Government Initiatives Support Biofuels

Biodiesel development in Canada is emerging and in early stages of development and commercialization. Efforts to develop this sector have been supported through direct and indirect incentives, regulations and legislation. In November 2002, the Government of Canada, under Canada's Climate Change Action Plan, established a biodiesel production target of 500 million litres/year by 2010. In 2003, the federal government exempted biodiesel from the $0.04/litre federal excise tax. Provincial jurisdictions have acted singularly to implement biodiesel initiatives to stimulate biodiesel production and investment. British Columbia, Ontario and Manitoba are the only provinces that offer tax exemption. The province of Ontario exempts biodiesel from its road tax at $0.143/litre and British Columbia has introduced a tax exemption ($0.15 - $0.21/litre) for biodiesel when used in blends from 5 - 50% with petroleum diesel. The Manitoba government no longer collects road and provincial sales tax on pure biodiesel ($0.115/litre). In addition, Manitoba released a $1.5 million support program for biodiesel production. On May 24, 2006, the provinces and territories agreed to support a Government of Canada framework of 5% renewable fuel by 2010.

The Conservative Government announced (as part of its election platform) that they would mandate the requirement of "…an average of 5% renewable fuel content by 2010…" Since the election a number of federal, provincial and industry consultations have been held to support the development of a biofuels strategy. Agriculture Minister Chuck Strahl stated on April 5, 2006, "I will be rolling out our biofuels strategy in the days ahead and I'm working with Environment Minister (Rona) Ambrose to ensure that farmers actually benefit from our commitment to 5% biofuels." In addition, in October of 2006, the Federal Governments Clean Air Act was introduced that indicated the current governments' interest in promoting renewable fuels. On December 20, 2006, the Federal Government announced that it intends to develop and implement a Federal Renewable Fuels Standard (RFS) that includes a mandate of an average of 5% renewable fuel content in gasoline by 2010. The regulation is to be developed under the Canadian Environmental Protection Act, 1999 which may be amended by Canada's Clean Air Act. As a result, the implementation of this standard is contingent on the passing of the Clean Air Act which may take some time. With regards to the details of this policy, the government has disclosed the following parameters:

  • a 5% average renewable content in gasoline by 2010;
  • a 2% renewable content for diesel and home heating fuels no earlier than 2010 and no later than 2012 conditional on successful demonstration of biodiesel use under the range of Canadian conditions;
  • the requirement for renewable fuel content will be on the basis of annual volumes;
  • the requirement for renewable fuel content will apply on a company wide basis;
  • a credit and trading system will be established such that a company will have an option of obtaining credits from others rather than actually having renewable fuel content in its fuel; and
  • consideration will be given to including "biases" for different renewable fuels

The design and development of a regulation will involve consultation with many stakeholders and is expected to take at least two years to develop. Environment Canada has indicated that they intend to initiate consultation on the details of the proposed regulation early in 2007.

In addition to the RFS, the Federal Government has announced $200 million through the Capital Formation Assistance Program for Renewable Fuels Production to encourage primary agricultural producers to invest in new plants and an additional $145 million through the Agricultural Bioproducts Innovation Program for research and development in the area of renewable fuels and the advancement of a Canadian bio-based economy.

The Capital Formation Assistance Program is a four year program that will make repayable capital available to renewable fuels projects based on the involvement of agricultural producers in those biofuels facilities. Funding will be based on the level of producer contributions to eligible project costs and will be capped at the minimum of either 25% of total project costs or $25 million per project. There are still many details of this program that are unknown at this time including the rate of interest that will be charged and the terms of repayment of the contribution.

The Agricultural Bioproducts Innovation Program is a five year program designed to support research, development, technology transfer and commercialization of bioproducts (including biofuels) in Canada. The areas of focus for this funding will be feedstock production, biomass conversion technology and product diversification through technology. Funding will be capped at $25 million for each bioproduct research network. Networks may include universities, private sector, federal government departments and agencies and other public sector research organizations. In addition, the 2007 Federal Budget announced an additional $500 million in funding for Sustainable Development Technology Canada (SDTC). SDTC is a not-for-profit foundation that finances and supports the development of clean technologies which provide solutions to issues such as climate change and clean air, and thereby benefiting the health of Canadians. Producers of biofuels are thereby eligible to receive funding from SDTC.

