January 23, 2018 …

January 23, 2018

Rebecca Tan
Policy Advisor
Ministry of the Environment and Climate Change
Climate Change and Environmental Policy Division
Air Policy Instruments and Programs Design Branch
77 Wellesley Street West
Floor 10, Ferguson Block
Toronto Ontario
M7A2T5

Response to the Regulation Proposal Notice: Low Carbon Transportation Fuels in Ontario: Amendments to Ethanol in Gasoline (O. Reg. 535/05) and Greener Diesel – Renewable Fuel Content Requirements for Petroleum Diesel Fuel (O. Reg. 97/14) Regulations
INTRODUCTION
The Ontario Society of Professional Engineers (OSPE) is pleased to provide feedback regarding low carbon transportation fuels in Ontario.
At a high-level, OSPE supports the direction of the proposal developed by the Ministry of the Environment and Climate Change. This submission details OSPE’s recommendations and general comments on the proposal. OSPE values the opportunity to share the voice of Ontario’s engineers in this important discussion and appreciates that our input will be seriously considered.
SUMMARY
•OSPE supports the proposed increase in ethanol content in gasoline from the current 5% to 10% to harmonize the requirement with other jurisdictions; •OSPE recommends that policy analysis of any climate change regulation consider possible interactions with cap-and-trade, which may result in increased greenhouse gas (GHG) emissions; •OSPE recommends that ethanol used for compliance emit no more than 25% lifecycle greenhouse gas emissions per unit energy than petroleum gasoline. (I.e. a minimum reduction of 75%, rather than the 35% suggested in the EBR.); •OSPE recommends a higher priority for cost-efficient and effective policies that reduce personal vehicle kilometres travelled, and improve fuel economy per vehicle-kilometre; •OSPE recommends that ethanol made from waste or marginal land be exempt from lifecycle emission requirements to spur future innovation on next-generation biofuel technologies. DECLARED CONFLICT OF INTEREST
In EBR 013-1929, the province proposes to require that a professional engineer certify that primary data used in the carbon intensity calculations are reasonable and the calculations are correct. This would be very laborious, providing employment for professional engineers from which some OSPE members would benefit. OSPE has endeavoured to look beyond this particular impact and evaluate the proposed regulatory changes based on its value to Ontario and society more generally.
REGULATORY PROPOSAL
“The Ministry is proposing to amend existing renewable fuel regulations to increase ethanol blending requirements, improve the environmental performance of fuels, and recognize emerging clean fuel technologies.”
EBR 013-1929 invites consultation on a proposal to amend Ontario's Ethanol in Gasoline Regulation. (O.Reg.535/05). If implemented, the new regulations would: •Require Ontario gasoline to have 10% ethanol by volume (annual average) (compatible with other states and provinces, and with Canada's emerging Clean Fuel Standard). •Impose maximum limits on greenhouse gas ("GHG") emissions from production and combustion of motor fuel ethanol, compared to hydrocarbon gasoline. •Offer incentives for new renewable fuel technologies (e.g. "renewable" gasoline, biocrude, cellulosic ethanol) in calculating compliance with the new ethanol requirements. •Require rigorous proof of life-cycle GHG performance of blended fuel, including certification by a P.Eng.
EBR 013-1929 also proposes to amend the Greener Diesel-Renewable Fuel Content Requirements for Petroleum Diesel Fuel (O.REg. 97/14), to create incentives for new renewable fuel technologies, such as biocrude.
"The Ministry is also exploring (financial) options to support biofuel production and innovation, through a Blenders Support Program, including potential funding of up to $155 million"
BACKGROUND
•In 2005, Ontario's Regulation 535 mandated the blending of 5% (volume) ethanol in gasoline. This Ontario Regulation was similar to other regulations in other jurisdictions. •The Ontario Government has announced greenhouse gas reduction targets of 15% by 2020, and 37% by 2030, compared to 1990 totals. •Reducing transportation emissions must be Ontario’s highest climate change priority, according to the Environmental Commissioner of Ontario. (Source: “Facing Climate Change: Greenhouse Gas Progress Report 2016”, Environmental Commissioner of Ontario, November 2016. Section 6.3.2 “Low-Carbon Transportation”. https://eco.on.ca/reports/2016-facing-climate-change/) •Across Ontario economic sectors, transportation has the fastest growing emissions. Ontario has 8 million personal motor vehicles, emitting 35,000 kilotonnes of GHG equivalent per year. At present trends, Ontario will have 9 million personal motor vehicles by 2030. Within this increase, the market share of high-emitting "light trucks" is increasing, while the market share of low-emitting small automobiles is decreasing. •Government programs to reduce emissions from personal motor vehicles appear to be expensive and incapable of achieving the stated goals. The Discussion Paper issued in EBR 012-7923 describes a set of policies and programs (e.g. Cap-and-Trade, Electric Vehicles) to reduce Ontario's GHG emissions. This group of policies and programs does not appear to be sufficient to reduce Ontario's emissions to the planned numbers.
RECOMMENDATIONS
Ethanol Content
OSPE supports the proposed increase in ethanol content in gasoline from the current 5% to 10%.
