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Industry Needs Transparency from Ottawa on Clean Fuel Standard

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David MacLean.

It’s now clear that we’re facing strong economic head winds as the world re-emerges from the pandemic lockdown. Getting back to the pre-pandemic “normal” is going to take some time. We need to handle Canada’s economy delicately so we can come out the other side as strong as possible. That’s why Canadian Manufacturers & Exporters is urging caution as the Federal Government forges ahead with consultations on Clean Fuel Standard (CFS) regulations.

The proposed CFS, following the national carbon price policy, is intended to cut GHG emissions by an additional 30,000 tonnes by 2030 by steering homeowners and industrial facilities toward the use of less carbon-intensive fuels (namely renewables). The regulations will apply to any fuel source – including natural gas, propane, coal, biomass and gasoline.

Specifically, the CFS would force fuel distributors to meet emissions intensity reduction targets for the fuel they sell for credits, which they can then sell to distributors who are unable to meet those targets. Additional costs, naturally, would be passed on to consumers – businesses and individuals.

Here’s the biggest problem – even though the CFS has been discussed and consulted on for several years now, we still don’t know how much this will cost Canadian businesses and their customers, but we do know that it won’t be cheap.

We do know that this is the most significant climate policy since the implementation of the federal carbon tax. Some industry experts estimate that the CFS cost would be equivalent to a $200 per tonne carbon tax (the current price on carbon is $50). And yet, the development of this policy continues to fly under the radar for most Canadians and even some Canadian manufacturers.

Last month in this space we called for a national industrial strategy focusing on international competitiveness. It’s increasingly likely that there will be no speedy recovery from pandemic-related economic malaise. Canadian businesses, including value-added exporters, will be scratching and clawing for market share for years to come.

In March and April, 300,000 manufacturing jobs disappeared, and total hours worked in manufacturing fell by nearly 30 per cent. To make matters worse, manufacturing sales fell by 9.2 per cent in March, while merchandise exports tumbled by 4.7 per cent. These numbers tell the story of a sector that needs stimulus and investment, not additional business costs.

In June, Canadian Manufacturers & Exporters wrote Environment and Climate Change Minister Jonathan Wilkinson calling for exemptions for businesses, clarity on what we are trying to achieve with the policy, and a life-cycle analysis modelling tool, which would help industry determine the carbon intensity of fuels they use. Finally, and most importantly, CME called for a comprehensive economic and regulatory impact analysis for both individuals and industry.

We aren’t suggesting Canada should abandon its climate targets due to the pandemic, but at minimum Canadians deserve to know how much this policy will cost – both financially and in terms of jobs lost to competing countries.

Canadian Manufacturers & Exporters (CME) is the voice of Canadian manufacturing. CME represents more than 2,500 companies who account for an estimated 82 per cent of manufacturing output and 90 per cent of Canada’s exports.

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