Federal Renewable Fuels Regulations: Overview
NOTE: Information below is for compliance promotional purposes only and is not a substitute for the Renewable Fuels Regulations nor does it offer any legal interpretation of these regulations. For requirements under the Regulations, refer to the actual Regulations. In the event of discrepancies between this document and the Renewable Fuels Regulations, the Regulations prevail.
- Why is action necessary?
- What are the costs and benefits of regulation?
- Who must act?
- What actions must be taken?
- How does the trading system work?
- When does this happen?
- How to stay informed?
- Did you know?
The Government of Canada is committed to expanding the production of renewable fuels such as ethanol and biodiesel and their use in Canadian transportation fuel. The Government's comprehensive strategy has four components:
- Increasing the retail availability of renewable fuels through regulation;
- Supporting the expansion of Canadian production of renewable fuels;
- Assisting farmers to seize new opportunities in this sector; and
- Accelerating the commercialization of new technologies.
The first component is being implemented through the Renewable Fuels Regulations (Regulations) under the Canadian Environmental Protection Act, 1999. More information on the Government's strategy for renewable fuels can be found online.
What are the main requirements under these Regulations?
The Regulations require fuel producers and importers to have an average renewable content of at least 5% based on the volumeFootnote 1 of gasoline that they produce or import (commencing December 15, 2010) and at least 2% of average renewable content based on the volumeFootnote1 of diesel fuel and heating distillate oilFootnote 2 that they produce or import (commencing July 1, 2011). The Regulations include a trading system and administrative, compliance, and enforcement provisions such as recordkeeping and reporting. The complete text of the Regulations is available online.
Why is action necessary?
Why is the Government requiring renewable content in fuels?
Greenhouse gases (GHGs) are primary contributors to climate change and combustion of fossil fuels is a significant source of GHG emissions. The Government of Canada is committed to reducing Canada’s total GHG emissions by 17% from 2005 levels by 2020. These Regulations will make a significant contribution to reductions in air pollution from GHGs to protect the health and environment of Canadians.
Furthermore, increasing the use of renewable fuel is an important part of the Government’s commitment to farmers and rural communities. These Regulations will provide the certainty needed for the renewable fuels industry to make investments that will create new jobs and market opportunities for farmers.
The emerging global bioeconomy is an opportunity to diversify farm incomes by creating market opportunities for Canadian farmers as both developed and developing countries move away from dependence on traditional petroleum based fossil fuels in favour of more sustainable options. Canada has a natural advantage in this emerging economy, with a wealth of natural resources and a vast land mass to produce agricultural and forestry products. Renewable fuels, such as ethanol and biodiesel, are created from agricultural crops and other resources that are abundant in Canada, including wheat, corn, canola and soy.
What are the costs and benefits of regulation?
Benefits: Over a 25-year period, the Regulations have been estimated to result in a cumulative reduction of 47.4 million tonnes of CO2e in GHG emissions (about 2 million tonnes per year) with approximately half accruing from the gasoline requirement and half from the diesel fuel and heating oil requirement. At $25 per tonne of CO2e in GHG emissions reductions, this benefit was estimated to have a present value of $1.1 billion.
Costs: The present value of the quantified costs associated with the Regulations has been estimated to be $4.8 billion, with $1.9 billion being due to the renewable fuel in gasoline requirement. Gasoline producers and importers were to incur net costs of $775 million and costs to gasoline consumers were expected to total $1.1 billion. Diesel fuel and heating oil producers and importers were to incur net costs of $2.7 billion and costs to distillate consumers were to total $0.2 billion. Costs to the federal government for enforcement, compliance promotion, and development and maintenance of the electronic reporting system were to be approximately $2.3 million.
These numbers are based on the costs and benefits analyses for the original Regulations and their 2011 regulatory amendments. Finally, the 2013 regulatory amendments added some distillate sector impacts but these are not directly comparable. Full details of the cost-benefit analyses are available online.
Who must act?
Who is affected by the Renewable Fuels Regulations?
The Regulations place various requirements on the following depending on the nature of their activity:
- Persons who produce and/or import gasoline, diesel fuel or heating distillate oil
Renewable Fuel Producer and/or Importer
- Persons who produce and/or import renewable fuel
- Persons who elect under s.11 of the Regulations to create compliance units as trading system participants
Seller for Export
- Persons who sell for export renewable fuel or petroleum fuel that contains renewable fuel
What are fuel producers and importers required to do?
Producers and importers of gasoline, diesel fuel and heating oil must demonstrate that they meet the renewable fuel requirement(s) – an average of 5% for gasoline and 2% for diesel fuel and heating oil. Compliance with the Regulations is demonstrated through the ownership of a sufficient number of compliance units. A trading system was designed to enable primary suppliers to acquire compliance units from others, if needed, in order to meet their renewable fuel content requirement(s) under the Regulations.
How does the trading system work?
What is a compliance period?
A compliance period is the period over which a primary supplier must meet the renewable fuel requirement for gasoline and diesel fuel and heating oil, respectively. See Table 1 for more information.
What are compliance units?
A compliance unit represents a litre of renewable fuel and is used to demonstrate compliance with the Regulations. There are two types of compliance units (CUs) under these Regulations:
- 1) Gasoline CUs:
- Are created for renewable fuel content in gasoline and fuels other than diesel fuel or heating oil; and
- May be used to demonstrate compliance with the 5% renewable fuel requirement based on gasoline.
- 2) Distillate CUs are:
- Are created for renewable fuel content in diesel fuel or heating oil; and
- May be used to demonstrate compliance with either the 2% renewable fuel requirement in diesel fuel and heating oil or the 5% renewable fuel requirement for gasoline.
Who may participate in the trading system?
