AMA: 3Degrees answers Clean Fuel Regulations questions – Electric Autonomy Canada

Report on Canada’s Clean Fuel Regulations and Sustainable Development Goals

Introduction

Canada’s Clean Fuel Regulations (CFR), effective since July 2023, represent a significant initiative aimed at reducing greenhouse gas (GHG) emissions from the transportation sector. This program aligns with multiple Sustainable Development Goals (SDGs), particularly SDG 7 (Affordable and Clean Energy), SDG 9 (Industry, Innovation and Infrastructure), SDG 11 (Sustainable Cities and Communities), and SDG 13 (Climate Action).

Overview of the Clean Fuel Regulations

Purpose and Targets

The CFR is designed to lower the carbon intensity (CI) of transportation fuels by setting progressively stringent annual targets. It adopts a life cycle “well to wheels” assessment approach, evaluating emissions from extraction through to fuel use. The program aims for a 15% reduction in CI by 2030 compared to 2016 levels, supporting SDG 13 (Climate Action).

Carbon Intensity Reduction Mechanism

1. Annual reduction targets decrease by 1.5 points per year.
2. Obligated parties producing or importing fuels exceeding CI targets must purchase credits.
3. Entities supplying fuels below CI targets or enabling end-use fuel switching generate credits.

Fuels Covered

• Biodiesel
• Electricity
• Renewable natural gas (RNG)
• Hydrogen (liquid and gaseous)
• Low carbon gasoline
• Ethanol
• Renewable diesel

Owners of eligible electric vehicles and hydrogen fueling infrastructure can generate credits, promoting SDG 7 and SDG 9.

Scope and Compliance

Affected Sectors

• Transportation fuels sector (gas and diesel producers) – obligated parties
• Alternative fuels sector (biofuel producers, EV charging businesses, public agencies) – voluntary participants
• Aviation and marine sectors – opt-in, currently exempt from compliance

Penalties and Obligations

Entities failing to meet CI reduction targets generate deficits and must purchase credits, ensuring accountability and compliance with SDG 13.

Relation to Other Programs

• The CFR replaces the Renewable Fuels Regulations (RFR), shifting focus to lifecycle GHG emissions.
• Comparable programs exist in California, Oregon, Washington, and British Columbia.
• The CFR and British Columbia Low Carbon Fuel Standard (BC-LCFS) are stackable but operate independently with separate reporting and credit markets.

Credit Generation and Market Dynamics

Eligible Credit Applications

• Lifecycle CI reduction initiatives
• Low-carbon fuel supply (e.g., ethanol, biodiesel)
• Direct fueling of natural gas vehicles, hydrogen fuel cell vehicles, and electric vehicles
• Charging and fueling infrastructure development, including EV charging and hydrogen stations

This supports SDG 9 by fostering innovation and infrastructure development.

Eligible Equipment and Participants

• Non-residential EV charging equipment
• Electric or hydrogen forklifts and buses
• Electric cargo handling equipment and ground support equipment
• Electric power for ocean-going vessels and electric aircraft
• Municipalities, transit agencies, private fleets, and charging network operators

Credit Types

• CC1: Emission-reduction projects lowering fuel CI
• CC2: Production or import of low-CI fuels
• CC3: End-use fuel switching, including EV charging and alternative fuel supply

Credit Market Functionality

1. Entities with fuels above CI targets must buy credits to offset deficits.
2. Entities with fuels below targets generate and sell credits.
3. Credits are tracked via an online database ensuring transparency and market integrity.

Benefits and Financial Opportunities

For Fleets and Fuel Suppliers

• Reduction in petroleum dependence contributes to SDG 7 and SDG 13.
• Revenue from credit sales can finance further decarbonization efforts.
• Lower total cost of ownership through reduced operating and maintenance expenses.
• Enhanced brand reputation and competitive advantage by demonstrating sustainability commitment (SDG 12 – Responsible Consumption and Production).
• Participation does not disqualify entities from other grants or incentives.

Credit Spend Requirements

• Charging network operators must reinvest credit revenue into expanding EV infrastructure, subsidizing EV ownership, or upgrading electricity distribution systems.
• Voluntary participants are encouraged to reinvest proceeds into clean fuel adoption or technology deployment, fostering a sustainable cycle of growth.

How to Participate

Organizations aiming to accelerate the transition to low-carbon transportation can benefit from CFR participation by:

1. Engaging in credit generation activities aligned with their operations.
2. Utilizing expert support to navigate administrative processes and maximize credit value.
3. Leveraging CFR credits to meet sustainability goals and comply with evolving regulations.

3Degrees, with extensive experience in clean fuel standard markets, offers services to support organizations in credit generation, monetization, and emissions reduction project development.

