CANADA ANNOUNCES PROGRAMS TO PROMOTE PRODUCTION,

UNCLAS SECTION 01 OF 02 OTTAWA 003639 SIPDIS SIPDIS DEPARTMENT FOR WHA, EB AND OES DOE FOR POLICY AND INTERNATIONAL WHITE HOUSE FOR CEQ EPA FOR OFFICE OF THE ADMINISTRATOR AND INTERNATIONAL AFFAIRS USDA FOR FAS/OAMYOST; FAS/OGA/JNUTTALL/PJARRELL; FAS/OCRA/CALEXANDER/MCHESLEY/BZANIN/PSIMMONS E.O. 12958: N/A TAGS: ENRG EAGR SENV CA SUBJECT: CANADA ANNOUNCES PROGRAMS TO PROMOTE PRODUCTION, USE OF BIOFUELS REF: OTTAWA 3561 AND PREVIOUS ¶1. Environment Minister Rona Ambrose and Agriculture Minister Chuck Strahl announced in Saskatoon on December 20 a C$345 million program to promote the use of renewable fuels in Canada. They billed the program as the next element of the Conservative government's environmental agenda, but this time with a tie-in to agriculture. The program overall will mandate renewables content in gasoline (5 percent by 2010) and diesel and heating oil (2 percent by 2012). On the production side, the program will fund efforts to bolster the development of biofuels and other bioproducts, and to create new market opportunities for Canada's agricultural producers under the Agricultural Bioproducts Innovation Program and the Capital Formation Assistance Program for Renewable Fuels Production. Benefiting the Environment - and More -------------- ¶2. Ambrose, of course, pitched the effort as environmentally friendly, claiming "(o)ur government understands Canadians' concerns around the quality of the air we breathe," and fulfilling the Harper government's commitment to meaningful action. Strahl, on the other hand, stressed the support the programs would provide for Canada's "bio-based economy" in creating additional opportunities in the agricultural sector. Ambrose described the program as a win-win solution for Canada, with the citizenry overall reaping environmental benefits, farmers and rural communities profiting from greater demand for their products, and industry gaining support to develop a viable domestic biofuels industry and cementing Canada's place in the growing "bio-economy." ¶3. Reactions to the announcement were mixed. The biofuels lobby predictably applauded it. "This is the best type of Christmas announcement," the Canadian Renewable Fuels Association gushed. On the other side of the debate, the David Suzuki Foundation has been critical of the Tory renewable fuels strategy from the start, claiming "the amount of greenhouse gas emissions that will be cut by boosting ethanol production is virtually insignificant." Commentary in the press, noting the huge increase in ethanol production that will be required, suggested the measures will bring more benefit to farmers and producers (and investors) than to the environment. Just the Facts -------------- ¶4. As to specifics of mandating renewables content in fuel, the government intends to use the authority it already has under the Canadian Environmental Protection Act (1999) and the revisions to CEPA proposed in the Clean Air Act. The government calculates the 5 percent requirement for gasoline will amount to about 2.1 billion liters of renewable fuel per year in 2010. The 2 percent mandate for diesel fuel and heating oil will require another 600 million liters in 2012. The government admits these regulations will be complex and take around two years to develop. They will also require extensive consultation with provinces, territories, affected sectors and other stakeholders. The government plans to begin discussions, consultations and studies early next year. ¶5. The Capital Formation Assistance Program for Renewable Fuels Production will receive $200 million over four years to QFuels Production will receive $200 million over four years to provide incentives (repayable, and capped at the lesser of 25 percent of costs or $25 million per project) to encourage agricultural producer participation in new renewable fuels production capacity. The Agricultural Bioproducts (i.e., not just biofuels) Innovation Program ($145 million over five years) will support cross-sector research networks conducting scientific R&D and commercialization related to the advancement of a Canadian bio-based economy with grants of up to $25 million per network. ¶6. According to the government, Canada's transport sector accounts for more than 27 percent of greenhouse gas emissions. It calculates that the new regulations will require enough renewable fuel to reduce emissions by about 4 million tons per year, the GHG equivalent of taking almost one million vehicles from the road. By way of comparison, OTTAWA 00003639 002 OF 002 Canada's total GHG emissions in 2004 came to 785 million tons (according to OECD data),meaning the transport sector would have contributed just under 200 million tons. In 2004, (the latest available data) total ethanol production and consumption in Canada amounted to approximately 250 million liters ) just 0.7 percent of the country's total gasoline consumption - according a Canadian Renewable Fuels Association analysis. Limited industrial biodiesel production in Canada began in late 2005. Building Out the Overall Environment Strategy -------------- ¶7. The Ambrose/Strahl announcement billed these programs as just the latest element of the Conservative's overall plan on the environment, and they certainly should act to reduce Canada's greenhouse gas emissions. Government officials had told Embassy as far back as late summer that the overall environmental plan would be rolled out in tranches, beginning with the Clean Air Act tabled in Parliament in late October (reftels). In addition to the Clean Air Act, the government also announced stricter regulation of harmful chemicals as part of its new Chemicals Management Plan on December 8. Visit Canada's Classified Web Site at http://www.state.sgov.gov/p/wha/ottawa DICKSON