The new Clean Fuel Regulations (CFR), set to take effect on July 1, 2023, will require primary suppliers (e.g., producers and importers) to reduce the carbon intensity of gasoline and diesel they produce and sell in Canada.  Propane is currently a credit generator due to its low carbon intensity and is not currently subject to the CFR reporting process.

NOTE: The CFR are in addition to the federal fuel charge already in place in Alberta, Saskatchewan, Manitoba and Ontario. The federal fuel charge will begin to apply in Newfoundland and Labrador, Nova Scotia and Prince Edward Island also on July 1, 2023. All other provinces and territories are implementing their own pricing systems.

Those companies that can’t meet CFR requirements will be required to buy credits. Those costs will likely be passed onto consumers through higher pump prices.

The new Clean Fuel Regulations (CFR) cover the entire life cycle of fuels, from production and transport to consumption. They are meant to cut the “carbon intensity” of automotive fuels sold on the Canadian market, with the goal to push companies that produce or import fuel to gradually reduce the emissions intensity of that process by setting a ceiling and dropping it each year. By 2030, the rules will require a 15% cut in emissions intensity compared to 2016 levels.  

Producers could comply with the new rules in different ways. They could put more ethanol in their gasoline, use more biodiesel or find innovative ways of reducing their refineries’ emissions through, for example, carbon capture and storage.  

Producers that come in below the federal government’s emissions intensity ceiling will earn extra credits they can sell. Other producers can buy those credits if their fuels fall short. It’s also possible for others to earn credits through investments in, for example, electric vehicle charging stations, and to sell those credits to fuel producers.  

Environment and Climate Change Canada predicts that by 2030, consumers should see some added costs when filling their tanks, estimating a price increase of anywhere between six and 13 cents per litre for gasoline, depending on how refineries comply. The Parliamentary Budget Office (PBO) predicts a price increase of 17 cents per litre and notes the following:  

• Relative to household disposable income, the regulations are broadly regressive – the cost to lower-income households represents a larger share of their disposable income compared to higher-income households.
• By 2030, the estimated cost of the CFR to households:
  • ranges from 0.62% of disposable income (or $231) for lower-income households to 0.35% of disposable income (or $1,008) for higher-income households.
  • is the highest in Saskatchewan (0.87% or $1,117), Alberta (0.80% or $1,157) and N.L. (0.80% or $850), reflecting the higher fossil fuel intensity of their economies.
  • is the lowest in B.C. (0.28% or $384), reflecting the relatively muted impact on real GDP. The cost to the average household in Ontario (0.35% or $495) and Quebec (0.39% or $436) is only modestly larger.

The Government of Alberta is joining the Government of Saskatchewan and the Atlantic provinces in calling on the federal government to immediately halt the implementation of the federal Clean Fuel Regulations on July 1.

Further economic information can be found here: A Distributional Analysis of the Clean Fuel Regulations. 

On June 15, 2023, Premier David Eby announced B.C.’s first call for power in 15 years, along with $140 million in new funding for the BC Indigenous Clean Energy Initiative. 

At the announcement, Premier Eby said, “As we face the threat of a record fire season across Canada, the need to switch to clean power to fight climate change has never felt more urgent…To guarantee affordable power for this important transition, we’re working in partnership with First Nations and BC Hydro to generate more of the clean electricity that British Columbia needs to build our economy and grow our role as a clean-energy superpower.”  

Electricity demand is expected to increase by 15% between now and 2030 due to economic and population growth, and as more homes, businesses and industries switch from fossil fuels to clean electricity. In the past six years, the number of electric vehicles on B.C.’s roads has increased by nearly 2,000%. Updated demand forecasts confirm that new sources of electricity will be required sooner than previously expected.   

BC Hydro will only acquire 100% clean, renewable electricity, including wind and solar.  “First Nations are key partners as we work to power B.C.’s growing clean economy with clean, renewable electricity,” said Josie Osborne, Minister of Energy, Mines and Low Carbon Innovation. “Funding for the B.C. Indigenous Clean Energy Initiative will open up new opportunities for First Nations in clean-energy projects, including wind and solar, create local jobs, and support Indigenous self-determination.” The province’s $140 million contribution to the initiative will support smaller Indigenous-led power projects that may otherwise not be competitive due to their smaller size. 

BC Hydro expects to initiate a call for power in the spring of 2024 to acquire new sources of electricity as early as 2028.  

The CPA will continue to engage with the provincial government to demonstrate that propane’s low carbon intensity can help British Columbia meet its climate goals while also ensuring an equitable transition for communities not connected to natural gas or grid systems.  

The minister responsible for the Pacific Economic Development Agency of Canada announced the government is giving nearly $6 million for Indigenous communities in British Columbia to develop clean energy projects.  Minister Sajjan says the funding shows Canada is committed to working with First Nations to help them grow their economy and take advantage of opportunities in the technology sector.  

More than $3.9 million of the funding, provided by PacificCan and Indigenous Services Canada, will be given to the BC Indigenous Clean Energy Initiative to help 14 communities develop clean energy projects. The CPA encourages CPA members active in the province to reach out to communities relying on diesel and explore areas of partnership and opportunity.  

The 2023 Ontario Seminar was held on June 14 at the Blue Mountain Resort near Collingwood. 

