Biofuels Annual

An Expert's View about Renewable Energy in Canada

Last updated: 17 Jul 2011

On December 15, 2010, Canada implemented a long-debated federal mandate of five percent of the gasoline pool, and, on June 29, 2011 announced it was moving ahead with a July 1, 2011 implementation date for a federal mandate of two percent of renewable content in diesel fuel.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 07/05/2011 GAIN Report Number: CA11036 Canada Biofuels Annual 2011 Approved By: Robin Gray Prepared By: Darlene Dessureault Report Highlights: On December 15, 2010, Canada implemented a long-debated federal mandate of five percent of the gasoline pool, and, on June 29, 2011 announced it was moving ahead with a July 1, 2011 implementation date for a federal mandate of two percent of renewable content in diesel fuel. Bioethanol production in Canada will increase in 2011 to an estimated 1,350 million liters, up 12.5 percent from 2010 levels. Bioethanol production is forecast to grow to 1,375 million liters in 2012. Corn and wheat remain the largest sources of feedstock. For 2011 and 2012, total bioethanol production capacity is forecast at 1,796 and 1,833 million liters, respectively, up 58 percent and 61percent, respectively, from year 2007 production capacity levels. In 2011, biodiesel production is projected to increase to 158 million liters, up nearly 13 percent from 2010 levels. Biodiesel production is forecast to rise in 2012 as more biodiesel refineries come on-line. Biodiesel production is forecast at 475 million liters in 2012. Production capacity for biodiesel is forecasted to jump to 558 million liters in 2012, double the estimated production capacity in 2011. Canada?s limited biofuel production capacity, both in the short and medium term, suggests that Canada will not soon be a major player in the global biofuels market. Canada Biofuels Annual 2010 Table of Contents Page Executive Summary 3 Policy and Programs 4 A. National Biofuels Mandate 4 B. Federal Programs to Encourage the Development of a Canadian 5 Renewable Fuels Industry C. Provincial Mandates and Programs to Encourage Renewable Fuels 8 Industry Development D. Factors Affecting the Long-Term Viability of a Canadian Biofuels 9 Industry Bioethanol and Biodiesel 10 A. Context: Canada?s Overall Energy Situation 10 B. Bioethanol 10 i. Bioethanol Production 10 ii. Bioethanol Trade 14 iii. Impacts of Bioethanol Production on Feedstock Markets 15 (a) Bioethanol Produced from Corn 15 (b) Bioethanol produced from Wheat 15 C. Biodiesel 16 i. Biodiesel Production 16 ii. Biodiesel Trade 17 iii. Impacts of Biodiesel Production on Feedstock Markets 19 (a) Biodiesel Produced from Canola and Animal Fats/Oils 19 Biomass for Heat and Power 20 A. Wood Pellets 20 B. Fuels Production from Other Biomass 21 Appendix I: Provincial Mandates, Policies, Tax Exemptions, Incentives 22 and Conditions (i) Alberta Biofuels Policies 22 (ii) British Columbia Biofuels Policies 24 (iii) Manitoba Biofuels Policies 27 (iv) Ontario Biofuels Policies 28 (v) Quebec Biofuels Policies 29 (vi) Saskatchewan Biofuels Policies 31 (vii) Atlantic Canada Biofuels Policies 32 Appendix II: Energy Production and Consumption Statistics 33 Appendix III: Biofuel Plants: Existing, Expanding, Under Construction 35 2 Canada Biofuels Annual 2010 Executive Summary On December 15, 2010, Canada implemented a long-debated federal mandate of five percent of the gasoline pool. Many provinces already have higher provincial mandates in place. Half of bioethanol production occurs in three provinces, all with provincial mandates: 7.5 percent of fuel must be bioethanol in Saskatchewan, 5 percent in Ontario and 8.8 percent in Manitoba. British Columbia and Alberta account for a quarter of net national gasoline sales in Canada and have implemented 5 percent renewable fuel mandates in 2011. Quebec (20 percent of net national gasoline sales) expects 5 percent of its gasoline content be renewable fuels by 2012. Bioethanol production in Canada will increase in 2011 to an estimated 1,350 million liters, up 12.5 percent from 2010 levels. Bioethanol project is forecast to grow to 1,375 million liters in 2012. This is still well below the federal government?s target of 1,900 million liters, as stated in their Notice of Intent when the renewable fuels strategy was first announced. However, production capacity in 2011 has increased to 1,796 million liters, up 12.5 percent from 2010 levels, and is forecast to increase another 2% in 2012 with the expected completion of a 36 million liter "waste to biofuels" bioethanol production facility in Edmonton, Alberta. Bioethanol feedstock remain largely corn and wheat. On June 29, 2011, to many industry observers' surprise, the federal government announced it was moving ahead with a July 1, 2011 implementation date for a federal mandate of two percent of renewable content in diesel fuel and heating oil. The eastern part of Canada has been given an implementation exemption until December 31, 2012 (18 months) in order to get the necessary blending infrastructure in place. At this time, Canada?s biodiesel industry remains far from the federal government's target of 600 million liters of domestically produced biodiesel as stated in its Notice of Intent. In 2011, domestic production of biodiesel is forecast to reach 158 million liters, a nearly 13 percent increase over the 2010 production level of 140 million liters. The federal mandate, the extension of a government program to help increase investment in the biodiesel industry, and the completion of a 225 million liter biodiesel refinery (canola oil feedstock) in Saskatchewan is forecast to help increase production levels of biodiesel to 475 million liters in 2012, and doubling Canada's biodiesel 2011 estimated production capacity. In 2011, the share of biodiesel production from tallow (animal fats) is expected to remain at 2010 levels of 60%. The share however is expected to fall dramatically in 2012 (to 34%) with the expected completion of a 225 million liter canola-oil feedstock based biodiesel plant. Canada?s limited bio-fuel production, both in the short and medium term, suggests that Canada will not soon become a major player in the global bioethanol market. While domestic supply in Canada limits the amount of trade, there is an increasing amount of trade in the co-products of bioethanol production. North-south trade between Canada and the United States in biofuels reflects the most economical trade corridors. Wood pellet production in 2010 (latest data available) has remained at 2009 levels of 1.3 million tons, however there is an increasing share going to Europe. In 2010, Canada exported 1.61 million tons of wood pellets globally, up 20 percent from 1.34 million tons in 2009. 