# Clean Fuel Standard: proposed regulatory approach

## Part I : Context

### 1. Context

The Government of Canada is developing a Clean Fuel Standard to reduce the lifecycle carbon intensityFootnote 1  of fuels and energy used in Canada. The objective of the Clean Fuel Standard is to achieve 30 million tonnes of annual reductions in greenhouse gas emissions by 2030, making it an important contribution to the achievement of Canada’s target of reducing national emissions by 30% below 2005 levels by 2030. In meeting its greenhouse gas reduction goal, the Clean Fuel Standard will aim to stimulate investments and innovation in low-carbon-intensity fuels while enabling low-cost compliance.

The Clean Fuel Standard regulations will cover all fossil fuels used in Canada, but will set separate requirements for liquid, gaseous and solid fossil fuels. It is being developed in a phased approach (fuel types will be referred to as classes). The regulations for the liquid fossil fuel class are being developed first, with draft regulations planned for publication in the Canada Gazette, Part I by early 2020 and final regulations by early 2021. Draft regulations for the gaseous and solid fuel classes are targeted for publication in the Canada Gazette, Part I, in mid-2021, with final regulations in 2022. The government intends to bring liquid class regulations into force in 2022 and the gaseous and solid classes in 2023.

#### 1.1 Document on Proposed Regulatory Approach

This document presents the full regulatory approach for the liquid fossil fuel regulations of the Clean Fuel Standard, developed with extensive engagement and consultations with stakeholders. It builds upon the Regulatory Design Paper published in December 2018Footnote 2  as well as the Clean Fuel Standard Regulatory Framework published in December 2017Footnote 3 .

This document provides the full set of requirements and credit creation opportunities that will be included in the liquid class regulations. While most elements of this document represent further elaboration of the regulatory requirements presented in December 2018, some key elements are new.

Those new elements include:

• Annual carbon intensity reduction requirements for the liquid fuel class: Carbon intensity reduction requirements for liquid fuels will start in 2022, requiring a 3.6 g CO2e/MJ reduction for all liquid fossil fuels, increasing by 0.8 g CO2e/MJ annually to achieve a 10 CO2e/MJ carbon intensity reduction requirement in 2030.
• Land-use change: The regulations will account for land-use change in two ways:
• the Fuel Lifecycle Modelling Tool will account for greenhouse gases associated with direct land-use change;
• the regulations will identify sustainability criteria for feedstocks that address certain land-use changes – including indirect land-use change – and land management practices. Only feedstocks adhering to these criteria will be eligible for credit creation under the Clean Fuel Standard.
• New credit creation opportunities:
• no credit creation threshold (previously proposed a threshold of 10 kt CO2e) for emission reduction projects;
• carbon capture and use and carbon capture and storage at industrial facilities in addition to oil and gas facilities;
• the production of biogas, including using biogas on-site; and
• the production and on-site use of biofuels at industrial facilities
• Fund Compliance Mechanism: A regulated party (referred to as a “primary supplier”) will be able to meet up to 10% of its annual compliance requirement by making a payment at a set price into a list of approved funds.
• Credit Clearance Mechanism: Primary suppliers will have to buy credits at a price that cannot exceed the set price under the Credit Clearance Mechanism to clear a credit shortfall before carrying forward a deficit (of up to 10% of their annual compliance requirement) into a subsequent compliance period.
• Verification, reporting, measurements and records requirements will be set out in the Clean Fuel Standard to ensure consistent quality and robustness of data and information, and to ensure that credits are valid.

The Proposed Regulatory Approach does not further any design elements for gaseous and solid fossil fuels beyond the December 2018 Regulatory Design Paper, other than adding some early credit creation opportunities for reducing the carbon intensity of gaseous and solid fossil fuels. Design elements for the gaseous and solid fuel classes that were published in the Regulatory Design Paper are reproduced in Annex II.

#### 1.2 Complementing carbon pollution pricing

The Clean Fuel Standard is one of the complementary policies under Canada’s climate plan, which will work in concert with carbon pollution pricing to reduce emissions across the economy. These complementary policies will help make carbon pollution pricing more effective and create incentives for innovation and clean growth. Investments in clean technology and innovation help accelerate development of the next generation of technologies and ideas that will further lower emissions in the future.

The Clean Fuel Standard and carbon pollution pricing also send mutually reinforcing price signals. For example, actions by a fossil fuel supplier (such as a refinery) to reduce its emissions by installing more energy efficient technology will reduce its exposure to carbon pollution pricing: it will either pay less or will be able to earn credits that it can sell to others covered by the pricing system. It will also create credits that can be used or sold for compliance under the Clean Fuel Standard.

## Part II: Proposed regulatory approach

### 2. Application and exemptions

#### 2.1 Parties regulated under the Clean Fuel Standard: “primary suppliers”

The Clean Fuel Standard regulations will require those who produce and import liquid fossil fuels in Canada to reduce the carbon intensity of the liquid fossil fuels they produce and import annually. These parties will be referred to as “primary suppliers”.

Primary suppliers who produce or import less than 400 m3 of liquid fossil fuel will not be subject to the regulations.

#### 2.2 Liquid fossil fuel subject to the annual reduction requirements

##### Liquid fossil fuel types

Liquid fossil fuels that will be subject to the annual carbon intensity reduction requirements include gasoline, diesel, kerosene and light and heavy fuel oils. Non-fossil fuels will not have a carbon intensity reduction requirement.

##### Self-produced and used fuels

Fossil fuels are sometimes produced and used on-site by fossil fuel producers in the process to produce a finished fuel or in their facility operations. This fuel is referred to as “self-produced and used fuel”. In most cases, the Clean Fuel Standard will not set separate carbon intensity reduction requirement for these fuels, as their carbon intensity will be accounted in the lifecycle carbon intensity of the finished fuels that are produced with them.

As such, self-produced and used fuels for stationary uses will not have separate carbon intensity reduction requirements. However, all self-produced and used transportation fuels produced at refineries and upgraders (diesel fuel and gasoline) will be subject to the reduction requirements for gasoline and diesel under the Clean Fuel Standard.

##### Exemptions

The Clean Fuel Standard will not apply to liquid fossil fuels for the following uses:

1. non-combustion purposes (e.g. solvents or diluents);
2. feedstocks that are used for non-combustion purposes in industrial processes (e.g. steel production); and
3. for scientific research.

Liquid fossil fuels that are: in transit through Canada; imported in a fuel tank that supplies the engine of a conveyance that is used for transportation by water, land or air (e.g. the fuel tank of a car); or exported from Canada, are not subject to the regulations.

The following exemptions will be included in the Clean Fuel Standard:

• Remote communities: The expected impact on households in remote communities would be disproportionally high given the already high cost of energy in these communities, and given limited energy infrastructure and supply constraintsFootnote 4 .
• Liquid fuels for international marine use: The International Maritime Organization adopted an interim strategy for greenhouse gas emissions in 2018, which will be reviewed in 2023. The Government of Canada supports the International Maritime Organization as the appropriate forum to address international maritime shipping emissions, and the work it has undertaken to address these emissions. Therefore, liquid fuels for international marine use will not be subject to the Clean Fuel Standard.
• Liquid fuels for international aviation use: The International Civil Aviation Organization’s Carbon Offsetting and Reduction Scheme for International Aviation is mitigating greenhouse gas emissions from international aviation. The Government of Canada supports the International Civil Aviation Organization as the appropriate forum to address international aviation emissions, and the work it has undertaken to address these emissions. Therefore, jet fuel that is used for international flights will not be subject to the Clean Fuel Standard. The treatment of domestic aviation fuels and credit creation for low-carbon-intensity aviation fuels is still under consideration, and is being examined in conjunction with carbon pollution pricing policies.
• Aviation gasoline: Aviation gasoline is gasoline that is used in smaller, piston engine aircrafts (e.g. Cessna). This is different than the fuel used in large commercial airliners, known as jet fuel, which is similar to a diesel and kerosene. Aviation gasoline will not be subject to the Clean Fuel Standard. The volumes of aviation gasoline used and its contribution to Canada’s greenhouse gas emissions are small, and aviation gasoline certification bodies have not yet focused on suitable low-carbon-intensity gasolines for aviation use. They remain focused on finding unleaded aviation gasoline alternatives.

### 3. Lifecycle carbon intensity

The Clean Fuel Standard sets performance standards for liquid fossil fuels based on their lifecycle carbon intensity. The lifecycle carbon intensity is a measure of the greenhouse gas emissions released throughout the full lifecycle of a fuel, from oil extraction to combustion, and is expressed in grams of carbon dioxide equivalents (g CO2e) per unit of energy in megajoules (MJ). Low-carbon-intensity fuels and alternative energy sources that are used to reduce the carbon intensity of fossil fuels will also be assessed on a lifecycle carbon intensity basis. More information is provided in section 4, Carbon intensity reduction requirements and section 5.2 Production of low-carbon-intensity fuels.

#### 3.1 Fuel Lifecycle Assessment Modelling Tool

Environment and Climate Change Canada is developing a new Fuel Lifecycle Assessment Modelling Tool to support the Clean Fuel StandardFootnote 5 . The objective of the Fuel Lifecycle Assessment Modelling Tool is to provide a robust, user friendly and transparent modelling tool to calculate carbon intensities of fuels used in Canada. The tool will be used under the Clean Fuel Standard to set baseline lifecycle carbon-intensity values for refined petroleum produced fuels used in Canada, and to quantify the lifecycle carbon intensity of low-carbon-intensity fuels used in Canada.

Environment and Climate Change Canada will make the modelling tool available publically at no cost. For example, a person who desires to create credits for the supply of low-carbon-intensity fuels or for specific end-use fuel switching in transportation will be able to use the modelling tool, as detailed in Section 5.2 and 5.3.

The development of the Fuel Lifecycle Assessment Modelling Tool is being supported by a Technical Advisory Committee, led by Environment and Climate Change Canada with representatives from Agriculture and Agri-Food Canada, Natural Resources Canada, and the National Research Council Canada. Periodic updates to the background data sets in the model are expected.

### 4. Carbon intensity reduction and minimum low-carbon-intensity fuel content requirements

#### 4.1 Fossil fuel baseline lifecycle carbon intensity values

All fossil fuels of the same type produced and imported in Canada will be assigned the same carbon intensity baseline that is a Canadian average lifecycle carbon intensity value, calculated from the Fuel Lifecycle Assessment Modelling Tool, based on 2016 data. These values, presented in Table 1, will be used to set the annual carbon-intensity reduction requirements that primary suppliers will have to meet for the fuels they supply to Canada.

The Clean Fuel Standard will not differentiate among crude oil types, or on whether the crude oil is produced in or imported into Canada. The calculation of the Canadian average lifecycle carbon intensities for refined petroleum products in Table 1 accounted for the suite of different crude types used in Canada. The fossil fuels baseline values do not account for land-use change. A presentation and a report are available upon request for more details on the methodology used to calculate these baseline values.

The national average carbon-intensity value of the crude oils used in Canada will be monitored through reporting requirements under the Clean Fuel Standard, outlined in Section 10. The Clean Fuel Standard’s five-year review will consider the carbon intensity trend in the crude oil mix used in Canada and will provide an opportunity for Environment and Climate Change Canada to mitigate increases in carbon intensity of the crude mix, if warranted. Such action could include, for example, making adjustments to the reduction requirement of primary suppliers to account for changes in the carbon intensity of the crude mix, similar to what is done under California’s Low Carbon Fuel Standard program.

The baseline Canadian average fossil fuel carbon intensity values will be set out in the regulations and will not be updated prior to full implementation in 2030. This will provide certainty to investors and primary suppliers planning for compliance.

Table 1: Canadian Average Baseline Carbon Intensity Values for Liquid Fossil Fuels
Fuel Carbon intensity
(g CO2e/MJ)
Gasoline 92
Diesel 100
Kerosene 88
Light Fuel Oil 84
Heavy Fuel Oil 99
Jet Fuel 86

#### 4.2 Annual reduction requirement and carbon intensity limits

The Clean Fuel Standard will set a carbon intensity limit for each fossil fuel type for each annual compliance period (from January 1 to December 31). The limit will be determined according to an annual carbon intensity reduction requirement set from the baseline Canadian average lifecycle carbon intensity values (Table 1). Carbon intensity reduction requirements and limits will be expressed in grams of carbon dioxide equivalents (g CO2e) per megajoule (MJ). Non-fossil fuels will not have carbon intensity reduction requirements.

The carbon intensity limits for liquid fossil fuel will start in 2022 and will become more stringent over time, capping at a carbon intensity reduction requirement of 10 g of CO2e per MJ in 2030. This 2030 carbon-intensity reduction requirement represents a decrease of 10% to 12% in carbon intensity below 2016, depending on the fuel type, which is equivalent to up to 23 Mt of incremental emission reductions in 2030. Reduction requirements for the years after 2030 will be held constant at 10 g of CO2e per MJ, subject to a review of the regulations and future amendments.

A carbon intensity reduction requirement of 3.6 g of CO2e per MJ in 2022 is being set. It is an achievable requirement, as it takes into account the following business-as-usual actions that will be allowed to create credits:

• As of the final publication of the regulations in Canada Gazette, Part II, participants will have the possibility to create and bank credits for actions that include current federal and provincial renewable fuel mandates and the BC Low Carbon Fuel Standard, and the current supply of electricity to electric vehicles; and
• In 2022, compliance flexibilities will begin, such as the ability to use credits created from the gaseous and solid fuel classes, and the rollover of the compliance unit bank from the Renewable Fuel Regulations.

The carbon intensity reduction requirements from 2022 to 2030 will follow a linear trajectory for all fuels. This linear reduction approach was taken for the following reasons:

• allows for investment lead time;
• incentivizes innovation in the short and the long term;
• steadily reduces the carbon intensity of fossil fuels over time, providing a constant and predictable increase in compliance requirement; and
• avoids oversupply of credits, balancing the full suite of compliance flexibilities such as unlimited banking, cross-class use of credits, Compliance Fund Mechanism, Credit Clearance Mechanism and deficit carry-forward, which help ensure sufficient credits for compliance.

Table 2: Annual carbon-intensity reduction requirements and limits

Annual Carbon Intensity Reduction Requirement (g of CO2e per MJ)
Year 2022 2023 2024 2025 2026 2027 2028 2029 2030 and thereafter
All fuels 3.6 4.4 5.2 6.0 6.8 7.6 8.4 9.2 10.0
Annual Carbon Intensity Limits (Canadian average lifecycle carbon intensity value minus the carbon intensity reduction requirement)
Year 2022 2023 2024 2025 2026 2027 2028 2029 2030 and thereafter
Gasoline 88.4 87.6 86.8 86.0 85.2 84.4 83.6 82.8 82.0
Diesel 96.4 95.6 94.8 94.0 93.2 92.4 91.6 90.8 90.0
Kerosene 84.4 83.6 82.8 82.0 81.2 80.4 79.6 78.8 78.0
Light Fuel Oil 80.4 79.6 78.8 78.0 77.2 76.4 75.6 74.8 74.0
Heavy Fuel Oil 95.4 94.6 93.8 93.0 92.2 91.4 90.6 89.8 89.0

#### 4.3 Compliance with the annual reduction requirements and carbon intensity limits

Primary suppliers will have an annual reduction requirement based on the net amount (expressed in MJ of energy) of each fossil fuel they produce and import for use in Canada (exempted fuels would be deducted from these amounts). The reduction requirement will be represented by tonnes of carbon dioxide equivalent (t CO2e) and will be calculated on a company-wide basis, summing up the reduction requirements per liquid fossil fuel type for each of a company’s production facilities and for their total imports. Annex III presents the methodology for calculating the annual reduction requirement.

For each compliance period, a primary supplier calculates their reduction requirement for each liquid fossil fuel type and must satisfy these requirements with credits that represent CO2e reductions from the activities described in Section 5 (credits are canceled when they are used to satisfy reduction requirements). The regulations will be flexible, and will allow primary suppliers to apply any type of credit to satisfy any fossil fuel type’s reduction requirement, with limitations on credits created from other classes.

#### 4.4 Minimum low-carbon-intensity fuel content requirements

The Clean Fuel Standard will incorporate the minimum renewable fuel content requirements that are in the federal Renewable Fuels Regulations. The Clean Fuel Standard will require a minimum 5% low-carbon-intensity fuel content in gasoline and 2% low-carbon-intensity content in diesel fuel and heating distillate oil. The last compliance period for the Renewable Fuels Regulations will be 2021. The final reporting and true-up period will be in 2022, and the regulations will be repealed in 2023.

Under the Clean Fuel Standard, each primary supplier will be required to demonstrate for each compliance period that, of the total number of Clean Fuel Standard credits it retires for compliance, a minimum (5% of its gasoline pool and 2% of its distillate pool) is from low-carbon-intensity fuels. The information required to demonstrate compliance with this requirement for low-carbon-intensity fuel type and volumes, will be coded into the credit identification numbers and will also be obtained from the information required to be supplied for credits transfers.

### 5. Credit creation activities

The Clean Fuel Standard will provide several options to meet the carbon intensity limits. Credits will be created by primary suppliers and by parties that are not primary suppliers (voluntary credit creators) for actions taken in the following compliance categories:

1. actions throughout the lifecycle of a fossil fuel that reduce its carbon intensity;
2. the supply of low-carbon-intensity fuels; and
3. specific end-use fuel switching in transportation.

#### 5.1 Compliance category 1: Actions throughout the lifecycle of a fossil fuel that reduce its carbon intensity

The Clean Fuel Standard will recognize actions that directly reduce a fossil fuel’s carbon intensity through greenhouse gas emissions reductions projects at any point along the lifecycle of a fossil fuel. Credits can be created as of the publication of final regulations in Canada Gazette, Part II. Emission reductions from a project will not be pro-rated or reduced from credit eligibility for the volumes of crude oil or refined petroleum fuels exported.

Credits created for these projects will be created annually for a minimum period of 5 years, with longer periods set for carbon capture and storage projects and consideration for longer periods for other projects will be considered during the development of each project specific quantification methodology. Any extension of the ability to create credits for a project beyond 5 years would consider the length of the amortization period of the capital investment.

Examples of these emission reductions projects include electrification; switching from a higher carbon intensity fuel to a lower-carbon-intensity fuel; renewable energy integration; and carbon capture and storage. These actions can be taken by primary suppliers or by other oil and gas actors in the fossil fuel lifecycle, with the exception of carbon capture and use and carbon capture and storage, where the action can be taken by industrial facilities in addition to oil and gas facilities.

The regulations will set out criteria against which projects will be assessed for approval to create credits. To be eligible, a project will have to:

• reduce the carbon intensity of a fossil fuel;
• determine its reduction, sequestration or use of CO2e emissions with a quantification methodology that is applicable to the project and provided by Environment and Climate Change Canada; and
• begin to reduce, sequester or use CO2e emissions, as defined in the quantification methodology, on or after July 1, 2017. This may include either a new project or an expansion project.

A person may apply to Environment and Climate Change Canada to have a CO2e emission reduction project recognized for creating credits. The application must be signed by the authorized official of the participant and contain the information set out in Annex IV. Once the application is approved and the project is recognized, Environment and Climate Change Canada will assign a unique alphanumeric identifier to the project. The participant may create a number of compliance credits determined in accordance with the quantification methodology provided by the department. For each compliance period, the proponent will be required to submit the information specified in that quantification methodology. This information will need to be accompanied by a third-party verification report including a verification opinion.

