Canadian budget commits $2 billion to renewable fuels

Canada's ruling conservative party has committed CAN$2 billion for renewable fuels in its 2007 budget.

The government also announced in the budget document its intentions to expand its renewable fuels standard (RFS) to include 2 percent renewable content in diesel and heating fuels by 2012.

"Going from nothing essentially to a $2 billion commitment is tremendous," said Tyler Bjornson, vice president of corporate affairs for the Canola Council of Canada. The budget incentives combined with the RFS for diesel will help build a CAN$1 billion-per-year biodiesel business in Canada, he predicted. "Now we have to work on the details of how it's implemented," he said.

The budget proposed up to $1.5 billion over seven years for an incentive to producers of renewable alternatives, such as biodiesel and ethanol. Incentive rates will be up to 10 Canadian cents per liter for renewable alternatives to gasoline and up to 20 Canadian cents per liter for renewable alternatives to diesel. The full incentives will last for three years and then decline. The incentives won't be provided when the renewable fuel industry's rates of return exceed 20 percent, and payments to individual companies will be capped.

Another $500 million over seven years is proposed for Sustainable Development Technology Canada to invest in the private-sector development of next-generation renewable fuels from agricultural and wood waste.

The budget includes an incentive program to retire older, high-emissions vehicles and requirements for greening the federal vehicle fleet through purchasing more flexible-fuel vehicles and renewable fuel blends. In addition, tax incentives once used to spur the development of the oil sands will be redirected to renewable fuels, allowing companies to take accelerated capital cost allowances.

The British Columbia Energy Plan has the strongest RFS in Canada. The provincial plan, announced in late February by the Ministry of Energy, Mines and Petroleum Resources, requires an average of 5 percent renewable content in diesel fuel by 2010. The provincial plan includes a CAN$25 million fund and other strategies to support the development of clean energy and energy-efficient technologies in electricity, alternative energy, transportation, and the oil and gas sectors.