3 Canada Biofuels Annual 2010 Policy and Programs A. National Biofuels Mandate Canada?s government announced a renewable fuels strategy in late 2006, including a national renewable fuels mandate. Since that time, there have been legislative amendments and federal and provincial incentive programs have encouraged the development of a Canadian renewable fuels industry. A Notice of Intent was published in the Canada Gazette Part 1 on December 30, 2006, detailing the federal regulations requiring renewable fuels. The proposed Renewable Fuels Regulations are a key element of the Government's Renewable Fuels Strategy. The Renewable Fuels Regulations are annexed to the Canadian Environmental Protection Act, 1999. The overall structure is similar to the Renewable Fuel Standard in the United States, with the point of compliance being the point of production or importation. The objective of the proposed regulations is to reduce green house has (GHG) emissions by mandating an average 5 percent renewable fuel content based on the gasoline volume, thereby contributing towards the protection of Canadians and the environment from the impacts of climate change. The proposed regulations are estimated to result in an incremental reduction of GHG emissions of about one ton of carbon dioxide equivalent (1 MT CO2) per year over and above the reductions attributable to existing provincial requirements already in place. The proposed regulations fulfill the commitments under the Renewable Fuels Strategy of reducing GHG emissions from liquid petroleum fuels and creating a demand for renewable fuels in Canada. On August 23, 2010, the finalized (official) federal Renewable Fuel Regulations, which require an average of 5 percent renewable content in gasoline across Canada, came into force. The regulations were published in the Canada Gazette Part II (Canadian equivalent of the Federal Register in the United States) on September 1, 2010 and set the five percent renewable fuel mandate for the gasoline pool to come into effect on December 15, 2010 (full regulations). The September 1, 2010 publication left open the commencement date for the mandated average 2% renewable fuel content in diesel fuel and heating distillate oil, which is a provision of the federal Renewable Fuel Regulations. The reason for this omission was that the demonstration of technical feasibility under the range of Canadian conditions had not yet been completed. Proposed amendments to the Renewable Fuel Regulations were published in Gazette Part I on February 26, 2011. The proposed amendments set the 2 percent renewable content mandate for diesel fuel and heating distillate oil for July 1, 2011. The February 26, 2011 publication stated that the assessment conducted by Natural Resources Canada (NRCan) through the National Renewable Diesel Demonstration Initiative (NRDDI) concluded that renewable diesel can meet the Canadian petroleum industry accepted standard, subject to timing considerations for infrastructure readiness. On June 29, 2011, to many industry observers' surprise, the federal government announced it was moving ahead with a July 1, 2011 implementation date for a federal mandate of two percent of renewable content in diesel fuel and heating oil. The eastern part of Canada has been given an implementation exemption until December 31, 2012 (18 months) in order to get the necessary blending infrastructure in place. The official version of the regulations will be published in the coming weeks, however, and non-official, pre-published version is available at: http://www.ec.gc.ca/energie- energy/default.asp?lang=En&n=0AA71ED2-1. A permanent exemption is being provided for renewable content in diesel fuel and heating distillate oil sold in Newfoundland and Labrador to address 4 Canada Biofuels Annual 2010 the logistic challenges of blending biodiesel in this region. Temporary exemptions for renewable content in diesel fuel and heating distillate oil sold in Quebec and all Atlantic provinces are being provided until December, 31, 2012, to give eastern Canada time to install biodiesel blending infrastructure. B. Federal Programs to Encourage the Development of a Canadian Renewable Fuels Industry With its announcement of a renewable fuels strategy, the Canadian government launched several programs designed to promote the development of a domestic renewable fuels industry. Several of the programs are designed to encourage agricultural producer involvement in renewable fuels and the usage of agricultural biomass to produce bioethanol. Many federal programs which were announced as being part of the renewable fuel strategy expired at the end of March, 2011. The federal government has not, as of yet, announced any future measures to replace the programs which have expired. Table 1 Federal Programs to Promote a Domestic Renewable Fuels Industry Program Name Budget Allocated / Type of Program Program Design / Duration Administering Ministry or Agency Renewable Environment Federal requirement Renewable fuel mandate for gasoline Fuels Canada; RFR are for 5% renewable pool came into effect on December Regulations annexed to the content in the 15, 2010. Renewable fuel content for Environment Canadian gasoline distillate pool remains undetermined. Canada Act, 1999 pool and a 2% renewable content in the distillate pool. C$1.5 billion; Production incentive Provides incentive rates of up to EcoEnergy Administered by program (subsidy); $0.10/liter (L) for renewable for Biofuels Natural Resources production capacity alternatives to gasoline and $0.26/L Overview Canada building for renewable alternatives to diesel for the first three years, declining in the 6 years thereafter; program runs April, 2008 - March 31, 2017 . The final round of funding has closed. Table continues on next page Table 1 - continued Federal Programs to Promote a Domestic Renewable Fuels Industry Budget Allocated Type of Program Name / Administering Program Program Design / Duration Ministry or Agency ecoAGRICULTURE C$200 million; Loan Encourages producer Biofuels Capital Administered by (repayable equity/ownership in bio-fuel 5 Canada Biofuels Annual 2010 Initiative Agriculture and contributions) facilities. The program helps fund Agri-Food Canada projects that use agricultural feedstock to produce bio-fuels and requires agricultural producer equity investments of 5 percent to meet the eligibility requirements. The funding increases as producer investment increases, however a contribution cap of C$25 million applies; program has been extended from March 31, 2011 to September 30, 2012. Agricultural Bio- C$145 million; Grants Seeks to mobilize research networks products Innovation Administered by that conduct scientific research Program (ABIP) Agriculture and projects with a specific focus on Agri-food Canada developing effective and efficient technologies for an agricultural biomass conversion; evolve beyond bio-fuels production to a sustainable, bio-based economy; Program runs multi-year Table continued on next page Table 1 - continued Federal Programs to Promote a Domestic Renewable Fuels Industry Program Type of Name Budget Allocated / Program Program Design / Duration Administering Ministry or Agency 6 Canada Biofuels Annual 2010 Agri- C$134 million; Loans To accelerate the commercialization of Opportunities Administered by (repayable new agricultural products, processes or Program Agriculture and Agri- contributions) services that are currently not produced Food Canada or commercially available in Canada and that are ready to be delivered to the marketplace with for the United States on projects geared to new agri-food, agriculture or bio-products; program closed onMarch 31, 2011 NextGen C$500 million; Loans To increase production capacity of 2nd Biofuels Fund Administered by (repayable generation bio-fuels; to spur investment Sustainable contributions) with the private sector in establishing Development large-scale facilities for the production Technology Canada of next-generation renewable fuels, to address the gap between demonstration and commercialization; program closed March 31, 2011 Biofuels C$20 million; Direct payment, Provides financial assistance to develop Opportunities Administered by encourage bio-fuel feasibility studies (suitability for Producers Agriculture and Agri- producer of bio-fuel production in local Initiative food Canada; funding ownership / community) and business plans; delivered through involvement funding was available for projects with regional industry greater than one-third producer councils ownership; program closed on March 31, 2008 Cap-And-Trade Research In Alberta, a Green Fund and an Offset System already exist to allow large emitters to purchase carbon credits from farmers, and a law enacted in Saskatchewan in late April 2010 (The Environmental Management and Protection Act 2010) would allow the purchase of carbon