For the liquid class regulations, credits may be created in respect of the liquid, gaseous and solid classes, as of final publication in Canada Gazette, Part II. Gaseous class and solid class credits may be banked and traded or, starting in 2022, used for compliance with the liquid class regulations within the limits set out in section 7.3. A project that reduces greenhouse gas emissions throughout the fuel lifecycle of only one fuel class will create credits in that class type. If a project reduces the carbon intensity of fossil fuels in more than one fuel class (e.g., at refineries that produce liquid, solid and gaseous fuels), the credit creator will be allowed to select which fuel class the credits are created in, which could be a proportion split between the fuel classes. Project applicants will be permitted to change the selection of the fuel class and the proportion split between fuel classes once for a given project, following publication of the gaseous and solid fuel class regulations.

Projects may include an aggregation of emission reductions from multiple sources or facilities owned or operated by the primary supplier or a voluntary credit creator. Projects may also be aggregated by a third party across several companies. Project must yield measurable greenhouse gas emission reductions, but no minimum emission reductions threshold will be set.

To be able to create credits under the Clean Fuel Standard, a project will have to generate emission reductions that are real and incremental to a defined base case (i.e., additional). Additionality will be assessed during the development of the quantification methodology for each project type. The additionality assessment will take into account many factors, including the financial aspect of the project, regulatory considerations (e.g., whether an action is required by other law or regulations), technological and financial barriers, emissions (in the defined base case and projected reductions), and the penetration rate of the technology or practice.

As the following project types are not considered to be additional, they will not be eligible for credit creation under the Clean Fuel Standard:

• projects that are legally required by other federal, provincial, territorial, or municipal laws or regulations that are not carbon pollution pricing-related;
• the use of renewable or low-carbon-intensity fuels on sites if that fuel already created credits under the Clean Fuel Standard;
• the use of renewable hydrogen, produced from renewable natural gas, if that renewable natural gas already created credits under the Clean Fuel Standard;
• changes in the type of crude oil or raw natural gas processed by a facility (e.g., switching from processing a heavy crude oil to a light crude oil or from a sour gas to a sweet gas);
• replacement of pneumatic devices;
• curtailment, that is the intentional operational and/or physical change exclusively for the reduction or cessation of fuel production; or
• maintenance activities.

The Clean Fuel Standard will recognize the following projects as eligible for credit creation, as long as the project is compliant with the criteria set out in the relevant quantification methodology:

• a project that overlaps with the compliance requirements or enables the creation of credits under federal, provincial or territorial carbon pollution pricing systems; and
• a project that meets the criteria for compliance category 1 and that overlaps with BC’s Low Carbon Fuel Standard, such as co-processing biocrudes at a refinery.

In addition, some projects that receive funding under federal, provincial, territorial or municipal mechanisms may be eligible. The incrementality of emission reductions for projects that receive funding will be assessed in the development of quantification methodologies and on a case-by-case basis.

More details about the additionality assessment of projects undertaken by new oil and gas facilities are discussed below.

##### Emission reduction quantification methodologies

The ability of a project to create credits will be governed by a quantification methodology provided by Environment and Climate Change Canada for specific types of projects. The quantification methodology for a type of project will:

• be consistent with ISO Standard 14064-2;
• be based on data that are verifiable for a given period of time;
• be based on emission factors that are from generally recognized scientific sources;
• not yield a result that is considered an overestimate;
• establish the time period after which the carrying out of the project ceases to create compliance credits (no less than 5 years);
• set out data necessary to determine the compliance credits created each year for the project in operation; and
• set out the reporting and verification requirements to create credits annually.

Quantification methodologies will be made available and maintained by Environment and Climate Change Canada outside of the Clean Fuel Standard regulations. New quantification methodologies will be developed by a team of technical experts including Environment and Climate Change Canada representatives and reviewed by a broader consultative committee. There will be a process to develop a new quantification methodology, which will also be specified outside of the Clean Fuel Standard regulations. Parties may propose the development of a quantification methodology to Environment and Climate Change Canada, if an existing methodology does not exist, is not applicable to their project, or is not sufficiently tailored to their project.

Environment and Climate Change Canada has prioritized and is undertaking the development of quantification methodologies for the following project types, and will take into consideration existing emission reduction accounting methodologies or offset protocols in other jurisdictions:

• carbon capture and storage;
• enhanced oil recovery;
• low-carbon intensity electricity integration;
• methane reductions that are additional to regulatory requirements;
• co-generation;
• electrification; and
• co-processing of biocrudes in refineries and upgraders.
##### New oil and gas facilities

The Clean Fuel Standard will provide an incentive for existing oil and gas facilities to reduce the carbon intensity of the fuels they produce, and for new oil and gas facilities to use the most efficient technologies and processes possible. As such, for some technologies and practices, a benchmark above which new facilities could create credits is being considered.

For refineries and upgraders, a benchmark utilizing the complexity weighted barrel metric is being considered. This metric is used by the Federal Output-Based Pricing System and Alberta’s Carbon Competiveness Incentive Program. Refineries and upgraders that perform better than the benchmark would be eligible to create credits for the technologies they deploy.

For other facility types, such as in-situ oil sands facilities or gas processing plants, a suitable benchmark may not be possible across facility types. Project-specific benchmarks for certain technologies are being considered, for example for electrification, co-generation and methane reductions that go beyond regulatory requirements. The additionality of emission reductions for these technology-specific projects – including in the cases where a project receives governmental funding – will be assessed during the development of the quantification methodologies for those projects.

For all facility types, there could be specific cases where a typical new facility would not have implemented an innovative technology or practice, but may be encouraged to do so as a result of credit creation opportunities under the Clean Fuel Standard. In these cases, the quantification methodologies will provide the same credit creation opportunities to new facilities as to existing facilities, without using a benchmark. These cases would be for carbon capture and storage, enhanced oil recovery, low-carbon-intensity electricity integration and co-processing of biocrudes in refineries and upgraders.

#### 5.2 Compliance category 2: Supply of low-carbon-intensity fuels

A key pathway to reducing the lifecycle carbon intensity of fossil fuels is to blend low-carbon-intensity fuels with fossil fuels or use low-carbon-intensity fuels in their neat form. Low-carbon-intensity fuels are fuels, other than the fossil fuels subject to the carbon intensity reduction requirements, which have a carbon intensity that is equal to or less than 90 % of the credit reference carbon intensity value for the fuel.

Credits will be created under the Clean Fuel Standard for low-carbon-intensity fuels produced and imported in Canada. For the liquid class regulations, credits may be created for liquid and gaseous low-carbon-intensity fuels, as of final publication in Canada Gazette, Part II. Gaseous low-carbon-intensity fuel credits may be banked and traded, or starting in 2022, used for compliance with the liquid class regulations within the limits set out in section 7.3.

Eligible fuels in the liquid class may include (but are not limited to): ethanol; renewable diesel; biodiesel; hydro-treated vegetable oil; low-carbon-intensity jet fuel; synthetic fuels; and renewable methanol.

For the liquid class regulations, low-carbon-intensity fuels in the gaseous class are limited to: hydrogen; biogas; renewable natural gas; and renewable propane. This limitation has been set as the Fuel Lifecycle Assessment Modelling Tool will not have the capacity to accommodate all gaseous low-carbon-intensity pathways initially. In that context, gaseous fuels in commercial use now have been prioritized. As the gaseous class regulations are further developed, Environment and Climate Change Canada will consider credit creation for the supply of other low-carbon-intensity gaseous fuel.

Credits for low-carbon-intensity fuels will be created by the producer and importer of those fuels. For low-carbon-intensity fuels that are imported in a blended product (e.g., E10), the credit will be created by the importer of the blended fuel. The right to create credits may be transferred from the default credit creator to a party downstream of the production or importation point. A written agreement between the parties is required.

##### Credit creation

All low-carbon-intensity fuels supplied to the Canadian market, including fuels used to comply with existing federal and provincial renewable fuel mandates and the BC Low Carbon Fuel Standard, will be able to create credits under the Clean Fuel Standard, as long as its carbon intensity is at least 10% lower than the credit reference carbon intensity value. However, the portion of a low-carbon-intensity fuel made of feedstock at risk of indirect land-use change (see later in this section) will not be eligible for credit creation.

Credits for low-carbon-intensity fuels will be created based on the difference between the lifecycle carbon intensity of the low-carbon-intensity fuel and the credit reference carbon intensity value for the fuel. For a fuel that is liquid at standard conditions, the credit reference carbon intensity value is the liquid class credit reference carbon intensity value. For biogas used for heating or in high efficiency equipment that produces electricity, renewable natural gas and hydrogen, the credit reference carbon intensity value is the interim credit reference carbon intensity value for natural gas. For renewable propane, the credit reference carbon intensity value is the interim credit reference carbon intensity value for propane.

For biogas used in low efficiency equipment that produces electricity, Environment and Climate Change Canada is considering credit creation based on the difference between the lifecycle carbon intensity of the electricity produced from biogas and the default carbon intensity that will be representative of the provincial grid mix in which the production of electricity from biogas took place.

The credit reference carbon intensity for liquid class fuels is the average carbon intensity for all liquid fuels supplied in Canada in 2016 (fossil and renewable fuels) minus the carbon intensity reduction requirement for all liquid fuels for a given compliance year. The interim credit reference carbon intensities for natural gas and propane are equivalent to the baseline carbon intensities for natural gas and propane, respectively, minus 0.2 g CO2e/MJ. The interim credit reference carbon intensity for natural gas and propane will be reviewed when the gaseous and solid class regulations will be published. The credit reference carbon intensity values by year are shown in Table 3.

Table 3: Credit reference carbon intensity for the liquid and gaseous classes (g CO2e/MJ)
Class 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Liquid Class Credit Reference 89.9 89.9 89.1 88.3 87.6 86.8 86.0 85.2 84.5 83.7
Interim Credit Reference for Natural Gas 61.8 61.8 61.8 61.8 61.8 61.8 61.8 61.8 61.8 61.8
Interim Credit Reference for Propane 74.8 74.8 74.8 74.8 74.8 74.8 74.8 74.8 74.8 74.8

Annex V provides the calculations for credit creation for low-carbon-intensity fuels as well as for the liquid class credit reference carbon-intensity value.

##### Carbon intensity values of low-carbon-intensity fuels

In order to be able to create credits, a low-carbon-intensity fuel producer/importer will be required to obtain an approved carbon intensity value for the low-carbon-intensity fuels it produces/imports. The regulations will require the use of either the Fuel Lifecycle Assessment Modelling Tool to calculate facility-specific carbon intensity values using facility specific data, or the use of a set of disaggregated default values. The use of the Fuel Lifecycle Assessment Modelling Tool will only be authorized when at least 12 consecutive months of steady-state operating data has been obtained, as described below.

An application for a carbon intensity value must be submitted to Environment and Climate Change Canada for approval, along with supporting data and the corresponding verification or validation report by a third-party verification or validation body. The application will have to contain specific information, listed in Annex V. Additional information will be required when the Fuel Lifecycle Assessment Modelling Tool is used.

Environment and Climate Change Canada will approve the application if the determination of the carbon intensity value is based on:

• data and results that are verifiable;
• results of calculations that are within the prescribed materiality thresholds;
• emission factors, input data, background data sets and a methodology that are appropriate for that determination and are conservative in the sense that they do not result in an under-estimation of the carbon intensity value; and
• a methodology consistent with ISO 14040 and ISO 14044 and with the Methodological Basis for the Fuel Lifecycle Assessment Modelling Tool, for applications using the Modelling Tool (modified or new pathways).

Once the application is approved, Environment and Climate Change Canada will assign a unique alphanumeric identifier for each specific low-carbon-intensity fuel pathway .

The same requirements will apply to imported low-carbon-intensity fuels, whether imported neat or in a blend with petroleum fuel (e.g., E10).

##### Using disaggregated default values to obtain a carbon-intensity value for a low-carbon-intensity fuel

The carbon intensity value for each low-carbon-intensity fuel pathway can be determined by using the disaggregated default values set out in the regulations, according to the calculation provided in Annex V. The carbon intensity value for a given fuel is the sum of each of the disaggregated default values for cultivation and extraction, land-use change, fuel production, transportation and combustion. Disaggregated default values are available for various fuel types, feedstock types and technologies used in the production process. The applicant must select the most appropriate disaggregated default values for their fuel, their feedstock and their process or, if no defined disaggregated default values apply, use the more conservative generic default values. The use of disaggregated default values provides a less burdensome means for obtaining a carbon intensity value; however, the value will be conservative in nature.

New facilities that have less than one year of operating data must use the disaggregated default values as a provisional carbon intensity value until one year of operating data is obtained. A provisional carbon intensity value allows new facilities to create credits while they acquire enough process data to apply for a facility-specific carbon intensity value using the Fuel Lifecycle Assessment Modelling Tool, which they can do after one year of operating data has been obtained. Once a facility-specific value has been obtained, credits may be created for the 12 consecutive months preceding their facility specific application for the difference between the provisional carbon intensity and the approved facility specific carbon intensity.

##### Using the Fuel Lifecycle Assessment Modelling Tool to obtain a carbon intensity value for low-carbon-intensity fuels

The Fuel Lifecycle Assessment Modelling Tool will be used to determine carbon intensity values for low-carbon-intensity fuels that reflect the greenhouse gas emissions associated with different feedstocks and production processes. A facility specific carbon intensity value may be obtained using the Fuel Lifecycle Assessment Modelling Tool, provided at least 12 consecutive months of steady-state operating data has been obtained.

There are 3 options to obtain a carbon intensity value using the Fuel Lifecycle Assessment Modelling Tool, which are used in the order specified below:

1. Existing low-carbon-intensity fuel pathway – Low-carbon-intensity fuel suppliers provide defined input data values (energy, feedstock, volumes, co products etc.) to calculate the carbon intensity for a given defined pathway that is pre-defined in the Fuel Lifecycle Assessment Modelling tool.
2. Modified low-carbon-intensity fuel pathway – Low-carbon-intensity fuel suppliers provide defined data values and process flows or background datasets to calculate the carbon intensity to modify a given pre-defined pathway in the Fuel Lifecycle Assessment Modelling Tool. This option would be used when background data sets need modification or slight modifications are required to the process flows. This would be the scenario used for imported fuels. Supplemental data and a description of any data sets or changes made to the model would be required to be verified.
3. New fuel pathway – Low-carbon-intensity fuel suppliers provide defined data values and process emissions to create a new pathway in the Fuel Lifecycle Assessment Modelling Tool. A new fuel production pathway would be required to be built in the model database to create a carbon intensity value. A comprehensive description of the lifecycle analysis assessment, including data sources, assumptions and allocation approach, would be required to be verified. The new pathway will have to follow 14040 and 14044 standards as well as be consistent with the methodology of the Fuel Lifecycle Assessment Modelling Tool.
##### Validity of carbon intensity values

An approved carbon intensity value will be valid until criteria specified in the regulations requiring a review or update of the value are triggered. Carbon intensity values will also be a part of a credit creator’s annual third-party verification requirements. The input data supporting each fuel’s carbon intensity (e.g., feedstock type, energy requirements) will be required to undergo verification. The approved carbon intensity values will no longer be valid if there are changes noted that increase the carbon intensity of the fuel. Carbon intensity values will also be subject to review by Environment and Climate Change Canada.

##### Minimum threshold requirements

The Clean Fuel Standard will reward continued improvements in the carbon intensity of low-carbon-intensity fuels. If a facility undergoes process changes that reduce the carbon intensity of the low-carbon-intensity fuels it produces, an application may be submitted for an updated carbon intensity value. A minimum threshold of an improvement of 1g CO2e/MJ or 5% difference between the current value and the proposed new value, whichever is greater, will be required in order to submit a request for a new carbon intensity value.

Facilities with an approved carbon intensity value that incorporate process modifications must continue to use the approved carbon intensity value until steady-state operation has occurred for 12 months with the new process modification. Facilities will continue to create credits with existing approved carbon intensity values and once a new carbon intensity value is approved, the facility can create credits for the difference between the old and new approved carbon intensity values, for the 12 months preceding the application for this new carbon intensity value.

##### Land-use change

Direct land-use change happens when a particular parcel of land is converted to grow crops for biofuel production. Indirect land-use change occurs when crops grown for biofuels displace traditional food and animal feed crops, leading to a demand to produce that displaced food crop elsewhere (i.e., land somewhere else is converted to grow the food crop). If new agricultural land expands into areas with high carbon stock such as forests, wetlands and peat land this leads to additional greenhouse gas emissions. If it occurs in a highly biodiverse land, it can lead to lost biodiversity. While it is very difficult to quantify and determine what actions cause indirect land-use change and to separate it from direct land-use change, there is global consensus that it does happen and is an important issue to consider.

Applying best practices developed in other jurisdictions can help mitigate undesired direct and indirect land-use impacts resulting from the increased use of low-carbon-intensity fuels under the Clean Fuel Standard. To do so, the regulations will account for land-use change in two ways:

• the Fuel Lifecycle Assessment Modeling Tool will account for greenhouse gas impacts of direct land-use change in the carbon intensity of low-carbon-intensity fuels;
• the regulations will define sustainability criteria for biofuels and their feedstocks, related to land-use change – including indirect land-use change – and land management practices. The portion of a fuel made from feedstocks associated with land-use changes that do not meet the criteria will not count for credit creation under the Clean Fuel Standard.

The criteria referred to in the second bullet above align with the sustainability criteria in the European Union’s Renewable Energy Directive II of December 21, 2018 and the European Union’s Delegated Regulation on high indirect land-use-change-risk feedstockFootnote 6 . The criteria will vary depending on the type of feedstock (i.e. agricultural or forest biomass), and will apply to both domestically-produced and imported biofuels and feedstocks.

For agricultural feedstock, the criteria include:

• feedstocks at high risk of indirect land-use change: the portion of a biofuel comprised of feedstocks at high risk of indirect land-use change will not count towards credit creation for Clean Fuel Standard;
• high biodiversity or carbon stock land: raw material used in the production of biofuels may not come from land that has the status of high biodiversity land or high carbon stock land on or after January 1, 2008; and
• protected areas: raw material used in the production of a biofuel may not come from land that has the status of protected area on or after January 1, 2008.

For forest feedstock, the criteria include:

• sustainable forest management: forest biomass used to produce biofuels must meet a set of sub-criteria to ensure it is harvested in a country/area where sustainable forest management is practiced; and
• protected areas: raw material used in the production of biofuel may not come from land that has the status of protected area on or after January 1, 2008.

Details on the proposed criteria are provided in Annex VI.

The Clean Fuel Standard will require third-party verification or certification to ensure the criteria along with all the regulatory requirements are met. Work is underway to develop these verification and certification requirements.

#### 5.3 Compliance category 3: Specific end-use fuel switching in transportation

The Clean Fuel Standard will allow some end-use fuel switching to create credits for the liquid class regulations. End-use fuel switching occurs when an end-user of fuel changes or retrofits their combustion devices (e.g. an engine) to be powered by another fuel or energy source. End-use fuel switching does not directly reduce the carbon intensity of the fossil fuel. Instead, it reduces greenhouse gas emissions by displacing the fossil fuel with a fuel or energy carrier with lower-carbon intensity.

