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Cablegate: Canada Announces Programs to Promote Production,

VZCZCXRO2785
RR RUEHGA RUEHHA RUEHQU RUEHVC
DE RUEHOT #3639/01 3561610
ZNR UUUUU ZZH
R 221610Z DEC 06
FM AMEMBASSY OTTAWA
TO RUEHC/SECSTATE WASHDC 4672
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RHEHAAA/WHITE HOUSE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEAEPA/EPA WASHDC

UNCLAS SECTION 01 OF 02 OTTAWA 003639

SIPDIS

SIPDIS

DEPARTMENT FOR WHA, EB AND OES
DOE FOR POLICY AND INTERNATIONAL
WHITE HOUSE FOR CEQ
EPA FOR OFFICE OF THE ADMINISTRATOR AND INTERNATIONAL
AFFAIRS
USDA FOR FAS/OAMYOST; FAS/OGA/JNUTTALL/PJARRELL;
FAS/OCRA/CALEXANDER/MCHESLEY/BZANIN/PSIMMONS

E.O. 12958: N/A
TAGS: ENRG EAGR SENV CA
SUBJECT: CANADA ANNOUNCES PROGRAMS TO PROMOTE PRODUCTION,
USE OF BIOFUELS

REF: OTTAWA 3561 AND PREVIOUS

1. Environment Minister Rona Ambrose and Agriculture
Minister Chuck Strahl announced in Saskatoon on December 20 a
C$345 million program to promote the use of renewable fuels
in Canada. They billed the program as the next element of
the Conservative government's environmental agenda, but this
time with a tie-in to agriculture. The program overall will
mandate renewables content in gasoline (5 percent by 2010)
and diesel and heating oil (2 percent by 2012). On the
production side, the program will fund efforts to bolster the
development of biofuels and other bioproducts, and to create
new market opportunities for Canada's agricultural producers
under the Agricultural Bioproducts Innovation Program and the
Capital Formation Assistance Program for Renewable Fuels
Production.

Benefiting the Environment - and More
-------------------------------------
2. Ambrose, of course, pitched the effort as environmentally
friendly, claiming "(o)ur government understands Canadians'
concerns around the quality of the air we breathe," and
fulfilling the Harper government's commitment to meaningful
action. Strahl, on the other hand, stressed the support the
programs would provide for Canada's "bio-based economy" in
creating additional opportunities in the agricultural sector.
Ambrose described the program as a win-win solution for
Canada, with the citizenry overall reaping environmental
benefits, farmers and rural communities profiting from
greater demand for their products, and industry gaining
support to develop a viable domestic biofuels industry and
cementing Canada's place in the growing "bio-economy."

3. Reactions to the announcement were mixed. The biofuels
lobby predictably applauded it. "This is the best type of
Christmas announcement," the Canadian Renewable Fuels
Association gushed. On the other side of the debate, the
David Suzuki Foundation has been critical of the Tory
renewable fuels strategy from the start, claiming "the amount
of greenhouse gas emissions that will be cut by boosting
ethanol production is virtually insignificant." Commentary
in the press, noting the huge increase in ethanol production
that will be required, suggested the measures will bring more
benefit to farmers and producers (and investors) than to the
environment.

Just the Facts
--------------
4. As to specifics of mandating renewables content in fuel,
the government intends to use the authority it already has
under the Canadian Environmental Protection Act (1999) and
the revisions to CEPA proposed in the Clean Air Act. The
government calculates the 5 percent requirement for gasoline
will amount to about 2.1 billion liters of renewable fuel per
year in 2010. The 2 percent mandate for diesel fuel and
heating oil will require another 600 million liters in 2012.
The government admits these regulations will be complex and
take around two years to develop. They will also require
extensive consultation with provinces, territories, affected
sectors and other stakeholders. The government plans to
begin discussions, consultations and studies early next year.

5. The Capital Formation Assistance Program for Renewable
Fuels Production will receive $200 million over four years to
QFuels Production will receive $200 million over four years to
provide incentives (repayable, and capped at the lesser of 25
percent of costs or $25 million per project) to encourage
agricultural producer participation in new renewable fuels
production capacity. The Agricultural Bioproducts (i.e., not
just biofuels) Innovation Program ($145 million over five
years) will support cross-sector research networks conducting
scientific R&D and commercialization related to the
advancement of a Canadian bio-based economy with grants of up
to $25 million per network.

6. According to the government, Canada's transport sector
accounts for more than 27 percent of greenhouse gas
emissions. It calculates that the new regulations will
require enough renewable fuel to reduce emissions by about 4
million tons per year, the GHG equivalent of taking almost
one million vehicles from the road. By way of comparison,

OTTAWA 00003639 002 OF 002


Canada's total GHG emissions in 2004 came to 785 million tons
(according to OECD data), meaning the transport sector would
have contributed just under 200 million tons. In 2004, (the
latest available data) total ethanol production and
consumption in Canada amounted to approximately 250 million
liters ) just 0.7 percent of the country's total gasoline
consumption - according a Canadian Renewable Fuels
Association analysis. Limited industrial biodiesel
production in Canada began in late 2005.

Building Out the Overall Environment Strategy
---------------------------------------------
7. The Ambrose/Strahl announcement billed these programs as
just the latest element of the Conservative's overall plan on
the environment, and they certainly should act to reduce
Canada's greenhouse gas emissions. Government officials had
told Embassy as far back as late summer that the overall
environmental plan would be rolled out in tranches, beginning
with the Clean Air Act tabled in Parliament in late October
(reftels). In addition to the Clean Air Act, the government
also announced stricter regulation of harmful chemicals as
part of its new Chemicals Management Plan on December 8.

Visit Canada's Classified Web Site at
http://www.state.sgov.gov/p/wha/ottawa

DICKSON

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