Scaling Up: The Promise and Perils of Canada's Biofuels Strategy

Abstract

Canada has great potential to produce biofuels to aid in the transition to a low-carbon economy, but developing the full potential requires using sustainable feedstocks and driving down production costs. 

Canada's biofuels industry is evolving from first-generation fuel, made from sugar crops, starch crops (e.g., corn), oilseed crops (e.g., soybean, canola), and animal fats, to secondgeneration, made from non-food crops (energy crops such as perennial grasses and fastgrowing trees) and waste biomass. 

Next-wave products like sustainable aviation fuel, renewable diesel, and renewable natural gas all have unique challenges for scaling up production and reducing costs. Recognizing the limitations of industrial policy and letting the market drive innovation will avoid costly subsidies and mistakes. 

Biofuel mandates in British Columbia, and at the federal level, set targets for carbon intensity reductions and employ rigorous life-cycle models to assess the carbon intensities of different fuels. Applying these principles nationwide, harmonizing approaches, and reducing the potential for trade frictions, will create a level playing field while incentivizing the most sustainable biofuels.

Keywords: Energy and Natural Resources, Biofuels

JEL Classification: Q42