In the liquid class, end-use fuel switching in the transportation sector from a higher carbon intensity fossil fuel to the following less carbon intensive fuels will be eligible for credit creation: natural gas and renewable natural gas (including compressed and liquefied), hydrogen (including compressed and liquefied), propane and renewable propane, and non-carbon energy carriers, such as electricity or hydrogen. For fuel switching in transportation end-uses, a baseline and additionality requirement will not be applied. All low-carbon-intensity fuel volumes supplied for transportation would be eligible to create credits.

Credits for early action (i.e. prior to the start of the reduction requirements in 2022) for specific end-use fuel switching in transportation may be created in the liquid class after the publication of the liquid class regulations in Canada Gazette, Part II, which is expected in 2021.

##### End-use fuel switching to non-carbon energy carriers: electricity and hydrogen

Electricity supplied to on-road light-duty and heavy-duty electric vehicles as well as to all off-road vehicles will create credits based on: the energy supplied to the vehicles; the difference between the carbon intensity limit of the fossil fuels being displaced and the carbon intensity of the electricity being used to charge the electric vehicles; and the energy efficiency ratio for the type of vehicles being displaced. Credits for light-duty passenger electric vehicles and heavy-duty electric vehicles will be calculated as a substitute to gasoline and diesel, respectively.

The regulations will also allow credits to be created for hydrogen fuel cell vehicles in a similar manner as electric vehicles, with credit calculations based on: the energy supplied to the vehicles; the difference between the carbon intensity limit of the fossil fuels being displaced and the carbon intensity of the hydrogen being supplied to fuel cell vehicles; and the energy efficiency ratio for the type of vehicles being displaced.

##### Credit creators for electric and hydrogen fuel cell vehicle charging

Public and private electric vehicle charging

The Clean Fuel Standard will allow credits to be created by the following parties for public and private electric vehicle charging:

• electric vehicle charging network operators will create credits for public charging of electric vehicles; and
• site hosts will create credits for private/commercial charging of electric vehicles.

Residential charging

For residential charging, the credit creator needs to be able to measure charging data accurately to ensure that credits are based on actual electricity use. Accurate and verifiable charging information can be obtained from vehicles with telematics capabilities that collect detailed charging data, including the quantity of electricity and the location of the charging taking place; home charging stations connected to a network; new dynamic and precise data measurement solutions; or other smart home technologies that can accurately measure electricity supplied to electric vehicles.

A two-tiered approach for residential charging will provide opportunities for a range of credit creators:

• For homes equipped with charging stations connected to a network or that have other smart technologies that can accurately measure electricity supplied to electric vehicles, the network or smart technology operator will be able to create credits.
• For all other residential charging, original equipment manufacturers will be the default credit creators.

A reinvestment requirement for residential charging credit creators is being considered, in the range of 50% to 100%, as detailed below.

Charging site hosts will be eligible to create credits for the electricity supplied to electric buses if the transit service provider owns or leases the charging stations and is the exclusive user of that equipment. This will include both en route and depot charging, contingent upon the use of dedicated electricity meters or integrated electricity meters within the charging stations for the purposes of reporting only the electricity that has been supplied to these electric vehicles.

Charging site hosts will be eligible to create credits for electricity supplied to electric trains and other rail transport vehicles propelled by an electric motor whose source of electricity is from a third rail, overhead catenary system or a rechargeable battery, with similar requirements for the electricity supplied to be measured by a dedicated meter. Environment and Climate Change Canada is considering setting a baseline for credit creation for electricity supplied to trains and other rail transport vehicles. Subways will not be considered as electric trains for the purposes of credit creation, however, as these are by default powered by electricity.

For hydrogen supplied to fuel cell vehicles, the station site host is the owner or operator of a hydrogen refuelling station and will be the default credit creator, contingent upon the refuelling station having information pertaining to the source of the hydrogen it distributes, such that the carbon intensity of each batch of hydrogen can be determined. The hydrogen refuelling station will be required to report the quantity of hydrogen dispensed in kilograms by vehicle weight category to:

1. light-duty vehicles/medium-duty vehicles (to calculate credits as gasoline replacement);
2. heavy-duty vehicles (to calculate credits as diesel replacement).

The default credit creator can transfer their rights to create credits to other voluntary credit creators or primary suppliers provided no other entity is creating credits for the electricity or hydrogen dispensed through the same charging station or hydrogen fuelling station. Any credit revenue reinvestment requirements applicable to the default credit creator will also be transferred to the secondary entity to whom the credit creation rights were transferred.

The following table summarizes the default credit creator for electric vehicle charging and hydrogen refuelling.

Table 4: Default credit creators
Activity Default credit creator
Electric vehicles – Residential charging (without charging network data or other accurate metering technology) Original equipment manufacturers
Electric vehicles – Residential charging (with charging network data or other accurate metering technology) Charging network operators or smart technology operator
Electric vehicles – Public charging (service provided by site host) Charging site hosts
Electric vehicles – Public charging (service provided by network operator)* Charging network operators
Electric vehicles – Private/commercial non-residential charging for exclusive use (metered only)** Charging site hosts
Fuel cell vehicles – Hydrogen refuelling Station site hosts

*regardless of whether the site is publicly or privately owned.
**e.g., workplace, fleets.

##### Methodology for Credit Calculation

Credits for electricity used in electric vehicles and hydrogen used in fuel cell vehicles will be determined on the basis of the total energy supplied to the electric or hydrogen fuel cell vehicles, the energy efficiency ratio to determine fossil fuel energy displaced, the carbon intensity limit of the fossil fuel being displaced and the carbon intensity of the alternative energy.

The carbon intensity of the electricity will be set out in a document incorporated by reference in the Regulations, which will accompany the Fuel Lifecycle Assessment Modelling Tool. These default values will be updated periodically. The carbon intensity value will be representative of the provincial grid mix in which the electric vehicle charging took place, with options to modify this value if the participant has input data regarding the source and quantity of electrical energy supplied to electric vehicles at the charging station for a period of at least 12 consecutive months.

For hydrogen, the station site host must obtain information from its hydrogen suppliers to determine the mass-weighted average carbon intensity of all hydrogen distributed to fuel cell vehicles during the compliance period. The carbon intensity of hydrogen must be determined either by using disaggregated default values or the Fuel Lifecycle Assessment Modelling Tool provided at least 12 consecutive months of steady-state operating data has been obtained (see section 5.2).

When one year of operating data has been obtained, participants who have been using default carbon-intensity values for electricity or disaggregated default values for hydrogen may apply for a facility-specific carbon-intensity value. Once they have this facility-specific value, they may create credits for the 12 consecutive months preceding their facility-specific application for the difference between the carbon-intensity values obtained from the default or disaggregated default values and their approved facility-specific carbon intensity.

The calculation for determining the number of credits created is described in Annex V.

Energy Efficiency Ratio

The energy efficiency ratio measures the relative efficiency with which a vehicle or engine uses a specific fuel. The higher the energy effectiveness ratio is, the more efficient the use of the fuel or energy, as compared to a reference fuel or energy. Energy efficiency ratios are specific to the vehicle type, the alternative fuel being used and the fossil fuel being displaced.

Energy effectiveness ratios will be used in the calculation to create credits for electric and hydrogen fuel cell vehicles. Table 5 below provides the energy efficiency ratios that will be listed in the regulations. The ratios will be reviewed as part of the Clean Fuel Standard five-year review given that vehicles and their energy efficiency change over time, and other more specific fuel and vehicle applications may be necessary as technology evolves.

Table 5: Energy efficiency ratios by application
Fuel/vehicle application Energy efficiency ratio
Electric vehicles for light- and medium-duty application (replacing gasoline) 4.1
Electric vehicles for on-road heavy-duty applications and off-road vehicles (replacing diesel) 5
Electric trains 3.3
Electric commercial marine vessels 3.1
Hydrogen fuel cell vehicles for light- and medium-duty applications (replacing gasoline) 2
Hydrogen fuel cell vehicles for on-road heavy-duty applications and off-road vehicles (replacing diesel) 1.9
##### Requirement to reinvest electric vehicle credit revenue

The Clean Fuel Standard will require a proportion of credit revenue to be reinvested to further incent the adoption of zero-emission vehicles, as some credits for electric vehicle charging may be created with minimal or no incremental investment in zero-emission vehicles related to the Clean Fuel Standard. The credit revenues will have to be invested into projects, programs, policies or other types of action that:

1. expand the network of electric vehicle charging infrastructure to make travelling long distances with an electric vehicle or owning an electric vehicle for those without access to home charging easier;
2. reduce the cost of electric vehicle ownership though financial incentives to purchase or operate an electric vehicle; or
3. educate or inform consumers of the benefits of electric vehicles, their environmental benefits and lower costs of ownership compared to fossil fuel powered vehicles (e.g., marketing campaigns, outreach programs).

Environment and Climate Change Canada is considering allowing part of the reinvestment requirement to be discharged by transferring revenues to electricity distribution utilities for the purpose of improving or updating the electricity grid (e.g., residential transformers) to accommodate additional electric vehicle charging. Investments in new electricity generation would not count toward the re-investment requirements.

The amount of reinvestment required will depend on the credit creator, and is represented in the following table as a portion of the total revenue obtained by the sale of the credits from each activity. Revenues will be required to be re-invested within one year after the end of the compliance period in which the credits were sold.

Table 6: Credit revenue reinvestment requirements
Default credit creator Fraction of credit revenue that must be reinvested
Charging network operators and original equipment manufacturers 50% – 100%
Site hosts* 0%

* Site hosts – including both charging site hosts and station site hosts – will not be required to reinvest revenue as credit revenue may be used to improve the business case for investing in these vehicles and their associated fuel supply equipment.

##### Other end-use transportation fuel switching

The supply of natural gas and renewable natural gas (including compressed and liquefied), hydrogen (including compressed and liquefied) as well as propane and renewable propane that displaces liquid transportation fuels will create credits. This includes fuel switching in vehicles, both on-road and off-road, and in locomotives and marine vessels.

Credit creators and methodology for credit calculation for other end-use transportation fuel switching

The fuelling facility owner will be the default credit creator for fuelling for transportation purposes for compressed and liquefied natural gas and propane, including the fossil portion of any blend with a renewable fuel component. The credits will be created in the liquid class as this represents a displacement of liquid transportation fuel. Credits for the supply of compressed or liquefied natural gas and propane for transportation uses will be determined based on the volume of fuel supplied, its energy density, its carbon intensity and the liquid class credit reference carbon intensity (CILCR). An illustrative example of this, for liquefied natural gas, is shown in Figure 1. The carbon intensity of compressed or liquefied natural gas (CILNG) and propane will be set out in a document incorporated by reference in the Regulations, which will accompany the Fuel Lifecycle Assessment Modelling Tool. These values will be updated periodically.

Figure 1: Illustration of the credit calculation for the supply of liquefied natural gas for transportation purposes (numbers are illustrative)

Long description

CIRNG (5)

CIL-RNG (16) (16–5 = 11)

CICR for NG (61.8)

CING (62)

CILNG (73) (73–62 = 11)

CILCR (89.9) (89.9–73 = Credits fuelling station owner)

CIDiesel (100)

For low-carbon-intensity fuels that are renewable natural gas, renewable propane, or hydrogen, or for the portion of these fuels in a fossil fuel blend, the default credit creator will be split between the producer/importer of these fuels and the fuelling facility owner who supplies them for transportation uses. This split, shown in Figure 2, will reduce the risk of the fuelling facility owner and the producer/importer being credited for the same carbon intensity improvements.

Figure 2: Illustration of the credit calculation for the supply of liquefied renewable natural gas for transportation purposes (numbers are illustrative)

Long description

Total credits for liquefied RNG used for transportation purposes:

• CIRNG (5)
• CIL-RNG (16)
• CICR for NG (61.8)
• CING (62)
• CILNG (73)
• CILCR (89.9)
• CIDiesel (100)
CIRNG (5) to CIL-RNG (16) = 11

CING (62) to CILNG (73) = 11

CIRNG to CICR for NG = Credits portion producer or importer of RNG liquid credits if transportation use, otherwise gaseous credits

CICR for NG to CING = Credits portion 1: Fuelling station owner

CILNG to CILCR = Credits portion 2: Fuelling station owner

The producer/importer of renewable gas, renewable propane and hydrogen would create gaseous class credits for the volumes produced/imported, or liquid class credits if there is documentation that these fuels were distributed for transportation use. The number of credits will be calculated in both cases based on the volume of fuel supplied, its energy density and the carbon intensity difference between the interim credit reference for natural gas (CICR for NG) or propane and the carbon intensity of the gaseous low-carbon-intensity fuel (CIRNG). The number of credits is the same, but the class of credits is different.

The producer/importer of these gaseous low-carbon-intensity fuels will determine their carbon intensity either by using disaggregated default values or the Fuel Lifecycle Assessment Modelling Tool, provided at least 12 consecutive months of steady-state operating data has been obtained (see section 5.2). After one year of operating data has been obtained, participants who have been using disaggregated default values may apply for a facility-specific carbon intensity value determined by using the Fuel Lifecycle Assessment Modelling Tool. Once they have this facility-specific value, they may create credits for the 12 consecutive months preceding their facility-specific application for the difference between the carbon intensity values obtained from disaggregated default values and their approved facility-specific carbon intensity.

The fuelling facility owner will create liquid class credits for the volumes they supply for transportation uses. There are two portions in the calculation of credits, to account for the compression of the gas for transportation uses, which are added together to calculate the total number of credits. The first portion is the number of credits for the supply of low-carbon-intensity fuels and is calculated based on the volume of fuel supplied, its energy density and the carbon intensity difference between the carbon intensity of natural gas or propane (CING) and the interim credit reference for natural gas or propane (CICR for NG). The second portion is the number of credits for the supply of compressed or liquefied natural gas and propane for transportation uses. The number of credits will be determined based on the volume of fuel supplied, its energy density, and the carbon intensity difference between the liquid class credit reference (CILCR) and the carbon intensity of compressed and liquefied natural gas and propane (CILNG).

The right to create credits may be transferred from the default credit creator to a party downstream of the production or importation point or upstream of the fuelling station. A written agreement between the parties is required.

Environment and Climate Change Canada is not considering the use of energy effectiveness ratios in the calculation to create credits for natural gas and propane vehicles.

The method for determining the number of credits created is provided in Annex V.

Environment and Climate Change Canada will establish and administer a credit trading system under the Clean Fuel Standard to facilitate the acquisition of credits for primary suppliers and create market opportunities for the deployment of low-carbon-intensity fuels.

#### 6.1 Participants

Participants in the credit trading system include primary suppliers and voluntary credit creators. These participants will be able to create, own, transfer and acquire credits.

Other parties will be allowed to participate in the credit trading system if they enter in an agreement with parties that conduct activities eligible for credit creation, for the purpose of acting on behalf of these parties.

A voluntary credit creator will be able to end its participation in the Clean Fuel Standard trading system (i.e., be relieved of reporting requirements) at any time upon satisfying its annual requirements respecting record keeping and reporting requirements and the cancellation of remaining credits owned.

Environment and Climate Change Canada is developing and will maintain an on-line electronic trading platform to enable the Credit Trading System.

##### Credit account

Upon registration, Environment and Climate Change Canada will open a credit account in the Credit Trading System for the participant.

Three types of accounts will be created:

• a liquid fuel class credit account;
• a gaseous fuel class credit account; and
• a solid fuel class credit account.

To ensure the cross-class trading requirements are respected, only transfers between the same types of account will be allowed.

Credit trading transactions will be conducted through the on-line electronic platform.

A participant (the “transferer”) who transfers credits to another participant (the “transferee”) will submit the following information for each trade through the transaction system, and includes a trading authorized official signature:

1. the name, civic address (or GPS coordinates) and mailing address of the transferer;
2. the name, title, civic and postal addresses, telephone number and if any, email address and fax number, of their trading authorized official of the transferer;
3. the name, civic address (or GPS coordinates) and mailing address of the transferee; and
4. the following information with respect to the credits that are to be transferred:
1. the number of those credits;
2. the type of credits to be transferred: liquid, gaseous or solid fuel class;
3. the year in which the credits were created;
4. the total price for the trade, if any, and
5. the type of low-carbon-intensity fuel that was produced or imported into Canada to create the credit, if applicable.

After the transferer submits the information and the transfer request, it is reviewed and accepted by an authorized representative of the transferee. Environment and Climate Change Canada will then transfer the credits from the transferer’s account to the transferee’s account.

#### 6.3 Provisions to support the integrity and liquidity of the trading system

A number of provisions have been developed in order to support the integrity as well as the liquidity of the credit trading system.

To support the integrity of the trading system, the following requirements will apply:

• a unique identification number to be assigned to each credit;
• credit creations, trades and uses to be verified by a third-party annually; and
• invalid credits to be replaced, as detailed in Section 8.3.

To support liquidity in the credit market, the Clean Fuel Standard will include the following provisions, in addition to the flexibility and stability mechanisms described in Section 7:

• credits will not expire;
• there will be no limit to the number of credits that can be transferred among parties; and
• there will be no limit to the number of times a single credit can be transferred.

### 7. Market flexibility and stability mechanisms

Market flexibility and stability mechanisms are designed to work together to give regulated parties access to lower-cost compliance opportunities, provide a price signal for the development and provision of low-carbon-intensity fuel alternatives, and support market stability.

#### 7.1 Renewable Fuel Regulations compliance unit bank roll-over

Under the Renewable Fuels Regulations, primary suppliers are able to own a limited bank of surplus compliance units. In 2022, following the final reporting and true-up period for the Renewable Fuels Regulations, primary suppliers will be able to convert their remaining surplus compliance units into Clean Fuel Standard credits, one time only, prior to December 31st, 2022.

• Gasoline compliance units will be converted to Clean Fuel Standard credits using the following calculation:
• Clean Fuel Standard credits = Number of gasoline compliance units (litres) x energy density of gasoline (MJ/L) x [carbon intensity Liquid Class Credit Reference – carbon intensity ethanol (gCO2e/MJ) ]
• The carbon intensity of ethanol will be a Canadian average representative value of 59 gCO2e/MJ.
• Distillate compliance units will be converted to Clean Fuel Standard credits using the following calculation:
• Clean Fuel Standard credits = number of distillate compliance units (litres) x energy density (MJ/L) x [carbon intensity Liquid Class Credit Reference – carbon intensity hydrogenation-derived renewable diesel / biodiesel (gCO2e/MJ)]
• The carbon intensity of the renewable fuels will be a Canadian average representative value for renewable diesel (hydrogenation-derived renewable diesel and biodiesel) of 35 gCO2e/MJ.

#### 7.2 Banking

The Clean Fuel Standard will allow for unlimited banking of surplus credits.

#### 7.3 Using credits from other classes for liquid class compliance

A primary supplier will be able to use credits from the gaseous or solid fuel classes to satisfy up to 10% of its total liquid reduction requirement, annually.

#### 7.4 Early credit creation

The Clean Fuel Standard will allow credits to be created for all compliance categories, before the January 1, 2022 start of the reduction requirements. After the publication of the liquid class regulations in Canada Gazette, Part II, liquid class credits and some gaseous and solid class credits will be able to be created, as described in section 5. Gaseous and solid class credits may be banked and traded, or used for compliance with the liquid class regulations within the limits set out in section 7.3.

#### 7.5 Credit Clearance Mechanism

The Clean Fuel Standard will establish a Credit Clearance Mechanism. Jurisdictions with programs similar to the Clean Fuel Standard have implemented this type of mechanism to increase certainty regarding compliance cost, enable the sale of credits, strengthen incentives to invest in and produce low-carbon-intensity fuels, and reduce the probability of credit shortfalls.Footnote 7  Participation in the Credit Clearance Mechanism will be mandatory for a primary supplier with a credit shortfall for a given compliance period.

