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BC's 'Cleaner' Fuel Standard: Reality Check

How a law supposed to require low carbon gasoline and diesel spares the oil sands at the atmosphere's expense.

Geoff Dembicki 13 Dec

Geoff Dembicki reports on energy and climate issues for The Tyee and Tyee Solutions Society. This series was produced by Tyee Solutions Society (TSS) in collaboration with Tides Canada Initiatives Society. Funding for this series was provided by the Bullitt Foundation and Hospital Employees' Union. All funders sign releases guaranteeing TSS full editorial autonomy. TSS funders and Tides Canada Initiatives neither influence nor endorse the particular content of TSS' reporting. To republish articles from this series, please contact TSS editor Chris Wood here.

In late September this year, a who's who of climate policy experts, industry reps and provincial bureaucrats gathered at the swanky Delta Ocean Pointe Hotel on Victoria's inner harbour, just across the water from B.C.'s legislature buildings.

The purpose of their two-day retreat -- which went unreported by all Canadian media, including The Tyee -- was to evaluate the province's low carbon fuel standard, a policy that has positioned B.C. in the global vanguard of climate change action.

In theory the standard will make all gasoline and diesel sold in the province better for the climate and help us transition to a clean energy economy.

Yet the mood at the Pollution Probe-hosted conference, which drew the majority of its participants from the oil and gas industry, was far from celebratory.

"Industry was challenging the fuel standard, saying it's unworkable," Alison Bailie, a Pembina Institute policy advisor who attended told The Tyee.

Perhaps more surprising is that Bailie herself, and other prominent green groups, are also reluctant to support the initiative.

With the legislation set to go into effect next year, they see major design flaws that could render its clean energy goals unlikely, if not impossible, to achieve.

Those flaws, they argue, give big handouts to Alberta's oil sands industry and entrench B.C.'s addiction to some of the world's most polluting fuel.

"It's hard to have a position on B.C.'s low carbon fuel standard," Bailie said. "We can say we're supportive of the objectives, but the way it's implemented can have a profound impact on whether it does lead to greenhouse gas reductions."

Schwarzenegger gives high praise

In 2007, B.C. became the second jurisdiction in the world after California to adopt a low carbon fuel standard, and optimism couldn't have been higher.

"With your willingness to be innovative in clean technology, you are poised to start British Columbia's new gold rush," then-California governor Arnold Schwarzenegger declared at a Vancouver economic summit that year.

The goal of B.C.'s fuel standard, modeled after similar Sunshine State legislation, remains unchanged after four years. It strives by 2020 to make all gasoline and diesel sold in the province 10 per cent less damaging to the climate than it was in 2010.

Not only that, say its proponents, but the policy would also provide powerful incentives to adopt cleaner, more renewable fuel sources, creating a veritable "gold rush" of new technology and investment.

The fuel standard is based on a fairly straightforward premise.

If global warming is ever to get solved, it will mean drastic cuts in emissions from transportation, a sector responsible for 36 per cent of all greenhouse gases released in B.C. in 2008.

One obvious way to reduce them is by making people drive less‚ an objective of B.C.'s carbon tax, which increased the price of gasoline and diesel.

That only addresses part of the problem though. Many of the emissions associated with road fuels are released (think crude-oil upgraders, refineries etc.) before those products ever get into a gas tank.

There's no single way to reduce these so-called "upstream" emissions.

Still, by setting a clear reductions target for the final product at the pump, and imposing fines for non-compliance, you not only force the transportation fuel industry to come up with solutions, but give it every incentive to speed the shift to renewables.

Of course it's one thing to talk about a "gold rush", and quite another to actually make it happen.

Anatomy of a carbon policy

In order to understand why B.C.'s low carbon fuel standard could potentially do more harm to the climate than good, you must first get a sense of how the government designed it.

The initial step in any climate policy is to establish some sort of "baseline," a starting value that all carbon reductions are measured against.

Think of it like an obese person recording his or her weight before enrolling in boot camp.

