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New Policy Incentives for Carbon Intensity Cuts: Part 2, Canada

How Your Company Can Assess Clean Fuel Regulation Opportunities

Life cycle metrics and LCA studies support innovative fuel pathways

In this, the second of a two-part series, we’ll provide a quick overview of the Canadian Clean Fuel Regulation (CFR) program, including what to expect in the application process, based on remarks by EarthShift Global director of research Nathan Ayer at a recent webinar. For a review of obtaining US tax credits under Section 45Q and 45V of the Inflation Reduction Act (IRA), see part 1.

The Canadian CFR initiative is “intended to incentivize innovation and adoption of clean technologies and expand the use of low carbon intensity fuels (LCIF) throughout the economy,” explained Nathan.

The CFR as a whole, like many sections of the IRA, has a life cycle orientation and requires applicants to use specific tools and methods to conduct a life cycle assessment (LCA) of processes and emission rates in their fuel pathways, which in many cases must be critically reviewed or audited. Thus, organizations considering participation should do some up-front evaluation of their existing internal resources and confirm that the potential benefits justify the effort involved.

EarthShift Global’s founder and CEO Lise Laurin noted during the webinar that it’s helpful to assess data collection and tool requirements early on, to identify any gaps. Additionally, she pointed out that flexibility in the LCA process is important, as products sold into different jurisdictions may be required to use different modeling tools, data, and assumptions.

Key Provisions of the CFR

Nathan noted the CFR’s key provisions include requirements for gasoline and diesel producers to gradually reduce the carbon intensity (CI) of their fuels, working towards a 15% reduction by 2030 (relative to 2016 values), and establishment of a credit market for low-carbon fuels where regulated producers can create or buy credits to comply with their reduction targets.

A significant challenge is the ability to estimate life cycle CI not only for the wide range of currently available solid, liquid, and gaseous fossil and biofuels, but also for future innovations including process modifications and entirely new approaches to fuel production. With this in mind, the Environment and Climate Change Canada (ECCC) agency (working with outside consultants including an EarthShift Global team led by Nathan), developed a publicly available Fuel LCA Model that can be used to estimate the CI of existing and novel fuel pathways.

The model leverages the free openLCA software platform, and includes libraries of pre-defined processes, configurable low carbon fuel pathways, and impact assessment methods for estimating carbon intensity based on IPCC characterization factors. This allows developers to model new fuel pathways and submit them for approval, while ensuring a level playing field.

Nathan advised companies to confirm whether their specific fuel pathway can be modeled using existing data and processes or if a new pathway is needed, and to reach out to ECCC contacts early in the process, particularly for very novel pathways and ones that involve unique materials and processes.

“Allow time for your staff to learn the tools and become familiar with modeling requirements and the software tool itself, and also time and resources if you’ll be seeking external support for data collection and modeling,” added Nathan.

The webinar also provided a wealth of more-detailed data on the CFR initiatives; a recording can be accessed here Brown Bag Webinar recordings.