If there are not sufficient credits available in the Credit Clearance Mechanism for all primary suppliers to satisfy their outstanding reduction requirement, each primary supplier will need to acquire a pro-rated amount of the available credits, as detailed below. Once the Credit Clearance Mechanism is depleted of all pledged credits, a primary supplier must contribute into the Compliance Fund Mechanism. Then, it can carry forward its outstanding deficit into a future compliance period, of up to a maximum of 10% of its total reduction requirement for the compliance period that just ended.

##### Functioning of the Credit Clearance Mechanism

If there is at least one primary supplier in a deficit position, Environment and Climate Change Canada will hold a Credit Clearance Mechanism on August 1st for the preceding compliance period. Credits obtained through the Credit Clearance Mechanism must be used to reduce or satisfy the primary supplier’s reduction requirement for the preceding compliance period.

Determining the need to hold a Credit Clearance Mechanism

Primary suppliers must submit a Compliance Report on June 30th, indicating if they have sufficient credits to satisfy their total liquid reduction requirement or a shortage of credits. Environment and Climate Change Canada will establish a Credit Clearance Mechanism if at least one primary supplier reports that it does not have enough credits to satisfy their total liquid reduction requirement.

Pledging credits into the Credit Clearance Mechanism

Trading system participants may pledge an amount of credits they own into the Credit Clearance Mechanism when they submit their annual Credit Balance Report (for non-primary suppliers) or their annual Compliance Report (for primary suppliers) on June 30th. Once a participant has pledged credits, those credits cannot be used or transferred, other than through the Credit Compliance Mechanism, until the end of the market on October 1st.

Before August 1st every year, Environment and Climate Change Canada will notify trading system participants whether a Credit Clearance Mechanism will be held. If a Credit Clearance Mechanism is to be held, Environment and Climate Change Canada will provide information in a notice, including:

1. the total number of credits that have been pledged;
2. the total amount of credits that are required by primary suppliers to satisfy their reduction requirement; and
3. if applicable, the pro-rated amount of credits available to each primary supplier in the market.

Credit transfer transactions

Credit transfer transactions under the Credit Clearance Mechanism will occur between August 1st and September 30th. A primary supplier is limited in the amount of credits it may acquire through Credit Clearance Mechanism to the lesser of:

1. the number of credits they indicated in their Compliance Report that they required in order to satisfy their total liquid reduction requirement for the preceding compliance period; and
2. the pro-rated amount determined by Environment Climate Change Canada, determined by the formula C × RP/RT.

Where:

 C total number of credits pledged under the Credit Clearance Mechanism RP the number of credits that a primary supplier still requires to satisfy their liquid reduction requirement for the preceding compliance period RT the total number of credits required for all primary suppliers to satisfy their total liquid reduction requirement for the preceding compliance period, that has not yet been satisfied
##### Price for credits acquired, purchased or transferred in the Credit Clearance Mechanism

The Clean Fuel Standard regulations will set a maximum price for credits acquired, purchased or transferred in the Credit Clearance Mechanism. In setting the maximum price for trades under the Credit Clearance Mechanism, Environment Climate Change Canada will account for the objectives of: providing market certainty about compliance costs, providing incentives to invest in and produce low-carbon-intensity fuels, and avoiding price spikes.

#### 7.6 Compliance Fund Mechanism

The Clean Fuel Standard will allow primary suppliers to offset up to 10% of their annual liquid class reduction requirement for a compliance period by payment at a fixed price into a fund that invests in, and obtains greenhouse gas emissions reductions, in the short term. This option is an additional optional compliance flexibility intended to ensure a range of options for regulated parties to come into compliance.

Contributions will be made at a price specified in the Clean Fuel Standard. This price may not be the same as the maximum price for credit trades under the Credit Clearance Mechanism. In setting the contribution price, Environment Climate Change Canada will account for the objectives of: providing market certainty about compliance costs, providing incentives to invest in and produce low-carbon-intensity fuels, and avoiding price spikes.

Upon contribution to a fund, a primary supplier will create credits that are non-tradable and non-bankable (i.e. they must be used in the compliance period for which the contribution is made).

Primary suppliers will be able to make a contribution to a fund during the true-up period, until they submit their Compliance Report (June 30). They will also be able to make a contribution in October and November, if required to satisfy their reduction requirement after participating in the Credit Clearance Mechanism, before any deficit is carried forward.

##### Criteria to determine eligible funds

The Clean Fuel Standard regulations will set out the criteria that a fund will have to meet in order to be eligible to receive Clean Fuel Standard contributions. Environment Climate Change Canada will maintain a list of approved funds. A primary supplier will be able to choose the approved fund or funds to which it contributes.

The fund criteria include:

• contributions received are used only to finance projects or activities in Canada that support the demonstration, commercialization or deployment of technologies or processes that reduce greenhouse gas emissions;
• contributions must finance projects that will achieve emission reductions in the short term:
• by 2030 for contributions made up to the end of the 2025 compliance year; or
• within 5 years for contributions after the 2025 compliance year.
• the fund establishes and publishes policies, criteria or procedures for distribution of the monies in the fund, including a policy for avoiding conflicts of interest when making decisions regarding that distribution;
• the fund makes public, annually, a report that provides specified project details (e.g. name of project, recipient, amounts of funding received, location of the project, project milestones and estimated reductions in greenhouse gas anticipated to result from the project and actual reductions in greenhouse gas emissions that result from the project).
• the fund maintains financial and management control systems, information systems and sound management practices; and
• the fund is subject to an annual independent financial audit.

#### 7.7 Deficit carry forward

The Clean Fuel Standard will allow a primary supplier to carry forward up to 10% of its annual liquid reduction requirement into the next compliance period with a 20% annual interest rate. Before a primary supplier can carry forward a deficit into a future compliance period, it must use the Credit Clearance Mechanism to acquire credits. If enough credits are available in the Mechanism to satisfy every primary supplier’s reduction requirements, no deficit may be carried forward. Similarly, a primary supplier also has to use its maximum contribution of 10% into an emission reduction fund before being authorised to carry forward a deficit.

The deficit must be satisfied within two years and no further deficit carry forward may be accrued until the deficit is satisfied.

#### 7.8 Summary of mechanisms

Table 7 presents a summary of the Clean Fuel Standard market flexibility and stability mechanisms and how they can be used for compliance.

Table 7: Summary of market flexibility and stability mechanisms
Mechanism Using the mechanism for compliance
Renewable Fuel Regulations compliance unit bank roll-over
• Primary suppliers who have surplus compliance units under the Renewable Fuels Regulations will be able to convert these units into Clean Fuel Standard credits.
• This conversion can be done one time only, after the final reporting and true-up period in 2022 of the Renewable Fuels Regulations, and prior to December 31st, 2022.
• Once converted to a Clean Fuel Standard credit, the credit can be used the same way as other Clean Fuel Standard credits (e.g., unlimited banking, etc.).
Banking
• Unlimited banking for all surplus credits, with no expiry date on credits.
• Banked credits can be used to meet reduction requirements, without any limit (i.e., for up to 100% of the reduction requirements).
• Gaseous and solid class credits can be used for up to 10% of the reduction requirements in the liquid class.
Early credit creation
• Credits created before 2022 and after publication of the final liquid class regulations can be used for compliance in any compliance period and are fully bankable and tradeable.
Credit Clearance Mechanism
• Must be used by primary suppliers to acquire credits when they have a deficit for the preceding compliance period.
Compliance Fund Mechanism
• Can be used to satisfy a maximum of 10% of the reduction requirements for a given compliance period.
• Upon contribution to a fund, a primary supplier will receive credits that are non-tradable and non-bankable.
Deficit carry forward
• A primary supplier will be authorized to carry forward up to 10% of its reduction requirements only if:
• there were not sufficient credits in the Credit Clearance Mechanism to satisfy its deficit; and
• it has used its maximum contribution to an emission reduction fund (10% of its reduction requirements).

### 8. Primary suppliers using credits to satisfy reduction requirements

#### 8.1 Using credits to meet reduction requirements

At the end of the true-up period, a primary supplier will have to retire a number of credits equal the number required to satisfy its annual liquid reduction requirement plus any deficit carried-forward from previous years, with interests. Only credits created under the Clean Fuel Standard regulations may be used. A primary supplier may use either credits that it created or credits that it acquired from other trading system participants.

The reduction requirements and credit balance of primary suppliers will be maintained separately for each of the three fuel classes. A primary supplier must meet its annual liquid reduction requirement with credits from the liquid class, with the exception of up to 10%, which can be met with credits from other classes, as explained in section 7.

#### 8.2 Cancelling credits for exports of low-carbon-intensity fuel

Any low-carbon-intensity fuel produced/imported for the purposes of export will not be eligible for credit creation. The procedure to address this situation depends on the circumstances.

When a low-carbon-intensity fuel producer/importer produces/imports a low-carbon intensity fuel for the purpose of exporting it, the producer/importer cannot create credits for that fuel.

In other circumstances, a low-carbon-intensity fuel provider may have produced/imported a low-carbon intensity fuel and sold it to a third-party who subsequently exported the fuel. The low-carbon-intensity fuel producer/importer may have created credits for that fuel. In that case, the party that exported the low-carbon-intensity fuel will be responsible for cancelling a number of credits equivalent to those created for the low-carbon-intensity fuel upon its production or import.

In the case where a producer/importer knows that it is selling a fuel to a party that intends to export it, the producer/importer may chose to refrain from creating credits and provide evidence to the buyer that no credits were created. With that evidence, the fuel exporter will not have to cancel credits.

The Clean Fuel Standard will require third-party verification for exported low-carbon intensity fuels to ensure the regulatory requirements, including credit cancellation, are met.

### 9. Verification

The Clean Fuel Standard is a market-based instrument, the success of which is dependent on the trust and confidence in the credit market. A robust program that comprises requirements for validation, certification and verification ensures consistent quality and robustness of data and informationand an assurance that credits are valid, in turn promoting greater liquidity in the credit market.

The Clean Fuel Standard will have requirements for validation, certification or verification for the key elements supporting the reporting of information, creation of credits, carbon intensity values and trading system. These requirements are in line with similar programs, such as the United States Renewable Fuel Standard 2, California’s Low Carbon Fuel Standard and the European Union’s Renewable Energy Directive II.

The following is a summary of the major provisions related to this program:

• Validation of applications for obtaining an approved carbon intensity for low-carbon-intensity fuels where 12 consecutive months of steady-state operating data is not available;
• Verification of data submitted for the purpose of:
• obtaining an approved carbon intensity for low-carbon-intensity fuels or electricity where 12 consecutive months of steady-state operating data is available;
• demonstrating that the low-carbon intensity fuel or the electricity supplied in the compliance period is accurately represented by the approved carbon intensity value (Carbon Intensity Pathway Report);
• credit creation (quarterly and annual Credit Creation Reports are verified annually);
• demonstrating that an original equipment manufacturer or a charging network operator has invested the net credit proceeds according to the requirements to reinvest electric vehicle credit revenues (Net Credit Proceeds Report);
• quantifying base case emissions and reductions resulting from the greenhouse gas emission reduction project in a compliance period;
• quantifying the reduction requirement and demonstrating compliance (Compliance Report / Credit Clearance Mechanism Compliance Report); and
• credit trading transactions (currently under consideration);
• Certification of:
• imported low-carbon-intensity fuels for the purpose of creating credits; and
• imported feedstock used to produce low-carbon-intensity fuels or used in greenhouse gas emission reduction projects for the purpose of creating credits;
• Data quality requirements for the quality of:
• the quantification methodology for CO2e emission reduction projects, using ISO 14064-2: 2019 Greenhouse gases – Part 2; and
• monitoring requirements (including the data management system and controls) for entities that will be required to obtain verification and validation of their reports or applications;
• Qualifications and accreditation requirements for third-party validation bodies, verification bodies and certification bodies;
• Reporting requirements for verification and validation, as well as for certifications; and
• Procedures for the conduct of validation, verification and certification processes.

#### 9.1 Verification and validation procedures

Verification and validation will have to be conducted in accordance with procedures set out in the standard ISO 14064-3: 2019 Greenhouse gases - Part 3: Specification with guidance for the validation and verification of greenhouse gas assertions in addition to specific requirements set out in the Clean Fuel Standard. Some key requirements are summarized below.

• ISO 14064-3: 2019
• requirements for conducting verification of greenhouse gas statements related to greenhouse gas inventories, greenhouse gas projects and carbon footprints of products;
• requirements for validating the assumptions, limitations, and methods that support a statement about the outcome of future activities or projects;
• requirements to perform verification in accordance with the risk-driven approach;
• requirements and guidance for persons performing verification and validation of greenhouse gas data and information; and
• requirements for site visits and situations for which site visits are mandatory.
• Clean Fuel Standard specific requirements
• a reasonable level of assurance to conduct verification;
• the materiality thresholds to be used for validation or verification;
• quantification methods, application processes and reporting requirements that will be included in the verification and validation assessments;
• the submission of a verification or validation report, including the corresponding opinion; and
• certifications for imported feedstock or imported low-carbon-intensity fuels.

#### 9.2 Verification or validation outcome

Environment and Climate Change Canada will require an unmodified or a modified opinion from the verification or validation processes in order to consider that the requirements of the Clean Fuel Standard have been adhered to by the party undergoing verification or validation. This means that the third-party performing the verification or validation processes must come to the conclusion and state that there is a reasonable level of assurance that the submitted data, report or application contains no material errors, omissions or misstatements and that it was prepared in accordance with the regulations.

##### Types of opinion

The opinion issued by the verifier should report the conclusion reached by the verifier on whether the criteria were applied appropriately in all material respects and that the information adheres to the requirements in the regulations.

The opinion issued by the validator should report the conclusion reached by the validator on whether the assumptions are a reasonable basis for the forecast and that the forecast has been prepared in accordance with the regulations.

Validators and verifiers can arrive at three types of conclusions: unmodified, modified, and adverse.

An unmodified opinion can be issued when there are no material misstatements and the submitted data, report or application has been prepared in accordance with the regulations.

A modified opinion has no material misstatements but there is departure from the regulation or a limitation on the scope. In issuing a modified opinion, the validator and/or verifier should report a description of the departure and limitation and if any, adjustments that could be made to the submitted data, report or application.

An adverse opinion is issued when there are material misstatements in the submitted data, report or application and/or the submitted data, report or application has not been prepared in accordance with the regulation. The validator and/or verifier must provide an adverse opinion if:

• there is a material quantitative discrepancy that exceeds the Clean Fuel Standard regulatory Material Threshold; or
• the relative error exceeds the Clean Fuel Standard Material Threshold; or
• there is a qualitative finding that is deemed to be material.
##### Disclaimer

In both validation and verification, a validator or verifier may disclaim a validation or verification in the event there is insufficient information to arrive at a conclusion. A disclaimer is not an opinion because a conclusion cannot be formed.

#### 9.3 Certification outcome

For imported feedstock and for imported low-carbon-intensity fuels that create credits under the Clean Fuel Standard, Environment and Climate Change Canada will require the submission, by the importer or by the fuel or feedstock owner, of a certification (including the supporting documentation) stating that the imported feedstock or the imported low-carbon-intensity fuels adhered to the Clean Fuel Standard requirements.

#### 9.4 Qualifications and eligibility of third-parties performing verification, validation and certification

The Clean Fuel Standard will set out the qualifications and eligibility criteria for third parties performing verification, validation or certification under the regulations. These include technical competencies, official accreditations and independence requirements.

##### Technical competencies and accreditation requirements

To be accredited to perform verification, validation or certification for the Clean Fuel Standard, a third-party must:

• be an organization (rather than an individual);
• be accredited by the Standard Council of Canada or by the American National Standards Institute to all of the following standards:
• ISO 14065: 2013 Greenhouse gases – Requirements for greenhouse gas validation and verification bodies for use in accreditation or other forms of recognition;
• ISO 14066: 2012 Greenhouse gases – Competence requirements for greenhouse gas validation teams and verification teams;
• ISO 14064-3: 2019 Greenhouse gases - Part 3: Specification with guidance for the validation and verification of greenhouse gas assertions; and
• ISO 14064-2: 2019 Greenhouse gases - Part 2: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements;
• ISO 14040:2006 Environmental Management - Lifecycle Assessment - Principles and Framework;
• demonstrate that they have the skills and experience to address the subject matter and conduct the validation and/or verification;
• have technical competence in the applicable technical area(s) described in Annex VII and is accredited to the applicable technical area; and
• have a qualified independent reviewer – the independent reviewer must have the following skills and experience:
• familiarity with the quality control procedures of the validation and/or verification body;
• experience in conducting validations or verifications;
• an understanding of the technical area;
• an understanding of the requirements of an independent reviewer; and,
• an understanding of the documentation requirements for the reviewer's role including documentation of discrepancies and their resolution.

In addition to the criteria above, a third-party who wishes to be accredited for certification under the Clean Fuel Standard will have to be accredited by the American National Standards Institute to the standard ISO/IEC17065 : 2012 - Conformity assessment – Requirements for bodies certifying products, processes and services.

##### Independence requirements

A third-party who wishes to be accredited under the Clean Fuel Standard cannot have a real or potential threat to independence, or a real, perceived or potential conflict of interest that compromises its impartiality. A third-party cannot perform validation or verification activities for a specific client for more than six consecutive years. A three-year pause will be required before the third-party is authorized to resume verification and validation activities for that client.

The validation and/or verification body must monitor their independence during the validation and/or verification.

A third-party cannot perform verification and/or validation or certification if it is under investigation or suspended by an accreditation organization.

### 10. Registration, reporting, measurement and records

#### 10.1 Reporting format

Environment Climate Change Canada is developing an online registration, reporting and credit transaction system. Any report or notice that is required under the Clean Fuel Standard must be submitted electronically through the online system. Should the online system not be available, reports or notices may be sent on paper or in another format specified by Environment and Climate Change Canada.

#### 10.2 Registration

Registration provides Environment Climate Change Canada with information regarding a regulated party and its activities that would be subject to the requirements of the regulations. Registration reports are one-time reports required from primary suppliers and voluntary credit creators, with updates to key information as that information changes. The information required in the registration report is detailed in Annex VIII.

#### 10.3 Reports

##### Primary suppliers

Primary suppliers will be required to submit up to three reports annually: the Compliance Report, the Refinery and Upgrader Report and the Credit Clearance Mechanism Compliance Report, if required.

Compliance Report (June 30) and Credit Clearance Mechanism Compliance Report (November 30)

Primary suppliers will quantify their total reduction requirement for the compliance period plus any deficits (plus interests) carried forward from any of the previous two compliance periods, and submit information on the quantities of fuel they produced and imported that were subject to the reduction requirements and those that were exempt.

Primary suppliers will demonstrate how they satisfy their liquid fuel reduction requirement with credits in the Compliance Report. The report will indicate if a primary supplier does not have enough credits to satisfy its total liquid reduction requirement and is therefore required to participate in the Credit Clearance Mechanism. In this case, the primary supplier will be required to submit a Credit Clearance Mechanism Compliance Report by November 30 (following the Credit Clearance Mechanism) to report its final compliance period balances, with credits acquired in the Credit Clearance Mechanism, contributions to the Compliance Fund Mechanism and deficit carry forward totals, if any.

