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Fuel standard regulations to start later, cut more emissions from gasoline, diesel

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OTTAWA — The federal government is delaying new emissions standards on gasoline and diesel another year but is demanding the oil and gas sector make bigger cuts to fuel emissions by 2030 given how much more money the companies are now making.

Cabinet approved the final regulations for the long-awaited Clean Fuel Standard last week and The Canadian Press obtained them today ahead of their intended publication on July 6.

A confluence of communications errors led to the regulations being distributed early upon request and the government was scrambling Monday to inform provinces as the news was about to leak.

“The CFS will be a key tool that complements pollution pricing and the pending oil and gas sector emission cap, to cut emissions and drive the use of clean fuels and technology in Canada,” a statement from Environment Minister Steven Guilbeault’s office said Monday.

“Since the previous draft of the CFS, we’ve been working to make this as focused as possible on our end goal — driving down emissions and driving up innovation.”

The Clean Fuel Standard was first promised in 2016 as part of the Liberals’ first climate plan. At that time it was expected it would cut 30 million tonnes of greenhouse gases a year by 2030, but a new analysis based on the final regulations is expected shortly.

The initial plan was to have draft regulations ready by the spring of 2020, but the draft wasn’t published until December 2021, and was followed by a mandatory six-month comment period.

The draft regulations said the new standard would kick into gear in December 2022. But the final regulations say the first compliance check will now be in December 2023.

The draft regulations also included kerosene, jet fuel or fuel oil on the list of fuels that need to comply but those are not included in the final regulations.

But they do increase the expected cuts to emissions from both gasoline and diesel.

The draft regulations expected gasoline to drop carbon intensity 2.5 per cent in December 2022 from a baseline number set using a 2016 average intensity. The final plan adjusts that baseline slightly, and requires a drop of 3.6 per cent for gasoline, and 3.8 per cent for diesel in December 2023.

The emissions intensity cap declines each year until 2030. Initially the plan was that both gasoline and diesel emissions intensities would decline 12.5 per cent by 2030. The final regulations, however, now say gasoline has to fall 14.7 per cent by 2030, and diesel by 15 per cent.

In June 2020 the federal government said it would scale back the standard in the early years as oil and gas companies reeled from a pandemic revenue hit.

Guilbeault’s office now says companies are making record profits and “there’s no doubt there is the capacity to invest in clean options.”

“In fact, the future sustainability of the industry depends on investment in innovation.”

Most Canadian oil and gas companies reported massive profits in the first quarter as global oil prices surged, largely due to the Russian invasion of Ukraine.

In May, Guilbeault told The Canadian Press he expected those companies to use those profits to invest in clean tech, after one oilpatch CEO complained federal tax credits for carbon capture and storage technology were not generous enough.

The emissions intensity is calculated on what are known as life cycle emissions — every ounce of carbon dioxide, methane or other greenhouse gases produced when oil and gas is extracted, processed, refined, upgraded, transported and finally, burned.

There are multiple options to lower emissions intensity, such as by replacing fossil fuels with clean electricity during the extraction or refining phases, distributing biofuels such as ethanol and biodiesel, or investing in electric or hydrogen fuel-powered vehicles.

This report by The Canadian Press was first published June 27, 2022.

 

Mia Rabson, The Canadian Press

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Canada eyes cash for critical minerals in Biden's big new climate bill – CBC News

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A historic climate bill just passed by the U.S. Congress could have implications in entrenching Canada’s role in the shift toward clean transportation.

The legislation that passed last week established preferential tax treatment for electric vehicles assembled anywhere in North America.

That made-in-North-America approach generated some news headlines by bringing an amicable resolution to a months-long Canada-U.S. irritant.

Less noticed in the bill was a pot of money containing hundreds of millions of dollars to jump-start a new domestic industry in components for electric-vehicle batteries.

The ripple-effects could eventually be felt across the border, up into remote Canadian mining communities.

At issue is growing U.S. concern about becoming dependent on its great geopolitical rival, China, for the critical minerals powering future vehicles. 

President Joe Biden invoked the U.S. Defense Production Act earlier this year allowing him to fund projects that would lessen dependence on U.S. rivals.

He’s now getting the funds to do it: $500 million US set aside in this incoming law, after another $600 million was tucked into a recent Ukraine assistance bill, atop an older multibillion-dollar loans program.

Those funds are now at Biden’s disposal to enact his stated plan to develop new suppliers for lithium, nickel, cobalt, graphite and manganese, as well as heat pumps.

An ‘opportunity’ for Canada

Could some of that money create new battery-component projects in Canada? Canadian officials are hopeful it will.

They point to a document recently posted on the White House website, from a binational panel: It explicitly mentions Canada being included as a domestic source under the U.S. Defense Production Act and says that creates potential co-operation opportunities on critical minerals.