credits from farmers there. Provincial governments in Ontario, Quebec, Manitoba and British Columbia are discussing a protocol under the Western Climate Initiative. California, British Columbia and Quebec are aiming for a 2012 start date, while Ontario and Manitoba have stated that they will join after the regional emissions trading program has started. To date, the Chicago Climate Exchange is a voluntary market with more supply of carbon credits than demand, making them worth about $2/ton of sequestered carbon. In Alberta, carbon credits are trading at $13/ton while in Europe, their value ranges from $20 to $30/ton. Future policy debates will focus on who claims the credits. C. Provincial Mandates and Programs to Encourage Renewable Fuels Industry Development Provinces have led the way in developing mandates on renewable fuel contents. However, inconsistencies in provincial requirements may frustrate the flow of bio-fuel trade within Canada. There is concern that, with each provincial government implementing its own complex production and/or consumption incentives with differences in eligibility and duration, there may be barriers to trade and production in areas not well suited to bioethanol production. Canada?s refineries are mostly in western Canada (Alberta) and on the east coast (Newfoundland and Labrador), while most gasoline is used in 7 Canada Biofuels Annual 2010 central Canada (Quebec and Ontario). In its Notice of Intent, the federal government makes note of these barriers and sees the federal mandate as a means to work with provinces to harmonize provincial mandates to eliminate inter-provincial trade barriers. However, given the lead provinces have to develop provincial regulations, the ability of the federal government to prevent barriers and uneconomic production is unclear. Several provinces have implemented provincial mandates on the amount of bioethanol required in the gasoline pool. Certain provinces have also brought in legislation and regulations that will result in a renewable fuel standard for diesel fuel that will likely come into force ahead of the federal biodiesel mandate. Table 2 summarizes the incentive measures that are currently in effect and Appendix I provides detailed information: Table 2 Renewable Fuels Standards, by Province Renewable Content Province Gasoline (bioethanol) Distillate (biodiesel) British Columbia 3-5%* Alberta 5%** 2%** Saskatchewan 7.5% Manitoba 8.5% 2% Ontario 5% Quebec 5%*** New Brunswick 5%**** 2%**** * Increase from 3 % to 5% by 2012 **In April 2011 ***Target by 2012, from advanced renewable fuels ****Possible target in co-operation with the federal government Source-Canadian Renewable Fuels Association D. Factors Affecting the Long-term Viability of a Canadian Biofuel Industry The long-term viability of producing biofuels in Canada will depend on a multitude of factors including federal/provincial regulations and implementation, plant size, production types, co-products, feedstock costs, energy prices, and production/consumption incentives. The required increase in biofuel production set out by the federal mandate will necessitate a build up of infrastructure to support the industry. More detailed trade statistics are needed to measure the development of the biofuels market and the markets for the co-products. Canada?s limited production capacity, both in the short and medium term, suggest that Canada will not soon be a significant player in the global bioethanol market. While the possibility of increased bioethanol trade, especially between the northwest United States and Western Canada (wheat-bioethanol to the United States and corn-based bioethanol to Canada), is unlikely to develop quickly, there is an increasing amount of trade in the co-products of bioethanol production. 8 Canada Biofuels Annual 2010 9 Canada Biofuels Annual 2010 Bioethanol and Biodiesel: A. Context: Canada?s Overall Energy Situation Unlike the United States, energy security is not a factor behind the recent and projected growth in Canada?s bioethanol industry. Canada has the world?s second largest proven oil reserves (estimated at 179.2 billion barrels) and is one of the top 10 oil-exporting countries in the world. While Canada is a significant producer of oil, it also ranks among the world?s top ten consumers of petroleum. Between the years of 2005-2009 transportation accounted for nearly one quarter of energy consumption (see Appendix II, Table 18), and motor gasoline and diesel fuel oil accounted for approximately 87 percent of the energy used (see Appendix II, Table 20). Data from the U.S. Department of Energy shows that Canada marginally decreased its consumption of petroleum in 2009 (see Appendix II, Table 17). A closer look at the use of energy within the transportation industry shows that on average between the years 2002-2008 (most recent available data), the share of energy used for freight averaged a little more than 40 percent per year and the share of energy used for passenger transportation averaged 56 percent. A breakdown of transportation energy use by fuel type reveals that gasoline and diesel fuel account for an average of 55 percent and 31 percent, respectively, of the fuel type used in the period 2004-2008, and dominate as the transportation sector?s main energy sources (see Appendix II, Table 20). Table 3 Canada: Sales of Fuel Used for Road Motor Vehicles in million liters 2005 2006 2007 2008 2009 Average Net sales of gasoline 38,484 38,654 39,635 39,149 39,736 39,132 Net sales of diesel oil 16,216 16,612 17,133 16,555 16,192 16,542 Source: Statistics Canada B. Bioethanol i. Bioethanol Production Bioethanol production in Canada will increase in 2011 compared to 2010 levels due to two new plants coming on-line (Kawartha Ethanol and Suncor St-Claire, see table 21, Appendix III). Production is estimated to increase to 1,350 million liters, compared to 1,200 million liters in 2010. Production is forecast to grow slightly to 1,375 million liters in 2012 with the expected completion of the 36 million liter Enerkem Alberta Edmonton Biofuels to Waste Facility. Factors most effecting changes in production will include gasoline prices, technological improvements and the impact of federal and provincial mandates. Based on the trend of net national sales of gasoline used for road motor vehicles between 2005-2009 (see Table 3 above), the federal mandate of 5 percent renewable fuel content requires require an estimated minimum of 1,940 million liters production, not just capacity. Production capacity of bioethanol is not expected to surpass 1,796 and 1,833 million liters in 2011, and 2012, respectively (see table 21, Appendix III). 10 Canada Biofuels Annual 2010 Imports are expected to grow in 2011 and 2012 due to the domestic production not being able to meet the supply required by the federal mandate of 5 percent in the gasoline pool. Trade data also shows a growing upswing in fuel ethanol exports to the United States, likely due to an increase in production capacity as well as U.S. demand driven by the RFS2 mandate. Fuel ethanol trade occurs north-south or east-west depending on which trade corridors make the most economic sense. In 2011, it is estimated that 78 percent of the production of domestic bioethanol will be derived from corn, 21 percent from wheat and 1 percent from ?other? feedstock such as wood waste and wheat straw. Post forecasts that this will likely change to 67 percent corn, 31 percent wheat and 2 percent ?other? feedstock for 2012. Overall Canada?s limited biofuel production capacity, both in the short and medium term suggests that Canada?s entry into the global bioethanol market is still quite distant. In 2011, Ontario alone is estimated to account for 62 percent of current domestic bioethanol production capacity. Quebec is estimated to account for 9 percent of current domestic bioethanol production capacity and the western provinces of Manitoba, Saskatchewan, and Alberta combined are estimated to account for 29 percent of domestic bioethanol production capacity. 