Canada is developing biofuel incentives similar to California's which could provide a valuable market for the U.S. biodiesel industry, as it struggles to increase exports to other countries due to countervailing duties and other barriers.
The policy, known as the Clean Fuel Standard, was introduced in 2016. It aims to reduce greenhouse gas (GHG) emissions incrementally in Canada by 11%, or 30 million tons of greenhouse gas emissions annually by 2030. The U.S. biodiesel industry hopes that target translates into increased demand for U.S. biodiesel.
Canada's policy is a cousin to California’s Low Carbon Fuel Standard, which became law in 2011. The goal of the LCFS is to reduce the carbon intensity of the transportation fuel pool by 10% by 2020 and is administered by the California Air Resources Board.
The president of Advanced Biofuels Canada, Ian Thomson, tells Agri-Pulse that the CFS will allow more options for generating credits than the California program. For example, any industrial facility, including chemical, fertilizer and cement plants that uses systems to capture and store carbon could generate liquid-class credits without having any link to transportation fuels.
In June, Canada’s environmental agency released a proposed regulatory approach for the CFS. According to the Canadian government, the first phase would set requirements for gasoline and diesel with regulations expected to be implemented in 2022.
Alan Weber, an adviser to the National Biodiesel Board, said sales to Canada have made up 80% to 90% of America’s biodiesel exports since 2016.
Ian Thomson, Advanced Biofuels Canada
Jarrett Whistance, research scientist at the University of Missouri’s Food and Agricultural Policy Institute, said the CFS policy could be beneficial to U.S. producers, especially if it distinguishes between feedstocks based on their relative reductions in greenhouse gas emissions.
“That would probably give U.S. biomass-based diesel a competitive edge over imports from countries like Indonesia, where biodiesel is produced from feedstocks such as palm oil,” Whistance told Agri-Pulse.
Thomson said it is too early to tell whether Canada will need U.S. biodiesel exports to meet the CFS requirements, because “2030 is too far to see, the CFS design is not done, and Canada and U.S. economics for domestic vs. imports hinge on a host of variables."
Thomson said the models they are using to assess 2030 biodiesel demand, depending primarily on CFS design, show a range of biodiesel production from 166% to 290% growth from 2020 levels. The range of consumption of biodiesel in Canada is projected at 1.39 billion liters (367 million U.S. gallons) to 2.04 billion liters (539 million U.S. gallons).
While he said the scale of biodiesel imports from other countries is unknown, they will play some sort of role. Thomson noted the U.S. has long been a key factor in helping support market development of biodiesel in Canada.
“Long before we had enough production capacity and Canada’s support fuel standards, we were reliant on being able to import U.S. biodiesel to meet demand,” Thomson said. It helped show regulators the fuels work and suppliers could use them, he added.
Meanwhile, total U.S. biodiesel exports have stayed relatively flat. NBB's Weber expects only a slight increase for biodiesel exports this year compared to 2018. Exports totaled about 100 million gallons in 2018, up from an average of about 90 million gallons a year from 2015 through 2017.
Weber said the industry continues to have challenges entering markets like Southeast Asia, the Americas and the European Union.
“In Southeast Asia, cost competitiveness with palm-based biodiesel where there are no restrictions on the use of palm-based biodiesel" would likely be the number one issue or barrier to increased exports, Weber said.
He also said China is another potential market, but blending biodiesel must be more economical than using diesel fuel. It’s the same situation in the North and South American countries. The European Union also currently has antidumping duties on U.S. biodiesel.
Alan Weber
While exports are projected to rise year over year, imports have been a bigger story in recent years. Imports of biodiesel, primarily from Argentina, jumped sharply in 2015 and 2016, said Whistance.
But in 2018, the U.S. Department of Commerce began imposing anti-dumping and countervailing duties on biodiesel imports from that country as well as Indonesia.
“In 2016, more than 400 million gallons of product were imported from Argentina and after those cases were formatively determined, that imported product dropped to zero,” Weber said.
“Indonesia was similar, (there were) about 110 million gallons coming in in 2017 and imports dropped to zero.”
Weber noted an increase in exports could also depend on the European Union lifting its anti-dumping biodiesel duties in the next couple of years.
In its August report, FAPRI projected modest growth in exports over the next five years.
Whistance said the projected increase is based primarily on the assumption of rising crude oil prices, which would lead to some expansion in global biomass-based diesel demand.
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