AMTA  E-News

June  2010

Study Conducted for Environment Canada Casts Further Questions on Why Federal Government is Seeking Biodiesel Mandate

Cost of mandate would be five times the benefit

A study conducted in 2009 by EcoRessources Consultants (ERC) for Environment Canada casts doubt on the net benefits of a biodiesel mandate. The study, recently obtained by the Canadian Trucking Alliance (CTA), determined that the societal costs of a proposed federal two per cent biodiesel mandate would outweigh the benefits by a factor of five.

In December 2006, the federal government introduced a notice of intent in Canada Gazette to develop a federal regulation requiring two per cent renewable diesel fuel content no earlier than 2010 and no later than 2012 pending confirmation that this fuel will not have a detrimental impact on truck engines. Prior to that announcement and since that time, CTA has been lobbying the federal government in order to raise awareness of the issues confronting the trucking industry should a biodiesel mandate be introduced; part of this lobby campaign was the call for a cost-benefit analysis.

The ERC study provides additional credence to the concerns raised by CTA and others that there is little to be gained from a biodiesel mandate from an environmental perspective and that the impetus for such a policy is really to create a new market for farmers. In addition, CTA says there are still a number of operability issues associated with biodiesel that are unresolved.

According to ERC, the total incremental cost to society of the proposed biodiesel regulation for on-road use would be $4.5 billion between 2011 – 2035, whereas the benefits, in the form of reduced GHG emissions, are valued at only a tad over $860 million. On a regional basis, Western Canada would take the biggest cost hit at about $1.8 billion, followed by Ontario at $1.3 billion and Quebec at more than $450 million.

The report makes clear that consumers – the trucking industry and the increasing number of people buying more fuel-efficient diesel powered light-duty vehicles – would ultimately be burdened with the bulk of the incremental costs of a biodiesel mandate, both in terms of direct costs and by the flow through of the increased costs to the petroleum refining sector.

ERC also said it was “probable” that higher and more volatile fuel prices may be experienced in the first few years after introduction of a biodiesel mandate until the supply infrastructure is established. In terms of the growth of supply, the consultants pointed out that current biodiesel production in Canada comes mainly from yellow grease and animal fats, which they caution are in relatively small supply and located mainly in urban centres.

Of course, the way to reduce GHG emissions is through improved fuel efficiency. However, according to ERC, current biodiesel has lower energy content than conventional diesel and estimates that approximately 604 million litres of additional diesel purchases would be required over the 25-year period.

AMTA is a founding member of Canadian Trucking Alliance. www.cantruck.ca