11 Canada Biofuels Annual 2010 Table 4 Conventional & Advanced Bioethanol Supply and Demand in million liters 200 200 2011 2012 7 8 2009 2010 (e) (f) Beginning stocks 4 8 11 13 16 18 Production (a) 640 850 955 1200 1,350 1,375 Imports (b) 511 567 265 522 750 775 Exports (c) 29 19 42 32 150 150 1,12 1,40 Total Supply 6 6 1,189 1,703 1,966 2,018 1,11 1,39 Consumption (d) 8 5 1,176 1,687 1,948 2,000 Ending Stocks 8 11 13 16 18 18 Production Capactiy (Conventional Fuel) (g) No. of Biorefineries (g) 10 12 14 15 16 16 113 Capacity 850 5 1265 1,590 1790 1790 Production Capacity (Advanced Fuel) No. of Biorefineries 0 0 1 1 1 2 Capacity 0 0 4 4 5 41 Co-Product Production (1,000 metric tons) Distiller?s Dried Grains with Soluables (DDGS) (h) 980 1030 1150 1150 Feedstock Use (1,000 metric tons) (i) Corn 2,105 2,255 2,630 2,630 Wheat 770 770 770 770 Other (e.g. wood, etc.) 13 16 16 16 Total Feedstocks 2,890 3,042 3,417 3,417 Notes- Sources (a), Canadian Renewable Fuels Association, estimated (b), (c) Global Trade Atlas Network; HS code 22072020 (d)(e) Energy Information Association (Branch of U.S. Department of Energy) (e) Estimated (f) Forecast (g) Canadian Renewable Fuels Association (h) Conversion Rate-Every ton corn/other feedstock produces 33 percent DDGs, Every ton wheat feedstock produces 37 percent DDGs. Numbers are rounded to convey these figures are derived from formulas, not actual reported statistics. (i) Conversion Rate- One ton of corn will provide enough feedstock to produce 400 liters of bioethanol and one ton of wheat will provide enough feedstock to produce 375 liters of ethanol according to the Canadian Renewable Fuels Association. Numbers are rounded to convey these figures are derived from formulas, not actual reported statistics. 12 Canada Biofuels Annual 2010 13 Canada Biofuels Annual 2010 While the federal and provincial programs have been designed to encourage bioethanol plants with greater agricultural producer/rural community equity or investment, Canadian bioethanol is being produced by companies that range from (a) energy companies and energy marketers, to (b) companies which focus on grain-based bioethanol production that often have some degree of producer equity/investment, to (c) co-operatives, to (d) companies focused on a range of activities such as grains, or other sources of renewable fuels. Only one multinational corporation, ADM, has involved itself in the production of Canadian bioethanol. ADM has invested in Husky?s large, wheat-based bioethanol production facility in Lloydminster, Saskatchewan. To date, multinationals have not expressed interest in Canadian produced bioethanol, seeing Canada primarily as a market for U.S.?produced bioethanol. This may change once the Canadian government?s federal mandate takes effect. Table 5 Canadian Bioethanol Producer Business Models Energy Producers and Marketers: Location / Primary Feedstock / Plant Capacity / Start-up Suncor Energy Plant 1: Sarnia, Ontario / Corn / 2,225 million liters / 2006 Plant 2: St-Clair, Ontario / Corn / 2,225 million liters / 2010 Husky Energy Plant 1: Minnedosa, Manitoba / Wheat, some corn / 130 million liters / 2007 Plant 2: Lloydminister, Saskatchewan / Wheat / 130 million liters / 2006 Grain Based Bioethanol Plants with Producer Equity: Location / Primary Feedstock / Plant Capacity / Start-up GreenField Bioethanol Plant 1: Varennes, Quebec / Corn / 132 million liters / 2007 Plant 2: Chatham, Ontario / Corn / 162 million liters / 1996 Plant 3: Tiverton, Ontario / 26 million liters / 1989 Plant 4: Johnstown, Ontario / Corn / 225 million liters / 2008 Plant 5: Hensall, Ontario / Corn / 200 million liters / 20?? Poundmaker Lannigan, Saskatchewan / Wheat / 12.5illion liters / 1991 Terra Grain Fuels Belle Plaine, Saskatchewan / Wheat / 162 million liters / 2008 IGPC Aylmer, Ontario / Corn / 150 / 2008 Kawartha Bioethanol Havelock, Ontario / Corn / 80 million liters / 2010 North West Bio Energy Unity, Saskatchewan / Wheat / 25 million liters / 2009 Table continues on next page Table 5 Canadian Bioethanol Producer Business Models Renewable Fuels Companies: Location / Primary Feedstock / Plant Capacity / Start-up 14 Canada Biofuels Annual 2010 NorAmera Bioenergy Weybur, Saskatchewan / Wheat / 25 million liters / 2005 Iogen Ottawa, Ontario / Wheat straw / 4 million liters / 2004 Enerkem Westbury, Quebec / Wood waste / 5 million liters / 2005 GreenField Bioethanol/Enerkham Joint Edmonton, Alberta / Municipal landfill waste / 36 million Venture liters / 20?? ii. Bioethanol Trade Due to the North American Free Trade Agreement there is no tariff on renewable fuels produced in the United States and imported into Canada; however, Canada does have a tariff on bioethanol imported from other countries such as Brazil ($0.05 per liter). While the current differences in provincial tax exemptions for renewable fuels do not greatly affect production decisions, the combination of lower oil prices (e.g. return to pre-2005 levels), and higher grain prices could make certain provincial tax-exemption restrictions obstacles to expanding the industry. As Canada continues to expand bio-fuel production capacity through federal and provincial programs/strategies, potential trade issues such as World Trade Organization (WTO) rules, biotechnology, and inter-provincial barriers contrary to the national treatment principle embodied in the WTO and the NAFTA may arise. Confrontations reflecting these concerns are likely still a long ways off as an international trade/market for bioethanol and bio-diesel has yet to develop. In the meantime, Canada will be expanding its biofuels industry in order to meet its federal and provincial mandates. Nearly 100% bioethanol trade for Canada is done with the United States in recent years. However, the possibility of significant volumes of bioethanol trade, especially between the northwestern United States and Western Canada (wheat-based bioethanol to the United States and corn-based bioethanol to Canada), is unlikely to develop in the short to medium term. This is due mainly to the fact that Canada does not have excess bioethanol production capacity, which would permit exports to the United States. In addition, the transportation, distribution and infrastructure issues around bioethanol trade have yet to be resolved. iii. Impacts of Bioethanol Production on Feedstock Markets Corn and wheat are the main feedstock for bioethanol production in Canada and the introduction of the mandatory renewable fuel content by the Canadian government will undoubtedly have an impact on production patterns. At this time, there are no official statistics for the amount of corn and wheat directed into bioethanol production. 