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Fuel for thought
What is the future of renewable fuels in Canada?

With the ratification of the Kyoto Accord, the Canadian government has committed our country to reducing greenhouse gas emissions and doing our part to halt climate change. A major area that needs to improve is the transportation sector, which accounts for 25% of Canada’s greenhouse gas emissions.

One way of potentially reducing these harmful pollutants is through the increased use of alternative or so-called "green" fuels, such as ethanol and biodiesel, which are cleaner-burning, renewable fuels made from plants such as canola.

These fuels are gaining footholds in the European and American marketplaces, though Canada has been slower to jump on the renewable fuel bandwagon. However, part of the federal government’s Climate Change Plan for Canada includes increasing the production of ethanol and other kinds of renewable energy.

But what are these fuels, and what role can they really play in Canada? We spoke with Bliss Baker, the president of the Canadian Renewable Fuels Association, to pump up our knowledge on this energizing subject. Here’s what he had to say.

Canadian Geographic: What is the overall importance of developing alternative or "green" fuels?
Bliss Baker: The benefits of green fuels or renewable fuels go well beyond the environment, especially for the government. The win-win for governments is that if they support and build these industries, the benefits extend to the economy, to agriculture, to farmers, so the benefits are really quite broad.

CG: Where did the ideas of using fuels such as ethanol and biodiesel originate?
BB: It really does date back. Henry Ford, for example, designed his first Model T to run on alcohol. But back then there were a few issues, such as Prohibition and an abundant supply of cheap gasoline, and gasoline sort of won the day. So, ethanol in cars has been a concept for some time now, about 100 years or so. But ethanol started to take off again in the 70s. Some of the oil price crunches then created a big push to look for cheaper alternative fuels, and renewable fuels. That started some of the research work, and in the late 70s it started to take off in the U.S. and some other countries. It’s grown in fits and starts for 30 years, but in the last 10 years it has really started to gain some momentum for a variety of reasons.

CG: Why has interest in ethanol taken off in the last decade?
BB: Different countries have different reasons. For example, in the United States, security is a big issue today. Finding a home-grown fuel and home-grown energy source has been a big drive in the United States and has resulted in the U.S. administration putting millions of dollars into renewable fuels, with a huge pay back.

CG: Compared with ethanol, is biodiesel a newer idea?
BB: It is newer, but biodiesel has again been around for decades, particularly in Europe where fuel prices are quite high and renewable fuels can compete with hydrocarbons (diesel and gasoline). It is quite common in some countries, like Germany and France, where you can actually get biodiesel blends at the pump now.

CG: What are the specific environmental advantages of these fuels?
BB: They range, but when it comes to the environmental issue of the day with Kyoto it’s greenhouse gases. Both of them reduce greenhouse gases. Ethanol, for example, will reduce greenhouse gases by 50% compared to gasoline. They also significantly reduce things like particulates, which are not greenhouse gases but have an impact on things like urban smog. They also reduce other contaminants, things like organic compounds and carbon monoxide, which is a precursor to smog. In the case of ethanol, it reduces them by being high in oxygen content (35% oxygen). When you add this fuel to gasoline, it oxygenates the gas and therefore the gasoline blend burns more efficiently. And when it burns more efficiently, it reduces emissions.

CG: Are there also direct benefits to the environment from having fields of the crop plants from which the fuels are derived?
BB: Absolutely. The notion is that the carbon released into the atmosphere by burning an ethanol blend is sequestered in the plants that brought you that fuel in the first place. So if you look at it on a carbon cycle and life cycle basis, it is renewable. It’s a complete cycle.

CG: Are there also beneficial byproducts?
BB: Yes. Not so much in biodiesel, although there is a bit of a byproduct in glycerin, which has a market in cosmetics and soaps, so it has a value. But when you make ethanol, you’re really making three things. You take the grain and make a mash, etc., and you distill it and you make ethanol. But there is also the spent grain leftover that is a really beautiful feed for cattle and for hogs, and it is high in protein. That stuff today is about $160 a tonne. The other product you’re making is carbon dioxide, which is one of the gases given off in the fermenting process. That gas is trapped and sold to the beverage industry, so it’s in your Coke and Pepsi.

CG: Are these fuels currently only available as blends with gasoline?
BB: In Canada and the U.S., yes. They range in blends from 10% to 85%. However, there are countries that have more. In Brazil, for example, the latest figure I heard was that one in four cars there runs on 100% ethanol. So, there’s a huge, huge industry there.

