To state the obvious, poorly-devised government policies can not only fail to provide benefits but can actually do more harm than good.
For example, the federal government’s so-called “Clean Fuel Regulations” (or CFRs) meant to promote the use of low-carbon emitting “biofuels” produced in Canada. The CFRs, which were enacted by the Trudeau government, went into effect in July 2023. The result? Higher domestic biofuel prices and increased dependence on the importation of biofuels from the United States.
Here’s how it works. The CFRs stipulate that commercial fuel producers (gasoline, diesel fuel) must use a certain share of “biofuels” — that is, ethanol, bio-diesel or similar non-fossil-fuel derived energetic chemicals in their final fuel product. Unfortunately, Canada’s biofuel producers are having trouble meeting this demand. According to a recent report, “Canada’s low carbon fuel industry is struggling,” which has led to an “influx of low-cost imports” into Canada, undermining the viability of domestic biofuel producers. As a result, “many biofuels projects — mostly renewable diesel and sustainable aviation fuel — have been paused or cancelled.”
Adding insult to injury, the CFRs are also economically costly to consumers. According to a 2023 report by the Parliamentary Budget Officer, “the cost to lower income households represents a larger share of their disposable income compared to higher income households. At the national level, in 2030, the cost of the Clean Fuel Regulations to households ranges from 0.62 per cent of disposable income (or $231) for lower income households to 0.35 per cent of disposable income (or $1,008) for higher income households.”
Moreover, “Relative to disposable income, the cost of the Clean Fuel Regulations to the average household in 2030 is the highest in Saskatchewan (0.87 per cent, or $1,117), Alberta (0.80 per cent, or $1,157) and Newfoundland and Labrador (0.80 per cent, or $850), reflecting the higher fossil fuel intensity of their economies. Meanwhile, relative to disposable income, the cost of the Clean Fuel Regulations to the average household in 2030 is the lowest in British Columbia (0.28 per cent, or $384).”
So, let’s review. A government mandate for the use of lower-carbon fuels has not only hurt fuel consumers, it has perversely driven sourcing of said lower-carbon fuels away from Canadian producers to lower-cost higher-volume U.S. producers. All this to the deficit of the Canadian economy, and the benefit of the American economy. That’s two perverse impacts in one piece of legislation.
Remember, the intended beneficiaries of most climate policies are usually portrayed as lower-income folks who will purportedly suffer the most from future climate change. The CFRs whack these people the hardest in their already-strained wallets. The CFRs were also — in theory — designed to stimulate Canada’s lower-carbon fuel industry to satisfy domestic demand by fuel producers. Instead, these producers are now looking to U.S. imports to comply with the CFRs, while Canadian lower-carbon fuel producers languish and fade away.
Poorly-devised government policies can do more harm than good. Clearly, Prime Minister Carney and his government should scrap these wrongheaded regulations and let gasoline and diesel producers produce fuel — responsibly, but as cheaply as possible — to meet market demand, for the benefit of Canadians and their families. A radical concept, I know.