15 Canada Biofuels Annual 2010 (a) Bioethanol Produced from Corn Corn at this time, is the main feedstock for Canadian bioethanol production. Ontario is the largest corn-producing province in Canada and not surprisingly, where, in 2010, 58 percent of the Canadian bioethanol production takes place. In 2011, and 2012, corn is expected to account for 77 percent of bioethanol feedstock. While no new corn-based ethanol plants are expected to come on-line in 2011 and 2012, there are several corn-based plants being proposed. (b) Bioethanol Produced from Wheat Wheat is the feedstock for most of the balance of Canada?s bioethanol production. In 2010, it accounted for 25 percent of Canadian ethanol feedstock, and is forecast to account for 23 percent of bioethanol feedstock for years 2011, and 2012, respectively. The newer wheat bioethanol plants have more flexibility built-in as the pipes are larger and allow the use of other feedstock, such as corn, when wheat feedstock may be too expensive. The Husky Energy?s wheat-based bioethanol plant in Minnedosa, Manitoba uses corn when wheat feedstock was unavailable or too expensive. However, Husky Energy has agreed that 80 percent of the feedstock used to produce bioethanol will come from Manitoba producers. The agreement is with the Manitoba government and expires in 2017. As the bioethanol industry grows, demand for different wheat varieties is also expected to grow resulting in increased competition between wheat end-users, such as the Canadian bioethanol producers, livestock producers and the milling industry. The need for high-yielding, low-protein wheat by the livestock industry and the bioethanol plants are in direct conflict with the needs of the flour industry. Increases in bioethanol efficient wheat is expected to affect production patterns and result in more Canadian wheat farmers seeding area to lower protein/high starch wheat such as Winter Wheat and Canadian Prairie Spring Wheat rather than higher protein/lower starch wheat varieties used by the milling industry. The livestock sector, especially the hog sector, competes for the same wheat varieties as the bioethanol sector. There are additional layers of complication that exist in Canada when wheat produced in Western Canada is used as a feedstock in bioethanol production, depending on te co-products and the markets for which they are destined. The Canadian Wheat Board controls the slaes of wheat for human consumption and export. As long as the Western wheat bioethanol is used as fuel and the DDG's use to feed livestock, the CWB has no involvement. If the plant fractionates the grain and removes components for human consumption, such as wheat gluten, then a portion of the wheat technically, has, to be purchased through the CWB. For the most part, however, bioethanol plants purchase wheat in the same way a feed mill makes purchases, either directly from farmers or from a grain company. While the CWB promotes industrial uses for its western-grown grains and its mandate allows it to enter the market for sales of wheat for bioethanol production, it currently does not do so. In the spring of 2011, the Canadian federal government announced plans that will eliminate the CWB's involvement in sales of wheat for bioethanol production. The federal government announced that it will introduce legislation in the fall of 2011 that will eliminate the CWB's monopoly control over Western wheat and barley on August 1, 2012. This has been a goal of this Conservative government since first coming to power in 2006. It was only in the 2011 federal election, however, that the Conservative party achieved its long- sought majority government status and therefore does not need the support of one of the opposition 16 Canada Biofuels Annual 2010 parties to pass legislation. Since the CWB has not been very involved in bioethanol production to date, it is unlikely that this change will have an effect on wheat-based bioethanol production. C. Biodiesel i. Biodiesel Production The Canadian government?s Notice of Intent anticipates that to reach its objective of a federal mandate of 2 percent renewable fuel content in diesel fuel, 600 million liters of diesel fuels will be required. Despite the Government of Canada?s announcement that it intends to mandate renewable fuel content in diesel fuel, the growth in biodiesel production capacity has not increased significantly until recent years. A stronger driver of the increase in biodiesel production capacity seems to be provincial mandates which will be in force ahead of the federate mandate. To many industry observers' surprise, the Canadian government sent out a press release on June 29, 2011, announcing their intention to push ahead with the July 1, 2011 coming-into-force date. A permanent exemption is being provided for renewable content in diesel fuel and heating distillate oil sold in Newfoundland and Labrador to address the logistic challenges of blending biodiesel in this region. Temporary exemptions for renewable content in diesel fuel and heating distillate oil sold in Quebec and all Atlantic provinces are being provided until December, 31, 2012, to give Eastern Canada time to install biodiesel blending infrastructure. This recent announcement, in combination with the extension of the ecoABC Initiative (a program to assist in the construction of biofuel facilities that have a minimum of five percent producer investment) which has been extended until September of 2012, is likely to help spur on investment in biodiesel production facilities. 17 Canada Biofuels Annual 2010 Table 6 Conventional & Advanced Biodiesel Supply and Demand in million liters CY 2007 2008 2009 2010 2011(e) 2012(f) Production (a) 92 100 125 140 158 475 Imports (b) 4 68 40 56 57 145 Exports (c) 12 70 60 70 70 70 Consumption (d) 92 101 105 126 145 550 Ending Stocks 3 0 0 0 0 0 Production Capacity (Conventional Fuel) (g) No. of Biorefineries 3 4 5 9 11 14 Capacity 102 118 165 186 207 558 Production Capacity (Advanced Fuel) No. of Biorefineries 0 0 0 0 0 0 Capacity 0 0 0 0 0 0 Feedstock Use (1,000 metric tons) (h) Rapeseed Oil 1 1 20 25 25 215 Animal Fats 85 90 90 95 105 160 Mixed 0 0 30 40 45 100 Total Feedstock 86 91 140 160 175 475 Notes- Sources (a), (d) Energy Information Association ; (b) estimates based on industry discussions (c) estimates based on industry discussions (e) Estimated (f) Forecast (g) Canadian Renewable Fuels Association (h) Conversion rate used: Diesel density is about 0.85 kg/liter, thus 1 metric ton is approximately 1,276 liters. Numbers are rounded to convey these figures are derived from formulas, not actual reported statistics. Biodiesel production is projected to increase slightly in 2011 up to 158 million liters from 140 million in 2010. Additionally, the EU?s increased demands for renewable energy has generated a growing market for biodiesel exports within Canada, expanding old plants and creating new production facilities. Even with the current plants and the potential 225 million liter Canada Bioenergy/ADM plant that is currently under construction, the federal biodiesel mandate is unlikely to be met solely with domestic production. Future growth, of the Canadian biodiesel industry may be limited to the industry?s ability to secure cheap feedstock. Most of the current and forecasted increase in biodiesel comes from rendered animal by-products. Industry sources put a ceiling on potential production from rendered animal fats at 250 million liters. Specifically, the large increase in rapeseed oil as a byproduct is a result of record acreage by canola farmers in response to increased demand from canola oil for use as an oil in the food retail industry. 