CG: Besides environmental benefits, what are the economic perks?
BB: From an economic point of view, one study jumps to mind by Prof. Michael Evans from the Kellogg School of Management at Northwestern University a few years ago. He did some extensive economic analysis on the impact the ethanol industry is having on the U.S. and specifically looked at what they are getting for their money, because a lot of tax exemptions support the ethanol industry. And he concluded that for every dollar the U.S. government puts into the ethanol industry, the economy benefits by $5.50. And there are a variety of reasons for that, but you are basically creating an industry from scratch. One that wouldn’t be there in the absence of some kind of tax measure. And so, the impact of an ethanol plant on a rural community is huge. Seventy-five to 80% of all revenue from the ethanol plant stays within the region. Because of that, it works and acts like an economic development engine. These plants, which cost on the order of $100 million, are not built in cities or urban areas; they’re built in rural parts of the countries. And there are a lot of economic spin-offs.

CG: What are the social benefits?
BB: On the social side, there are a lot of studies that suggest our dirty air is having a huge impact on health costs, especially in an area like southern Ontario. The lineups in emergency wards for respiratory issues on smog days are not a myth. If you can reduce the smog and particulate matter in the air and the contaminants that we breathe, it will obviously have an effect on social costs in terms of health care. That’s just one area. But there are these huge issues that we deal with as provinces in terms of health-care budgets, but it’s often overlooked that we are causing part of the problem in the air we breathe. There is definitely something we can do about it, and ethanol is part of that solution. It’s not the panacea, but it’s part of it.

CG: Are there any success stories of these fuel plants in Canada?
BB: The best example is Chatham, Ont. It has Canada’s largest ethanol plant. The company has invested more than $100 million in that community. It continues to spend about $50 million a year in the community on salaries, on taxes, on services, on infrastructure and that sort of thing.

CG: What are some of the disadvantages of these fuels?
BB: The biggest disadvantage for renewable fuels is the cost, without question. It’s been both our biggest disadvantage and our biggest obstacle for penetrating the market place. Because historically, ethanol and biodiesel have been far more expensive to produce than is wholesale gasoline or diesel fuel. We cannot compete with them head-to-head without some kind of tax exemption for renewable fuel. That being said, about 20 years ago it probably cost about $1.50 a litre to make ethanol. Now it’s in the neighbourhood of 42 cents to make a litre of ethanol. We are about a decade away from being able to compete with gasoline and diesel, because of the efficiencies and new technology, etc. We’re getting close.

CG: How long have the fuels been commercially available?
BB: In Canada, ethanol has been available as a fuel since the early 1990s, but biodiesel is not yet available at the retail level. You can’t go to a pump and fuel up on biodiesel yet. But it is coming.

CG: Where is ethanol available?
BB: It is available just about coast to coast. There are a lot of independents who sell it. Independents in Ontario that have ethanol in their fuel include MacEwen’s, UPI Fuels, Mr. Gas and Pioneer Gas. In Ontario, Sunoco stations also have ethanol. The Husky stations in Western Canada have ethanol. And beginning in 2004 or 2005, Petro-Canada will begin selling ethanol blends in Quebec.

CG: Are there particular geographic areas where these fuels have really taken off?
BB: Not so much in Canada, because it’s thinly spread out. But in the U.S., it’s taken off in the Midwest and certain cities like Chicago and Denver. But it’s taken off because of regulation, not because of demand. In the U.S. the Clean Air Act, which was introduced in 1990, essentially said that gasolines in certain zones where they have problems with smog had to have certain percentages of oxygen in their gasoline. There are only a couple of ways in which to oxygenate your gasoline. One is to add ethanol, and the other is to add a chemical called MPBE. MPBE, which is a derivative of natural gas, is now banned in 16 states, and will be banned coast to coast in the U.S. by 2005, I believe, because it is contaminating ground water. So, the oxygen requirement for gasoline is still there, and the only other option now is ethanol, so the ethanol industry is booming. They’re building one new ethanol plant a month in the U.S.

CG: Does it take government involvement to get renewable fuels off the ground?
BB: It takes two things. One is it takes a level of tax exemption for ethanol to make it competitive price-wise with gasoline. And secondly, it helps to have some kind of regulatory measure to make renewable fuels content in gasoline mandatory. In electricity in California, for example, 5% of all the electricity generated in California has to be green. And in the U.S., they will soon have a mandate that will say a certain percentage of all fuel in the United States has to be renewable by 2010. Europe passed a similar directive in December of last year that said 5.7% of all fuel in Europe will have to be renewable by 2010. Very aggressive legislation. Canada is struggling with the concept of regulating renewable fuels.

