BP Canada Energy Group ULC (…

BP Canada Energy Group ULC (“BP”) has provided detailed input to the Ontario Government’s previous consultation on low carbon and renewable transportation fuels policy and regulation. Specifically, BP has commented on the Provincial discussion paper on the development of a modern renewable fuel standard for gasoline (March 2017), and the regulation proposal on low carbon transportation fuels in the Province (January 2018) which amended gasoline and diesel requirements. Our affiliate experience under other programs as a conventional fuels producer and distributor, as well as a renewable fuels producer and blender, provides a unique, balanced perspective from which to comment. We welcome this opportunity to reiterate key comments with reference to Ontario’s latest regulation proposal for increasing renewable content in fuels (ERO 013-4598).

As stated previously, BP believes flexible compliance mechanisms are a necessary design element for a sustainable, market-based compliance program that drives innovation. A broad set of activities that lowers the carbon intensity of transportation fuels should be eligible for compliance purposes. Allowing for these activities in the regulation incentivizes participants to seek out fuel suppliers who can provide the best value, from a low carbon intensity perspective, which can help maximize environmental efficiency. Increased diversity of and demand for low carbon fuels sends a strong market signal to fuel producers and suppliers to innovate from current standards and make technological advancements. Additionally, compliance diversity provides choice and promotes healthy market-based competition to achieve greater low carbon intensity goals, while allowing participants the economic efficiency to choose the path that best complements their business strategy and commercial needs.

BP notes that Ontario intends to increase the renewable fuel content obligation as required by the Ethanol in Gasoline regulation, mandating suppliers to maintain an annual average of 15% renewable content (e.g. ethanol) by volume in regular grade gasoline. A potential concern highlighted previously is how this will interact with any low carbon standard obligation and how uncertainty could deter or delay stakeholder investment in low carbon intensity fuels. To overcome this uncertainty, BP suggested that Ontario integrate the renewable fuel content and low carbon standard elements to create a single, simplified market mechanism. This harmonization would create greater transparency and simplify participant economics, providing greater potential to attract investment.

BP believes that a technology neutral, performance-based regulation in Ontario will achieve more favourable environmental outcomes than mandating a specific renewable fuel content obligation (e.g. ethanol) for gasoline. Prescribing only a single compliance mechanism for lowering fuel carbon intensity does not leave room for the future evolution of low carbon fuels that may serve as gasoline blendstocks, renewable gasoline or gasoline replacements. Furthermore, by focusing on low carbon transportation fuels more broadly, there is the potential to admit other fuels to the mix, including those derived from renewable natural gas, contributing to Provincial GHG reduction targets.

Furthermore, a diverse renewable fuel mix reduces the strain put on any one type of renewable feedstock or fuel. A suite of compliance options helps insulate compliance entities and consumers from unexpected shortages, while continuing to promote the program’s environmental ambitions. Specifically, the focus on gasoline containing greater quantities of lower carbon intensity ethanol ignores regional supply and demand realities. While there is rail capacity to import low carbon ethanol from the US, domestic production is limited and supply would have to originate from international sources, such as Brazilian sugar-cane ethanol. Ontario would have to compete for Brazilian supply with established and growing demand from both Brazil and California, as well as overcome logistical constraints on the importation of waterborne ethanol. Demand from California would likely continue to attract lower carbon ethanol derived from any future, more technologically advanced sources.

BP believes that greater environmental efficiency in attracting low carbon renewable fuels into Ontario would be possible by harmonizing the Ethanol in Gasoline and Greener Diesel regulations into a single compliance target that could be met with GHG reductions in either fuel type. By keeping these regulations as separate standards, Ontario risks creating silos in the gasoline and diesel fuel sectors where investment decisions may not return the best environmental outcome. A more desirable approach would be one that incentivized every fuel producer and supplier to look across the full spectrum of renewable fuels available to meet GHG reduction goals, and target their investments at the technologies and supplies that provide the greatest low carbon benefit per dollar invested. To support a program with this level of flexibility, a credit mechanism representative of GHG reductions achieved anywhere throughout the gasoline or diesel sectors would need to be created. While this is a large undertaking for Ontario, it would have the added benefit of providing a clear price signal for the value of GHG reductions in the Province. This would allow it to compete for and attract renewable fuels that are currently incentivized into other provincial or US programs.

BP is participating in the Environment and Climate Change Canada consultation on the development of a national Clean Fuel Standard. As stated previously, where various levels of government seek to regulate the same activity of a participant, harmonization of standards and compliance mechanisms would reduce administrative burden and unnecessary costs and avoid potential conflict. For example, the requirement to validate or verify the carbon intensity of transportation fuels demanded by Ontario and Canada should be the same to avoid duplicative measures.

BP appreciates the opportunity to comment on Ontario’s regulation proposal and welcomes the opportunity to share a more detailed perspective with your policy team.