Thank you very much, Mr. Chairman.
On behalf of Canada's biofuels producers, thank you for this opportunity to provide our views on the Canada-EU Comprehensive Economic and Trade Agreement.
Each year Canada's domestic biofuels industry returns more than $3 billion to the economy and removes over 4 million megatonnes of carbon from the environment. We represent the producers of renewable fuels. For ethanol, we upgrade wheat, corn, forest products, and municipal solid waste. For renewable diesel, we use soy, canola, rendered tallow, used cooking oil, and corn oil.
Our association also includes every aspect of the value chain for renewable content, from the producers of the feedstock to the eventual customer, the traditional petroleum sector.
Our industry has created over 14,000 quality jobs and delivers the same greenhouse gas reduction benefits as removing one million cars from our roads every year. CRFA members have built an established industry that is well positioned; however, we operate in a very competitive global marketplace. Today, in 2013, Canada is a net importer of renewable fuels. Our open North American fuels market allows for cross-border trade. The federal mandate created by this government requires 2.1 billion litres of ethanol a year, and yet we consume approximately 2.8 billion litres a year, almost all of which comes from the United States.
In Canada, imports from the United States go specifically to over-compliance with the federal regulation. The reason for this is that ethanol currently has a lower price when compared to fossil fuels. It's almost a buck a gallon less expensive. It is a traded commodity on the Chicago Board of Trade.
This over-blending saves consumers money at the pump, reduces harmful GHGs, and gives domestic fuel added octane enhancement. It also means our domestic biofuels producers need expanded market access.
For these reasons, the CRFA strongly supports the government's efforts to open foreign markets for our products. There is in Europe an ambitious policy to increase renewable content in their transportation fuels to 10%. Some of their automakers and oil and gas companies are recommending a 20% ethanol blend by 2025, and a 7% biodiesel mandate. Certainly, there is a future market opportunity there for biofuels.
In Europe we see growth in the biodiesel sector. To the extent that we can enter that market, it is largely in the biodiesel market; it is less so on the ethanol side, mostly due to massive amounts of ethanol from Brazil and from the United States.
CETA will open significant new market opportunities, mean greater access for Canadian biofuels, and expand markets for all of the value-added, bio-based products our advanced producers generate. CETA's ratification would aggressively curtail tariffs on our products. This can only be a good thing.
In total, it's estimated that CETA has the potential to create more than $50 million in new market opportunities for Canadian renewable fuels and agricultural co-products.
Of particular interest to our members is the reduction on tariffs for chemical products. Our industry is at the forefront of developing new, sustainable chemicals that would be especially valuable in Europe. Is there a true market opportunity for renewable fuels? Maybe not today, but certainly in the future. Eradicating tariffs would go a long way to ensuring access to those markets.
But to get the most out of any trade agreement, especially one of this scope and magnitude, we have to ensure that our businesses can actually capitalize on all the potential benefits. Like all trading partners, we don't think the same way about everything. For starters, while the Europeans have a 10% commitment for biofuels as part of their renewable energy directive, European legislators are giving serious consideration to a backwards-thinking, indirect land use change component to their renewable fuels directive.
This proposal would cap crop-based biofuels at a level below current European production. While I can assure you this is a problem for European biofuels producers, this is a direct affront to Canadian producers, including corn, wheat, canola, and soy, that are looking for new markets to ship their products to as either feedstock or as finished product.
There is irrefutable evidence that ILUC has not come to fruition. By way of example, in Canada we are growing more crops on less land. This has occurred since the advent of the renewable fuel standard, and many argue that it happened because of it.
Another concern we have is that Europeans maintain a very low tolerance for genetically modified grains destined for feed use. These products specifically have helped to drastically improve crop yields and ensure the feedstock is available for our products—and feed at a lower cost.
But as my friends from the Grain Farmers of Ontario explained to this committee, one of the most promising points under the agreement is that Canada and the EU will establish a working group to examine biotech issues and ensure they do not disrupt trade. This open dialogue and collaboration on the issue of genetically modified grains is an exceptional step forward in our relationship with the EU, and we look forward to contributing to this working group.
But if that committee doesn't work, the importance of the effective and swift dispute resolution mechanism that would be found in CETA cannot be overstated. Our industry has seen first-hand the challenges that weak mechanisms provide, and I am sure you will agree that WTO challenges are not the objective of any trade deal. The dispute resolution mechanisms that are found in the CETA framework are of the utmost importance.
At their core, trade agreements like CETA allow countries to do better business with each other. They also give countries a chance to learn from one another. Very recently the European Union adopted a comprehensive bio-economy strategy and invested 2 billion euros in research, commercialization, innovation, and skills for the bio-economy. As l mentioned, CETA provides provisions for cooperation in the area of biotechnology. This is a significant accomplishment for our trade negotiators.
Our domestic policy leaders should also take note: Canada currently does not have a domestic bio-economy strategy. As a country, we need a national plan to capitalize on our natural wealth of biomass, attract private investment, and enhance synergies with other policy initiatives. And given similar initiatives coming out of the U.S. and Europe, we need to have it sooner rather than later or we will be left behind.
Another feature that we are very appreciative of is what I will call the mirror-image rule. It's not so different from a flyer or a coupon we sometimes see that says they'll match any advertised offer from their competitors. As a result of CETA, Canada will be able to match any other aspect of future deals that Europe negotiates, like, for example, the one they are starting to negotiate with the United States. There is currently a very strong disagreement between the U.S. renewable fuel producers and the Europeans, and this is a dispute that does affect Canada.
Finally, Europeans have very effectively monetized carbon while addressing challenges inherent in their low carbon standards. Obviously, their system is not perfect and undoubtedly it is a challenge for some of our energy producers, all of whom should use the dispute resolution mechanisms that will be found in CETA.
More needs to be done in terms of our federal policy and regulations. If this sounds familiar, a top executive from Royal Dutch Shell said the same thing on Tuesday. The certainty of regulations in this space will incent investment, because today, as the Shell executive said, they can't make investments until they have regulatory certainty. We verily believe that our renewable fuels are the lowest cost compliance pathway for GHG reductions across all the different sectors the federal government is currently looking at, not just the transportation sector.
Canada needs to seriously consider how to integrate with the European carbon market to ensure our producers can be assured of a fair market value for the greenhouse gas reduction benefits that biofuels and sustainable products provide. The driver for using our fuels in the future is fairly recognizing the GHG attributes they possess and allowing all industries to use them to meet their reduction obligations. Europe has done this.
Members of the committee, I would like to conclude my remarks by commending the government in bringing forward the CETA deal. And I would like to conclude by offering my full compliments to Steve Verheul and his team in negotiating this landmark agreement. The CRFA believes that CETA will succeed in securing global trade markets, not just for the green fuels of today but also the growing range of advanced bio-based products of tomorrow. Ultimately, it will give us a chance to open more doors, grow our exports, and contribute to building Canada's bio-economy, all of which is absolutely critical to ensuring Canada's long-term economic and environmental prosperity, for today and for generations to come.
Thank you very much.
