Environment and Climate Change Canada Clean Fuel Standard for ISCC Stakeholder Meeting North America

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1 Environment and Climate Change Canada Clean Fuel Standard for ISCC Stakeholder Meeting North America Lorri Thompson, Head Regulatory Development Fuels Section, Oil Gas and Alternative Energy Division December 5, 2017

2 Pan-Canadian Framework on Clean Growth and Climate Change and the federal Clean Fuel Standard In March, 2016, the First Ministers agreed to take ambitious action in support of meeting or exceeding Canada's 2030 target of a 30 percent reduction below 2005 levels of greenhouse gas (GHG) emissions First Ministers met again on December 9, 2016, to release the Pan-Canadian Framework on Clean Growth and Climate Change a plan to grow Canada s economy, reduce GHG emissions, and build resilience to the impacts of a changing climate On November 25, 2016, Minister McKenna announced that the Government of Canada would launch consultation to develop a Clean Fuel Standard as one of the key federal action to support the Pan-Canadian Framework Minister McKenna highlighted that the Clean Fuel Standard that will be a made-for-canada approach that will provide flexibility to industry in how they innovate and how they reduce emissions throughout the fuel system. Page 2 Dezember 6, 2017

3 Canadian Context: Renewable, Clean and Low Carbon Fuel Standards Federal Renewable Fuels Regulations require petroleum fuel producers and importers to have minimum renewable fuel content 5% based on their volume of gasoline 2% based on their volume of diesel fuel and heating distillate oil Some provinces also have renewable fuel mandates equal to or higher than the current federal requirements: British Columbia, Alberta, Saskatchewan, Manitoba, and Ontario Renewable fuel performance criteria in addition to volume mandates in Ontario (diesel fuel) and Alberta British Columbia is currently the only province with a low carbon fuel standard (LCFS) in place, in addition to its renewable fuel requirements Requires fuel suppliers to reduce the carbon intensity of gasoline and diesel fuels by 10 percent by 2020 from a 2010 baseline Consulting on the feasibility to increase the carbon intensity reductions to 15 to 20 percent by 2030 Page 3 Dezember 6, 2017

4 Key Elements of the Clean Fuel Standard (announced Nov. 25, 2016) 1 Modern, flexible and performance-based approach to reduce the GHG emissions from the fuels supplied in Canada Outcome-oriented: the overall objective is to achieve 30 megatonnes of annual reductions in GHG emissions by 2030 Reductions are incremental to what is being achieved as a result of current measures Reductions in the lifecycle carbon intensity of fuels supplied in a given year would be required, based on lifecycle analysis Overall lifecycle carbon intensity reductions of approximately 10-15% by 2030 are being considered Would not differentiate between crude oil types produced in or imported into Canada Non-prescriptive, market-based approach Regulatory requirements to be developed under the Canadian Environmental Protection Act, 1999 Page 4 Dezember 6, 2017

5 Key Elements of the Clean Fuel Standard (announced Nov. 25, 2016) 2 Would include a broad suite of liquid, gaseous and solid fuels used for transportation, industry, homes and buildings Regulated party proposed to be the fuel supplier (producer, importer, distributor) rather than the fuel user (except for fuels where user is also supplier) Approach would incent the use of lower carbon fuel pathways and alternatives (e.g. renewable fuels, electricity, natural gas, biogas/ renewable natural gas) and drive technology and innovation to achieve the desired outcomes Regulations would be designed to provide flexibility to fuel suppliers, while ensuring objectives are met Would be complementary to the Pan-Canadian approach to pricing carbon pollution Carbon pricing will price fossil fuels, as well as emissions from industrial activities, to send a price signal to markets and further incent GHG emission reductions Page 5 Dezember 6, 2017

6 Compliance with the Clean Fuel Standard A variety of compliance mechanisms are being consider to provide flexibility in meeting the objective of the Clean Fuel Standard A federal standard would consider the use of a credit trading system as integral to the design of the standard which could include the ability to bank credits, trade credits and to carry forward surplus credits into subsequent years Compliance options to reduce the average carbon intensity of fuels supplied that are being considered Blending with renewable and lower carbon fuels Switching to lower carbon fuels Reducing facility emissions Obtaining credits from other fuel suppliers Generating credits from other actions that have a possibility of reducing the carbon intensity of fuels or improving market access for lower carbon intensity fuels Recognition for innovative crude oil production technologies Page 6 Dezember 6, 2017

7 Consultations Launched in January 2017 Discussion Paper to help inform the development of a regulatory framework was released February 24, 2017 for a 60 day public comment period (ended on April 25) Sought views on scope (fuels and regulated parties), determination of carbon intensity, compliance mechanisms, and asked questions on various elements of what could be in a Clean Fuel Standard Extensive consultation sessions starting in January and continue, including a faceto-face workshop, technical webinars and bilateral meetings with various stakeholders from 125 written submissions were received on the discussion paper with quite diverse views and comments on the various themes of policy objectives, regulatory design, fuels covered by the regulations, targeting emission reductions, timelines, interactions with other measures (including the Renewable Fuels Regulations) and competitiveness A report, Clean Fuel Standard: Summary of stakeholder written comments on the Discussion Paper, summarizing these diverse comments, was prepared by the International Institute for Sustainable Development Link to report Page 7 Dezember 6, 2017

8 Comments Received on Sustainability Views ranging across the spectrum were received, but many respondents generally agreed on the need for sustainability criteria Suggestions and views: Sustainability criteria should encompass all the potential impacts, including air quality, biodiversity, fertilizer use, forest management (both area and quality), soil carbon, water, wastes and social impacts Favour for the use of comprehensive LCAs and inclusion of iluc Criteria should be based on internationally recognized schemes EU Renewable Energy Directive, U.S. EPA Renewable Fuel Standard, the Sustainable Forestry Initiative and the Forest Stewardship Council Canada Sustainability criteria should be applied to all fuels equally, domestic and imported GHG emissions should be the only quantitative measure, but adopt renewable biomass requirements for eligibility Page 8 Dezember 6, 2017

9 Next steps A proposed Regulatory Framework is planned for release in fall 2017 Focused regulatory design discussions with industry winter/spring 2018 Publication of proposed regulations in Canada Gazette, Part I in mid-2018 Public comment period on proposed regulations and consultations on the proposal would follow Publication of final regulations in Canada Gazette, Part II in 2019 Page 9 Dezember 6, 2017

10 Clean Fuel Standard Contacts Contacts Clean Fuel Standard team address: Cam Carruthers, Executive Director, Oil Gas & Alternative Energy Division Lynne Patenaude Manager, Fuels Lorri Thompson Head, Fuels Regulatory Development Information Clean Fuel Standard webpage: Google Drive with consultation documents: Page 10 Dezember 6, 2017