Canadian Fuels Association: How lower-carbon fuels can help decarbonize transport sector

At a glance

Powering Progress: 2024 Update to CFA’s Driving to 2050 Vision, Canadian Fuels Association, Nov. 5, 2024.

In 2022, Canada’s transport sector was the second-largest emissions source of emissions, producing 156 Mt CO2 equivalent or 22 per cent of total national emissions. This was a 33 per cent increase since 1990, largely due to heavy-duty freight and passenger trucks. While the increasing popularity of electric vehicles is starting to help reduce emissions, this report from the Canadian Fuels Association (CFA) stresses that a diverse fuel mix is crucial for decarbonizing transportation. The report shows how biofuels, hydrogen and sustainable aviation fuel (SAF) can be blended with existing fuels and used in current engines and infrastructure and blended with existing fuels for immediate emissions reductions. The authors call for stronger collaboration between the transportation and agriculture sectors, as well as government and communities, to bolster Canada’s energy security and economy. They argue that a diversified approach is key to a resilient energy transition and climate goals, with Canada playing a pivotal role in the clean energy shift. The CFA is an industry association for Canada’s petroleum refining, distribution and marketing sector.

Key findings

• Rising demand for ethanol: Canada’s ethanol demand is projected to increase by 50 per cent from 2022 levels, reaching about five billion liters per year by 2030.
• Renewable diesel production expanding: Imperial Oil’s new facility in Strathcona County, set to open in 2025, will produce over one billion liters of renewable diesel annually from local feedstocks like canola, boosting regional development and energy security.
• Economic impact of biofuel production: Canola-based biofuel has contributed nearly $1.4 billion annually to Canada’s economy since 2021, benefiting agriculture, fuel markets and the full value chain from farms to fuel producers.
• Hydrogen infrastructure growth: North Atlantic is expanding hydrogen production and building a national network of refueling stations to support hydrogen adoption.
• Scaling up carbon capture: Shell Canada’s Polaris and Atlas projects aim to capture 650,000 tonnes of CO2 yearly, with operations beginning by 2028.
• Low-carbon liquid fuels for heavy transport: Low-carbon liquid fuels are essential for decarbonizing sectors that are challenging to electrify, such as shipping and aviation.

Bigger picture

Given the considerable emissions caused by transportation, decarbonizing Canada’s transport sector is crucial to meeting climate targets. This report offers a comprehensive overview of the country’s approach, positioning Canada as a potential leader in sustainable fuels while emphasizing low-carbon options like ethanol, renewable diesel and hydrogen. These alternatives are especially crucial for industries like aviation and shipping, where electrification much more challenging and so these fuels can serve as a bridge.

The report shows how partnerships between fuel producers, agricultural sectors and government agencies can drive innovation and economic growth. By investing in domestic fuel production, Canada can reduce its dependency on imports, enhance energy security, and generate jobs. The CFA emphasizes Canada’s unique positioning to lead in the low-carbon fuel market, offering a competitive edge and the chance to shape the future of clean energy.

Looking ahead, the report identifies promising projects, such as the expansion of hydrogen infrastructure and scaling of renewable diesel production. Drawing comparisons to the U.S. biofuel sector –where incentives like the Clean Fuel Production Tax Credit have spurred investment – the report suggests that Canada must adopt similar measures to remain competitive. To attract capital and inspire innovation, Canada’s commitment to these initiatives must be as robust and forward-thinking as those of its global peers.

Challenges and opportunities

Key barriers to energy transition progress in Canada’s transport sector:

• Limited technology options: The transportation sector lacks the diverse technologies and alternative fuels required to support comprehensive decarbonization.
• Innovation gaps: Insufficient research and innovation currently hinder progress in decarbonizing high-impact sectors like aviation, shipping, and heavy-duty transport.
• Investment challenges: The high upfront costs for essential projects, such as carbon capture, hydrogen infrastructure, and large-scale biofuel facilities, present significant financial barriers to development.
• Inconsistent policy and regulatory support: Uncertain or inconsistent policies around low-carbon fuels and carbon pricing deter potential investors in renewable technologies.

To address these challenges, the report recommends:

• Range of decarbonizing pathways: Expanding initiatives across decarbonization strategies to enable access to a wider array of technologies and alternative fuels.
• Support for advanced R&D in new fuel technologies: Increasing R&D funding in SAF, marine biofuels, and innovations helps close gaps in high-impact sectors and drive global energy-aligned breakthroughs.
• Stable, supportive policy frameworks: Long-term policies and incentives for biofuels, carbon capture, and hydrogen projects foster investor confidence and attract renewable investments.
• Public-private investment in hydrogen and carbon capture: Government-industry partnerships can help overcome financial barriers to hydrogen and CCS, accelerating vital projects for heavy industry and transport.
• Leveraging existing infrastructure for biofuel integration: Utilizing current refinery infrastructure for renewable feedstocks offers an efficient, scalable approach to increasing low-carbon fuel production.
• Investment in sustainable feedstock supply chains: Strengthening partnerships with agriculture and forestry sectors is vital for ensuring reliable biofuel feedstock supplies. Supporting sustainable agricultural practices can stabilize production without disrupting food supply chains.
• Incentives for localized energy solutions: Promoting regional production facilities such as biofuel plants can help enhance energy security. Additionally, encouraging decentralized investments can help with Canada’s vast geography, providing reliable energy options for rural communities.

In their own words

While electrification is offering significant promise for cleaner personal and public transport, electric vehicles (EVs) are not a standalone solution. A truly effective strategy must include a variety of new technologies and alternative fuel options.

Powering Progress: 2024 Update to CFA’s Driving to 2050 Vision, Canadian Fuels Association, Nov. 5, 2024.

Final thoughts

The CFA report underscores the urgency of a multi-dimensional strategy to achieve net-zero emissions in Canada’s transportation sectors. Low-carbon fuels, hydrogen, and carbon capture stand out as essential alongside electrification, particularly in hard-to-decarbonize sectors. The findings place Canada at the cusp of becoming a leader in low-carbon fuel production, illustrating that meeting climate targets can also strengthen energy security and economic resilience.

However, the report would benefit from a deeper examination of international best practices and more explicit policy alignment targets to expedite progress. A deeper exploration of biofuel challenges, such as land-use conflicts with food crops and the formidable task of producing sustainable aviation fuels at scale, is also warranted. the report appears to downplay the principal role of electric vehicles in decarbonizing road transportation, despite broad consensus on their centrality to this mission. Finally, it could have mentioned the role of consumer-driven changes, such as opting for public transit, cycling, and limiting air travel, given these shifts are also powerful factors in reducing transport sector emissions.

Download the full report originally published by the Canadian Fuels Association on Nov. 5, 2024.