanks again for joining.

Doug Hooper:

Thanks for having me.

Jackie Forrest:

Thank you. And thanks to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.

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