As organizations’ and government entities’ net-zero goal timelines inch closer year after year, it is becoming increasingly crucial that new and immediate steps are taken to reduce greenhouse gas emissions (GHG). One key measure that is becoming more popular is the implementation of state and national Clean Fuel Standard (CFS) programs. By design, these initiatives intend to reduce the carbon intensity (CI) of the fuel pools in a given market, while offering financial incentives to companies that take action to reduce their transportation-related emissions.
So far, we have seen these programs launch in British Columbia, California, Oregon, and Washington, with Canada recently adopting their own standard which comes into force in July 2023.
With the transportation industry now surpassing the power sector as the largest emitter of GHG emissions in the United States, it’s no wonder many new CFS programs are being launched across North America at a rapid pace.
What are the Canadian Clean Fuel Regulations (CFR)?
The Canadian Clean Fuel Regulations (CFR), released last year, will come into full effect by regulating fuel suppliers beginning July 1, 2023. The CFR represents one part of Canada’s nationwide effort to reduce GHG emissions to combat climate change. Like other CFS programs, the regulations aim to reduce the life cycle CI of transportation fuels and promote cleaner fuel alternatives.
The regulations set CI standards for gasoline and diesel and require fuel producers and importers to reduce the CI of their fuels to meet annual thresholds over time. The primary goal of the Canadian CFR is to reduce the average carbon intensity of gasoline and diesel consumed in Canada by 15% (below 2016 baseline levels) by 2030, which is anticipated to avoid 26 million tonnes of GHG emissions.
Suppliers unable to hit the outlined annual thresholds will generate deficits and be required to procure compliance credits from other regulated organizations or voluntary participants who generate credits by supplying low-carbon fuels or utilizing lower-carbon alternatives, such as electricity or hydrogen. Revenue earned from the sale of compliance credits by certain voluntary participants must be used to fund further decarbonization activities, such as deploying electric vehicle (EV) charging infrastructure, installing electricity distribution infrastructure that supports EV charging, or providing financial incentives for consumers to purchase EVs. Even where this is not explicitly required, the CFR program is designed to provide money to the entities responsible for growing the market for low-carbon fuels across Canada. This cycle of incentive and reinvestment aims to rapidly expand the clean fuel industry for businesses and consumers alike.
Who are eligible credit creators under the Canadian CFR?
Parties who undertake credit generation activities are referred to as Registered Creators. Registered Creators can generate credits under three unique compliance categories. First, fossil fuel producers can earn credits for projects that reduce emissions from the fuel production process. Second, credits can be generated by producers or importers of low-CI fuels like ethanol and biodiesel. Third, and perhaps the most enticing to the vast majority, credits can be generated by those who supply low-CI fuels directly to vehicles, thereby encouraging the adoption of technologies like EVs and hydrogen fuel cell vehicles.
There are three main groupings for Registered Creators under this third compliance category: 1) electric vehicle (EV) charging network operators, for public or residential metered EV charging; 2) charging site hosts, who operate privately held commercial charging; and 3) clean alternative fueling stations, such as hydrogen.
Once registered and approved as a Registered Creator, these operations can begin generating credits on an annual basis. These credits are later sold on the open market for purchase by deficit generators who have an annual compliance target. To earn credits, organizations must demonstrate that their clean fuel projects meet the eligibility criteria set out in the regulations, comply with reporting requirements, and may be subject to verification by an independent third party.
By promoting and incentivizing low-carbon technology, the Canadian CFR looks to create permanent jobs in clean technology, promote the expansion of EVs, and grow Canada’s clean fuel industry.
How can 3Degrees help?
3Degrees works with fleet operators, EV charging infrastructure providers, and alternative fueling suppliers to quantify and monetize their transportation-related emissions reductions. Our unique three-phase process ensures that your organization maximizes the financial benefit of your current assets while providing a foundation for future growth.
Phase 1: Planning and Opportunity Assessment
3Degrees will work hand in hand with your team to identify all eligible activities under the Canadian CFR, appraise credit value, and manage the application and approval process.
Phase 2: Quality Assurance and Data Oversight
After approval is received, 3Degrees will oversee all data and reporting to meet all requirements and deadlines.
Phase 3: Credit Monetization and Risk Management
We will then look to mitigate any market risk your organization may face by arranging custom offtake arrangements.
How to get started
If your organization is interested in taking advantage of the new Canadian CFR as a credit generator, now is a great time to consider beginning the process.
We understand that the process to get started as a credit creator can be daunting, which is why we offer complimentary evaluations to help navigate any confusion and determine what opportunities are available to you as well as what that financial reward may look like. If you are ready to get started or for more information, please contact us here.