November 12, 2024 – While biofuels have been in the shadow of other low-carbon technologies such as solar and wind for more than a decade, the industry is poised for renewed attention in the coming years, according to a new report from the C.D. Howe Institute.
In “Scaling Up: The Promise and Peril of Canada’s Biofuels Strategy,” Werner Antweiler of UBC writes that biofuel production in Canada has suddenly spiked within the last year. He finds that Canada is well-positioned to be a significant player in the biofuel industry because of its vast agricultural resources and extensive experience with conventional fuel production. But he adds that developing the country’s full potential faces challenges.
Antweiler says Canada’s biofuels industry is currently evolving from first-generation fuel, made from agricultural products such as corn, canola and animal fats, to second-generation fuels, made from more sustainable non-food crops such as perennial grasses and fast-growing trees, as well as waste biomass. This new generation of fuels includes sustainable aviation fuel, renewable diesel, and renewable natural gas.
These new fuels, however, aren’t currently price competitive because of high production costs. In addition, their access to sustainable feedstocks is uncertain.
To remedy that, Antweiler says governments need to remain involved. However, that doesn’t simply mean showering the industry with cash: Biofuel mandates already in place in British Columbia and 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 first- and second-generation biofuels.
“Understanding the limitations of industrial policy and letting the market drive innovation will avoid costly subsidies and mistakes,” he writes.
For more information contact: Werner Antweiler, Associate Professor & Chair, Strategy and Business Economics Division, UBC Sauder School of Business; and Daniel Kitts, Communications Officer, C.D. Howe Institute, 416-220-8470, dkitts@cdhowe.org
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.