Under B.C.'s fuel standard, bureaucrats in the ministry of energy and mines have calculated that baseline to be 82.40 g/MJ for the year 2010.

What that means, is that for every unit of energy (a mega-joule) created by gasoline, diesel and biofuels that year, an average of 82.40 grams of carbon was released.

That number must go down to 73.82 by 2020, meaning that on average, every litre of road fuel pumped into cars and trucks will be about nine to 10 per cent less damaging to the climate.

It's sort of like acknowledging that every excess calorie a person consumes creates body fat -- then declaring that in order to reduce overall obesity in the population, restaurants must start serving lower-calorie meals.

Forcing B.C.'s fuel suppliers to provide road fuel that's 10 per cent cleaner by 2020 may sound straightforward enough.

But the math that the provincial government relies upon could mean the difference between a carbon policy that succeeds and one that fails.

Let's return to that original "baseline" number, the 82.40 g/MJ value for 2010 that all carbon reductions are measured against.

Calculating that number meant the B.C. government had to do three things: figure out exactly how much gasoline, diesel and biofuels were being sold in the province; measure how bad each is for the climate; and then do some fancy math to create an average.

The first and third parts are easy, while the second relies on a complex science with virtually no historical precedent.

Road fuel vs. the climate

Most people fill up their gas tanks with little regard for the fuel they're pumping, where it came from, or how it was made.

These factors, though, are precisely what make one kind of fuel worse for the climate than another.

To understand why, consider the case of gasoline, by far the most commonly pumped road fuel in B.C.

Broadly speaking, drivers across the province are filling up with two types of gasoline. There is gasoline made from conventional oil, and gasoline made from oil sands. (The same holds true for diesel).

Spend a week powering your car with each type, and the emissions coming out of your tailpipe will be virtually identical.

So to truly figure out which is better for the climate, you'd have to track how each type of gasoline was produced, determining, in the parlance of carbon policy, its "lifecycle emissions".

That's exactly what Stanford University researcher Adam Brandt did in a recent European Commission report.

And based on the huge amounts of energy needed to extract and refine oil sands crude, he concluded that this energy source is 23 per cent worse for the climate than conventional oil.

Which brings us back to that 82.40 value created by the B.C. government, the one which shows how much carbon was emitted for each unit of road fuel energy in 2010.

As part of the complicated math needed to create that number, policy makers needed to somehow account for the differences between the two types of gasoline described above, oil sands and conventional.

They did this by essentially averaging each fuel's carbon footprint, among others, in order to create a single value. (It would be like calculating an average calorie count for say, all the pizza served in B.C.)

Hence all gasoline sold across the province, whether oil sands or conventional, is considered by the B.C. government to have a carbon intensity of 90.21 g/MJ. (Diesel got the same treatment too, resulting in a slightly higher 93.33 g/MJ).

So why does all this technical mumbo jumbo matter?

Math doesn't add up

Recall the report that compared the actual carbon intensity of both oil sands and conventional fuel, the one that said oil sands is 23 per cent worse for the climate.

According to the report's author, Stanford's Brandt, the actual carbon intensity of oil sands fuel should be somewhere around 107.3 g/MJ.

But the B.C. government considers all gasoline, oil sands or not, to have the same carbon intensity, 90.21 g/MJ.

Here is why that is a big deal. If you're a fuel supplier that puts only oil sands gasoline onto the provincial market, the true carbon intensity of your product would resemble Brandt's 107.3 g/MJ figure.

And reducing that number to the province's target of 73.82 g/MJ by 2020 means your fuel supply has to get about 31 per cent cleaner, a serious undertaking.

You'd have to put real pressure on oil sands producers to clean up their acts, and start blending millions of litres of low carbon biofuels into your gasoline supply.

Instead, the B.C. government has decided that the carbon intensity of your oil sands gasoline is going to be 90.21 g/MJ on paper, not the more accurate 107.3 g/MJ.

The government has essentially granted you, the oil sands fuel supplier, a huge freebie. Because now you only have to make your gasoline 18 per cent cleaner in order to reach the 2020 target, instead of 31 per cent.

