Canada's biofuel policies have helped to reduce GHG emissions, but according to a new report from Canada's Ecofiscal Commission, these reductions have come at a significant cost. The report, Course Correction: It's Time to Rethink Canadian Biofuel Policies, examines the extent to which biofuel policies have achieved their stated objectives, and whether these policies have been cost effective for Canadians.
Federal and provincial governments currently use two different types of policies to encourage the production and use of biofuels. Production subsidies provide cash payments directly to biofuel producers, financed by taxpayers. Fuel mandates require gasoline and diesel to be blended with more expensive ethanol and biodiesel, thereby raising driving costs for consumers.
Course Correction finds that these biofuel policies have reduced GHG emissions by an average of 3 million tpy from 2010 to 2015, an amount less than 0.5% of Canada's total GHG emissions. These small reductions have been very expensive, however. The total consumer and taxpayer cost has been approximately CAN$640 million per year. On a per tonne basis, the estimated average cost of the emissions reductions have ranged from CAN$128 to CAN$185, far greater than the cost achievable with a carbon price, such as the ones already available and coming by 2018 to all Canadian provinces as per yesterday's Federal announcement.
An analysis of the policies' other objectives appears unlikely to justify these high costs. When it comes to support for rural communities, the federal government's own cost benefit analysis for its renewable fuel mandate found that economic costs far exceeded benefits. Further, the Ecofiscal report finds that impacts on air pollution and on the development of next generation biofuels have been negligible.
As a result, the Ecofiscal Commission recommends that all production subsidies be terminated as initially planned, and that renewable fuel mandates be gradually phased out. In their place, the Commission recommends that governments across the country continue to develop a rising pan-Canadian carbon price. The report also notes that as part of the policy transition, governments should consider complementing carbon pricing with flexible performance standards and broad funding for research and development to spur the shift to low carbon transportation.
"Carbon pricing should be the backbone of any climate policy, as it is the most cost effective way to reduce greenhouse gas emissions," said Commission Chair Chris Ragan, an Associate Professor of Economics at McGill University and member of the Federal Government's Advisory Council on Economic Growth. "In the policy context now emerging in Canada, with over 80% of Canadians living in provinces with a carbon pricing system in place or soon to be, and the federal government stepping in to fill the gaps, it is prudent to re-examine older policies to see if they still make sense. Our research finds that biofuel policies don't pass this test, and that it's time for governments to correct course and shift to the more cost effective policies now available: carbon pricing and flexible performance standards."
"Furthermore, as Canadians across the country continue to embrace carbon pricing, it will be helpful to have a coordinated pan-Canadian system which will make the various provincial policies even more cost-effective," Ragan continued. "This report shows that some sector specific policies, though well intentioned, may not be as sensible as many people think. A broadly applied carbon price, if well designed, can ensure that we reduce GHG emissions while maintaining the strongest economy possible."
Read the article online at: https://www.hydrocarbonengineering.com/clean-fuels/11102016/governments-urged-to-end-emissions-reduction-policies/