Refinery and Upgrader Report (November 30)

Primary suppliers that operate refineries or upgraders in Canada will be required to submit annually operating data and characteristics of crude oil used in the compliance period. These data will be used to monitor the national average carbon intensity of crude oil used in Canada (see section 4.1), to monitor the carbon intensity of refined petroleum products, to monitor the performance of the Clean Fuels Standard, and to calculate benchmarks for refineries and upgraders (for new facilities and for general energy efficiency projects). Monitoring the carbon intensity of refined petroleum products will enable updates to the fossil fuel carbon intensities that are used to calculate credits for low-carbon-intensity fuels and end-use fuel switching, if required.

A detailed list of information required in the Compliance Report, the Refinery and Upgrader Report and the Credit Clearance Mechanism Compliance Report is provided in Annex VIII.

##### Credit Creators

Credit creators will be required to submit a Credit Creation Report to create Clean Fuel Standard credits. A Carbon Intensity Pathway Report and a Credit Net Proceed Report will also have to be submitted in certain cases, as explained below.

Credit Creation Report (January 31)

Credit creators will submit an annual Credit Creation Report and may also elect to submit a voluntary quarterly report, with the exception of compliance category 1 credits (actions throughout the lifecycle of a fossil fuel that reduce its carbon intensity) that are created annually. This report is used to create credits – upon receipt of the report, Environment Climate Change Canada will deposit credits created into the account of a credit creator at midnight on the report deadline date.

Quarterly Credit Creation Reports are voluntary and allow credits to be created quarterly. The information submitted in any quarterly report does not have to be re-submitted in the annual report. Also, if a credit creator choses to submit a quarterly report for a given quarter, it is not obligated to produce a quarterly report for every quarter in that year. Consideration is being given to making these quarterly reports mandatory.

The information provided in the Credit Creation Report is a summary of low-carbon-intensity fuel transactions throughout the quarter or year that create credits, the number of credits created for the quarter or compliance period and other information depending on the compliance category of their credit creation activity. A detailed list of information required is provided in Annex VIII.

Carbon Intensity Pathway Report (June 30)

A credit creator that has created credits for the production/import of low-carbon intensity fuels must submit an annual Carbon Intensity Pathway Report. The report demonstrates that the low-carbon-intensity fuel or the electricity supplied in the compliance period is accurately represented by the approved carbon-intensity value.

The following information is required for low-carbon-intensity fuels:

• types of feedstocks used in the production of low-carbon-intensity fuels;
• modes of transportation for feedstocks and finished fuels;
• type and amount of energy consumed in the production process; and
• quantity and sources of electricity.

The following information is required for electricity:

• the source and quantity of electrical energy supplied to electric vehicles at the charging stations.

A detailed list of information required in the Carbon-Intensity Pathway Report is provided in Annex VIII.

Credit Balance Report (June 30)

Credit creators who are not primary suppliers will submit an annual Credit Balance Report to report the credit balance in each of their accounts (liquid, solid, and gaseous) as well as to pledge credit, if desired, for sale in the Credit Clearance Mechanism.

A detailed list of information required in the Credit Balance Report is provided in Annex VIII.

Credit Net Proceeds Report (June 30)

A credit creator that is subject to the requirement to reinvest electric vehicle credit revenues (an original equipment manufacturer or a charging network operator) must submit a Credit Net Proceeds Report annually. The report will contain information on the net proceeds made from the sale of Clean Fuel Standard credits as well as how the credit creator used these net proceeds.

A detailed list of information required for this report is provided in Annex VIII.

Verification Report (June 30)

A verification report must be submitted by both primary suppliers and voluntary credit creators after submitting regulatory reports or applications requiring third-party verification (i.e., annual verification of Credit Creation Reports; Credit Net Proceeds Report; Carbon-Intensity Pathway Report; Compliance Report; Credit Clearance Mechanism Compliance Report; and applications for approval of carbon intensity determination).

The report confirms that submitted data and regulatory reports or applications are accurate and reliable, and were prepared in accordance with the regulatory requirements. It includes the Verification Opinion issued by the Verification Body who conducted the verification process.

A detailed list of information required for this report is provided in Annex VIII.

#### 10.4 Correction of errors

The Clean Fuel Standard will set out the procedures for correcting errors in reported information that affects the creation of credits. The credit creator who erred will be liable for the error and any invalid credits, and will be required to take the prescribed corrective actions. The process for correcting errors in credit creation will depend on how the error was made and who noticed it. Two scenarios are possible and will lead to different requirements. These are:

• credits are created with erroneous data and the organization or third party verifier finds the error; and
• an organization did not create credits for an eligible action due to unintentional omission of information.

Environment Climate Change Canada may suspend credits in the event that compliance verification or enforcement activities leads to suspicion that credits may be invalid. During the suspension, these credits may not be traded or used for compliance.

The different requirements are described below for the two scenarios above and are also illustrated in Annex IX.

##### Scenario 1: Credits created with erroneous data and the credit creator or third party verifier finds the error

Notifying Environment and Climate Change Canada

A person must notify Environment and Climate Change Canada within 5 days of being aware that an error has been detected and credits are invalid.

Credits still in creator’s account

In the case where the invalid credits are still in the creator’s account, Environment and Climate Change Canada will revoke the credits upon receipt of the notification.

Credits no longer in creator’s account

In the case where the invalid credits are no longer in the creator’s account (i.e. they have been traded or used for compliance), Environment and Climate Change Canada creates a Corrective Credit Obligation of the same credit class, type (category 1, 2 or 3) and amount of credits.

The credit creator must satisfy the Corrective Credit Obligation within 90 days by creating or acquiring credits of the same class and type. In the case where credits of the same class and type are not available, the credit creator must meet the Corrective Credit Obligation with other credits of the same class.

The credit creator must notify Environment and Climate Change Canada upon satisfaction of the Corrective Credit Obligation. Environment and Climate Change Canada will retire the compensating credits upon receipt of the notice.

##### Scenario 2: Credits were not created due to unintentional omission of information by the Organization

There will be no retroactive credit creation after the submission of the annual Credit Creation Report on January 31 following compliance period.

#### 10.5 Measurement of volume requirements

Any volume that is required to be measured or recorded must be determined:

• by one or more measurement devices that comply with the Weights and Measures Act and the regulations made under that Act; or
• in accordance with a measurement standard or method that is appropriate for that determination and is cited in the American Petroleum Institute’s Manual of Petroleum Measurement Standards.

In the event that no measurement device, standard or method referred to in the previous paragraph is available, the volume may be determined by another person who is independent of them and the details of that measurement are recorded.

Volumes reported under the Clean Fuel Standard must be corrected to a temperature of 15°C. However, a person who imports an amount of fuel may correct the volume of the amount to 60°F, if the person records that they made the correction. Volumes that have to be recorded or reported must be in cubic meters and rounded according to the rounding requirements set out in the regulations.

#### 10.6 Record keeping requirements

##### Primary suppliers

Primary suppliers will be required to make records to support the data and information submitted under the Clean Fuel Standard. Records will be required to document and support the following:

1. the determination of the number of credits created during the compliance period, including records supporting any calculations;
2. the method used to measure volumes;
3. the determination of the reduction requirement for a compliance period, including records of fuels produced and imported or exempted from the requirements, and including records supporting any calculations;
4. records supporting the balances of each class of credits owned and cancelled, traded or received;
5. records supporting the payment into an approved fund identified for compliance purpose;
6. records supporting any agreement where the default credit creator passes the right to create credits to another party and,
7. other records and supporting documents as prescribed in the regulations.
##### Voluntary credit creators

Voluntary credit creators will be required to make records to support the data and information submitted under the Clean Fuel Standard. Records will be required to document and support the following:

1. the determination of the number of credits created during the compliance period, including records supporting any calculations;
2. the determination of the carbon-intensity values, including records supporting any calculations;
3. records supporting the balances of each class of credits owned and cancelled, traded or received;
4. records supporting any agreement where the default credit creator passes the right to create credits to another party;
5. the method used to measure volumes; and
6. other records and supporting documents as prescribed in the regulations.
##### Retention of records

Records, including copies of reports and notices submitted to Environment Climate Change Canada and any supporting documents that relate to the information contained in those records or copies must be kept for ten years. Records and supporting documents relating to compliance category 1 credits (project that reduce greenhouse gas emissions along the lifecycle of a fossil fuel) must be kept for ten years after the project ceases to create credits.

A record, copy or supporting document must be kept at the a principal place of business in Canada or at any other place in Canada where it can be inspected or provided to Environment and Climate Change Canada upon request.

### 11. Review of Clean Fuel Standard

The Clean Fuel Standard will include a requirement for a five-year review, with the intention of updating the regulations by 2030. The review will aim to assess whether the Clean Fuel Standard is functioning properly and whether any amendment is required to ensure the regulations meet their objectives.

The review may include an assessment of:

• the Fuel Lifecycle Assessment Modelling Tool and the carbon intensity values, including crude oil values;
• baseline Canadian average fossil fuel carbon intensity values (the baseline values will not be updated prior to full implementation in 2030);
• reduction requirement schedule (e.g., making adjustments to reduction requirements to account for changes in the carbon intensity of the crude mix);
• actions that are eligible for credit creation;
• compliance flexibilities;
• whether volumetric mandates are required;
• energy efficiency ratios; and
• the treatment of direct and indirect land-use change.

## Part III: Next steps

### 12. Next steps

#### 12.1 Feedback requested on mechanisms to achieve the Clean Fuel Standard objectives

The Clean Fuel Standard regulations are being developed to meet three main objectives:

• achieving 30 million tonnes of annual reduction in greenhouse gases by 2030, via the reduction of greenhouse gas emissions throughout the lifecycle of fuels;
• enabling low-cost compliance; and
• stimulating investments and innovation in low-carbon-intensity fuels.

To achieve these objectives, Environment and Climate Change Canada has included a suite of mechanisms in the Clean Fuel Standard. Environment and Climate Change Canada welcomes feedback on the full suite of mechanisms and its expected overall effectiveness in achieving the Clean Fuel Standard objectives.

Key mechanisms and their parameters include:

• stringency and trajectory of reduction requirements between 2022 and 2030;
• Credit Clearance Mechanism;
• Compliance Fund Mechanism; and
• deficit carry forward.

Environment and Climate Change Canada is still considering whether other exemptions should be added to those listed in Section 2, accounting for the following considerations:

• impact on greenhouse gas emission reductions;
• impact on market signal for investment and innovation in low-carbon-intensity fuels and technologies;
• availability of other compliance flexibilities within the Clean Fuel Standard that can address or mitigate the issue of concern;
• adverse impacts on compliance cost and industry competitiveness;
• impacts on household costs;
• technical feasibility and supply logistics considerations; and
• interaction with carbon pollution pricing and other greenhouse gas mitigation regulations.

Environment and Climate Change Canada will continue this assessment in the development of the draft regulations.

#### 12.3 Consultations

Since the announcement of the development of the Clean Fuel Standard, Environment and Climate Change Canada has engaged broadly and worked with stakeholders from across the country on the design of the regulations.

In addition to other federal departments, officials of all levels at Environment and Climate Change Canada have met with representatives of all levels from Provinces and Territories, industry, non-governmental organizations, Indigenous People and academia on strategic and technical issues related to the Clean Fuel Standard. This has included numerous bilateral meetings, webinars as well multilateral discussions, notably in the following fora:

• Clean Fuel Standard Federal-Provincial-Territorial Working Group;
• Clean Fuel Standard Technical Working Group; and
• Clean Fuel Standard Multi-Stakeholder Consultative Committee.

Environment and Climate Change Canada will continue regulatory design consultations through these fora as well as through bilateral meetings and the consultative processes for emission-intensive and trade-exposed sectors and the aviation sector, described in the following sub-sections.

#### 12.4 Emission-intensive and trade-exposed sectors

Emission-intensive and trade-exposed sectors have expressed concerns that the cumulative cost impacts from the Clean Fuel Standard combined with carbon pollution pricing could impact their competitiveness.

Environment and Climate Change Canada has engaged with emission-intensive and trade-exposed sectors including via bilateral meetings, written submissions and meetings of the Technical Working Group. In fall 2018, Environment and Climate Change Canada established the Clean Fuel Standard Task Group on Emission-Intensive and Trade-Exposed Sectors to better understand the concerns of these sectors and to consider options to mitigate competitiveness impacts while meeting the Clean Fuel Standard’s 2030 greenhouse gas emissions reduction goal. This multi-stakeholder Task Group met throughout winter and spring 2019.

Various design features outlined in this paper will help mitigate impacts of the liquid regulations on emission-intensive and trade-exposed sectors. These changes include:

• increased credit creation opportunities for emission-intensive and trade-exposed sectors:
• eliminating the credit creation threshold of 10 kt CO2e for actions taken under compliance category 1;
• changing the commission date from which projects can be eligible for credit creation under compliance category 1 from the publication of the final liquid class regulations to July 1, 2017;
• allowing credits for carbon capture use and/or storage by parties that are not primary suppliers;
• credits for self-produced and used biogas; and
• credits for the production and on-site use of biofuels at industrial facilities;
• removing the emission reduction requirements for liquid self-produced and used fuels used in stationary sources; and
• exempting remote communities and thereby reducing the overall reduction requirements (activities undertaken in remote communities are still eligible to create credits).

These adjustments are additional to the suite of flexibilities and market mechanisms already included in the Clean Fuel Standard, which are expected to help minimize costs to comply with the regulations. These include: use of credits from the Renewable Fuel Regulations; cross-class trading; a Credit Clearance Mechanism; a fund compliance mechanism; and deficit carry-forward. Other design elements have also been integrated to the Clean Fuel Standard to support cost containment, including:

• a progressive increase of reduction requirements between 2022 and 2030;
• unlimited banking;
• opportunity for early credit creation;
• opportunity to obtain credits for actions taken under federal-provincial-territorial carbon pollution pricing and renewable fuel mandates, as well as with BC’s Low-Carbon Fuel Standard.

Environment and Climate Change Canada will continue to consider the implications for emission-intensive and trade-exposed sectors as it finalizes the design of the Clean Fuel Standard regulations. The department will also continue to engage broadly on methodology and assumptions to estimate compliance costs for the liquid class regulations and in the design of the gaseous and solid class regulations when that work gets underway.

#### 12.5 Aviation sector

Environment and Climate Change Canada acknowledges the unique circumstances faced by the aviation industry in its decarbonization efforts. Environment Climate Change Canada will undertake a coordinated approach to consultations with the aviation industry, which will consider the treatment of aviation fuels under the Clean Fuel Standard in the context of the global aviation emissions reductions actions under the International Civil Aviation Organization’s Carbon Offsetting and Reduction Scheme for International Aviation, Canada’s carbon pollution pricing actions and the path to investment in domestic supply of low-carbon-intensity aviation fuels.

#### 12.6 Fuel Lifecycle Assessment Modelling Tool development timelines

Low-carbon-intensity fuel pathways and resulting carbon-intensity values are planned for September 2019, whereas revised fossil fuel baseline values are planned for by winter 2020.

Draft development of the Fuel Lifecycle Assessment Modelling Tool (software and interface) is planned for review in January 2020. Full development of the Fuel Lifecycle Assessment Modelling Tool is expected to be completed in 2021.

The modelling tool will be managed by Environment and Climate Change Canada. Specifics regarding the governance of the tool will be determined by Environment and Climate Change Canada at a later date.

#### 12.7 Timelines for regulatory development and feedback

Draft Clean Fuel Standard regulations for the liquid fuel class are planned for publication in the Canada Gazette, Part I in early 2020, with final regulations in early 2021 and coming into force in 2022, as planned.

Draft regulations for the gaseous and solid fuel classes are targeted for publication in the Canada Gazette, Part I, mid-2021, with final regulations in 2022 and coming into force in 2023, as planned.

Interested parties are invited to submit comments on the Proposed Regulatory Approach before August 26, 2019. These comments will help inform the development of the Clean Fuel Standard liquid class regulations.

Paola Mellow
Executive Director, Clean Fuel Standard
351 St. Joseph Boulevard, 21st Floor
Gatineau, QC K1A 0H3

## Annexes

### Annex I: Key definitions

Accreditation is a third-party attestation related to a Validation/Verification Body conveying formal demonstration of its competence to carry out specific validation or verification tasks.

Accreditation Organization / Body is the authoritative body that performs accreditation. It is member of, and signatory to, the International Accreditation Forum.

• The accreditation organization reviews the procedures, processes, and qualifications of the Validation/Verification Body and declares whether or not the Validation/Verification Body is competent and is conducting validation/verification activities in line with requirements.
• The accreditation organization also monitors accredited Validation/Verification Bodies on an ongoing basis to make sure that they are maintaining competent personnel and operate with transparency and impartiality.
• For the purposes of the Clean Fuel Standard, the Standard Council of Canada, and American National Standards Institute will be accreditation organizations / bodies.

Baseline Carbon Intensity means the Canadian average lifecycle carbon intensity value for each fossil fuel, calculated from the Fuel Lifecycle Assessment Modelling Tool, based on 2016 data.

Biofuel means any liquid, gaseous or solid fuel produced from biomass.

Biomass means the biodegradable fraction of products, waste and residues from biological origin from agriculture, including vegetal and animal substances, from forestry and related industries, including fisheries and aquaculture, as well as the biodegradable fraction of waste, including industrial and municipal waste of biological origin.

Biogas means a gaseous mixture comprised primarily of methane and carbon dioxide recovered from anaerobic decomposition of organic material and that contains other constituents that restrict it from injection into the closest natural gas pipeline.

Carbon Intensity, in relation to a type of fuel, means the quantity of CO2e emissions that are emitted during the activities undertaken over the fuel’s lifecycle — including all emissions associated with the extraction or the cultivation, as the case may be, of raw material used to produce the fuel, with processing, refining or upgrading that raw material to produce the fuel, with the transportation or distribution of that raw material, of intermediary products or of the fuel and with combusting the fuel — in relation to the energy produced during that combustion, expressed in grams of CO2e emitted, per megajoule of energy produced. It is the so-called “well-to-wheel” emissions associated with the lifecycle of that type of fuel.

Charging Network Operator means an entity that operates a network of electricity charging stations that are accessible to electric vehicles of members of the public and collects data from each of those stations as to the quantity of electricity received by those electric vehicles.

Charging Site Host means the owner, lessor or operator of an electric charging station that is accessible to a restricted class of operators of electric vehicles.

Compliance period is a calendar year that begins on January 1st and ends on December 31st during which primary suppliers must satisfy requirements set out in the Clean Fuel Standard regulations.

Electricity Distribution Utility means a utility that is engaged in the distribution of electricity to consumers and includes electric retailers, power brokers and agents that arrange the sale of its electricity to consumers.

Electric Vehicle means a vehicle that is propelled by an electric motor whose source of electricity is a rechargeable battery that is charged from a source of electrical energy that is not on-board the vehicle. It includes plug-in hybrid electric vehicles.

Hydrogen Fuel Cell Vehicle means a vehicle propelled solely by an electric motor whose source of electricity is an electrochemical cell that produces electricity from hydrogen.

Hydrogen Fuelling Station means a facility at which hydrogen fuel cell vehicles are supplied with hydrogen.

Independent Verification / Validation means the Verification/Validation processes are performed by a disinterested third-party.

Gaseous class means the following gaseous fossil fuels: propane and natural gas, including liquefied natural gas and compressed natural gas that are in a gaseous state at standard conditions.