On July 17th, 2006 the Federal Government introduced an opportunity for groups interested in the biofuels industry to submit applications for funding through the Biofuels Opportunities for Producers Initiative (BOPI). The intent of this program was to assist agricultural producers in developing sound business proposals for the production of biofuels and investment in biofuel operations. BFuel was a successful applicant in this process obtaining $300,000 of funding.

Further, the federal government announced on March 3, 2007 an additional $10 million in funding for the Biofuels Opportunities for Producers Initiative which BFuel may be able to apply for. The implications of these announcements and programs for BFuel are significant as a party interested in participating in the biofuels market. The establishment of the National Renewable Fuel Standard and policy is important to the industry. Currently, there are some provinces that have a Renewable Fuels Standard and some that do not, and even among those that do, the requirements are not consistent. Alberta does not currently have an RFS.

In the 2007 Federal budget, the Federal Government announced a seven year renewable fuels operating incentive program that provides $0.20 cents per litre of biodiesel produced in Canada for three years and will decline thereafter at the following rates: $0.16 on year fourth, $0.14 on year fifth, $0.12 on year sixth, $ 0.10 on year seventh. Also announced in the budget was the implementation of a clawback of incentives related to this program.

The details of the clawback are not yet known but the government has stated that they may be linked to profits. This incentive will replace the 4 cent excise tax abatement currently in place.

[Government Initiatives]

Budget news & BFuel Canada Corp
2007 Federal Budget
A Cleaner, Healthier Environment
Investing in Cleaner Fuels

Renewable fuels are cleaner fuels that reduce air pollution and lower greenhouse gas emissions. The Government recently announced a regulation requiring a 5 per cent average renewable content, such as ethanol, in Canadian gasoline by 2010. The Government also intends to develop a regulation for diesel fuel and heating oil to contain 2 per cent average renewable content, such as biodiesel, by 2012, once it has been verified that the new blended fuel is safe and effective for our Canadian climate and conditions. Renewable fuel production is a new market opportunity for farmers and rural communities. Budget 2006 included $365 million to assist farmers in realizing opportunities through agricultural bioproducts, including renewable fuels.

To meet the requirements of the proposed regulations, over 2 billion litres of renewable fuels will be required, creating tremendous business opportunities for Canadian renewable fuel and agricultural producers. Budget 2007 invests up to $2 billion in support of renewable fuel production in Canada to help meet these requirements, including up to $1.5 billion for an operating incentive and $500 million for next-generation renewable fuels.

Up to $1.5 billion over seven years will be allocated towards an operating incentive to producers of renewable alternatives to gasoline, such as ethanol, and renewable alternatives to diesel, such as biodiesel, under conditions where industry requires support to remain profitable. Incentive rates will be up to $0.10/L for renewable alternatives to gasoline and up to $0.20/L for renewable alternatives to diesel for the first three years, then decline thereafter.

In order to ensure companies do not earn excessive profits, government support will not be provided when rates of return exceed 20 per cent, determined annually. Support under the program to individual companies will be capped to ensure that benefits are provided to a wide range of participants in the sector-not just the largest oil-producing companies.

Budget 2007 also makes $500 million over seven years available to Sustainable Development Technology Canada to invest with the private sector in establishing large-scale facilities for the production of next generation renewable fuels. Next-generation renewable fuels-produced from agricultural and wood waste products such as wheat straw, corn stover, wood residue and switchgrass-have the potential to generate even greater environmental benefits than traditional renewable fuels. Canada is well positioned to become a world leader in the development and commercialization of next-generation fuels.

(Excerpt from federal budget March 19, 2007)

[Government Initiatives]