1. 1

2. 2
Overview
1. Policy Context
2. Biofuel Policy as Climate Policy
3. Other Policy Objectives
4. A New Policy Context for Biofuels in
Canada
5. Recommendations for Governments

3. Biofuel Policies in Canada
Government measures providing economic or financial
support to the production and use of biofuels
• Renewable fuel mandates
• Production subsidies
Four government objectives:
1. Reduce GHGs
2. Promote rural economic development
3. Reduce air pollution
4. Encourage the development of next-generation biofuels.
1. Policy Context
3

4. Increasing Canadian Production of Biofuels
1. Policy Context
4

5. 5
Canada’s Renewable Fuel Mandates
1. Policy Context

6. Estimating GHG Emissions Reductions
6
2. Biofuel Policy as Climate Policy
We compute outcomes with policies in place and compare them with
the “counterfactual” case of no policies
We provide estimates for:
1. GHG emissions reductions from policies
2. Costs of policies (to consumers, to government, and to the economy)
Technical Considerations
• “Lifecycle assessment”: all emissions from production to consumption
• System boundaries: global emissions vs. domestic emissions reductions
• Uncertainty in lifecycle emissions
• “Additionality” of policy impact
• Indirect land-use emissions

7. GHG Emissions Reductions
7
Fuel Type
Global Emissions
Reductions
Domestic Emissions
Reductions
Ethanol 2.2 2.1
Biodiesel 0.8 1.1
Total* 3.0 3.1
Average Annual Emissions Reductions, 2010–2015 (Mt CO2e)
*Totals may not sum due to rounding
2. Biofuel Policy as Climate Policy
(Context: Canada’s total GHG emissions are currently about 732 Mt.)

8. 8
The Costs of Biofuel Policies
We explore three cost concepts:
1. Consumer costs: the extra amount paid by
consumers for the more expensive biofuels
2. Fiscal costs: direct expenditures from provincial
and federal subsidy programs
3. Economic Costs: costs to the economy from
distortions created by policy
(# 3 is not equal to #1 + #2)
2. Biofuel Policy as Climate Policy

9. 9
For Eco-Geeks: Illustrating The Costs

10. 10
Consumer Costs: Ethanol
2. Biofuel Policy as Climate Policy

11. 11
Consumer Costs: Biodiesel
2. Biofuel Policy as Climate Policy

12. 12
Consumer + Fiscal Costs = $640 M Annually
2. Biofuel Policy as Climate Policy

13. Cost per Tonne of Emissions Reduced
13
Fuel Type
Global Emissions
Reductions
Domestic Emissions
Reductions
Ethanol $185 $180
Biodiesel $165 $128
Annual Average Per-Tonne Cost of Emissions Reductions From Biofuel Policies
2. Biofuel Policy as Climate Policy
Why might these estimates be too optimistic?

14. Sensitivity Analysis
If we use the upper bounds for emissions intensities?
• $238–$284 per tonne for ethanol policies
• $189–$596 per tonne for biodiesel policies
14
Source: Adapted
from IEA, 2011
2. Biofuel Policy as Climate Policy

15. Other Objectives of Biofuel Policies
Supported rural
economic
development?
Reduced air
pollution?
Accelerated new
biofuel
technologies?
 Rural economic
benefits from biofuel
policies have been
small
 Canadian biofuel
policies may help some
farmers and biofuel
producers, but have
other adverse
economic impacts
 Biofuels have not
clearly reduced air
pollution
 Low blending levels of
biofuels are unlikely to
generate significant
health benefits
 Current policies may
have slowed the
development of next-
generation biofuels
 Tensions between
objectives of rural
economic development
and driving next-
generation biofuels
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3. Other Policy Objectives

16. A New Policy Context
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15 years ago, biofuel policies offered a practical
opportunity to generate benefits for farmers, biofuel
producers, and the environment.
But today’s policy context is different:
• Information about these policies is better
• Carbon pricing is becoming mainstream
• Demonstration of flexible performance standards
4. A New Policy Context for Biofuels in Canada

17. Conclusions
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1. Biofuel policies are an expensive way to reduce GHG
emissions:
 Aggregate costs (fiscal + consumer) are roughly $640 million annually
 $180–$185/tonne for ethanol policies; $128–$165/tonne for biodiesel
policies
 Less optimistic estimates suggest that costs could be even higher:
• $238–$284/tonne for ethanol
• $189–$596/tonne for biodiesel policies
These costs are far greater than what is available with a
$30/tonne (or less) carbon tax.
5. Conclusions and Recommendations

18. Conclusions (2)
18
2. Biofuel policies have not achieved their other
objectives
3. Competing objectives undermine the performance of
biofuel policies
4. An emerging Canadian policy context offers the
option for smarter climate policy
5. Conclusions and Recommendations

19. Recommendations
19
1. Provincial and federal production subsidies should be
terminated, as initially planned.
2. Provincial and federal governments should phase out renewable
fuel mandates.
3. Provincial and federal governments should continue working
toward an increasing pan-Canadian carbon price.
4. As part of the policy transition, governments should complement
carbon pricing with flexible performance standards and funding
for research and development.
5. Conclusions and Recommendations

20. 20
Thank you.
Questions?