The federal government’s Clean Fuel Regulations kicked in Saturday, meaning some Canadians may pay more for gas at the pump, experts warned.
The regulations, first promised by Prime Minister Justin Trudeau’s government in 2016 and finalized last year, are designed to reduce pollution by making fuels in gasoline and diesel cleaner.
The regulations only target gasoline and diesel refiners and importers, rather than directly affecting consumers like carbon pricing does. These industries are required either to generate their own credits by reducing their own emissions or buy credits from other sources.
While the costs are not directly applied to consumers, the companies that must pay for credits could pass them on indirectly.
“The Clean Fuel regulation applies came into force July 1 and it covers gas and diesel,” Bob Larocque, president and CEO at Canadian Fuels Association, told Global News. “And you have to reduce the carbon intensity.”
The overall life cycle of crude oil — from producing, processing, transporting and using gasoline and diesel — is called carbon intensity, he explained. In order to clean up the fuel, the regulation now requires Canadian industries to reduce the intensity by 15 per cent by 2030, relative to a baseline of 2016.
“The gasoline and diesel that you use in your car is called drop-in. And what it means is that the emissions from the full lifecycle will be reduced by 15 per cent, So it is a cleaner fuel,” Larocque said.
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The good news for many Canadians is that, for now, they won’t experience an immediate increase in prices at the gas pump, he added.
But those living on the East Coast may be seeing a higher gas price Saturday.
That’s because, in provinces like New Brunswick and Nova Scotia, the gasoline and diesel market is regulated, Larocque said.
New Brunswick will hike prices eight cents a litre on July 7, and Nova Scotia by 3.74 cents. Prince Edward Island and Newfoundland and Labrador are still deciding whether to increase prices immediately.
On top of the Clean Fuel Regulations kicking in Saturday, the federal carbon tax came into effect on the East Coast, which also moved the prices for fuels up significantly.
“So what happened in Nova Scotia is they used to have their own provincial carbon system and then they decided that they would go on to the federal carbon system and that starts today,” Larocque said Saturday.
In terms of other parts of Canada such as Quebec, Ontario and the Prairies, said Dan McTeague, president of Canadians for Affordable Energy, gas prices should not be affected any time soon.
“I don’t see the clean fuel standard having that much impact for much of Canada right up until about 2025, at which point refineries have to turn to the carbon credit market, which is extraordinarily expensive,” he said.
“I estimate about a 60-cent increase overall for gasoline and a little higher for diesel by 2030.”
An impact analysis of the Clean Fuel Regulations published June 28 estimates they will cut about 18 million tonnes of greenhouse gas emissions in 2030, or five to six per cent of what Canada needs to eliminate to meet its current targets for that year.
It will cost between $22.6 billion and $46.6 billion for refineries and other fuel suppliers to comply, or an average of about $151 per tonne of emissions reduced.
The impact will shave $9 billion off of Canada’s GDP, and hike gasoline prices between six and 13 cents a litre in 2030 when the full scope of the regulations is in effect.
That could cost between $76 and $174 per vehicle, or up to $301 per household.
— with files from the Canadian Press
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