CTA warns of further pump pains with coming biodiesel mandate

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OTTAWA, Ont. — The Canadian Trucking Alliance (CTA) is warning its members to get ready for even more pain at the pump. The federal government has proposed to mandate that on-road diesel sold in Canada must contain an average 2% biofuel content starting July 1, which, the CTA says, could lead to higher prices for both fuel and consumer goods.

Currently, in the US, 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. For Canadian truckers, the CTA says the mandate could mean annual increases in diesel fuel costs in the range of $2,100-$6,000 per truck depending where biodiesel price increases fall in Canada.

According to the CTA, a leading feedstock to be used in producing biodiesel (canola) is already at record highs despite record volumes, so the cost impact on Canadian truckers could be even greater. The government’s own Regulatory Impact Analysis Statement, recently published in the Canada Gazette, acknowledges that biodiesel will cost consumers more, but the CTA says it underestimates the impact. The CTA noted that vehicle maintenance costs in the early stages of the biodiesel regulation will also rise.

The CTA also says biodiesel is costly to produce and there is a severe shortage of biofuel production and blending capacity in Canada, noting that the country would have to import 85% of the biodiesel needed to comply with the mandate. The Canadian Petroleum Products Institute, which represents petroleum producers, recently called upon the government to delay the implementation of the biodiesel mandate until its members can build the necessary blending facilities required to satisfy the regulation.

According to the Regulatory Impact Analysis Statement, the federal government says it has doled out more than $2 billion in subsidies to the renewable fuels industry in recent years. It also says there will be a net cost to taxpayers from the mandate of about $2.4 billion over the next 25 years with only an incremental reduction (1 MT CO2 per year) in greenhouse gas (GHG) emissions.

“It really makes you wonder why we’re doing this,” said David Bradley, CEO of the CTA. “All of these things add up to one thing: higher prices for consumers. The only question is by how much. The biodiesel mandate is only going to make things worse. They can’t even guarantee us that the stuff won’t gum up most truck engines at the kinds of blend rates we are likely to see at certain times of the year in various parts of the country. There is no protection for the consumer.

“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, whereas the consumer, mainly truckers, will get even higher fuel prices that we currently have at a time when trucking companies are just finding their financial legs after being ravaged by the recession, Why should truckers be forced to pay more when the biofuel industry has already received billions in subsidies? It’s no different than a fuel tax increase,” explained Bradley.

Bradley insists 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 way the government is approaching the biodiesel mandate fails on all counts. It’s clear this is not about the environment – there are ways to achieve significantly greater GHG reductions in trucking for a lot less,” he says.

CTA is calling upon the federal government to introduce amendments to its proposed regulation that will provide a level of protection for consumers.

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