Interim Credit Reference for Natural Gas means a reference carbon intensity value used to calculate the number of credits created in respect of the gaseous class for low-carbon-intensity gaseous fuels that are renewable natural gas, biogas or hydrogen. It is equivalent to the baseline carbon intensity for natural gas supplied in Canada in 2016 minus 0.2 g CO2e/MJ. It will be reviewed once the gaseous and solid class regulations are published.

Interim Credit Reference for Propane means a reference carbon intensity value used to calculate the number of credits created in respect of the gaseous class for renewable propane. It is equivalent to the baseline carbon intensity for propane supplied in Canada in 2016 minus 0.2 g CO2e/MJ. It will be reviewed once the gaseous and solid class regulations are published.

Liquid class means the following liquid fossil fuels: gasoline, diesel, kerosene, light fuel oil, heavy fuel oil and jet fuel.

Liquid Class Credit Reference means a reference carbon intensity value used to calculate the amount of credits created in respect of the liquid class for low-carbon-intensity fuels and some end use fuel switching. It is the average carbon intensity for all liquid fuels supplied in Canada in 2016 minus the carbon intensity reduction requirement for all liquid fuels for a given compliance year (see Annex V for calculations).

Low-Carbon-Intensity Fuel means a fuel, other than a fuel that is in the liquid class or gaseous class, that, at standard conditions, has a carbon intensity that is equal to or less than 90% of the following reference carbon intensities:

• the credit reference carbon intensity of the liquid class for a liquid fuel;
• the interim credit reference carbon intensity for natural gas for a gaseous fuel that it renewable natural gas, biogas or hydrogen; and
• the interim credit reference carbon intensity for propane for a gaseous fuel that is renewable propane.

Original Equipment Manufacturer means a company who produces electric vehicles for sale in the Canadian market.

Participant means, in relation to the credit trading system, a primary supplier or a voluntary participant.

Primary Supplier means

1. in respect of liquid fossil fuel that is produced at a production facility, a person who owns, leases, operates, controls, supervises or manages the production facility; and
2. in respect of liquid fossil fuel that is imported, the importer.

Renewable Natural Gas means methane gas that is derived from processing biogas and meets the standard for injection into the closest natural gas pipeline.

Retail Site Host means the owner, lessor or operator of a hydrogen refuelling station that is accessible to a restricted class of operators of hydrogen fuel cell vehicles.

Solid Class means the following solid fossil fuels: coal, coke and petroleum coke.

Validation means the process to evaluate the reasonableness of the assumptions, limitations, and methods that support a statement about the outcome of future activities.

Validation/Verification Body is:

• a third-party, disinterested;
• an organization (rather than an individual only);
• accredited by an Accreditation organization recognized by the International Accreditation Forum; and
• accredited to carry out validation/verification for a technical scope that is consistent with the facility-level activities.

Verification means the process for evaluating a statement of historical data and information to determine if the statement is materially correct and conforms to criteria.

### Annex II: Regulatory design for the gaseous and solid fuel classes

The Clean Fuel Standard regulations will set separate requirements for liquid, gaseous and solid fossil fuels. The carbon intensity requirements for gaseous and solid fossil fuel primary suppliers are planned to come into effect in 2023. This annex presents the design elements that were mentioned in the Regulatory Design Paper published in December 2018.

#### Parties regulated under the Clean Fuel Standard

The fossil fuel primary supplier is the party responsible for meeting carbon intensity requirements for the fossil fuels they supply. These parties can also create credits.

For gaseous fuels, the fossil fuel primary suppliers will be:

• persons who process or import natural gas, including liquefied natural gas and compressed natural gas;
• persons who produce or import propane;
• persons who deliver pipeline quality natural gas to end-users.

Propane producers include natural gas processors with fractionating capacity, straddle plants, stand-alone fractionators, refiners and upgraders that produce propane.

Natural gas distributors include transmission pipeline companies for direct sales and distribution companies.

For solid fuels, the fossil fuel primary suppliers will be:

• persons who produce solid fossil fuels; and
• persons who import solid fossil fuels.

#### Fuels subject to the annual reduction requirements

For gaseous fuels, fuels subject to the annual reduction requirement include natural gas (including liquefied natural gas and compressed natural gas) and propane.

For solid fuels, these include coal, petroleum coke and coke.

Coal combusted at facilities that are covered by the federal coal-fired electricity greenhouse gas emission regulations will be exempted from the regulations.

#### Self-produced and used fuels

Fossil fuels are sometimes produced and used on-site by fossil fuel producers in the process to produce a finished fuel or in their facility operations. This fuel is referred to as “self-produced and used fuel”. The Clean Fuel Standard will set a separate carbon intensity reduction requirement for some self-produced and used fuels:

In the gaseous class, self-produced and used fuels will not have separate carbon intensity reduction requirements. The lifecycle carbon intensities of the fossil fuels produced from these fuels will account for their emissions. These include the associated gases produced from crude oil and bitumen production and refinery and upgrader still gas.

In the solid class, some self-produced and used fuels will have a separate carbon intensity reduction requirements. These include coal used at coal mines and petroleum coke produced at refineries and upgraders. The carbon produced at refineries and upgraders from catalyst regeneration will not have a separate carbon intensity reduction requirement.

#### Carbon intensity

For natural gas-derived fuels, the Clean Fuel Standard will not differentiate between sweet and sour gas, or by origin of the gas. A Canadian average carbon intensity value for natural gas and propane produced and imported and consumed in Canada will be determined. The treatment of liquefied natural gas and compressed natural gas remains to be established. Given these fuels have higher carbon intensities than natural gas, Environment and Climate Change Canada is considering whether or not these fuels would be subject to the same annual reduction requirement as natural gas.

The baseline Canadian average fossil fuel carbon intensity values will be set out in the regulations and will not be updated prior to full implementation in 2030. This will provide certainty to investors and primary suppliers planning for compliance. Table 8 presents the baseline carbon-intensity values for gaseous and solid fossil fuels.

Table 8: Canadian average baseline carbon intensity values for gaseous and solid fossil fuels
Fuel Carbon intensity
(g CO2e/MJ)
Natural gas 62
Compressed natural gas 65
Liquefied natural gas 73
Propane 75
Coal 97
Petroleum coke 110

#### Volumetric fuel mandate

The Clean Fuel Standard will not set renewable volumetric requirements for natural gas.

### Annex III: Methodology for calculation of reduction requirements

#### Calculation of annual liquid reduction requirements

• Step 1: Calculate the volume of each type of liquid fossil fuel in the primary supplier’s pool.

$\text{Volume}\left({\text{m}}^{3}\right)={\text{Volume}}_{\text{Imported}}+{\text{Volume}}_{\text{Produced}}-{\text{Volume}}_{\text{Exported}}-{\text{Volume}}_{\text{Exempted}}$

• Step 2: Calculate energy in megajoules (MJ) by multiplying the volume of fuel (Step 1) by the energy density of the fuel.

• Step 3: Calculate grams of carbon dioxide equivalent by multiplying the energy (Step 2) by the annual carbon intensity reduction requirement. The annual carbon intensity reduction requirement is 3.6 g of CO2e per MJ in 2022 and increases linearly by 0.8 g of CO2e per MJ every year to reach 10 g of CO2e per MJ in 2030.

• Step 4: Calculate the reduction requirement generated in a given compliance period, in tonnes of carbon dioxide equivalent by dividing the grams of carbon dioxide equivalent (Step 3) by 1 000 000 grams per tonne.

• Note that Reduction RequirementCurrent Period must be satisfied before credits can be used to satisfy either of Reduction RequirementCarried Forward or Reduction RequirementCarried Forward Interest. To calculate the interest accrued  based on any deficit carried forward from the previous compliance period (Reduction RequirementCarried Over Interest), multiply the amount carried forward by 20%:

${\text{Reduction Requirement}}_{\text{Carried Forward Interest}}=0.2*{\text{Reduction Requirement}}_{\text{Carried Forward}}$

### Annex IV: Process to apply for credits under a project quantification methodology

A primary supplier or voluntary credit creator may apply to Environment and Climate Change Canada to have a CO2e emission reduction project recognized for creating credits (see section 5.1). The reductions will be determined in accordance with a quantification methodology that is applicable to the project and provided by Environment and Climate Change Canada. The application must be signed by the authorized official of the participant. The regulations will require the following, at a minimum, for each project application according to the approved quantification methodology:

• The name of the primary supplier or the voluntary credit creator.
• Project description including the civic address and name, if any, of each facility at which the project is to be carried out
• The name of the quantification methodology to be followed
• The duration of the project and the anticipated start and end-dates for carrying out the project;
• Supporting documentation and information required to be submitted according to the quantification methodology
• The regulatory regime and the federal or provincial law under which the project operates or the federal or provincial law, or program, under which it receives funding
• Class of fuels the project is applicable to and the proportion of credits allocated to each fuel class

### Annex V: Process for credit creation for compliance categories 2 and 3

#### Calculation of a credit for compliance category 2: supplying low-carbon-intensity fuels

• Step 1: Calculate the volume of the low-carbon-intensity fuel.
1. Applicable to liquid fuels and gaseous fuels

$\text{Volume}\left({\text{m}}^{3}\right)={\text{Volume}}_{\text{Imported}}+{\text{Volume}}_{\text{Produced}}-{\text{Volume}}_{\text{Exported}}-{\text{Volume}}_{\text{Excluded}}$

• Step 2: Calculate the energy of the low-carbon-intensity fuel in megajoules (MJ) by multiplying the volume of fuel by the energy density of the fuel (as specified in the regulations).

• Step 3 (only for biogas used in equipment that produces electricity): Determine the methodology to be used to create credits for the supply of biogas for use in equipment that produces electricity
• Biogas that is used in equipment that produces electricity can be used to create credits under this methodology if the amount determined by the following formula with respect to that equipment is equal to or more than 0.7:

$\text{(E}+\text{H) / (Q}×\text{D)}$

• where
• E is the electrical energy produced by the equipment, expressed in megajoules;
• H is the heat energy that is produced by the equipment and used, expressed in megajoules;
• Q is the quantity of that biogas used in the equipment, expressed as a volume in cubic metres; and
• D is the energy density of that biogas
• If the result of the formula is less than 0.7, credits must be determined based on the methodology specific for biogas used in low-efficiency equipment (see next section of this Annex).
• Step 4: Calculate the carbon intensity difference (CIDifference) by subtracting the carbon intensity of the low-carbon-intensity fuel (CILow-carbon-intensity fuel) from the applicable credit reference for the year in which the fuel is produced or imported (see below for an explanation of credit reference determination). In the case of liquid low-carbon-intensity fuels, the liquid class credit reference (CILiquid Class Credit Reference), is used in the calculation. In the case of low-carbon-intensity fuels that are biogas, renewable gas or hydrogen, the interim credit reference for natural gas is used in the calculation. In the case of low-carbon-intensity fuels that are renewable propane, the interim credit reference for propane is used in the calculation.

• Step 5: Calculate grams of carbon dioxide equivalent by multiplying the energy (Step 2) by the carbon intensity difference (Step 4).

• Step 6: Calculate the credits created in metric tons of carbon dioxide equivalent by dividing the grams of carbon dioxide equivalent (Step 5) by 1 000 000 grams per tonne.

#### Calculation of a credit for compliance category 2: supplying biogas for use in low-efficiency equipment that produces electricity

• Step 1: Determine the methodology to be used to create credits for the supply of biogas for use in equipment that produces electricity
• Biogas that is used in equipment that produces electricity can be used to create credits under this methodology if the amount determined by the following formula with respect to that equipment is less than 0.7:

$\text{(E}+\text{H) / (Q}×\text{D)}$

• where
• E is the electrical energy produced by the equipment, expressed in megajoules;
• H is the heat energy that is produced by the equipment and used, expressed in megajoules;
• Q is the quantity of that biogas used in the equipment, expressed as a volume in cubic metres; and
• D is the energy density of that biogas
• If the result of the formula is equal to or more than 0.7, credits are determined based on the general methodology for supplying low-carbon-intensity fuels (see previous section of this Annex).
• Step 2: Determine the electrical energy produced by the equipment, expressed in megajoules
• Step 3: Calculate the carbon intensity difference (CIDifference) by subtracting the carbon intensity of the electricity produced from biogas (CIElectricity from biogas) from the default carbon intensity (CIElectricity from provincial grid mix) that will be representative of the provincial grid mix in which the production of electricity from biogas took place.

• Step 4: Calculate grams of carbon dioxide equivalent by multiplying the energy (Step 2) by the carbon intensity difference (Step 3).

• Step 5: Calculate the credits created in metric tons of carbon dioxide equivalent by dividing the grams of carbon dioxide equivalent (Step 4) by 1 000 000 grams per tonne.

#### Calculation of the liquid class credit reference carbon-intensity value

Environment and Climate Change Canada will calculate the liquid class credit reference carbon intensity value for each year for which credits may be created (the liquid class credit reference).

• Step 1: Determine the average carbon intensity (CIaverageeach fuel) of:
• each fossil fuel in the liquid class supplied to Canada in 2016 using the Fuel Lifecycle Assessment Modelling Tool; and
Fuel Baseline Carbon Intensity
(g CO2e/MJ)
Gasoline 92
Diesel 100
Kerosene 88
Light Fuel Oil 84
Heavy Fuel Oil 99
Jet Fuel 86
• each low-carbon-intensity fuel supplied to Canada in 2016, using interim baseline carbon intensity values for liquid fuels estimated by Environment and Climate Change Canada. The interim methodology was based on a simplified lifecycle approach. California Air Resources Board Tier 1 Starch Ethanol and Biodiesel Calculators were used to determine the average carbon intensity of ethanol and biodiesel. The average of the carbon intensity values of hydrogenation-derived renewable diesel approved pathway in California’s Low Carbon Fuel Standard program was used as the average carbon intensity for hydrogenation-derived renewable diesel in Canada. The average was not volume weighted by production at each facility, as this information was not publically available. Carbon intensity values were converted from a lower heating value basis to a higher heating value basis. The document Methodology to estimate the interim baseline carbon intensity values for liquid fuels is available upon request.
Fuel Baseline Carbon Intensity
(g CO2e/MJ)
Ethanol 49
Biodiesel 26
HDRD 29
• Step 2: Determine the energy in megajoules (MJeach fuel) of:
• each fossil fuel combusted in Canada in 2016 , based on the 2018 reference case from Environment Climate Change Canada’s Energy, Emissions and Economy Model for Canada; and
Fuel MJ combusted in Canada in 2016
Gasoline 1,449,066 x 106
Diesel 1,117,322 x 106
Kerosene 17,875 x 106
Light Fuel Oil 87,493 x 106
Heavy Fuel Oil 112,896 x 106
Jet Fuel 100,052 x 106
• each low-carbon-intensity fuel supplied to Canada in 2016 from data reported to the federal Renewable Fuels Regulations.
Fuel Volume combusted in Canada in 2016 (L) Energy Density
(MJ/liter)
MJ combusted in Canada in 2016
Ethanol 2,972,436,000 23.42 69,614 x 106
Biodiesel 281,621,988 35.18 9,907 x 106
HDRD 261,232,000 36.51 9,538 x 106
• Step 3: Calculate the weighted average carbon intensity of the liquid class (CIWAverage), based on the energy in megajoules (MJeach fuel) of each fuel combusted in Canada in.

${\text{CI}}_{\text{WAverage}}=\frac{\sum \left({\text{CI}}_{{\text{average}}_{\text{each fuel}}}*{\text{MJ}}_{\text{each fuel}}\right)}{{\text{TMJ}}_{\text{Fossil}}+{\text{TMJ}}_{\text{Low Carbon}}}=93.4\frac{{\text{g CO}}_{2}\text{e}}{\text{MJ}}$

• Step 4: Calculate the liquid class credit reference (CIClass Credit Reference) based on
• the weighted average carbon intensity of the liquid class (CIWAverage);
• the annual carbon intensity reduction requirement (CIReduction Requirement) for a given compliance year (e.g., 10 g/MJ in 2030);
• total energy in megajoules (MJ) of fossil fuels (TMJFossil) combusted in Canada in 2016; and
• total energy in megajoules (MJ) of low-carbon-intensity fuels (TMJLow Carbon) combusted in Canada in 2016.

2021* 2022 2023 2024 2025 2026 2027 2028 2029 2030
CIReduction Requirement (g CO2e/MJ) N/A 3.6 4.4 5.2 6.0 6.8 7.6 8.4 9.2 10.0
Liquid Class Credit reference (g CO2e/MJ) 89.9 89.9 89.1 88.3 87.6 86.8 86.0 85.2 84.5 83.7

*The liquid credit reference in 2021 will be 89.9, the same as 2022.

#### Information required to apply for approval of a carbon intensity for a low-carbon-intensity fuel

The application for approval of a carbon intensity value for a low–carbon-intensity fuel must include:

1. the name of the primary supplier or voluntary credit creator
2. the name and address of the facility where the fuel was produced
3. the name of fuel
4. the type of each feedstock used to produce the fuel and the region where each of those feedstocks were extracted or cultivated;
5. the mode of transport used for the last stage of transport of each of those feedstocks to the fuel production facility and the mode of transport used for the finished fuel from the facility to the distribution terminal ;
6. the type and quantity of thermal energy consumed at the facility;
7. the quantity of electricity from the grid as well as the type and quantity of electricity produced on site;
8. a description of any co-products
9. a process flow diagram of the production of the fuel

Additional requirements when disaggregated default values are used to obtain a low-carbon-intensity fuel carbon intensity value:

1. each disaggregated default values selected;
2. the sum of the disaggregated default values;
3. third party attestation statement that the disaggregated default values selected were representative and applicable to the fuel production process being used

Additional requirements when the Fuel Lifecycle Assessment Modelling Tool is used to obtain a low–carbon-intensity fuel intensity value:

1. the carbon intensity determined for the fuel
2. third-party verification opinion respecting the accuracy of carbon intensity value
3. a copy of the Fuel Lifecycle Assessment Modelling Tool, with all required inputs and results, that was used to determine the carbon intensity value
4. volume of each type of feedstock used to produce the fuel
5. the volume of any co-product produced along with the fuel
6. measurements and calculations that are used to determine values for input data, along with supporting documents

For a modified fuel pathway, applications will additionally require:

1. any change in emission factors or background data sets, along with the sources of the change;
2. a description of any innovative technology or low-carbon-intensity energy that is used at the facility, and
3. a description of any process unit added to the modified pathway, along with supporting documents.

For a new fuel pathway, applications will additionally require:

1. description of any innovative technology or low carbon energy in use at the facility
2. comprehensive description of the life-cycle analysis, including an indication of the emission factors and background data sets along with the sources for those emission factors and data sets
3. a description of any process unit included in the new pathway, along with supporting documents

The application for approval of a carbon intensity value for electricity must include:

1. The name of the primary supplier or voluntary credit creator;
2. the name and address of the location where the charging station(s) are located;
3. source and quantity of electrical energy supplied to electric vehicles at those charging stations;
4. the lifecycle carbon intensity determined for the electricity; and
5. third-party verification opinion respecting the accuracy of carbon intensity value.