OSPE supports the Ontario Government initiative to amend the Ethanol in Gasoline Regulation (O.Reg.535/05) of the Environmental Protection Act to increase Ontario gasoline content of ethanol from the current required 5% to 10% as this would harmonize the requirement with other states and provinces and with Canada's emerging Clean Fuel Standard.
Cap-and-Trade Interactions
OSPE recommends that policy analysis of any climate change regulation consider possible interactions with cap-and-trade.
The complexities of overlapping carbon pricing with complementary regulations can result in counter-productive increases in greenhouse gas (GHG) emissions. This EBR, and the discussion paper that preceded it, did not satisfactorily demonstrate an awareness of these interactions. OSPE recommends that the Ontario Government study and address these interactions. Important initiatives such as increasing the required amount of ethanol in gasoline need to result in measurable reductions in GHGs.
Lifecycle Emissions
OSPE recommends that ethanol used for compliance emit no more than 25% lifecycle GHG emissions per unit of energy than petroleum gasoline. (i.e. a minimum reduction of 75% rather than 35% as communicated in the proposal.)
O.Reg 535/05 (“Ethanol in Gasoline”) interacts with cap-and-trade to cause a net increase in greenhouse gas (GHG) emissions. The proposed increase in ethanol content only aggravates this problem even further, while increasing compliance costs and externalities. The simplest way to reverse this outcome and drive real emission reduction would be by imposing a very stringent limit on lifecycle emissions. Otherwise, if the lifecycle requirement is weak, any increase in ethanol content in gasoline would aggravate climate change and is therefore inadvisable.
Although Ontario's ethanol mandate does, in all likelihood, reduce transportation emissions, it does not change the total emissions capped under the Western Climate Initiative (WCI). Trading of emission permits will then allow emissions to increase by an equal amount elsewhere in the WCI economy. (Source: Jonathan Arnold, Canada's Ecofiscal Commission, “Policy interactions untangled: Carbon pricing and low-carbon fuel standards” June 14, 2017. https://ecofiscal.ca/2017/06/14/policy-interactions-untangled-carbon-pr…) The law of supply and demand would suggest that the price of emission permits is pulled down by an ethanol mandate, while the overall cost of compliance is increased.
O.Reg. 535/05 is specific to Ontario, so increasing its stringency directly reduces emissions in Ontario rather than in other WCI jurisdictions (Québec and California). A focus on Ontario reductions would do more to meet Ontario's political commitments, but what matters to climate change is global cumulative emissions. Carbon dioxide is a well mixed gas in the atmosphere, and moving emissions from Ontario to California does not improve climate change impacts in Ontario. If the emission trading market responded to the Ontario ethanol mandate purely by importing fewer permits from California, then California's emissions would increase by the same amount as Ontario's ethanol mandate saved. The more complex reality is that emission permits released in Ontario are likely to be taken up in all three WCI jurisdictions, and emission increases will be distributed among them. The total emissions capped under the WCI will still be unchanged.
But while an ethanol mandate has no net impact on emissions within the WCI, it can increase upstream emissions from ethanol production outside of the WCI. The word “upstream” in this context is relative to the fuel distributor, which is where Ontario's cap-and-trade regulations and ethanol mandate are both applied. “Downstream” emissions are those emitted from combustion of fuel after distribution, and “upstream” emissions are those emitted by the supply chain prior to distribution. Biofuels have extremely low downstream emissions, because biogenic carbon captured from the atmosphere during plant growth is assigned a zero emission factor. However, most biofuels have higher upstream emissions than gasoline made from petroleum. The lifecycle emissions of a fuel is the sum of its upstream and downstream emissions.
The most common feedstock for ethanol fuel is corn. Estimates from the GHGenius model prepared for the Environmental Commissioner of Ontario show that the lifecycle emissions of corn ethanol are 42%-48% lower than petroleum gasoline on an energy basis. This would easily meet the 35% requirement suggested by EBR 013-1929. However, this reduction is entirely due ethanol's low downstream emissions. If we focus on upstream emissions alone, the emissions from corn ethanol are 116% higher, or more than double the upstream emissions of petroleum gasoline. (Source: “Facing Climate Change: Greenhouse Gas Progress Report 2016”, Environmental Commissioner of Ontario, November 2016. Appendix B, “Lifecycle Analysis of Ethanol in Gasoline”. https://eco.on.ca/reports/2016-facing-climate-change/)
If Ontario continues to produce all of its ethanol within the province, (a near approximation of the current market,) the increase in upstream processing emissions would be compensated by decreases elsewhere through cap-and-trade emission trading, just as with the downstream emissions. But if ethanol or its feedstock is imported from outside the WCI, upstream emissions caused by higher ethanol demand will contribute a net increase to global GHG emissions, making the ethanol mandate fundamentally counter-productive. Even without imports, agricultural emissions that are not covered by cap-and-trade may increase in Ontario.