18 Canada Biofuels Annual 2010 High prices for oilseeds may hinder Canada?s ability to supply the majority of the feedstock necessary for the balance of the volume required. The federal government?s biofuel strategy program is geared more towards bioethanol and is therefore limited in their ability to address the limiting factors for biodiesel market growth. This has implications when trying to determine the profitability for biodiesel venture. For example, crushing plants can be used to produce oil for both biodiesel production and human consumption, but the federal government does not want to inadvertently subsidize crushing capacity for oils destined for human consumption. As mentioned previously, In order to help stimulate investment in the domestic production of biodiesel, the federal government's ecoABC Initiative, a program to assist in the construction of biofuel facilities that have a minimum of five percent producer investment, has been extended until September of 2012. It was originally set to expire on March 31, 2011. ii. Biodiesel Trade Trade data for biodiesel is problematic since Canada does not have a dedicated tariff code for biodiesel. Adding to the complication, a European Union anti-dumping trade investigation which concluded in 2010, revealed inconsistencies between the European Union biodiesel import trade data and the Canadian biodiesel production capacity which is still in its infancy. The trade data is therefore based on discussions with industry. Lack of biodiesel production capacity has meant that some provincial mandates have necessitated the importation of biodiesel. The limited implementation of a federal mandate of 2 percent renewable content in diesel fuel as of July 1, 2011, with full implementation across Canada by the end of 2012, will likely result in biodiesel exports leveling off as the domestic demand increases. Imports of biodiesel are expected to rise in 2011 and 2012 as the Canadian biodiesel production capacity is unlikely to grow fast enough to meet the federal mandate with domestic production alone. Of note, the two Canadian companies that participated in the EU investigation have been exempt from the anti-dumping duties placed on the Canadian biodiesel industry following the investigation. Future Canadian biodiesel companies who wish to export biodiesel to the European Union will be provided the opportunity to apply for exemptions as well. More information on the EU investigation is available at: Council implementing regulation no 443/2011 (anti-subsidy) http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:122:0001:0011:EN:PDF Council implementing regulation no 444/2011 (anti-dumping) http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:122:0012:0021:EN:PDF iii. Impacts of Biodiesel Production on Feedstock Markets 19 Canada Biofuels Annual 2010 (a) Biodiesel Produced from Canola and Animal Fats/Oils With a 2 percent biodiesel mandate coming into force on July 1, 2011, the choice of feedstock comes into question. While biodiesel can be made from a variety of different feedstock?s, prices and availability are the determining factors of which one will be used. While canola, due to the abundance of the Canadian production, was thought to be the natural choice for feedstock, studies suggest that this may not be the case. Key competitors facing canola oil for use in biodiesel are rendered oils (yellow grease), rendered animal fats (tallow), palm oil (which would be imported as Canada does not produce palm oil), and soybean oil. Canola and soybeans are high-priced feedstock for biodiesel since they are priced as food oils in the international markets. Palm oil and rendered fats are priced at feed and industrial use levels. Most of the growth in biodiesel production capacity has occurred in Western Canada, spurred on by provincial mandates. Canola production has reached record high levels in recent years. Increased demand from canola oil from the food retail industry has resulted in higher prices. Canola producers have responded by planting record acreage but rainy conditions during 2010 planting session are a setback to the increasing trend. Difficult spring conditions in 2011 may have a similar impact. Despite this supply response, some industry observers suggest that canola could remain too expensive, and that a 2 percent biodiesel blend could only be met with cheaper feedstock. As demand for the feedstock increases, so it is likely that their prices will also increase. While canola use for biodiesel by-itself may be expensive, the co-products from biodiesel production may make economic sense. Co-products include meal to be used in animal feed. There are limits on the profitability of using canola as a feedstock if by-products are part of the everyday production process. For example, off-seed canola may not be a suitable feedstock since this meal may not meet quality standards. Despite these limitations, co-products and the production capacity of the plants (these plants could be supplying over 40 percent of the federal 2 percent biodiesel mandate), combined with provincial biodiesel mandates may make the industry profitable, despite higher commodity prices. In 2011, the share of biodiesel production from tallow (animal fats) is expected to remain at 2010 levels of 60 percent. The share however is expected to fall dramatically in 2012 (to 34 percent) with the expected completion of a 225 million liter canola-oil feedstock based biodiesel plant. The percentage of biodiesel produced from canola oil in 2012 is forecast to rise to 46 percent, from an estimated 14 percent share in 2011. The share of biodiesel produced from yellow grease is forecast to fall to 6 percent in 2012 from 2011 levels of nearly 13 percent, and the share of biodiesel produced from multiple feedstocks is forecast at a little over 15 percent, a marginal increase over the 2011 share. Biomass for Heat and Power A. Wood Pellets 20 Canada Biofuels Annual 2010 There is interest in exporting wood pellets from Canada to Europe to meet the increased demand for biofuels in European countries. The European Union (E.U.) has increased funding for renewable energy production, including doubling the financial contribution to renewable energy in 2007 for 2010 targets. The E.U. announced in 2004 that by 2020, 20 percent of its total energy consumption requirements with renewable energy sources, much higher than their current 7 percent rate. The wood pellet industry in Canada, especially in the west, has grown at an annual average rate of more than 20 percent over the last 5 years due to the steady supply of wood residues, and increasing demand from Europe. According to the Canadian Wood Pellet Association, as of 2010, Canada has 33 pellet plants with 2 million tons annual production capacity. In 2010, Canada's pellet plants operated at about 65% capacity, producing about 1.3 million tonnes per year. The province of British Columbia accounts for about 65% of Canadian production and capacity, while, collectively, the provinces of Alberta, Quebec, New Brunswick, Nova Scotia, and New Brunswick account for 35%. Contrary to the United States, where almost all the 800,000 tons of wood pellets produced are consumed domestically, more than 80 percent of wood pellets manufactured in Canada are exported to Europe. Table 7 Trade: Sawdust and Wood Waste/Scrap HS Code 440130 Canadian Imports in metric tons Origin 2007 2008 2009 2010 World 365,845 487,182 649,346 532,829 U.S. 365,290 486,579 647,806 531,987 E.U. 95 105 1,316 79 % U.S. 99.56% 98.99% 98.75% 98.84% % E.U. 0% 0% 0% 0% Canadian Exports in metric tons Destination 2007 2008 2009 2010 World 1,255,963 1,262,096 1,342,972 1,607,944 U.S. 647,577 561,673 449,996 368,238 E.U. 245,749 648,385 842,385 1,155,908 % U.S. 51.56% 44.50% 33.51% 22.90% % E.U. 19.57% 51.37% 62.73% 71.89% Source: Global Trade Atlas, Statistics Canada B. Fuels Produced from Other Biomass There has been growing interest and investment in producing bioenergy from sources other than corn and wheat. Over the past year, there were announcements of joint ventures to make cellulosic bioethanol and biogas, including a joint cellulosic bioethanol venture announced by GreenField 21 Canada Biofuels Annual 2010 Bioethanol and Enerkem. Enerkem, a Quebec-based gasification and catalysis technology company, has developed technology to convert biomass such as municipal solid waste and wood residue into cellulosic bioethanol. Its commercial-scale demonstration facility in Westbury, Quebec, which was completed in 2009, reached 1,000 hours of operation in 2010. Enerkem continues to grow, and is in the construction phase of its second plant, in partnership with the City of Edmonton and Alberta Innovates. The commercial waste-to-biofuels production facility is scheduled to begin operations in 2012. It is expected to have a production capacity of 36 million liters of