With Ontario Committee Chair Daryl Patjus away on company business, the meeting was chaired by Ontario Committee Vice-Chair Graham Bryan. One of Bryan’s first duties was to open up the floor to CPA’s new board chair Cameron Stewart. 

In his address, Stewart extended his thanks to Nancy Borden, CPA’s first female board chair and praised her “for her excellent stewardship, which has paved the way for the continued success of the association.”  

Stewart noted that going forward, the propane industry has an important opportunity to demonstrate to governments the crucial role propane plays in meeting the country’s energy needs for present and future generations. “We are not merely a transitional energy source,” he said. 

Part of that opportunity is to develop a path to net zero, which will be conducted throughout the summer and fall of this year. “We are kicking off a decarbonization study that demonstrates the importance of propane today and into the future,” said Stewart. “It will be overseen by the Producer Council who will lend their upstream expertise to the cause.” Stewart also noted that as outlined in the CPA Strategic Plan, meetings with politicians and policymakers will continue to play a central role with the diversity of each province a key consideration. CPA staff are implementing region-specific plans to guide those efforts.  

Two of the seminar’s featured speakers Dan McTeague, President of Canadians for Affordable Energy, and Nik Nanos, a nationally recognized pollster and President of Nanos Co. shared some important observations. 

McTeague noted that propane is critical for farming and food production. As a former federal MP, he said that this resonates with politicians, especially in discussions about affordability. He also indicated his support for CPA efforts to have the GST rated net zero for the purposes of home energy, in whatever form. 

Nanos began his presentation with a brief overview of the perception of the energy industry in Canada at a time when governments seem to be so focused on electrification. According to recent Nanos research, the proportion of Canadians who rate the importance of oil and gas to Canada’s future economy as important is 74%, a significant increase of about 8% in two years. 

The research also showed that about 66% of Canadians are concerned about the energy prices they will pay for things like heating and transportation over the next six months. 

Nanos observed that while governments may be focused on electrification, affordability for consumers including energy, remains among the most important issues facing Canadians. All of these provide an important opportunity for propane: Canada – and the world – need propane because it is essential, affordable clean energy.

On July 1, most Atlantic Canadians will be paying an extra 17 cents per litre in carbon for heating oil under the federal fuel charge (FFC). By 2030, the FFC on that same litre of heating oil will rise to over 45 cents per litre.  

Under the upcoming Clean Fuel Regulations (CFR), which is another carbon tax, by 2030, an additional 16 cents per litre will be added to the price of heating oil. Gasoline is treated similarly. All of this means that the carbon taxes alone on heating oil will cost an extra 62 cents per litre. Gasoline will see a 54 cents per litre increase. 

While these increases are not unique to Atlantic Canada, that region’s dependence on coal for electricity and heating oil for their homes means that they will be affected more than Quebec where hydro is cheaper or Ontario where the cost of electricity is subsidized by over $6 billion per year. The Atlantic premiers feel this is an unfair treatment by the federal government. The FFC and the CFR also affect other provinces such as Alberta, Saskatchewan, and Ontario. 

It was with this backdrop that CPA president Shannon Watt wrote to Atlantic premiers to remind them of the advantages of low-emission propane in terms of the environment and cost.  

She noted, “The transition to a green future requires fairness, affordability, and energy choice for all consumers. This means an all-hands-on-deck approach to not only reducing emissions but also providing affordable, reliable, and secure energy. In that regard propane checks all the boxes.” 

In terms of the affordability of propane compared to heating oil, she noted that at one point last winter, Atlantic CPA members reported that a litre of propane was about $1 cheaper than a litre of heating oil.  

While there is a federal fuel charge on propane, it is less than heating oil because of propane’s lower emissions. By 2030, the tax on a litre of propane will be almost 20 cents less than a litre of heating oil. Since propane is currently not affected by the CFR, the savings in a carbon tax for propane compared to heating oil by 2030 will amount to about 36 cents per litre. 

Watt also noted that decarbonization, done fairly, is a dial not a switch, that the transition to net zero must be affordable and that energy choice will allow for affordable, low-emission options.  

For Atlantic Canadians, the advantages of propane must be reflected in the development of their energy and low-carbon policies. 

At the Atlantic Seminar, held in Fox Harb’r, Nova Scotia on May 31, the implications of decarbonization policies were a key part of the discussion. 

The seminar’s featured speaker was Lana Asaff, senior economist at the region’s most important think tank, the Atlantic Provinces Economic Council.  

Asaff spoke to the implications for Atlantic Canada’s economy in the pursuit of zero emissions. She noted that significant emissions reductions are required if governments, federally and provincially, are to meet net-zero goals, adding that currently, Canada lacks the full suite of technology to get to net zero. Asaff said the top sources of Atlantic Canada’s emissions are electricity generation and transportation, which accounts for over half of the emissions.  

Her presentation was a wake-up call for those in the region who believe adapting to climate change will not have a cost attached. Net-zero actions will impact all Atlantic businesses as they will affect the cost of doing business. To offset costs, the federal government’s 2023 budget includes tax credits and funding for clean energy projects. Asaff also noted that emerging technologies such as hydrogen can be used as a fuel for electricity generation, transportation, and other purposes. 

She concluded her presentation by noting that many other economic factors need to remain top of mind during decarbonization. They include energy supply and demand, the labour market, the effects of decarbonization on communities, coherent policy coordination between the Atlantic provinces and the federal government, and most importantly, costs and affordability.