In order to ensure that the ethanol mandate does not cause a net increase in emissions, the upstream emissions of ethanol should be no higher than the upstream emissions of petroleum gasoline. If added to the downstream emissions of corn ethanol, that would result in lifecycle emission target of just 25% of petroleum gasoline – a 75% reduction in lifecycle emissions. Achieving this would require true innovation, but it is conceptually feasible through electrification of process heat and steam used for ethanol production. Alternatively, a more complex policy solution would be to dismantle cap-and-trade, as has been proposed by the opposition party. The federal carbon pricing backstop which would then come into play would be strictly additional to the emission reductions from the ethanol mandate. In this situation, even small reductions in lifecycle emissions would translate directly into reduced net emissions.
Alternative Measures
OSPE recommends a higher priority for policies that reduce personal vehicle kilometres travelled and improve fuel economy per vehicle-kilometre.
This stringent requirement on lifecycle emissions proposed by OSPE above would be merely adequate to ensure a net zero impact on GHG emissions. It would further increase compliance costs, which are already very high today. Before cap-and-trade came into effect, Canadian biofuel policies collectively cost an average of $180 per ton of carbon dioxide avoided. This figure included a range of supply-side measures and vehicle requirements, but the bulk of the cost was due to renewable fuel mandates and low-carbon fuel standards. With cap-and-trade, the per-ton figure is no doubt much higher in Ontario, since the ethanol mandate no longer reduces emissions. (Source: “Course Correction: It's Time to Rethink Canadian Biofuel Policies”, Canada's Ecofiscal Commission, October 2016. https://ecofiscal.ca/reports/course-correction-time-rethink-canadian-bi…)
Biofuels are clearly not the most cost-effective option to reduce marginal GHG emissions in Ontario, with or without cap-and-trade. Biofuel policies can possibly be justified as a subsidy to technology and infrastructure development that will pay off on a longer timescale, but even that stretches the imagination. Other solutions with lower cost deserve higher priority. For example, transforming Ontario communities into a new urban form, where people would not need personal motor vehicles to travel to work or to school or to the market or to the hospital. Professor Eric Miller, the Director of the University of Toronto's Transportation Research Institute, is a champion of this need to change our urban form.
Even today, new communities are being built around personal motor vehicle use, adding to Ontario's GHG emissions. The Ontario Government has the power to transform the planning and development of new communities to a new urban form through guidelines, permits, regulations and infrastructure, rigorously enforced. The cost to the taxpayers would likely be far lower than the compliance costs of the ethanol mandate.
At the same time, the government should enact policies and programs that encourage low-emission personal vehicles, and discourage high-emission personal vehicles. In 2018, more consumers are buying high-emission "light trucks" than low-emission automobiles. This increase in fuel economy per vehicle-kilometre overwhelms any advances in vehicle class fuel economy or fuel GHG intensity. The government, through changes in license plate fee, could discourage the purchase of high-emission personal vehicles, in favour of low-emission personal vehicles. Ontario's Tax and Credit for Fuel Conservation was in place from 1989 to 2010 and serves as an example of this. (Source: Nicholas Rivers & Brandon Schaufele, "New Vehicle Feebates: Theory and Evidence", September 3, 2014. https://www.ivey.uwo.ca/cmsmedia/1361413/new-vehicle-feebates.pdf)
Next-Generation Biofuels
OSPE recommends that ethanol made from waste or marginal land be exempt from lifecycle emission requirements.
In addition to the possibility of increasing emissions, first-generation feedstocks like corn and wheat have negative externalities. Runoff aggravates lake eutrophication. Competition for land pushes up the price of food, an effect which may multiply with, rather than add to, droughts brought on by climate change. Next-generation biofuel technologies have the potential to produce fuels from waste or marginal land, but the ones developed so far tend to have higher lifecycle emissions. Therefore, limits on lifecycle emissions tends to discourage further development. They could be encouraged by a revision to the incentive multiplier, but there may be a better way.
As an alternative compliance pathway, cellulosic ethanol or other alternatives that avoid competition for arable land could be exempted from the lifecycle emissions requirements, or be allowed a lower threshold. Even though this would revive the risk of net increases in GHG emissions, it would reward technology developments that progress in a more desirable direction. Improvements in upstream GHG emissions could be made later, instead of forcing industry to take on two major challenges simultaneously.
QUESTIONS & COMMENTS
For questions and/or comments regarding this document, please contact Patrick Sackville, Lead, Policy and Government Relations at patrick@ospe.on.ca.
About the Ontario Society of Professional Engineers (OSPE)
The Ontario Society of Professional Engineers (OSPE) is the voice of the engineering community in Ontario. Ontario is home to over 80,000 professional engineers and over 250,000 engineering graduates who contribute to the most strategic sectors of Ontario’s economy.
Engineers are trained, innovative problem solvers who develop solutions by considering costs and benefits, sustainability, public safety, and the complete lifecycle and integration of projects. Engineers are on the frontlines of developing, safeguarding, and maximizing Ontario’s investments and are key stakeholders for all levels of government.
OSPE was formed in 2000 after members of Professional Engineers Ontario (PEO) voted to separate regulatory and advocacy functions into two distinct organizations.

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