ethanol per year. With support from the Government of Canada, Iogen Corporation has built a demonstration plant to convert biomass fibers to bioethanol using enzyme technology. Located in Ottawa, Ontario, the plant can process over 25 tons of wheat straw per week, using enzymes produced in an adjacent facility. Since the early 1980s, Iogen has received $30 million in federal funding for its pre-treatment and cellulose enzyme development. Biogas is also of increasing interest and investment. Two of the three bio-energy projects that received funding under Alberta?s Biorefining Commercialization and Market Development Program and the Bio- energy Infrastructure Development Program are for the development of biogas as an alternative source of energy. Kingdom Farm Inc. received a significant grant to review the potential for bio-gas from large scale Alberta hog operations. Highmark Renewables Research also received a significant grant for a bio-gas feasibility study at a large scale dairy facility. Most fuels derived from non-grain biomass remain at the research level. One company moving to commercialize this technology is Lignol Energy Corporation, which specializes in cellulosic bioethanol and biorefining. Lignol announced the completion of a fully integrated industrial-scale biorefinery pilot plant in Burnaby, British Columbia in 2009 that is an end-to-end producer of cellulosic bioethanol. On June 15, 2010 Lignol signed a research and development agreement with Novozymes, the world?s leading producer of industrial enzymes, to make biofuel from wood chips and other forestry residues. The partners aim to develop a process for making biofuel from forestry waste at a cost as low as $2 per gallon, a price competitive with gasoline and corn bioethanol at the current United States? market prices. Additionally, Ontario Power Generation (OPG) is looking to buy two to three million tones of biomass annually by 2015-the date at which the Ontario government has mandated an end to burning coal for electricity generation. Biomass is being targeted to replace coal as soon as technical obstacles are overcome. However, biomass must find a more efficient and condensed solution for transport and handling. 22 Canada Biofuels Annual 2010 Appendix I Provincial Mandates, Policies, Tax Exemptions, Incentives and Conditions (i) Alberta Biofuels Policies Biofuels Strategy/Policy Documents: The buildup of biofuels production capacity in Alberta has largely been the result of its nine-point bioenergy plan, first announced in October 2006. In December 2008, the government built on this plan and announced its Provincial Energy Strategy. Renewable Fuel Standard: As part of the strategy, the government of Alberta announced its intention to implement a renewable fuel standard of 5 percent bioethanol content in gasoline and 2 percent renewable content in diesel by 2010. The implementation date has since been pushed back to April 1, 2011. In addition, the production and manufacturing life cycle of the renewable fuel must be at least 25 percent lower than emissions from producing and manufacturing the same quantity of traditional fossil fuels. Production Incentives: As mentioned in Table 16, the province of Alberta offers a Bioenergy producer credit program (PCP). Table 8 Alberta: Provincial Programs to Encourage the Development of a Biofuels Industry Program name: Bioenergy Infrastructure Commercialization/Market Development Development Grant Program Program Budget Alberta?s Biorefining Commercialization and Market Development Program and Allocation: Bioenergy Infrastructure Development Program have both been fully allocated and will expire in March 2011. Together, the programs have supported more than 70 bioenergy projects with grants totalling approximately $150 million. These two programs are no longer accepting applications. Administering Alberta Energy Alberta Energy Ministry or Agency Type of Financing grant Financing grant Program: Program Design To assist municipalities with the Designed to increase production capacity or Purpose: development and distribution through the market development and infrastructure of biofuels and commercialization of biofuels. energy. Duration Began April 1, 2008 and Began April 1, 2008 and originally was to originally was to end March 31, end March 31, 2009 but extended to March 2009 but extended to March 31, 31, 2011. 2011. Additional notes: Some program modifications due Some program modifications due to its to its extension. For more on extension. how this affects the programs see 23 Canada Biofuels Annual 2010 FAQs. Context: According to the most recent data, Alberta boasts approximately 13 percent of Canada?s total population, 11 percent of net gasoline sales and 3 percent of bioethanol production capacity. Table 9 Alberta: Provincial Mandates, Tax Exemptions, Incentives, and Conditions Mandate Incentives Conditions/Duration Alberta has enacted a Bioenergy producer credit Duration: The current credit program runs Renewable Fuels program (PCP): The from April 1, 2007 ? March 31, 2011. The Standard that will be producer credit amount is PCP has been extended and expanded until implemented April 1 $0.09/L for production March 31, 2016. 2011. It will require an from plants with a capacity average of 2 percent of 150 million liters or Alberta?s current bioenergy program treats renewable diesel and 5 more a year. all bioethanol equally. The extended program percent bioethanol. focuses on the great potential for second For plants with capacity of generation bioethanol, which uses feedstocks less than 150 million liters like forestry, agricultural and municipal per year, the credit amount waste. Specifically, the program will is $0.14/L. encourage development of new technologies The cap is $20 million per and facilities that use non-food crops, waste year and a total of $75 biomass or wood. million for the project For electricity from biomass (e.g. biogas, syngas), the rate is two cents per kilowatt hour (kWh) for production from capacity of three megawatts (MW) or more and six cents per kWh for production from capacity of less than 3 MW. 24 Canada Biofuels Annual 2010 (ii) British Columbia Biofuel Policies Biofuels Strategy/Policy Documents: In 2008, the province of British Columbia (BC) committed to bioenergy and renewables and set an objective to lower greenhouse gases emissions by 33 percent by 2020. The province, under its Ministry of Energy, Mines and Petroleum Resources, unveiled two strategy documents/plans related to using bioenergy resources to reduce greenhouse gases. The first is the BC Energy Plan, unveiled late February 2007. This document sets out the necessary steps for reducing BC?s greenhouse gas emissions and commits to investments in alternative technologies, including biofuels for transportation. The second is the BC Bioenergy Strategy which was made public at the end of January 2008. Renewable Fuel Standard: Since January 1, 2010, British Columbia?s Renewable and Low Carbon Fuel Requirements Regulation has required: A provincial annual average of five percent renewable content in gasoline sold in British Columbia. A provincial annual average of three percent renewable content in diesel sold in British Columbia in 2010, four percent in 2011, and five percent from 2012 onward. A 10 percent reduction in the carbon intensity of transportation fuels by 2020. Consumption Incentives: Motor Fuel Tax Act and Carbon Tax Incentive The incentives for bioethanol and biodiesel when blended with gasoline or diesel were discontinued, effective January 1, 2010. Fuel with at least 85 percent bioethanol, natural gas and propane (effective July 1, 2010) when used in a motor vehicle are exempt of the Motor Fuel Tax Act. Under specific conditions hydrogen is also exempt from the Motor Fuel Tax Act. 25 Canada Biofuels