“There is an opportunity the way [the bill is] structured — to take advantage of some of that,” Kirsten Hillman, Canada’s ambassador to Washington, told CBC News in an interview. 

“This will spur domestic production [in the U.S.]. It also includes Canada as a domestic source. So we look forward to shared opportunities.”

Princeton University’s Zero Lab estimates the incoming budget bill will result in U.S. emissions falling by 42 per cent. That’s not quite as ambitious as an earlier unpassed version of the bill known as Build Back Better, or at the level scientists say would halt global warming, but it’s a big jump from the current emissions trajectory. (CBC News)

The broader story of the new bill, which Biden will soon sign, is that it’s by far the most significant U.S. federal action ever against climate change.

It passed with relatively little media coverage last Friday, with the country’s politics distracted by the FBI search of former president Donald Trump’s home.

What’s in that big climate bill

But analysts who’ve studied the bill have predicted a major impact on carbon emissions through its more than $400 billion Cdn in tax credits and subsidies for a wide range of energy projects.

Those estimates project U.S. greenhouse-gas emissions will fall faster now to anywhere between 31 per cent and 42 per cent from 2005 levels, which would take the U.S. significantly closer to achieving its 2030 target under the Paris accord.

The so-called Inflation Reduction Act would remove one billion tons of greenhouse gasses from the atmosphere, says Princeton University’s Zero Lab — that’s equivalent to reducing two per cent of all current global emissions.

But there’s uncertainty in the projections: One reason the estimates vary so widely is it’s far from clear how quickly new energy projects will get started.

WATCH | U.S. EV tax credit changes a relief for Canada’s auto sector: 

U.S. EV tax credit changes a relief for Canada’s auto sector

19 days ago

Duration 2:06

Canadian automakers breathed a sigh of relief after a U.S. climate bill that would have seen consumer tax credits for American-made electric vehicles expanded to include North American-produced EVs, batteries and critical minerals.

Here’s an example of that uncertainty: The much-discussed electric vehicle credit.

For almost a year, it was a festering irritant in Canada-U.S. relations. An earlier version of the bill, previously known as Build Back Better, allowed only U.S.-assembled vehicles to access certain tax credits.

What happened to that EV tax irritant?

That triggered threats of trade retaliation. Ottawa warned that the bill violated the new North American trade deal and would wipe out auto jobs and investment in Canada.

Two electric vehicles are parked on the South Lawn of the White House, Aug. 5, 2021, at an event on clean cars and trucks. (Susan Walsh/The Associated Press)

The head of Canada’s Automotive Parts Manufacturers Association, Flavio Volpe, called the friendlier language in the new, final, bill a relief for Canadian jobs: “It’s a bullet dodged,” he said.

“Probably more of a missile dodged.”

But wait. There’s an important caveat in the new, friendlier language. U.S. auto-makers are now calling the new credit practically useless, under current conditions. 

For an electric car to qualify for the maximum $7,500 US in the new version of the credit, the car’s battery will increasingly need North American components: from 50 per cent of the battery in 2024, to 100 per cent in 2028.

The problem? North America doesn’t make that many battery components. 

“[No vehicles] would qualify for the full credit when additional sourcing requirements go into effect. Zero,” said a letter from a U.S. auto industry lobby group.

Biden speaks about climate change and clean energy at Brayton Power Station on July 20 in Somerset, Mass. (Evan Vucci/The Associated Press)

An analysis for the non-partisan U.S. Congressional Budget Office projected that only a tiny percentage of vehicles will wind up receiving the tax credit. 

In a 10-year fiscal forecast for the bill, the CBO estimated the U.S. treasury will wind up paying out just enough to deliver the full credit to slightly over 1 million vehicles over a decade.

That amounts to less than one per cent of an estimated 150 million total vehicle sales in the U.S. over those 10 years. During that period, an increasing percentage of vehicles sold will be electric.

The bottom line: Very few cars are expected to have enough North American components to qualify.

That’s where Canadian mining comes in.

A key architect of the final version of the bill, U.S. Sen. Joe Manchin, has repeatedly stated his skepticism about the original plan.

He said it made no sense to rush into the electric-vehicle age while America’s chief adversary still has a stranglehold on vital inputs.

This map shows the locations of early exploration projects currently underway in Ontario for critical minerals. It appears in the provincial government’s new strategy document for the sector published earlier this year. (Government of Ontario)

But after Manchin visited Canada earlier this year, he opined that the two countries should be working more closely together on minerals.

This new bill appears designed to do just that, through the tax credits for North American vehicles, and the cash for critical-minerals projects.

If U.S. mining companies want access to some of that money, they can submit proposals to the American government.

Quebec mining project

One company eyeing U.S. public funds happens to have an important investment in Quebec.

