Canada: Clean Fuel Regulations published in the Canada Gazette — a market for clean fuel credits

The Canadian government announced on 29 June 2022 the final version of the Clean Fuel Regulations (CFR), and the regulations, registered on 21 June 2022, were published in the Canada Gazette, Part II, on 6 July 2022 as SOR/2022-140. They introduce a federal market for credits for fuels with a lower carbon intensity: obligated parties — producers and importers of liquid fuels — must demonstrate a reduction in emission intensity, using credits created by themselves or acquired from others.

How the credit market works

The CFR provide that credits can be created by registered creators carrying out specified actions, for example projects that reduce lifecycle emissions of fuels or supplies of low-carbon fuels. Credits can be traded bilaterally or through the clearance mechanism. Registration and trading take place in the Credit and Tracking System (CATS). According to Blakes, the maximum price of credits acquired through the clearance mechanism is CAD 300 in 2022 (adjusted for CPI inflation); when the mechanism runs out of credits, obligated parties receive a proportionate share of the available pool. The compliance period begins on the day the regulations are registered and ends on 31 December 2022, then covers two half-years of 2023, and from 2024 – calendar years.

Biogas and RNG in the regulations

The regulations provide for the possibility of creating credits in the gaseous fuel class. Under section 96 of the regulation, a person who in Canada produces biogas used in equipment generating electricity, which displaces fuel from the gaseous class, can create provisional compliance credits in the gaseous class. Separate provisions concern gas for vehicles (section 98) and renewable gaseous fuels (section 99); the details for RNG should be checked in the text of the regulations and in the guidance of Environment and Climate Change Canada.

Significance for the industry

The CFR, alongside provincial systems (including British Columbia's), create the Canadian market for the climate value of fuels. For producers of biogas from manure, waste or landfill gas they mean another revenue stream, as does the LCFS in California. The value of credits depends on the price and on the carbon intensity methodology, which determines the number of credits per unit of energy.

Legal status

The regulations are dynamic in nature and may be amended, so it is always worth using the current consolidated version on the Justice Laws website.

What this means for Poland and Europe

The Canadian system is similar to the mechanisms for reducing fuel emission intensity in the EU (RED, FQD), but introduces open trading of credits on the market. For European companies planning to export biomethane or technology, it is a signal that the Canadian market rests on clearly defined credits and a trading register.