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Rich US subsidies may hobble Canada's clean-fuel
efforts
June
12,
2023
By Rod Nickel
![](images/images_06_12_2023/pic2.jpg)
A
view of Tidewater Renewables' renewable diesel and renewable hydrogen
complex at the refinery in Prince George, British Columbia, Canada
June 6, 2023. Tidewater Renewables/Handout via REUTERS
WINNIPEG, Manitoba, June 12 (Reuters) - Canadian biofuels producers
are threatening to build their next projects in the United States to
cash in on rich subsidies for clean fuel and stay competitive, a move
that could cost Canada C$10 billion ($7.5 billion) of investment and
undermine Prime Minister Justin Trudeau's efforts to build a greener
economy.
Reducing fuel's carbon intensity is critical to Canada's efforts to
curb greenhouse gas emissions by at least 40% from 2005 levels by
2030. Biofuels are alternatives to petroleum-based fuels made from
low-carbon sources such as crops and wood waste.
Fuel retailer Parkland's (PKI.TO) move
in March to cancel a planned renewable diesel plant in British
Columbia due partly to competition concerns about the U.S. Inflation
Reduction Act (IRA) underscores the seriousness of the companies'
concerns.
The $430
billion IRA, signed into law by U.S. President Joe Biden last year,
aims to cut carbon emissions across the U.S. economy.
European countries are also worrying about how to
compete with U.S. subsidies.
But Canada's location bordering the United States makes it especially
vulnerable to a possible future flood of cheaper U.S. biofuels, said
Ian Thomson, president of Advanced Biofuels Canada.
"There is already a lot of angst in the sector about this. The size of
the U.S. package is daunting," Thomson said.
The lobby group estimates there are some
C$10 billion worth of Canadian projects at early stages of
development, not counting more advanced ones by Imperial Oil (IMO.TO) and
others.
The IRA provides a tax credit for U.S. biofuels production starting in
2025. Canada offers nothing similar, but unlike the United States, has
negative incentives such as a carbon tax.
The companies considering investment in
the United States include Arbios Biotech, a joint venture of forestry
company Canfor (CFP.TO) and
Licella Holdings.
Arbios, which is building a demonstration bio-oil plant in British
Columbia, will consider a U.S. location for its planned commercial
plant unless Ottawa narrows the gap in financial support, said
chairperson Don Roberts.
"We're looking at a large pipeline of projects in the future," Roberts
said in an interview. "If we're looking at our next big investment,
chances are that will be south of the border."
Roberts, who also works as an industry consultant, said he is aware of
at least three other Canadian developers actively considering a U.S.
site.
Canadian companies collecting lower subsidies may have to charge more
for their fuel than U.S. producers to make similar profits, and may be
outbid for feedstocks used in production, such as canola and
restaurant grease, Thomson said.
PRESSURE ON OTTAWA
Biofuels companies are pressing Ottawa to increase supports in the
next fiscal update, expected late this year. Options include an
investment tax credit to offset some capital costs and a contract for
differences, a means of de-risking possible changes to carbon pricing
and regulatory policies, Thomson said.
The federal government will solicit feedback in summer on possible new
supports, said Keean Nembhard, a government spokesperson.
Braya Renewable Fuels is converting a Newfoundland and Labrador
refinery to produce 18,000 barrels per day (bpd) of renewable diesel
and sustainable aviation fuel this year.
New supports will be key to sanctioning a possible expansion to up to
30,000 bpd, said CEO Frank Almaraz.
"The sooner we have certainty of what the supportive regulatory
environment is going to look like, the sooner we will be able to make
those expansion decisions," Almaraz told Reuters.
Enbridge (ENB.TO),
a Canadian utility and pipeline company, has also asked Ottawa to
narrow the gap with the United States, said Pete Sheffield, its chief
sustainability officer. Enbridge is developing renewable natural gas (RNG)
projects in the United States and Canada.
While Canada offers some advantages,
executives say Ottawa can do better. Tidewater Renewables (LCFS.TO),
which looks to open Canada's first renewable diesel plant this summer,
plans to produce RNG in Alberta from cattle manure and has secured
utility Fortis (FTS.TO) as
a buyer for 20 years, said CEO Rob Colcleugh.
It plans two more RNG plants, including one in the U.S.
"It's hard to compare exactly apples to apples," Colcleugh said.
"Nonetheless, there is definitely room for more government support in
Canada."
($1 = 1.3356 Canadian dollars)
Reporting by Rod Nickel in Winnipeg, Manitoba
Additional reporting by Steve Scherer in Ottawa Editing by Denny
Thomas and Matthew Lewis
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