Thank you so much.
We have a wide membership in our association, representing the full gamut of non-fossil, clean fuel industries, from electric vehicles through hydrogen, RNG, biogas, synthetic fuels and advanced biofuels.
Our goal in testifying before the committee today is to relay the critical need to align the design of the oil and gas cap—as a new energy and climate policy in this country—with a policy that the government has invested a lot of effort and time designing, the clean fuel standard. We need to do this if we, as a country, are to have a coherent strategy to address our large and growing transportation sector emissions. The clean fuel standard as a regulation will be in place soon and will have a direct impact on the oil and gas cap, in whatever form it takes, and vice versa.
Transportation—as many of you know, I'm sure—is Canada's highest-emitting sector on an end-use basis. It was intended that the CFS do the heavy lifting in this sector in terms of emission reductions, because the sector is so difficult to decarbonize. Let me explain how the CFS connects to your current study.
The committee's focus is the fossil fuel emissions from upstream activities that extract and process crude oil and natural gas. Industry firms' pledges to achieve net-zero emissions will not reduce emissions from the use of the fuels they sell, however. On a well-to-wheel, or full life-cycle carbon accounting basis, it is the combustion of these fuels that creates most of the emissions from gasoline, diesel and jet fuel. In fact, 76% of transportation emissions come from the actual burning of fuels. The upstream component of fuel emissions is only a quarter of the full life-cycle emissions. You can see that the elephant in the room, from the point of view of climate change, is the combustion emissions.
Other jurisdictions aside from Canada have implemented clean fuel standards, but they target almost exclusively these combustion emissions by requiring the use of non-fossil fuels to displace gasoline and diesel. British Columbia's regulation, for instance, relies almost entirely on biofuels, electric vehicles, RNG and hydrogen.
The draft clean fuel standard design departs from global norms by creating a disproportionately large role for cleaner crude to meet compliance. Canada's exports of crude oil outnumber domestic use by about four to one. These exports can count towards CFS compliance, notwithstanding that the CFS is supposed to focus only on fuels in Canada. This provision, and other illogical ones, effectively and incorrectly duplicate the purposes of the CFS and the oil and gas sector emissions target, resulting in the double counting of actions to reduce carbon—potentially, at least. This duplication acts as a de facto subsidy for the prolonged use of fossil fuels in Canada and directly disincentivizes a greater use of non-fossil fuels that all of the science shows must be at the centre of a net-zero transportation sector.
Our coalition is recommending that the proposed greenhouse gas emissions cap for the oil and gas sector is the proper place to address emissions from the production of fuels, which would then assign to the clean fuel standard its primary purpose of reducing the combustion emissions of transportation fuels. In short, the role of crude oil should be very limited in the scope of the CFS. This change will make these two regulations work in an aligned manner and address inappropriate and inefficient regulatory duplication.
Our second recommendation, if I may, is straightforward. The carbon intensity reduction target for the clean fuel standard is also outdated by the half a decade-plus of regulatory development that the clean fuel standard has been subject to. We believe it should be increased to reflect not only the increased climate ambitions to which Canada has signed on in the past year, but also the rapid expansion and availability of very low-carbon clean fuels.
These two recommendations together are, in our view, vital to making sure that there is an effective clean fuel standard and that this works in tandem with an effective and efficient oil and gas sector emissions reduction cap.
My colleague and I look forward to your questions.
As a final note, I'll point out that the Department of the Environment and Climate Change held a stakeholder meeting on Friday last week to reveal some proposed updates to the clean fuel standard. We would be happy to address any questions that may arise in relation to this update.
I want to thank the committee members.