Keith Phillips, president of North Carolina-headquartered Piedmont Lithium, said he’s not yet clear on what conditions the U.S. government will set and what projects it’s looking to fund.

More details about the administration of the bill will be revealed in regulations to be drafted in the coming months. 

Governments in North America are working to build more charging stations for electric vehicles. (Doug Ives/The Canadian Press)

“I’m not sure anyone’s entirely clear on what the priorities are,” Phillips said in an interview.

His company is a minority investor in a Quebec lithium mine that’s now forecast to begin producing next year. 

The next goal is to build a plant in Quebec for value-added processing with the majority partner, Australia’s Sayona Mining. 

The project is in its infancy and there’s no site picked out yet. 

Phillips said a similar plant would cost $600 million US to build in the U.S. and he said public money is a lifeline for projects that banks have little history of supporting. 

“Of course it would be a priority,” he said of figuring out the potential for U.S. federal loans. 

“If government assistance could be involved, it’s very helpful.”

Building a North American battery industry

The Canadian government also recently budgeted $4 billion to develop the country’s critical minerals sector.

Yet North America is starting way behind. 

Canada, for instance, has a minute share of the world’s discovered deposits of lithium, cobalt and manganese.

Brian Kingston, head of the Canadian Vehicle Manufacturers’ Association, said he’s relieved by some of the changes in the U.S. bill.

But he’s still concerned — that auto-makers can’t meet the zero-emissions sales targets set by Ottawa without major improvements, in charging capacity, energy infrastructure and sales incentives.

As for a North American battery supply chain, he said: “[It] won’t emerge overnight.”

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Inflation in Canada falls to 7.6% in first decrease in a year – CBC News

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Canada’s inflation rate fell to 7.6 per cent in July, according to a report Tuesday from Statistics Canada, marking the first time in 12 months that the rate has decreased from the previous month.

In June, inflation hit a 39-year high of 8.1 per cent, with gasoline prices the single biggest contributor to the overall rate increase.

By contrast, gasoline prices declined on a monthly basis in July, according to the agency’s consumer price index. Consumers paid 9.2 per cent less for gasoline in July than they did in June, a monthly decline not seen since April 2020.

Ontario saw a 12.2 per cent monthly decline in gas prices — the largest of any province — after the provincial government implemented a gas and fuel tax cut on July 1. But some consumers have already made significant lifestyle changes to balance out the high costs.

“I had to sell my truck and buy a smaller car,” said Cameron Benn, a small business owner based in Brampton, Ont. He said at one point this year, he was paying $1,200 monthly for gas. 

“I got to the point where it just … didn’t make sense to have [the truck] anymore,” he said, adding that the situation “sucks” because he loved the truck. 

The overall downward trend, which was expected by economists, indicates that skyrocketing inflation is starting to ease up. But it’s still a long way from the Bank of Canada’s 2.2 per cent target.

WATCH | When will ‘normal’ inflation rates return? 

‘Normal’ inflation likely 18 months away, personal finance writer says

9 hours ago

Duration 6:34

Canada’s annual inflation rate declined slightly in July to 7.6 per cent, but a return to normal inflation rates of two to three per cent is still about 18 months away, says personal finance writer Rubina Ahmed-Haq.

While inflation went up by 0.1 per cent compared to June, measures of core inflation increased, said Tu Nguyen, an economist with consulting firm RSM Canada.

That means “inflation remains pervasive across all aspects of life and not just concentrated in a few categories such as gasoline and food,” she said, adding that it will “be a while” until households can breathe a sigh of relief.

“Wage growth continues to lag inflation, resulting in households losing purchasing power. Grocery prices are still climbing due to the Russian invasion of Ukraine and resulting global food shortages.”

Groceries rise at fastest pace since Aug. 1981

Groceries are pictured in a Vaughn, Ont., supermarket on Aug. 16, 2022. The war in Ukraine is affecting the price of flour globally. (Evan Mitsui/CBC)

Even as the cost of gas declined, prices at grocery stores rose at 9.9 per cent year-over-year, their fastest pace since Aug. 1981.

Bakery products, non-alcoholic beverages, eggs and fresh fruit are among the items seeing faster price growth. Baked goods in particular are up 13.6 per cent as the Russian invasion of Ukraine has contributed to surging wheat prices.

Higher prices for services like flights (up by 25.5 per cent), natural gas (12.4 per cent) and hotel stays (10.1 per cent) were notable contributing factors to the month-over-month increase due to a busier travel season.

Monthly rent is going up, too, according to the StatsCan report. With high interest rates sidelining buyers who can’t afford to take out mortgages, the rental market has expanded and rent prices are accelerating at a faster pace than in June.

Bank of Canada must continue to act: economist

Royce Mendes, an economist with Desjardins, told CBC News it’s clear that “the Bank of Canada has to continue to act.”