Conclusion

Canada’s Clean Fuel Regulations represent a pivotal strategy in advancing sustainable transportation and achieving multiple Sustainable Development Goals. By incentivizing low-carbon fuel use and infrastructure development, the CFR fosters innovation, reduces emissions, and promotes economic opportunities within the clean energy sector.

For further information or assistance, organizations are encouraged to contact 3Degrees and subscribe to their quarterly Transportation Markets Report for updates on market trends and regulatory developments.

1. Sustainable Development Goals (SDGs) Addressed or Connected

1. SDG 7: Affordable and Clean Energy
   • The article discusses the promotion of low-carbon and renewable fuels such as biodiesel, renewable natural gas, hydrogen, and electricity for transportation, aligning with the goal to ensure access to affordable, reliable, sustainable, and modern energy.
2. SDG 9: Industry, Innovation and Infrastructure
   • Development and support of electric vehicle charging infrastructure and hydrogen fueling stations are highlighted, promoting sustainable industrialization and fostering innovation.
3. SDG 11: Sustainable Cities and Communities
   • Encouragement of clean transportation options such as electric buses and forklifts contributes to making cities and human settlements inclusive, safe, resilient, and sustainable.
4. SDG 12: Responsible Consumption and Production
   • The lifecycle assessment approach to reducing carbon intensity of fuels supports sustainable consumption and production patterns.
5. SDG 13: Climate Action
   • The core objective of the Clean Fuel Regulations is to reduce greenhouse gas emissions from transportation, directly contributing to combating climate change and its impacts.

2. Specific Targets Under Those SDGs Identified

1. SDG 7 – Target 7.2: Increase substantially the share of renewable energy in the global energy mix.
   • Promotion of alternative fuels with lower carbon intensity such as ethanol, biodiesel, hydrogen, and renewable natural gas.
2. SDG 9 – Target 9.4: Upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies.
   • Support for electric vehicle charging and hydrogen fueling infrastructure development.
3. SDG 11 – Target 11.2: Provide access to safe, affordable, accessible and sustainable transport systems for all.
   • Encouragement of electric and hydrogen-powered public transit and cargo handling equipment.
4. SDG 12 – Target 12.2: Achieve the sustainable management and efficient use of natural resources.
   • Lifecycle carbon intensity reductions in fuel production and use.
5. SDG 13 – Target 13.2: Integrate climate change measures into policies and planning.
   • Implementation of Clean Fuel Regulations with annual carbon intensity reduction targets culminating in a 15% reduction by 2030.

3. Indicators Mentioned or Implied to Measure Progress

1. Indicator for SDG 7.2: Share of renewable energy in the total energy consumption.
   • Implied through tracking volumes of alternative fuels supplied and used in transportation.
2. Indicator for SDG 9.4: CO2 emission per unit of value added.
   • Measured by carbon intensity (CI) of fuels, which is a lifecycle assessment of emissions per unit energy.
3. Indicator for SDG 11.2: Proportion of population with convenient access to public transport.
   • Implied through increased deployment and use of electric and hydrogen-powered public transit vehicles and infrastructure.
4. Indicator for SDG 12.2: Material footprint, material footprint per capita, and material footprint per GDP.
   • Implied through lifecycle carbon intensity reduction and sustainable fuel production practices.
5. Indicator for SDG 13.2: Number of countries that have communicated the establishment or operationalization of an integrated policy/strategy/plan which increases their ability to adapt to the adverse impacts of climate change.
   • Measured by the annual carbon intensity reduction targets set by the Clean Fuel Regulations and compliance reporting.
6. Additional Indicator: Metric tonnes of CO2 equivalent (mtCO2e) reduced.
   • Credits represent reductions of 1 mtCO2e each, allowing quantification of emissions reductions achieved.

4. Table: SDGs, Targets and Indicators

SDGs	Targets	Indicators
SDG 7: Affordable and Clean Energy	7.2: Increase substantially the share of renewable energy in the global energy mix	Share of renewable energy in total energy consumption; volumes of alternative fuels supplied and used
SDG 9: Industry, Innovation and Infrastructure	9.4: Upgrade infrastructure and retrofit industries to make them sustainable	Carbon intensity (CI) of fuels (lifecycle emissions per unit energy)
SDG 11: Sustainable Cities and Communities	11.2: Provide access to safe, affordable, accessible and sustainable transport systems	Proportion of population with access to public transport; deployment of electric and hydrogen vehicles and infrastructure
SDG 12: Responsible Consumption and Production	12.2: Achieve sustainable management and efficient use of natural resources	Material footprint and lifecycle carbon intensity reductions
SDG 13: Climate Action	13.2: Integrate climate change measures into policies and planning	Annual carbon intensity reduction targets; metric tonnes of CO2 equivalent reduced (mtCO2e)

Source: electricautonomy.ca