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When farmers’ votes count more than yours: Canada’s biodiesel mandate

Between February and March 2011, the average rack price of diesel fuel in Canada, which is a reflection of wholesale prices before taxes, jumped by another 10% and was up by over 37% on a year-over-year basis.


Between February and March 2011, the average rack price of diesel fuel in Canada, which is a reflection of wholesale prices before taxes, jumped by another 10% and was up by over 37% on a year-over-year basis.

While it would be easy to point to the political unrest in North Africa and the Middle East as the reason for much of the recent escalation in prices, the fact is the current upward advance in fuel prices has been steadily underway since 2009, long before the current problems in that part of the world started.

But, the pain at the pump could get even worse this summer when Canada’s biodiesel mandate kicks in starting July 1. Make no mistake, biodiesel will cost more than regular diesel.

The only question is, how much more? Even the government’s own Regulatory Impact Analysis Statement (RIAS) published in the Canada Gazette on Feb. 26 concedes that point (although it severely underestimates the impact). The RIAS also acknowledges that biodiesel is less fuel efficient than regular diesel – a double whammy.

Currently in the United States, where there is a somewhat more mature biodiesel market, prices are – depending on the level of biofuel blended into the diesel – running at one to eight cents per litre above the price of regular diesel fuel.

This translates into increased costs in the range of $2,000-$6,000 per truck.

The cost of biodiesel could be even greater in Canada. The primary feedstock (canola) to be used in producing biodiesel in Canada has recently been reported to be at record prices and record volumes.

Moreover, Canada simply does not have sufficient capacity of biofuel production and blending facilities to meet the mandated demand. Even the Canadian Renewable Fuels Association has been quoted as saying that since 2007 “not a single industrial scale biodiesel facility (producing more than 100 million litres per year) has been built.”

It is estimated that demand for biodiesel in Canada will be about a billion litres a year, but the country produces only about 150 million litres. Canada will need to import 85% of its biodiesel requirements.

On top of that, truck maintenance and filter replacement costs will also increase. (In a previous column I discussed the potential impact on engine operability and durability – and therefore on engine warranties – from using higher blend, low quality biodiesel).

There are no Canadian fuel quality and blending standards. The Canadian Petroleum Products Institute, which represents the majority of the country’s petroleum producers recently called for a delay to the implementation of the biodiesel mandate until its members can build the necessary blending facilities and Canadian fuel quality standards are in place.

Transportation and distribution costs are expected to be high since biodiesel cannot be shipped by pipeline.

The RIAS makes it clear that the biodiesel mandate is being introduced to benefit canola and soybean farmers and big agri-business/biofuel producers. Consumer concerns and protection are not a priority, it would seem. The biofuel producers are getting literally everything they want – regulatory certainty, a captive market and massive subsidies – all of which they can take to the bank.

The RIAS calculates the biodiesel mandate will impose a net cost on taxpayers of about $2.5 billion over the next 25 years with only an incremental reduction (a mere one megatonne of CO2 per year) in GHG.

The renewable fuels industry has already been the recipient of over $2 billion in subsidies.

This certainly begs the question: Why are we doing this?

It’s clear this is not about the environment – there are ways to achieve significantly greater GHG reductions in trucking for a lot less.

CTA is not opposed to the introduction of alternative fuels into the trucking industry. We have been consistent on this point; why wouldn’t we want to reduce our reliance on oil?

But, we need to be sure the fuel we put in our tanks works, it has to be in plentiful supply and it should not cost us more than regular diesel.

As it stands now, the proposed biodiesel mandate fails on all counts.


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