#### Methodology to determine a carbon-intensity value with disaggregated default values

The carbon intensity of a low carbon intensity fuel including renewable propane, compressed renewable natural gas, liquefied renewable natural gas, compressed hydrogen or liquefied hydrogen is determined by the formula

Total CI = CIec + CIl + CIp + CItd + CIc

where

CIec
is the quantity of CO2e emissions that represents the quantity of CO2e that is emitted during the extraction or cultivation, as the case may be, of the raw material from which the type of fuel is produced, per megajoule of energy produced;
CIl
is the quantity of CO2e emissions that represents the quantity of CO2e from carbon stock changes caused by land use changes associated with the cultivation of the raw material from which the type of fuel is produced, per megajoule of energy produced;
CIp
is the quantity of CO2e emissions that represents the quantity of CO2e that is emitted during the production of the type of fuel from raw materials, per megajoule of energy produced;
CItd
is the quantity of CO2e emissions that represents the quantity of CO2e that is emitted during the transportation of the raw material and intermediary products used to produce the type of fuel, and the distribution of the fuel to end-users, per megajoule of energy produced; and
CIc
is the quantity of CO2e emissions that are emitted during the combustion of the type of fuel per megajoule of energy produced.

This formula for disaggregated default values used in the Clean Fuel Standard is derived from Annex 5 of the Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources.

Disaggregated default values will be available for various fuel types, feedstock types and technologies used in the production process. The applicant must select the most appropriate disaggregated default values for their fuel, their feedstock and their process or, if no defined disaggregated default values apply, use the more conservative generic default values. The use of disaggregated default values provides a less burdensome means for obtaining a carbon intensity value; however, the value will be conservative in nature.

Environment and Climate Change Canada is considering using the disaggregated default values provided in Annex 5 of the Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources. These disaggregated default values will be further investigated once the methodology for low-carbon-intensity-fuels is developed for the Fuel Lifecycle Assessment Modelling Tool. Some pathways may be added in the future or the values may be revised. Note that the values in the table are expressed on a LHV basis.

The quantity of CO2e emissions from carbon stock changes caused by land-use change associated with the cultivation of the raw material from which the type of fuel is produced will be calculated from the Fuel Lifecycle Assessment Modelling Tool once the methodology is developed.

Disaggregated default values for combustion will be taken from the National Inventory Report. CO2 emissions of the fuel will be taken to be zero for biomass fuels. Emissions of non-CO2 greenhouse gases (N2O and CH4) of the fuel in use will be included in the CIec value for biomass fuels.

#### Disaggregated default values

Low-carbon-intensity fuel production pathway Disaggregated default values for cultivation (gCO2e/MJ) Disaggregated default values for processing (gCO2e/MJ) Disaggregated default values for transportation and distribution (gCO2e/MJ)
Sugar beet ethanol (no biogas from slop, natural gas as process fuel in conventional boiler) 9.6 26.3 2.3
Sugar beet ethanol (with biogas from slop, natural gas as process fuel in conventional boiler) 9.6 13.6 2.3
Sugar beet ethanol (no biogas from slop, natural gas as process fuel in CHP planta) 9.6 18.5 2.3
Sugar beet ethanol (with biogas from slop, natural gas as process fuel in CHP planta) 9.6 10.6 2.3
Sugar beet ethanol (no biogas from slop, lignite or coal as process fuel in CHP planta) 9.6 38.3 2.3
Sugar beet ethanol (with biogas from slop, lignite or coal as process fuel in CHP planta) 9.6 22.0 2.3
Corn (maize) ethanol, (NG as process fuel in conventional boiler) 25.5 29.1 2.2
Corn (maize) ethanol (NG as process fuel in CHP planta) 25.5 20.8 2.2
Corn (maize) ethanol (lignite or coal as process fuel in CHP planta) 25.5 40,1 2.2
Corn (maize) ethanol (forest residues as process fuel in CHP planta) 25.5 2.6 2.2
Other cereals including wheat, but excluding corn (maize) ethanol (NG as process fuel in conventional boiler) 27 29.3 2.2
Other cereals including wheat, but excluding corn (maize) ethanol (NG as process fuel in CHP planta) 27 21.1 2.2
Other cereals including wheat, but excluding corn (maize) ethanol (lignite or coal as process fuel in CHP planta) 27.0 42.5 2.2
Other cereals including wheat, but excluding corn (maize) ethanol (forest residues as process fuel in CHP planta) 27.0 2.2 2.2
Sugar cane ethanol 17.1 1.8 9.7
The part from renewable sources of ETBE Equal to that of the ethanol production pathway used
The part from renewable sources of TAEE Equal to that of the ethanol production pathway used
Rape seed (canola) biodiesel 32.0 16.3 1.8
Sunflower biodiesel 26.1 16.5 2.1
Soybean biodiesel 21.2 16.9 8.9
Palm oil biodiesel (open effluent pond) 26.2 42.6 6.9
Palm oil biodiesel (process with methane capture at oil mill) 26.2 18.5 6.9
Waste cooking oil biodiesel 0 13.0 1.9
Animal fats from rendering biodiesel 0 19.1 1.7
Hydrotreated vegetable oil from rape seed (Canola) 33.4 15.0 1.7
Hydrotreated vegetable oil from sunflower 26.9 14.7 2.0
Hydrotreated vegetable oil from soybean 22.1 15.2 9.2
Hydrotreated vegetable oil from palm oil (open effluent pond) 27.4 38.9 7.0
Hydrotreated vegetable oil from palm oil (methane capture at oil mill) 27.4 13.6 7.0
Hydrotreated oil from waste cooking oil 0 14.3 1.7
Hydrotreated oil from animal fats from rendering 0 20.3 1.5
Wheat straw ethanol 1.8 6.8 7.1
Waste wood Fischer-Tropsch diesel in free-standing plant 3.3 0.1 10.3
Farmed wood Fischer-Tropsch diesel in free-standing plant 8.2 0.1 8.44
Waste wood Fischer-Tropsch petrol in free-standing plant 8.2 0.1 10.3
Farmed wood Fischer-Tropsch petrol in free-standing plant 12.4 0.1 8.4
Waste wood dimethylether (DME) in free-standing plant 3.1 0 10.4
Farmed wood dimethylether (DME) in free-standing plant 7.6 0 8.6
Waste wood methanol in free-standing plant 3.1 0 10.4
Farmed wood methanol in free-standing plant 7.6 0 8.6
Fischer-Tropsch diesel from black-liquor gasification integrated with pulp mill 2.5 0 7.7
Fischer-Tropsch petrol from black-liquor gasification integrated with pulp mill 2.5 0 7.9
Dimethylether (DME) from black-liquor gasification integrated with pulp mill 2.5 0 7.7
Methanol from black-liquor gasification integrated with pulp mill 2.5 0 7.9
Generic low-carbon-intensity fuel pathway (liquid) 34.7 42.6 10.4
Biomethane - wet manure (open digestate, no off-gas combustion)b,c 0 145.2 1.0
Biomethane - wet manure (open digestate, off-gas combustion)b,c 0 124.2 1.0
Biomethane - wet manure (close digestate, no off-gas combustion)b,c 0 31.7 0.9
Biomethane - wet manure (close digestate, off-gas combustion)b,c 0 10.7 0.9
Biomethane - maize whole plant (open digestate, no off-gas combustion)b 18.1 55.4 0
Biomethane - maize whole plant (open digestate, off-gas combustion)b 18.1 34.4 0
Biomethane - maize whole plant (close digestate, no off-gas combustion)b 17.6 33.3 0
Biomethane - maize whole plant (close digestate, off-gas combustion)b 17.6 12.3 0
Biomethane - biowaste (open digestate, no off-gas combustion)b 0 70.1 0.6
Biomethane - biowaste (open digestate, off-gas combustion)b 0 49.1 0.6
Biomethane - biowaste (close digestate, no off-gas combustion)b 0 34.5 0.5
Biomethane - biowaste (close digestate, off-gas combustion)b 0 13.5 0.5
Generic low-carbon-intensity fuel pathway (close digestate)(gas)b 17.6 34.5 0.9
Generic low-carbon-intensity fuel pathway (open digestate)(gas)b 18.1 55.4 1.0

a Default values for processes using CHP are valid only if all the process heat is supplied by CHP.
b For biomethane, emissions from processing include emissions from upgrading.
c The Directive provides manure credits that are subtracted from the total CI values.

#### Methodology for calculating credits from end-use transportation fuel switching to electric and hydrogen vehicles

The method of determining the number of credits created from end-use transportation fuel switching to electric and hydrogen vehicles is as follows:

Step 1: Determining quantity of energy supplied to zero-emissions vehicles for the year

1. For metered electricity used to charge electric vehicles delivered via a charging network operator, charging site host, original equipment manufacturer’s telematics or other smart metering technology

Energy = Electricity supplied for charging of electric vehicles within a province or territory × Energy Density

where,

Energy has units of megajoules (MJ)

Electricity has units of kilowatt hours (kWh); and

Energy Density for electricity is 3.6 $\frac{\mathsf{\text{MJ}}}{\mathsf{\text{kWh}}}$

1. For hydrogen used to fuel a hydrogen fuel cell vehicle via a hydrogen refuelling station (station site host), it is the total kilograms of hydrogen supplied:

Energy = Energy supplied to Zero Emission Hydrogen Vehicles × Energy Density

where,

Energy has units of megajoules (MJ)

Energy supplied to Zero Emission Vehicle has units of kg for hydrogen; and

Energy Density is 141.24 $\frac{\mathsf{\text{MJ}}}{\mathsf{\text{kg}}}$ for hydrogen

Step 2: Calculating the credits created for each type of vehicle listed in the table below, in tonnes of carbon dioxide equivalent for the compliance period

Credits = Energy × [(EER × CICI limit of fossil fuel displaced) – CInon-carbon energy] × 10-6

where,

Credits have units of tonnes of carbon dioxide equivalent (tCO2e)

Energy has units of megajoules (MJ);

EER is unitless;

CI has units of grams of carbon dioxide equivalent per megajoule of energy supplied $\left(\frac{{\mathsf{\text{gCO}}}_{2}\mathsf{\text{e}}}{\mathsf{\text{MJ}}}\right)$; and

The constant, 10-6, is a unit conversion with units $\frac{{\mathsf{\text{tCO}}}_{2}\mathsf{\text{e}}}{{\mathsf{\text{gCO}}}_{2}\mathsf{\text{e}}}$ .

CICI limit of fossil fuel displaced is provided in Table 2 for the liquid fossil fuel being displaced, and will vary according to the compliance period. For 2021, it is the same carbon intensity limit as 2022.

CInon-carbon energy of the electricity will be set out in a document incorporated by reference in the Regulations, which will accompanies the Fuel Lifecycle Assessment Modelling Tool. These default values will be updated periodically. The carbon intensity value will be representative of the provincial grid mix in which the electric vehicle charging took place, with options to modify this value if the participant has input data regarding the source and quantity of electrical energy supplied to electric vehicles at the charging station for a period of at least 12 consecutive months.

CInon-carbon energy of hydrogen must be determined either by using disaggregated default values or the Fuel Lifecycle Assessment Modelling Tool provided at least 12 consecutive months of steady-state operating data has been obtained (see section 5.2). For hydrogen, the station site host must obtain information from its hydrogen suppliers to determine the mass-weighted average carbon intensity of all hydrogen distributed to fuel cell vehicles during the compliance period.

Table 6 – Energy efficiency ratios by application
Fuel/vehicle application Energy efficiency ratio
Electric vehicles for light- and medium-duty (replacing gasoline) 4.1
Electric vehicles for heavy-duty applications (replacing diesel) 5
Electric trains 3.3
Electric commercial marine vessels 3.1
Hydrogen fuel cell vehicles for light- and medium-duty applications (replacing gasoline) 2
Hydrogen fuel cell vehicles for heavy-duty applications (replacing diesel) 1.9

#### Methodology for calculating credits from other end-use transportation fuel switching

Step 1: Determining quantity of energy supplied to vehicles for transportation

Energy = Volume × Energy Density

where,

Energy has units of megajoules (MJ)

Volume has units of cubic metres (m3); and

Energy Density has units of $\frac{\mathsf{\text{MJ}}}{{\mathsf{\text{m}}}^{3}}$

Step 2: Calculating the credits created in tonnes of carbon dioxide equivalent for the compliance period

Credits = Energy × [CIDifference] × 10-6

where,

Credits have units of tonnes of carbon dioxide equivalent (tCO2e);

Energy has units of megajoules (MJ);

CIDifference has units of grams of carbon dioxide equivalent per megajoule of energy supplied $\left(\frac{{\mathsf{\text{gCO}}}_{2}\mathsf{\text{e}}}{\mathsf{\text{MJ}}}\right)$ ; and

The constant is a unit conversion with units $\frac{{\mathsf{\text{tCO}}}_{2}\mathsf{\text{e}}}{{\mathsf{\text{gCO}}}_{2}\mathsf{\text{e}}}$ .

End-use fuel switching to compressed or liquefied natural gas and propane – the fuelling facility owner is the default credit creator

CIDifference natural gas = [CILiquid Class Crdit Reference – CICompressed or Liquefied Natural Gas]

CIDifference propane = [CILiquid Class Credit Reference – CIPropane]

End-use fuel switching to compressed or liquefied renewable natural gas and hydrogen - fuelling facility owner default credit creator portion

CIDifference crng, lrng and H2

= [CILiquid Class Credit Reference – CICompressed or Liquefied Natural Gas or Hydrogen]

+ [CINatural Gas – CIInterim Credit Reference for Natural Gas]

End-use fuel switching to renewable propane - fuelling facility owner default credit creator portion

CIDifference Rpropane

= [CILiquid Class Credit Reference – CIPropane]

+ [CIPropane – CIInterim Credit Reference for Propane]

End-use fuel switching to renewable natural gas, renewable propane and hydrogen – producer and importer default credit creator portion

CIDifference RNG and H2 = [CIInterim Credit Reference for Natural Gas – CIRNG or Hydrogen]

CIDifference Rpropane = [CIInterim Credit Reference for Propane – CIRenewable Propane]

CILiquid Class Credit Reference, CIInterim Credit Reference for Natural Gas and CIInterim Credit Reference for Propane will be provided within the Regulations.

CILiquid Class Credit Reference, will vary according to the year in which the fuel is produced or imported (see Table 3). For 2021, it is the same credit reference as 2022.

CICompressed or Liquefied Natural Gas and CIPropane will be set out in a document incorporated by reference in the Regulations, which will accompany the Fuel Lifecycle Assessment Modelling Tool. These values will be updated periodically.

CIRNG or Hydrogen and CIRenewable Propane must be determined either by using disaggregated default values or the Fuel Lifecycle Assessment Modelling Tool, provided at least 12 consecutive months of steady-state operating data has been obtain

### Annex VI: Sustainability criteriaFootnote 8

#### Agricultural biomass feedstockFootnote 9

High indirect land-use change-risk feedstock

1. The portion of a biofuel comprised of high indirect land-use change-risk feedstock will not count towards credit creation for the Clean Fuel Standard. For the purpose of determining high indirect land-use change-risk feedstock, the following two criteria must both apply:
1. The average annual expansion of the global production area of the feedstock since 2008 is higher than 1% and affects more than 100,000 hectares, and;
2. The share of the above expansion into land with high-carbon stock is higher than 10%, in accordance with the following formula:

${\mathsf{\text{x}}}_{\mathsf{\text{hcs}}}=\frac{{\mathsf{\text{x}}}_{\mathsf{\text{f}}}+2.6{\mathsf{\text{x}}}_{\mathsf{\text{p}}}}{\mathsf{\text{PF}}}$

where,

xhcs = share of expansion into land with high-carbon stock (%);

xf = share of expansion into forest (%);

xp = share of expansion into wetland including peatland (%);

PF = productivity factor.

PF shall be 1.7 for maize, 2.5 for palm oil, 3.2 for sugar beet, 2.2 for sugar cane and 1 for all other crops.

Both criteria above are determined based on information in Table 9 at the end of this annex, which is subject to periodic revision.

High biodiversity land

1. Raw agricultural material used to produce biofuels may not come from land with a high biodiversity value, namely land that had one of the following statuses on or after January 1, 2008, whether or not the land continues to have that status:
1. Primary forest – forest and other wooded land of native species, where there is no clearly visible indication of human activity and the ecological processes are not significantly disturbed;
2. Highly biodiverse forest – forest and other wooded land which is species-rich and not degraded, or has been identified as being highly biodiverse by the relevant competent authority, unless evidence is provided that the production of that raw material did not interfere with those nature protection purposes;
3. Highly biodiverse grassland spanning more than one hectare that is:
1. natural, namely grassland that would remain grassland in the absence of human intervention and that maintains the natural species composition and ecological characteristics and processes; or,
2. non-natural, namely grassland that would cease to be grassland in the absence of human intervention and that is species-rich and not degraded and has been identified as being highly biodiverse by the relevant competent authority, unless evidence is provided that the harvesting of the raw material is necessary to preserve its status as highly biodiverse grassland.

High carbon stock land

1. Raw agricultural material used to produce biofuels may not come from land with high carbon stock, namely land that had one of the following statuses on or after January 1, 2008, whether or not the land continues to have that status:
1. Forest – land spanning more than 0.5 hectares where the tree canopy covers more than 10% of the total land area and the trees can grow to a height of more than 5 metres ( does not include land that is predominantly urban or used for agricultural purposes); or,
2. Wetland - land that is saturated with water long enough to promote aquatic processes as indicated by poorly drained soils, hydrophytic vegetation and various kinds of biological activity which are adapted to a wet environment; or,
3. Peatland – wetlands with massive deposits of peat that are at least 40 cm thick, unless evidence is provided that the cultivation and harvesting of that raw material does not involve drainage of previously undrained soil.

#### Forest biomass feedstock

Sustainable forest management

1. Forest biomass used to produce biofuels must meet the following criteria:
1. the country in which forest biomass was harvested has national or sub-national laws applicable to forest harvesting, as well as monitoring and enforcement systems in place ensuring:
1. the legality of harvesting operations;
2. forest regeneration of harvested areas;
3. that areas designated by international or national law or by the relevant competent authority for nature protection purposes, including in wetlands and peatlands, are protected;
4. that forest management and related activities are carried out in ways that maintain or improve biodiversity and soil quality and otherwise minimize negative impacts; and
5. that forest management and related activities maintain or improve the long-term productivity of the forest.
2. when evidence referred to in point (a) of this paragraph is not available, management systems are in place at forest sourcing area level ensuring:
1. the legality of harvesting operations;
2. forest regeneration of harvested areas;
3. that areas designated by international or national law or by the relevant competent authority for nature protection and conservation purposes, including in wetlands and peatlands, are protected unless evidence is provided that the harvesting of that raw material does not interfere with those nature protection purposes;
4. that forest management and related activities are carried out in ways that maintain or improve biodiversity and soil quality and otherwise minimize negative impacts; and
5. that forest management and related activities maintain or improve the long-term productivity of the forest.

#### All feedstocks

Protected areas

1. Raw material used to produce biofuels may not come from land that had one of the following statuses on or after January 1, 2008, whether or not the land continues to have that status:
1. designated by law or by the relevant competent authority for nature protection purposes;
2. designated for the protection of rare, threatened or endangered ecosystems or species recognized by international agreements or included in lists drawn up by intergovernmental organizations or the International Union for the Conservation of Nature; or,
3. notwithstanding (a) and (b) above, biomass from certain rehabilitation activities in protected areas may be permitted, for example salvaging stands of trees damaged by fire, infestations, or natural disasters, if deemed appropriate by national forest governing organizations.