Annual 2010 Table 10 British Columbia: Programs to Promote a Provincial Renewable Fuels Industry P Budget Allocated / rogram Nam Administering Type of Program/ Program Design / Duration e Ministry or Agency BC Grant; funding assistance Bioenergy C$25 million Capacity building; to encourage the development and Network marketing of wood-to-bioenergy and other bioenergy technologies Began April 1, 2008 and has no specific end date Ministry of Energy, Additional note: The projects funded so far include C$1.82 Mines and Petroleum million in funding assistance to Lignol Energy Corporation, Resources; BC C$3 million to Nexterra, and C$400 thousand to Cedar Bioenergy Network Road, C$100,000 investment in University of British Columbia?s Clean Energy Research Centre (CERC). Liquid B C Grants, funding assistance; $ 10 million iofuels To help build up liquid biofuels production capacity; Program Call for applications went out late November, 2008, and Ministry of Small application date closed January 2009. Business, Technology Additional note: Projects that were awarded funding were and Economic announced in April 2009. Two of the eight projects are Development projects which use woody biomass to produce cellulosic bioethanol. The remaining six projects are for biodiesel production. For more information on these projects, see: Approved Liquid Biofuels Projects. rants, funding assistance; Innovative C G $ 25 million per year C To address specific energy and environmental problems lean Energy that have been identified by the province by supporting the Fund pre-commercial energy technology that is new or commercial technologies not currently used in the province (note: the funding is not specific to biofuels, but alternative fuel technologies are eligible); Established in December 2007. Ministry of Small Additional note: The First Call was announced in July Business, Technology 2008, the Second Call was announced in April 2009, and and Economic the Third Call, First Intake was announce in March 2010. Development For more information on these projects, see: ICE Fund Project Round One. Context: According to the most recent data, British Columbia boasts approximately 11 percent of Canada?s total population, 13 percent of net gasoline sales and virtually no commercial bioethanol production capacity. Table 11 26 Canada Biofuels Annual 2010 British Columbia: Provincial Mandates, Tax Exemptions, Incentives, and Conditions Mandate Incentives Conditions/Duration 5 percent for gasoline Fuel with at least 85 percent Under specific conditions hydrogen is 5 percent for diesel- bioethanol, natural gas and propane also exempt from the Motor Fuel Tax phased in over a three (effective July 1, 2010) when used Act. year period: in a motor vehicle are exempt of the 3 percent average Motor Fuel Tax Act. The incentives for bioethanol and starting biodiesel when blended with gasoline January 1, 2010; or diesel were discontinued, effective 4 percent (2011) January 1, 2010. 5 percent (2012) Carbon Tax Exemption Duration: No duration specified The exemptions for bioethanol and biodiesel under the Carbon Tax Act, were discontinued, effective January 1, 2010. 27 Canada Biofuels Annual 2010 (iii) Manitoba Biofuel Policies Biofuels Strategy/Policy Documents: Manitoba is developing its bioethanol and biodiesel industries under the Energy Development Initiative section of the Ministry of Innovation, Energy and Mines. Information on Manitoba?s biofuels initiatives is available on the province?s Energy Development Initiative website. Renewable Fuels Mandate: The implementation of The Bio-fuels and Gasoline Tax Amendment Act was enacted in the fall of 2007. The mandate requiring that 8.5 percent of the gasoline sold in the province must be bioethanol came into effect on January 1, 2008, beginning with a 5 percent bioethanol requirement for the first quarter of the year and moving to 8.5 percent for the remainder of 2008 and subsequent years. In December, 2007 the Province of Manitoba passed the Biofuels Act which includes strict licensing and fuel quality requirements and the option for a future biodiesel mandate. Production Incentives: The gasoline tax exemptions for bioethanol have been replaced by a direct producer grant that decreases over a period of eight years. The staggered, decreasing production incentives are as follows: 20 cents/liter producer incentive beginning January 1, 2008 until December 31, 2009; 15 cents/liter production incentive beginning January 1, 2010 until December 31, 2012; 10 cents/liter producer incentive beginning January 1, 2013 until December 31, 2015. To be eligible for the incentive, bioethanol must be produced in Manitoba and sold in Manitoba to fuel suppliers. More information on the program is available at: Bioethanol Fund Grant Regulation. Context: According to the most recent data, Manitoba boasts approximately 3 percent of Canada?s total population, 3 percent of net gasoline sales and 6 percent of bioethanol production capacity. Table 12 Manitoba: Provincial Mandates, Tax Exemptions, Incentives, and Conditions Mandate Incentives Conditions/Duration 8.5 percent pool average Direct Payment Bioethanol Condition: To be eligible for the credit, bioethanol content in Production Incentive the bioethanol has to be produced and gasoline beginning April 1; 15 cents/liter producer sold in Manitoba. 2008 credit from January 1, 2010 December 31, 2012. The incentive is capped on an annual 2 percent biodiesel pool basis by the amount of bioethanol average in diesel beginning 10 cents/liter from January required for the mandate. Nov. 1, 2009. 1, 2013 - December 31, 2015. Duration: January 1, 2008 ? December 31, 2015. 28 Canada Biofuels Annual 2010 (iv) Ontario Biofuel Policies Biofuels Strategy/Policy Documents: Ontario is the largest bioethanol-producing province in Canada and has been a leader in building bioethanol production capacity in Canada. Ontario?s bioethanol strategy has two components; (1) a renewable fuel standard mandate, and (2) the Ontario Bioethanol Growth Fund (OEGF) that was created in 2005. Renewable Fuels Standard: As of January 1, 2007, the gasoline tax exemption of 14.7¢ a liter on the bioethanol portion of the bioethanol-blended gasoline is no longer in effect. At the same time, a mandate that requires on average, no less than 5 percent bioethanol be blended in the gasoline sold in Ontario came into effect. Provincial Programs to Support the Development of a Regional Biofuels Industry: The Ontario Bioethanol Growth Fund (OEGF) provides: C$32.5 million for capital assistance to help meet financial challenges; cannot exceed 10¢ per liter; C$60.5 million per year from 2007-2017 for operating assistance to address changing market prices; no operating grant will exceed 11¢ per liter of bioethanol; C$16 million in support of independent retailers selling bioethanol blends Independent Gasoline Blender?s Transition Fund; C$7.5 million in private and public funds for research and development opportunities. Context: According to the most recent data, Ontario boasts approximately 39 percent of Canada?s total population, 40 percent of net gasoline sales and 66 percent of bioethanol production capacity. Table 13 Ontario: Provincial Mandates, Tax Exemptions, Incentives and Conditions Mandate Incentives Conditions Effective January 1, 2007, all gas sold Bioethanol None must contain no less than 5 percent $32.5 million for capital assistance to help bioethanol. meet financial challenges; $60.5 million per year from 2007-2017 for operating assistance to address changing market prices; $16 million in support of independent retailers selling bioethanol blends; $7.5 million in private and public funds for research and development
Posted: 17 July 2011, last updated 17 July 2011

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