CG: What is the Canadian government doing to promote these fuels?
BB: Well, most jurisdictions in North America, including provinces and states, have some type of tax measure for ethanol. For example, in Canada the federal government exempts natural gas, propane and ethanol from the federal gasoline tax. Ten cents is the federal excise tax on gasoline. But when people wanted to start blending ethanol with gasoline, it was being taxed as a gasoline. So, through some lobbying efforts, we got the federal government to agree that we shouldn’t put a gasoline tax on ethanol. Other groups have also gotten propane and compressed natural gas exempt from the gasoline tax. That 10 cents gives ethanol and other alternative fuels an advantage over gasoline, and at the end of the day helps make them more competitive. Without the exemptions, nothing would happen today. Most provinces also provide an exemption from the provincial gasoline taxes, as well. But in terms of incentives, since the 1970s the oil industry has also received $40 billion in subsidies from the government. And the reason that I raise this is that it’s always been a knock against ethanol and biodiesel from the oil industry that we’re subsidized. The government is exempting alternative fuels from taxation but they are not receiving other type of incentives. We hope we will some day.

CG: Do you think the Chrétien government’s commitment to Kyoto will affect alternative fuel development?
BB: It has already to the extent that it has raised awareness of ethanol and biodiesel. They are both part of the federal government’s Kyoto plan, and it has set new production targets of renewables in Canada. They’ve also outlined in the last budget that ethanol is one of the priorities for consideration of incentives to build the industry. They haven’t done it yet, but it was highlighted.

CG: Can the alternative fuels be used in any vehicle?
BB: Yes, up to a 10% blend, or E10. That’s the level at which auto manufacturers will warrantee their vehicles for the use of ethanol. That’s what the blend is at the gas stations that sell it anyway. When you get to blends above that, the ethanol tends to have a corrosive effect on certain rubbers and gaskets and hoses and things like that. Now that being said, they do make what are called "flex-fuel" vehicles, and there are a few million of them on the road in the United States today. They can use any grade of gasoline, but can also use what’s called E85, which is a blend of 85% ethanol and 15% gasoline. And those pumps are starting to pop up in the Midwest. And so if you have one of these flex fuel vehicles, you can use this fuel. But any kind of vehicle can use E10.

CG: Are there actually benefits to your car in using alternative fuel blends?
BB: Absolutely. One benefit is that it acts as a detergent. Ethanol will clean out your engine. One of the complaints you hear about ethanol is that it will clog your fuel filter. Well, the only reason it clogs your fuel filter when you start to use ethanol is because it is cleaning out your engine. So if you have an older vehicle with a dirty engine, you will have to clean out your fuel filter.
Biodiesel has an interesting property in that it has a high lubricity. So it actually has a lubricating property. And one of the reasons it’s becoming popular is that with the desulphurization of fuel, when you take out the sulphur you’re losing some of that lubricity. You can add back all of that lubricity by adding 2% biodiesel to your fuel. It can extend the life of your engine because of that value.

CG: What are some of the challenges of making these fuels more widely available and accepted?
BB: Again we go back to cost. Trying to find the right level of incentives in Canada that will make renewables competitive with gasoline and diesel fuels. That’s still critical. We’re not building plants in Canada because we don’t have the level of incentives to make it competitive today. The other big obstacle is convincing the oil industry that it is worth their while and in their best interests to use these fuels, because we only have five major companies, and if we can’t convince them to use ethanol, we won’t get it into fuels. It’s as simple as that.

CG: What do you hope happens in the future for these fuels?
BB: In the longer term, I expect that we will be able to go to a gas station and have a choice. A real choice. Not between a regular unleaded and a premium gasoline, but a choice between ethanol blended gasoline, whether it’s 10% or 85%, a choice between regular diesel and a blend of 5% biodiesel or a choice between some other type of ethanol diesel mixture. There will be green fuels and there will be non-green fuels, and my hope is that they will be priced accordingly. What I mean by that is that I hope the non-green fuels will be more expensive than the green fuels. We’re fighting decades of perception here, but if we do realize the true costs of things, then there’s no question that green fuels are cheaper.

Check out these links to learn more:
Canadian Renewable Fuels Association
ecoAction — Using less, living better
Natural Resources Canada’s site for Alternative Transportation Fuels

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