Last month, the Bank of Canada hiked rates a full percentage point to 2.5 per cent — the most recent in an ongoing and aggressive campaign to cool runaway inflation.

WATCH | Bank of Canada issues largest interest rate hike in nearly 25 years:

Bank of Canada hikes rates massively to fight inflation

1 month ago

Duration 2:19

An increase in lending rates was expected amid runaway inflation, but experts are still surprised at the size of the boost — it’s the largest in almost 25 years.

While it is widely expected that more rate hikes are to come, the question is whether the bank will issue a 50 basis point hike or a 75 basis point hike.

Even with today’s downward trending annual inflation rate, it remains to be seen how much that number will decrease without further action. As such, Mendes says he is cautious in declaring that inflation has peaked.

“There’s still a lot of inflation to come down and show up in the official statistics. And there’s still a lot of uncertainty with regards to the global economy, particularly with what’s going on in the Ukraine and what could happen this fall,” he said.

“So while I am cautiously optimistic that inflation has peaked, I’m not sure that it’s completely a done deal.”

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Canadian parliamentarians 'hoping' to make October visit to Taiwan – CBC News

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Members of Parliament’s standing committee on international trade are planning a trip to Taiwan as early as October, says the group’s chair Liberal MP Judy Sgro.

A potential fall visit to Taiwan by Canadian MPs and senators would come on the heels of U.S. House Speaker Nancy Pelosi’s visit to the island in early August.

Pelosi’s visit — which she characterized as a mission to show Washington’s support for Taiwan and democracies worldwide — enraged the Chinese government, which considers the self-ruled island a part of its territory. Beijing responded by encircling the island and conducting live-fire military drills close to territorial waters claimed by Taiwan and Japan.

Sgro said eight members of the committee — who are all also members of Parliament’s Canada-Taiwan Friendship Group — plan to go on the trip.

“The trade committee is very anxious to go and to visit Taiwan and see what opportunities there are for deeper trade relations between our two countries,” she said.

While acknowledging the “significant strain” on international relations that followed Pelosi’s trip, Sgro said “we certainly will use diplomacy as we proceed” through what she called a “necessary” trip.

“Democracy is cherished and an important part of what we all live in every day. We need to protect other countries that have fought for their freedom and for their democracy,” she said.

“So, yes, you know, I’m trying to be diplomatic in my comments, but clearly I’m proud that Canada is standing up to China as well. And I think that pushback is very important.”

Sgro said planning for the trip began last spring. Whether the trip takes place, she added, will depend in part on the future of Taiwan’s COVID-19 protocols.

Visiting U.S. House Speaker Nancy Pelosi waves to journalists during her arrival at the Parliament in Taipei on August 3, 2022. (Sam Yeh/AFP/Getty Images)

Liberal MP John McKay, who has visited Taiwan several times under the banner of the friendship group, said China’s dramatic reaction to Pelosi’s visit should not “in the least” dissuade Canada from following in her footsteps.

“My view is that China is trying to bully Taiwan and indirectly bully the rest of us on a false premise that Taiwan is part of China,” McKay said.

“That is nonsense. The Taiwanese have repeatedly expressed their desire to be an independent country and have behaved in an exemplary fashion.

“Canada should do everything to encourage Taiwan to express its democratic values. This parliamentary trip will encourage that.”

Previous iterations of the Canada-Taiwan Friendship Group have visited the island in the past, as recently as 2014. Individual MPs also have made trips to meet with Taiwanese politicians for many years, drawing the ire of Beijing.

But a fall visit by the friendship group would come at a time of heightened tensions between the Canadian and Chinese governments.

Defence Minister Anita Anand said China’s decision to conduct military drills following Pelosi’s visit was an “unnecessary escalation.”

“There is no justification to use a visit as a pretext for aggressive military activity in the Taiwan Strait,” Anand said.

China’s vice foreign minister urged Canada to “immediately correct its mistakes” after the G7 issued a condemnation of China’s actions.

Friendship groups represent only informal relations

The Canada-Taiwan Friendship Group is one of dozens of so-called “friendship groups” on Parliament Hill. There were 89 members of the group in 2021, according to a statement released by the Taiwanese government.

The informal nature of friendship groups allows MPs and senators to maintain relations with a variety of governments and communities outside the scope of official government activities.

Under the One China policy adopted by the vast majority of the international community, Canada has only informal diplomatic relations with the Taiwanese government.

Other active friendship groups include the Canada-Palestine Parliamentary Friendship Group and the Canada-Uyghur Parliamentary Friendship Group.

Friendship groups do not receive administrative or financial support from the Parliament of Canada.

A delegation of German parliamentarians is also set to visit Taiwan in the first week of October.

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