Study says Canadian biofuels policies too expensive for the GHG emissions reductions

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In Canada, biofuel policies have helped to reduce GHG emissions, but according to a new report from Canada’s Ecofiscal Commission, these reductions have come at a significant cost. The report, Course Correction: It’s Time to Rethink Canadian Biofuel Policies, examines the extent to which biofuel policies have achieved their stated objectives, and whether these policies have been cost-effective for Canadians.

Course Correction finds that these biofuel policies have reduced GHG emissions by an average of 3 Mt per year from 2010 to 2015, an amount less than one-half of one percent of Canada’s total GHG emissions. These small reductions have been very expensive, however. The total consumer and taxpayer cost has been approximately $640 million per year. On a per-tonne basis, the estimated average cost of the emissions reductions have ranged from $128 to $185, far greater than the cost achievable with a carbon price, such as the ones already available and coming by 2018 to all Canadian provinces as per yesterday’s Federal announcement.

An analysis of the policies’ other objectives appears unlikely to justify these high costs. When it comes to support for rural communities, the federal government’s own cost–benefit analysis for its renewable fuel mandate found that economic costs far exceeded benefits. Further, the Ecofiscal report finds that impacts on air pollution and on the development of next-generation biofuels have been negligible.

As a result, the Ecofiscal Commission recommends that all production subsidies be terminated as initially planned, and that renewable fuel mandates be gradually phased out. In their place, the Commission recommends that governments across the country continue to develop a rising pan-Canadian carbon price. The report also notes that as part of the policy transition, governments should consider complementing carbon pricing with flexible performance standards and broad funding for research and development to spur the shift to low-carbon transportation.