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Report on the Technical Feasibility of Integrating an Annual Average 2% Renewable Diesel in the Canadian Distillate Pool by 2011

6.1 Jurisdictional Context
6.2 Comparison to Ethanol Regulation

6.1 Jurisdictional Context

The background and context in which legislation for biodiesel and other biofuels have been or are being introduced are different from one jurisdiction to another. The accuracy and breadth of data to inform potential legislation also varies. The next subsections describe the context and status of biodiesel regulation in selected jurisdictions, including BC, Manitoba, USA and Europe. A comparison with context for ethanol legislation is also given.

6.1.1 BC Regulatory Elements

In its 2007 BC Energy Plan, the province announced that it would adopt a 5% biodiesel requirement. In April 2008, the province enacted Bill 16: Greenhouse Gas Reduction (Renewable and Low Carbon Fuel Requirements) Act which provided the province the legislative authority to develop the renewable fuel regulations. The 5% biodiesel regulation was approved in December 2008 but modified in late 2009 to a phased-in approach requiring 3% biodiesel in 2010, 4% in 2011, and 5% in 2012.

BC’s biodiesel regulation applies to diesel fuel that is used in both motive and stationary applications.Footnote 57 Regulated parties can meet the requirement using traditional biodiesel (fatty acid methyl esters) or renewable diesel (diesel fuel replacement made from plant or animal matter using a hydrogenation process). In all cases, the biodiesel used must meet the ASTM International standard ASTM D6751 Standard Specification for Biodiesel Fuel Blend Stock (B100) for Middle Distillate Fuels in order to qualify as biodiesel under the regulation.

According to the Ministry of Energy, Mines and Petroleum Resources, the reason behind the phased-in approach is to “…provide industry with the time to put the necessary Canadian supply infrastructure in place, and address technical issues regarding the cold weather properties of biodiesel and engine manufacturer warranties, which may limit the use of biodiesel.”Footnote 58

6.1.2 Alberta Regulatory Elements

Effective July 2010, the Alberta Renewable Fuel Strategy requires 2% renewable content by volume in diesel fuel.

6.1.3 Manitoba Regulatory Elements

Effective November 1, 2009, the Biodiesel Mandate for Diesel Fuel Regulation requires a 2% biodiesel blend in motive diesel and excludes diesel used in locomotives until December 31, 2012. The regulation provides flexibility in meeting the mandate including a first reporting period of November 2009 to December 2011 so that experience can be gained.

6.1.4 United States (U.S.) Renewable Diesel Experience

The U.S. Energy Policy Act of 2005 established the Renewable Fuels Standard (RFS), requiring 7.5 billion gallons of renewable fuels to be blended into gasoline by 2012. The Energy Independence and Security Act of 2007 expanded the program and established what is commonly referred to as RFS2, with annual volume requirements that increase to 36 billion gallons by 2022. RFS2 also created various renewable fuel categories, including a requirement for biomass-based diesel, with each category having lifecycle greenhouse gas performance threshold standards and specific volume requirements.

Five states and one city have renewable diesel mandates in effect. Minnesota has mandated B5 in all #2 diesel fuel sold in the state. The mandate increases to B10 in 2012 and B20 in 2015, but only from April through October. Oregon currently has a B2 mandate, but when annual in-state production of biodiesel reaches 15 million gallons, all diesel fuel sold in the state must contain B5. As of July 1, 2010, the city of Portland, Oregon, requires all diesel fuel sold in the city to contain B10. Washington State has mandated 2% biodiesel or renewable diesel content. This would increase to 5% once in-state feedstock and oil-seed crushing capacity can meet a 3% requirement. Pennsylvania requires B2 in all diesel fuel sold in the state. This increases to B5, B10 and B20 once in-state production can meet these levels. Massachusetts currently has a 2% renewable diesel fuel mandate came into effect July 2010 and increases incrementally to 5% by 2013; however, the current mandate has been suspended indefinitely due to concerns that higher costs would be borne by the consumer as a result of the expiration of the biodiesel federal tax credit.

Two additional states have enacted biodiesel mandates that have not yet taken effect. New Mexico’s B5 mandate for diesel fuel used in motor vehicles will come into effect in 2012. Louisiana’s B2 mandate is dependent on in-state annual production of 10 million gallons from domestically grown feedstock.

U.S. production capacity in 2009 was approximately 5,900 million litres, while actual production was approximately 1,672 million litres.

6.1.5 European Union (EU) Biodiesel Experience

The EU Biofuels Directive (Directive 2003/30/EC) set non-binding, biofuels-neutral targets for biofuels use as a percentage of fossil fuel use. In 2005, the target was 2% and in 2010, it is 5.75%. An amendment to the Fuels Quality Directive was voted in December 2008 to allow biodiesel blends of up to 7%. The related diesel fuel quality specification EN 590 was modified in 2009 to align with the directive.

The Renewable Energy Directive (Directive 2009/28) entered into force on June 25, 2009 and one of its core elements is a 10% binding target for renewables in the transportation sector and the introduction of a comprehensive set of sustainability requirements for biofuels in order to be counted towards the target.

Several EU member states have biodiesel or renewable diesel specific mandates, such as Germany (4.4%), Italy (3.5% in 2010; 4% in 2011; 4.5% in 2012), Lithuania (5%), and Portugal (10%).

6.2 Comparison to Ethanol Regulation

The federal government is implementing a 5% renewable alternative to gasoline mandate in 2010. There is a considerable amount of experience in Canada with blending and introducing ethanol into the gasoline pool, due to provincial ethanol mandates that have been in force for several years (Saskatchewan, Manitoba, Ontario, and more recently in British Columbia). The experience will help to reduce the risk associated with implementing a federal mandate, because it can/has inform(ed) the structure of the regulation.

On the other hand, Canadian experience with biodiesel is much more limited; Manitoba’s biodiesel mandate came into force on November 1, 2009, and BC’s mandate for renewable content in diesel and heating oil came into force on January 1, 2010. To date, the actual quantity of biodiesel consumed is not well known. The provincial regulations were designed with some flexibility for the first years and use could be relatively limited to date. The federal government will not be able to rely on much past experience in order to shape the renewable alternative to diesel regulation.

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