That's also 17 grams of carbon per mega-joule wiped off the province's carbon books. But not out of the atmosphere.

Those emissions are still being pumped out of upgrader smokestacks and vehicle exhaust pipes, contributing to rising global temperatures.

Let's assume that half of the 4.4 billion litres of gasoline consumed in B.C. each year comes from Alberta's oil sands (a not unreasonable estimate).

Arbitrarily reducing that gasoline's carbon intensity by 16 per cent, as the B.C.'s fuel standard does, ignores annual emissions equivalent to those from 255,647 passenger vehicles‚ roughly three times the number counted on the streets of Kelowna, B.C., in 2007.

582px version of Carbon Policy Infographic, Oil Barrels
Tyee Solutions Society graphic by Alex Grunenfelder.

You could expect a similar, though slightly smaller, figure for diesel. (A sidebar accompanying this story shows The Tyee Solutions Society calculations.)

"This is a gaping loophole," Environmental Defence program manager Gillian McEachern told The Tyee Solutions Society. "We're concerned that B.C.'s fuel standard won't achieve what the province says it will."

BC policy a 'hundred pound weakling'?

The scenario described above may be extreme, but it's where the B.C.'s road fuel sector is heading.

The province gets the majority of its gasoline and diesel from three Edmonton-area refineries.

Two of these (owned respectively by Shell and Suncor) process exclusively oil sands crude, while the other (owned by Imperial Oil) relies mostly on light, conventional oil.

The remainder of B.C.'s fuel needs are met largely from a Burnaby refinery operated by Chevron, which refines a mix of oil sands and conventional.

As supplies of the latter continue to dwindle across Alberta, the province's vast bitumen deposits will almost surely make up the difference.

Natural Resources Canada predicted as much in a 2008 report, stating that the oil processed by western Canadian refineries "will continue to get heavier in the coming decade."

Indeed, a recent federal agency report estimated that oil sands production is set to triple by 2035, while conventional Canadian production is tailing off.

As fuel suppliers bring more and more oil sands fuel onto the market, the carbon gap created by the B.C. government's fuel standard on average will also grow, leaving tonnes of emissions unaccounted for.

California's low carbon fuel standard (as well as pending European Union legislation) contains a solution to this loophole.

Instead of just one carbon intensity value for gasoline, and another for diesel, policymakers are creating a separate, relatively higher oil sands value.

Suppliers are free to sell whatever kind of gasoline and diesel they want. But if they intend to meet fuel standard targets, and avoid fines, they'll probably try to sell as little oil sands fuel as possible.

In theory this will have a cascading effect, with oil sands producers pushing hard for innovations that make their operations less damaging to the climate.

There's already evidence this could be happening. Cenovus Energy Inc., a major oil sands producer, announced this October that several of its operations now have a low enough carbon footprint to meet California's standard.

But those types of changes are unlikely to be spurred by B.C.'s policy, which "does not incentivize refiners to switch to lower-emissions crudes or to pursue energy efficiency improvements," according to a 2010 IHS-CERA report.

"Compared to the muscular version pioneered by Governor Schwarzenegger in California," said Environmental Defence's McEachern, British Columbia's policy is "a hundred pound weakling."

Industry fights back

You might think that western Canada's largest refiners would support a "weakling" fuel standard that doesn't target Alberta's oil sands.

But at the recent Pollution Probe-hosted conference in Victoria, the Canadian Petroleum Products Institute, a refining industry trade group, still fought hard against the legislation.

"The target is very optimistic," reads a presentation from Ted Stoner, the group's western Canadian head.

And in a sense the oil and gas industry is right. Its members don't necessarily control whether B.C. embraces electric vehicles, or develops the truly low-carbon bio-fuels deemed necessary to fight global warming (see sidebar).

Yet a tough low carbon fuel standard, such as the one being implemented in California, could potentially force innovative responses to those changes and help bridge the transition to a clean energy economy.

As it stands now, that doesn't seem too likely.  [Tyee]

Read more: Energy, Environment

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