Good morning. My apologies for holding things up. Those who know me won't be surprised with respect to the technical challenges.
I am happy to be here along with colleagues from Environment and Climate Change Canada and from across the federal government. We are very pleased to discuss some of the government's policies that relate to the low-carbon and renewable fuels industry in Canada.
As you all know, in December 2020 the government released “A Healthy Environment and a Healthy Economy”. This plan is intended to drive reduced emissions across the Canadian economy, both in the near term and towards the target of net zero by 2050, in ways that stimulate economic transformation and development.
Investors, consumers and governments around the world are increasingly accounting for low-carbon considerations. The government's climate plan is intended to help ensure that Canadian workers and businesses are well positioned to respond to and benefit from that demand.
To accomplish those goals, the strengthened climate plan takes an integrated approach to climate and economic policy. This approach uses a mix of policies and programs to support the development of low-carbon solutions and domestic supply chains for low-carbon products. The investments noted by Ms. Johnson will work together with various regulatory measures to be delivered by Environment and Climate Change Canada to incent the production and use of clean fuels.
Let's start with carbon pricing, which, as you know, has been in place throughout Canada since 2019 and before then in various provinces. Carbon pricing sends a broad signal across the economy to spur the lowest-cost greenhouse gas reductions wherever they may be found. As part of its strengthened climate plan, the government proposed to increase the price of carbon by $15 per year, starting in 2023, rising to $170 per tonne in 2030.
This increasing carbon price will spur demand for cleaner fuel, which in turn is already leading to investments to increase the domestic production of cleaner fuel, which in turn should make them more affordable.
The clean fuel standard complements carbon pricing. The CFS is expected to lead to increased use and production of cleaner fuels and technologies while reducing emissions by up to 20 megatonnes at the end of this decade.
The clean fuel standard will require producers and importers of gasoline, diesel and home heating oil to reduce the life-cycle carbon intensity of their fuels. This life cycle approach will reduce the emissions associated with extracting, processing, distributing and using that fuel.
The CFS is a market-based tool. It creates a credit trading system and gives regulated parties flexibility in how to meet their requirements, as compliance credits can be created in various ways. Importantly, for the purpose of today's discussion, producers and distributers of fuels can comply by blending low-carbon-intensity fuels such as ethanol with gasoline and renewable diesel with diesel. This allows clean fuel producers to generate credits and make money by producing clean fuels that are sold to fuel producers for blending with fossil fuels. In turn, the increased incentive for use and production of clean fuels will create a market for feedstock providers such as farmers and foresters.
Using clean fuels in transportation will be a key part of Canada's transition to a low-carbon economy, given that transportation is responsible for about a quarter of our emissions.
I emphasize this because this multi-faceted approach to transportation emissions is illustrative of the overall approach the government is taking to address climate change through an economic development lens. We will influence product design by continuing to establish increasingly stringent emissions regulations for vehicles and engines, most of which will be aligned with the U.S. standards in recognition of our highly integrated markets.
We've put in place market-based regulations like carbon pricing and the CFS to influence consumer decisions and fuel production composition. We complement those measures with various programs such as those being delivered by NRCan to support increased research and development and investment in the increased production of clean energy, low-emitting products and clean technology.
In conclusion, the global energy sector is undergoing a significant transition and there are significant opportunities for Canadian-made clean fuels. The strengthened climate plan seeks to establish an integrated approach to reducing greenhouse gas emissions in ways that enable the low-carbon transition of Canada's important energy sector.
We look forward to contributing to and learning the results of the committee's review of this important issue.
Thanks.