Canada will soon be unveiling a proposal to try to drastically reduce greenhouse gas emissions and overhaul how it regulates biofuel production. It could be a major boon for U.S. corn farmers and ethanol producers, creating new demand and market access north of the U.S. border, but only if the Canadian government can be convinced to change a couple of key provisions.
The U.S. sells hundreds of millions of gallons of ethanol to Canada every year, and that trade would very likely increase as a result of Canada’s efforts to cut emissions, says Craig Willis, senior vice president for global markets for Growth Energy. The plan — Canada’s Clean Fuel Standard — will include a nationwide goal of an average 15% ethanol blend by 2030. That will translate into increased demand from Canada, which is already the largest foreign market for the U.S. corn-based fuel.
The U.S. shipped 320 million gallons of ethanol to Canada for the 12-month period through August, making it the number one foreign customer for U.S. producers, according to Growth Energy.
But there are a couple of barriers to that increased trade in the current CFS draft that have the potential to discourage U.S. producers from shipping their fuel up north, says Willis and Ian Thomson, president of Advanced Biofuels Canada.
Canada wants to know exactly where the corn comes from and the condition of the land where it is produced; Willis says that’s not acceptable. The latest draft proposal released by the agency Environment and Climate Change Canada (ECCC) would force each and every U.S. farm that supplies corn to ethanol producers to get a special certification to show that the environment is not being harmed.
“Canada wants our member plants to go and get certification for any corn they buy from a farmer,” Willis said. “Farmers typically like to be private. They don’t want to give up a lot of information.”
But it goes far beyond just privacy. The cost of certification and time-consuming bureaucracy would be daunting, especially for biofuel producers that get their corn from elevators — which is most of them, Willis said.
“A lot of these ethanol plants buy corn from country elevators so it’s already combined,” he said. “The plant isn’t buying directly from farmers so that would require the elevator to go to all their farmers and get certification for the corn that’s ultimately going to the ethanol plant. … If they required the certification, there’s little doubt that it would disrupt trade between the countries.”
U.S. and Canadian industry officials say the Canadian government means well, but the efforts to make sure that North American farmers are not digging up wetlands or other sensitive land to produce the corn that goes into the ethanol are not needed. U.S. farmers are already prohibited from farming highly-erodible lands and wetlands under conservation compliance and other restrictions.
The U.S. Grains Council, Growth Energy, and the Renewable Fuels Association stressed that point in a recent submission to ECCC on its latest update to the draft CFS.
“With respect to biofuel feedstock production, agricultural standards in Canada and the U.S. are by and large some of the best in the world,” the U.S. groups wrote. “Recognizing that there has not been an expansion of crop land farmed in Canada and the U.S. over the last decades, Canada and the U.S. should not be considered at risk of indirect land use change. An aggregate acceptance of feedstocks produced in Canada and the U.S. should therefore apply to the CFS.”
Now the U.S. and Canada are treated equally in the U.S. by the Environmental Protection Agency. The U.S. agency essentially views the land use in an aggregate form to ensure there are no large expansions of acreage into sensitive lands, and that’s the way it should stay in Canada, U.S. and Canadian officials say.
“It’s a concern for the U.S. producers … but it’s also important to Canadian producers who are participating in the U.S. market right now under an aggregate compliance and don’t want to see two systems on opposite sides of the border,” said Thomson. “They very much want to see a unified system.”
But that doesn’t mean just copying the U.S. Renewable Fuel Standard.
“Canada is going to have its own system,” he said. “But we can adopt the U.S. approach … with the same kind of function.”
While the ECCC hasn’t agreed to that yet, officials have said they are willing to seriously consider it, Thomson said. The agency is “moving in the right direction and collaborating with Canada’s Ministry of Agriculture and Forestry.
“They are examining it closely,” said Thomson. “They’re educating themselves and looking at how it could work.”
Another proposal in the CFS that has U.S. producers concerned is it looks like they are being cut out of Canada’s plan to issue credits for carbon capture and sequestration.
“The way the rules are written, the ECCC will only allow the (carbon capture and sequestration) projects in Canada to qualify for credits,” Willis said. “Anything outside of Canada would not qualify. We think it’s giving the Canadian producers unfair treatment.”
It’s especially unfair, U.S. corn and ethanol groups say, because many U.S. companies are moving ahead with ambitious carbon capture and sequestration projects.
“An increasing number of U.S. ethanol plants are looking to implement (carbon capture and sequestration projects),” the U.S. groups note. “Meanwhile, for U.S. ethanol plants that do not implement CCS, they could see themselves unable to sell into the Canadian market as CCS uptake in Canada could make U.S. ethanol uncompetitive from a (carbon emissions) perspective.”
The bottom line, say U.S. and Canadian ethanol industry representatives, is that the CFS could be very good for producers in both countries.
“In particular, we are pleased to see a strong projection for ethanol blending at an average of 15% by 2030,” say the U.S. Grains Council, Growth Energy, and the Renewable Fuels Association. These are strong signals that show Canada’s continued commitment to ethanol usage.”
And it sets a good example for the rest of the world, says Willis.
“Canada is respected around the world and they are recognizing that ethanol is a path towards meeting their climate goals,” Willis said. “Hopefully we’ll see more of that across the world.”
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