Primary suppliersFootnote 3 are automatically participants in the trading system. Other parties who engage in one of the following activities may elect to become participants in the trading system (see section 11 of Regulations):
- blend renewable fuel with petroleum fuel (owner upon blending may create compliance units) producing petroleum fuel by using biocrude as a feedstock,
- importing petroleum fuel with renewable fuel content,
- selling neat renewable fuel to a neat renewable fuel consumer, or using neat renewable fuel that they produced or imported themselves
Participants in the trading system must register with Environment Canada and are the only persons who can create or trade compliance units.
How can I get compliance units?
Compliance units are created by activities such as adding renewable fuel to petroleum fuel, importing petroleum fuels with renewable fuel content or by using biocrude (see sections 13 to 16 of Regulations) and must be confirmed through recordkeeping requirements (see sections 31 and 32 of Regulations). Generally, one compliance unit equates to one litre of renewable fuel. Sections 21 to 25 of the Regulations contain provisions and limits for compliance units to be carried forward into a future compliance period, carried back for use in a previous compliance period, or cancelled if required to do so.
Primary suppliers are the only parties obligated to meet the renewable fuel content requirements and are therefore the only participants able to acquire compliance units through trading. Elective participants may sell or trade compliance units provided that the party receiving the compliance units is a primary supplier.
What is the trading period?
The trading period begins at the start of a compliance period and ends the March 31 immediately following the end of a compliance period. It provides an additional three months for primary suppliers to review their records, assess compliance with their renewable fuel volume requirements, and to acquire additional compliance units, or trade away excess units. At the end of the trading period a primary supplier must own sufficient compliance unitsFootnote 4 that were created during, carried forward into, or carried back into, the associated compliance period to meet their renewable fuel volume requirements.
When does this happen?
Important dates and reporting deadlines are outlined in the Tables below. Forms for submitting the required registration information in Table 2 will be made available online for the convenience of regulatees.
|PRIMARY SUPPLIER OF GASOLINE||PRIMARY SUPPLIER OF DISTILLATE (diesel fuel and heating distillate oil)|
|Renewable Fuel requirement||Average 5% of gasoline pool for each compliance period||Average 2% of distillate pool for each compliance period|
|Coming-into-force date of requirement||December 15, 2010||July 1, 2011|
|First compliance period||December 15, 2010 to December 31, 2012||July 1, 2011 to December 31, 2012Footnote 5|
|Second compliance period||January 1, 2013 to December 31, 2013||January 1, 2013 to December 31, 2015Footnote 6 Footnote 7|
|Future compliance period(s)||January 1 to December 31 (a calendar year)||January 1 to December 31 (a calendar year)|
|Trading period associated with each compliance period||Start of compliance period to March 31 following end of compliance period||Start of compliance period to March 31 following end of compliance period|
|Recordkeeping||December 15, 2010 and onwards||December 15, 2010 and onwards|
What happens if I don't comply with the Regulations?
Compliance with the Regulations is mandatory. A person who is found guilty of contravening or failing to comply with the Regulations is subject to fines and/or imprisonment. Environment Canada's Compliance and Enforcement Policy for the Canadian Environmental Protection Act, 1999 sets out the criteria for responses by Environment Canada enforcement officers to alleged violations and is available online.
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How to stay informed?
Environment Canada also has the following information available online.
- Renewable Fuels Regulations (full text of Regulations)
- Federal Renewable Fuels Regulations: Primary Suppliers
- Federal Renewable Fuels Regulations: Sellers of Fuel for Export
- Federal Renewable Fuels Regulations: Blending Operations
- Federal Renewable Fuels Regulations: Renewable Fuel Producers and Importers
- Federal Renewable Fuels Regulations: High-Renewable Content and Neat Renewable Fuels
- Federal Renewable Fuels Regulations: Small-Volume Suppliers
- Federal Renewable Fuels Regulations: Biodiesel Suppliers
- Federal Renewable Fuels Regulations: Excluded-Volumes-Only Suppliers
- Questions and Answers on the Federal Renewable Fuels Regulations
Further questions and inquiries can be directed to Environment Canada's Inquiry Centre:
Email: email@example.com(Environment Canada's Fuels Program)
Did you know?
There are a number of other federal fuel regulations that must be complied with, if applicable, namely:
- Fuels Information Regulations, No. 1 (sulphur and additives reporting)
- Gasoline Regulations (lead and phosphorus)
- Benzene in Gasoline Regulations
- Sulphur in Gasoline Regulations
- Sulphur in Diesel Fuel Regulations
- Contaminated Fuel Regulations
- Gasoline and Gasoline Blend Dispensing Flow Rate Regulations
- Regulations Prescribing Circumstances for Granting Waivers Pursuant to Section 147 of the Act
More information is available online
Photos: © Photos.com – 2010
- Footnote 1
Refer to subsection 6(4) of the Regulations for excluded volumes
- Footnote 2
Refer to the Regulations for full definition of “heating distillate oil”
- Footnote 3
Primary suppliers who produce and/or import less than 400 m3 of fuel per year are exempt from the trading system (see section 2 of the Regulations) but may choose to opt into the Regulations under section 3.
- Footnote 4
Calculated in accordance with section 8 of the Regulations
- Footnote 5
During the first distillate compliance period, distillate fuel sold for or delivered for use in Quebec (on or south of 60° North) and the Maritimes may be excluded from the distillate pool. Other exclusions may apply within the Regulations as well. Refer to sections 1 and 22 of the Regulations for details on the pre-distillate compliance period.
- Footnote 6
During the second distillate compliance period, until June 30, 2013, distillate fuel sold for or delivered for use in the Maritimes may be excluded from the distillate pool.
- Footnote 7
Heating distillate oil volumes used for space heating purposes may be excluded from the distillate pool since January 1, 2013.
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