Table 9: Global Crop Expansion Values (European Commission 2018)Footnote 10

Cereals Average annual expansion of production area since 2008 (kha) Average annual expansion of production area since 2008 (%) Share of expansion into land referred to in Article 29(4)(b) and (c) of Directive (EU) 2018/2001 Share of expansion into land referred to in Article 29(4)(a) of Directive (EU) 2018/2001
Wheat -263.4 -0.1 1% -
Maize 4027.5 2.3 4% -
Sugar crops Average annual expansion of production area since 2008 (kha) Average annual expansion of production area since 2008 (%) Share of expansion into land referred to in Article 29(4)(b) and (c) of Directive (EU) 2018/2001 Share of expansion into land referred to in Article 29(4)(a) of Directive (EU) 2018/2001
Sugar cane 299.8 1.2 5% -
Sugar beet 39.1 0.9 0.1% -
Oil crops Average annual expansion of production area since 2008 (kha) Average annual expansion of production area since 2008 (%) Share of expansion into land referred to in Article 29(4)(b) and (c) of Directive (EU) 2018/2001 Share of expansion into land referred to in Article 29(4)(a) of Directive (EU) 2018/2001
Rapeseed 301.9 1.0 1% -
Palm oil 702.5 4.0 45% 23%
Soybean 3183.5 3.0 8% -
Sunflower 127.3 0.5 1% -

### Annex VII: Sectors for accreditation of third-party performing verification/validation

Table 10: Sectors for accreditation of third-party performing verification/validation
Technical areas Organization/facility level activities
Sector 1 Production and import of liquid fossil fuels: gasoline, diesel fuel, jet fuel, kerosene and light and heavy fuel oils
Sector 2 Production and import of renewable fuels: denatured ethanol, biodiesel or renewable diesel fuel
Sector 3 Processing and import of natural gas, including liquefied natural gas (LNG) and compressed natural gas (CNG)
Sector 4 Delivery of natural gas to end users and distribution companies
Sector 5 Renewable and bio-gas production
Sector 6 Production and import of propane
Sector 7 Production and import of hydrogen
Sector 8 Electric Power Distribution and Transaction
Sector 9 Production and import of solid fossil fuels: coal and petroleum coke

### Annex VIII: Reporting Requirements

This annex provides a description and a list of information requested for each of the report required by the Clean Fuel Standard. Figure 3 on next page presents the sequencing of the reporting requirements under the Clean Fuel Standard.

The reports are presented in the following order:

1. Registration Report;
2. Credit Creation Report;
3. Compliance Report;
4. Credit Clearance Mechanism Compliance Report;
6. Credit Balance Report;
7. Credit Net Proceeds Report;
8. Carbon-Intensity Pathway Report; and
9. Verification Report.

Figure 3: Clean fuel standard reporting timelines

Long description

Year X

• April 30: Q1 Credit Creation for year X (compliance categories 2 and 3)
• July 31: Q2 Credit Creation for year X (compliance categories 2 and 3)
• October 31: Q3 Credit Creation for year X (compliance categories 2 and 3)

Year X+1

• January 31: Q4 and/or Annual Credit Creation for year X (compliance categories 1, 2 and 3)
• January to June: True-up and fund contribution to comply with year X requirements
• June 30:
• Annual report for:
• Compliance Report (primary suppliers)
• Credit Balance Report (credit creators)
• Credit Net Proceeds Report (original equipment manufacturers / charging networks operators)
• Carbon Intensity Pathway Report
• Verification report and verification opinion for:
• Credit Creation Report(s)
• Credit Net Proceeds Report
• Compliance Report
• Carbon Intensity Pathway Report
• August to September
• August 1: Credit Clearance Mechanism, if needed
• October to November
• Additional fund contribution, if needed
• November 30: Credit Clearance Mechanism Compliance Report (includes deficit carry forward, if any)

Note: Credits created in year X+1 cannot be used to comply with year X

#### Registration report

Report description

Submission by primary suppliers and voluntary credit creators to register as a participant in the Clean Fuel Standard.

Reporting requirements

1. The following information with respect to the primary supplier and to the voluntary credit creator:
1. organization name;
2. civic address or GPS coordinates;
4. the name, title, civic and postal addresses, telephone number and if any, email address and fax number, of their authorized official; and
5. the name, title, civic and postal addresses, telephone number and if any, email address and fax number, of a contact person, if different from the authorized official.
2. The following information with respect to each facility at which the primary supplier produces fuel in the liquid class:
1. name;
2. civic address or GPS coordinates;
3. The name of each province into which the primary supplier imports fuel (fossil and low-carbon-intensity) in the liquid class from outside Canada.
4. A declaration of the intention to create compliance credits by (select all that apply):
1. reducing the carbon intensity of a type of fuel in the liquid class by the carrying out of a CO2e emissions reduction project;
2. reducing the carbon intensity of a type of fuel in the gaseous class by the carrying out of a CO2e emissions reduction project;
3. reducing the carbon intensity of a type of fuel in the solid class by the carrying out of a CO2e emissions reduction project;
4. producing a low-carbon-intensity liquid fuel for use as a fuel in Canada whether as neat fuel or as part of a blend with a type of fuel in the liquid class;
5. importing a low-carbon-intensity liquid fuel for use as a fuel in Canada whether as neat fuel or as part of a blend with a type of fuel in the liquid class;
6. producing biogas, renewable natural gas, renewable propane, or hydrogen for use as a fuel in Canada whether as neat fuel or as part of a blend with a type of fuel in the gaseous class and is not destroyed;
7. importing biogas, renewable natural gas, renewable propane, or hydrogen for use as a fuel in Canada whether as neat fuel or as part of a blend with a type of fuel in the gaseous class and is not destroyed;
8. attributing a lowering of the carbon intensity of a type of fuel in the liquid class by a displacement based on end-user fuel switching of what would otherwise be the use of a volume of a type of fuel in the liquid class as a fuel in a conveyance in Canada by the use in a conveyance in Canada of a volume of propane, compressed natural gas, liquefied natural gas, renewable propane, compressed renewable natural gas, liquefied renewable natural gas, compressed hydrogen or liquefied hydrogen; and
9. attributing a lowering of the carbon intensity of a type of fuel in the liquid class by a displacement based on end-user fuel switching of what would otherwise be the use of a volume of a type of fuel in the liquid class as a fuel in a conveyance in Canada by the use as an energy source in an electric vehicle or hydrogen fuel cell vehicle in Canada, of electricity or hydrogen, as the case may be.

#### Credit creation report

Report description

The Annual (and Quarter 4) Credit Creation report must be submitted by credit creators to create credits that have not yet been created in a previous quarter, including credits from emission reduction projects.

Voluntary reports may be submitted by credit creators for the first three quarters to create credits, if desired to access credits prior to the annual report.

Reporting requirements

1. The name of the credit creator.

CO2 emission reduction projects

1. The following information with respect to each CO2e emissions reduction project carried out:
1. the alphanumeric identifier assigned to it;
2. the number of credits that the credit creator created for the compliance period; and
3. additional information required to be reported in accordance with the quantification methodology for the project.

Production/import of liquid and/or gaseous low-carbon-intensity fuels

1. The following information with respect to each liquid or gaseous low-carbon-intensity fuel that is produced or imported into Canada during the reporting period, for which credits are created:
1. name of the low-carbon-intensity fuel;
2. the alphanumeric identifier for its approved carbon intensity;
3. the energy density, expressed in MJ/m3;
4. whether the low-carbon-intensity fuel is produced or imported;
5. the name, civic address (or GPS coordinates) and mailing address of the facility in which the fuel was produced;
6. if the low-carbon-intensity fuel was imported into Canada, the province in which it was imported and the point of entry into that province (information not necessary for gaseous low-carbon-intensity fuels);
7. quantity of each low-carbon-intensity fuel produced at the facility or imported into Canada in each province, expressed in cubic meters;
8. if the low-carbon-intensity fuel is part of a blend, the components of that blend and the proportion of that blend that is a low-carbon-intensity fuel;
9. in the case of a low-carbon-intensity fuel that is imported into Canada, the method of transport (information not necessary for gaseous low-carbon-intensity fuels); and
10. the quantity of the low-carbon-intensity fuel produced at the facility or imported into Canada that was transferred to another participant with credits, expressed in cubic meters, and the name of the participant to whom the low-carbon-intensity fuel was transferred.

End-user fuel switching – propane and natural gas

1. The following information with respect to propane, compressed natural gas, or liquefied natural gas for which credits were created by the owner or operator of the fuelling station in the period referred to in the report as a result of end-user fuel switching:
1. the name, the civic address (or GPS coordinates) and mailing address of each fuelling station where the fuel was supplied to vehicles;
2. for each fuelling station reported in 4(a), the name of each fuel supplied to vehicles;
3. for each fuel reported in 4(b)
1. the default carbon intensity value applicable to the fuel;
2. the energy density, expressed in MJ/m3; and
3. the quantity supplied to vehicles, expressed in cubic metres at STP.

End-user fuel switching – renewable propane, renewable natural gas, and hydrogen – fuelling stations

1. The following information with respect to renewable propane, renewable natural gas or hydrogen for which credits were created by the owner or operator of the fuelling station in the period referred to in the report as a result of end-user fuel switching:
1. the name, the civic address (or GPS coordinates) and mailing address of each fuelling station where the fuel was supplied to vehicles;
2. for each fuelling station reported in 5(a), the name of each fuel supplied to vehicles;
3. for each fuel reported in 5(b)
1. the energy density, expressed in MJ/m3;
2. the quantity supplied to vehicles, expressed in cubic metres at STP; and
3. the name of the person from whom the fuel was purchased.

End-user fuel switching – renewable propane, renewable natural gas, and hydrogen – producer/importer

1. The following information with respect to renewable propane, renewable natural gas or hydrogen for which credits were created by the producer or importer of the fuel in the period referred to in the report as a result of end-user fuel switching:
1. the name of each fuel;
2. for each fuel reported in 6(a)
1. the alphanumeric identifier for its approved carbon intensity;
2. the energy density, expressed in MJ/m3;
3. the name, civic address (or GPS coordinates) and mailing address of the facility in which it was produced;
4. if the fuel was imported into Canada, the province in which it was imported and the point of entry into that province;
5. the quantity of the fuel supplied to each fuelling station, expressed in cubic metres;
6. the name, the civic address (or GPS coordinates) and mailing address of each fuelling station to which the fuel was supplied; and
7. the name of the owner or operator of each fuelling station.

End-user fuel switching – electricity for electric vehicles and hydrogen for hydrogen fuel cell vehicles

1. The following information with respect to electricity that is supplied to residential customers for use in an electric vehicle:
1. a description of the technology used to meter the electricity supplied (e.g., vehicle telematics, network charging station or other technology);
2. for each technology type listed in a, the quantity of electric energy supplied to electric vehicles charged within a province or territory, expressed in kWh; and
3. the choice of the default carbon intensity of electricity or the alphanumeric identifier for the approved carbon intensity of the electricity, as set out in the regulations.
2. The following information with respect to electricity that is supplied to electric vehicles by a charging network operator for non-residential charging:
1. For each province in which electricity is supplied to electric vehicles by a charging network operator, the choice of the default carbon intensity of electricity or the alphanumeric identifier for the approved carbon intensity of the electricity, as set out in the regulations;
1. For each type of displacement by electricity of gasoline or diesel per province, the name or identifier for each charging station.
2. For each charging station reported in 8 (a) i),
1. the energy efficiency ratio for that application, as set out in the regulations, and
2. the quantity of electricity supplied to vehicles as measured by meters or other devices that measure the quantity of electricity supplied when charging those electric vehicles, expressed in kWh.
3. The following information with respect to electricity that is used to charge electric vehicles by a charging site host:
1. For each province in which electricity is supplied to electric vehicles by a charging site host, the choice of the default carbon intensity of electricity or the alphanumeric identifier for the approved carbon intensity of the electricity, as set out in the regulations;
2. For each type of displacement by electricity of gasoline or diesel per province, the name or identifier for each charging station.
3. For each charging station reported in 9(b),
1. the energy efficiency ratio for that application, as set out in the regulations, and
2. the quantity of electricity supplied to vehicles as measured by meters or other devices that measure the quantity of electricity supplied when charging those electric vehicles, expressed in kWh.
4. The following information with respect to hydrogen that is supplied for use as an energy source for hydrogen fuel cell vehicles for which credits were created by the owner or operator of a hydrogen fuelling station:
1. the name, the civic address (or GPS coordinates) and mailing address of each fuelling station where the fuel was supplied to vehicles;
2. for each fuelling station reported in 10 (a),
1. the quantity of hydrogen supplied to light-duty and medium-duty vehicles by each hydrogen fuelling station dispenser meter, in kilograms;
2. the quantity of hydrogen supplied to heavy-duty vehicles by each hydrogen fuelling station dispenser meter, in kilograms; and
3. the alphanumeric identifier for the approved carbon intensity of the hydrogen.

#### Compliance report

Report description

Submission by primary suppliers to quantify the reduction requirement for the liquid class and to demonstrate how compliance is being achieved with credits (including cross-class trading) or by a contribution into the Compliance Fund Mechanism. The primary supplier will be required to participate in the Credit Clearance Mechanism (CCM) if they have a credit shortfall.

Submission deadline: June 30th of the following compliance period.

Reporting requirements

1. The name of the primary supplier.
2. The following information with respect to each fuel in the liquid class that is produced or imported into Canada during the compliance period referred to in the report:
1. name of the fuel;
2. whether the fuel is produced or imported;
3. if the fuel is produced, the name, civic address (or GPS coordinates) and mailing address of each facility in which it was produced;
4. if the fuel was imported into Canada, the province in which it was imported and the point of entry into that province;
5. in the case of a fuel that is imported into Canada, the method of transport;
6. quantity of each fuel produced at each facility;
7. quantity of each fuel imported into Canada in each province, expressed in cubic meters;
8. if the fuel is part of a blend, the components of that blend and the proportion of that blend that is a fossil fuel;
9. quantity of each fuel sold or delivered for a use other than being combusted, expressed in cubic meters;
10. quantity of jet fuel used on an international flight that begins or ends in Canada, expressed in cubic meters; and
11. quantity of fuel sold or delivered for use in a marine vessel that has a non-Canadian port as its destination.
3. The primary supplier’s reduction requirement in respect to each type of fuel in the liquid class.
4. The number of credits that were created as a result of a contribution to an approved fund and the receipt.
5. With respect to the credits that the primary supplier will use to satisfy the reduction requirement:
1. the amount of credits used, the account in which the credit is located (liquid, gaseous or solid), and the year each credit was created;
2. of the credits reported in section 5(a), how many credits were acquired in trade;
3. of the credits reported in section 5(a) how many credits were acquired with a fuel;
4. for the purposes of satisfying the minimum 2% low-carbon-intensity fuel content requirement for diesel and light fuel oil, the number of credits reported in section 5(a) that were created with respect to biodiesel or hydrogenation-derived renewable diesel, the corresponding alphanumeric identifier for its approved carbon intensity and the year each credit was created; and
5. for the purposes of satisfying the minimum 5% low-carbon-intensity fuel content requirement for gasoline, the number of credits reported in section 5(a) that were created with respect to a low-carbon-intensity fuel other than biodiesel and hydrogenation-derived renewable diesel, the corresponding alphanumeric identifier for its approved carbon intensity and the year each credit was created.
6. The portion of the primary supplier’s unsatisfied deferred reduction requirement from a previous compliance period in respect of each type of fuel in the liquid class and the associated interests.
7. With respect to the credits that a primary supplier will use to satisfy the deferred portion of its obligation and associated interests, referred to in section 6 of this report:
1. the number of credits;
2. the account in which the credit is located (liquid, gaseous or solid); and
3. the year each credit was created;
8. The number of credits that will remain in each of its accounts once all necessary credits have been used.
9. If the primary supplier requires additional credits to satisfy the reduction requirement, whether the primary supplier is willing to have its name shared to other participants as part of the Credit Clearance Mechanism.
10. The number of the credits that are referred to in section 8 of this report, that were created in respect of the liquid class before the end of a given compliance period, which the primary supplier voluntarily pledges to offer in the Credit Clearance Mechanism.

#### Credit Clearance Mechanism compliance report

Report description

Submission by primary suppliers who participated in the Credit Clearance Mechanism to demonstrate how compliance is achieved, either by the use of credits acquired in the Credit Clearance Mechanism or by contributing to the Compliance Fund Mechanism (for up to 10% of their obligation), and/or by deferring up to 10% of their obligation to the following compliance period, if eligible.

Submission deadline: November 30th of the following compliance period

Reporting requirements

1. The name of the primary supplier.
2. The number of credits that were created as a result of a contribution to an approved fund and the receipt.
3. The number of credits that were acquired in transfer from the Credit Clearance Mechanism.
4. In respect of each type of fuel in the liquid class, the amount of the reduction requirement that had not been satisfied on June 30 following the compliance period, expressed in tonnes of CO2e.
5. With respect to the credits that the primary supplier will use to satisfy the reduction requirement specified in section 4 of this report:
1. the amount of credits used, the account in which the credit is located (liquid, gaseous or solid), and the year each credit was created;
2. for the purposes of satisfying the minimum 2% low-carbon-intensity fuel content requirement for diesel and light fuel oil, the number of credits reported in section 5(a) that were created with respect to biodiesel or hydrogenation-derived renewable diesel, the corresponding alphanumeric identifier for its approved carbon intensity and the year each credit was created; and
3. for the purposes of satisfying the minimum 5% low-carbon-intensity fuel content requirement for gasoline, the number of credits reported in section 5(a) that were created with respect to a low-carbon-intensity fuel other than biodiesel or hydrogenation derived renewable diesel, the corresponding alphanumeric identifier for its approved carbon intensity and the year each credit was created.
6. With respect to the reduction requirement specified in section 4 of this report, the portion of the reduction requirement for the given compliance period that has not been satisfied and that is carried-forward to the next compliance period, if allowed.
7. In respect of each type of fuel in the liquid class, the portion of the primary supplier’s deferred reduction requirement and interests that had not been satisfied on June 30 following the compliance period, expressed in tonnes of CO2e.
8. With respect to the credits that the primary supplier will use to satisfy the deferred reduction requirement specified in section 7 of this report:
1. the number of credits;
2. the account in which the credit is located; and
3. the year each credit was created.
9. With respect to the deferred reduction requirement specified in section 7 of this report, the portion of the reduction requirement that has not been satisfied and the amount carried forward into the next compliance period, if allowed.
10. The number of credits that will remain in each of its account once all necessary credits have been used.

Report description

Primary suppliers that operate refineries or upgraders in Canada will be required to submit annually operating data and characteristics of the crude oil they used. These data will be used to monitor the national average carbon intensity of crude oil used in Canada (see section 4.1), to monitor the carbon intensity of refined petroleum products, improve the low-carbon-intensity fuel pathways in the Fuel Lifecycle Assessment Modelling Tool and to calculate benchmarks for facilities.

Submission deadline: November 30th of the following compliance period

Reporting requirements for each facility

1. The name of the primary supplier;
2. The name, civic address (or GPS coordinates) and mailing address of the facility;
3. Actual process unit throughput;
4. Electricity imports, generated on site, transfers to affiliates, and sales to third parties;
5. Hydrogen imports, produced on site, transfers to affiliates, and sales to third parties;
6. Heat/steam imports, produced on site, transfers to affiliates, and sales to third parties;
7. Additional information on cogeneration, if any (unit capacity, stand alone or onsite, electricity generation, heat production, direct CO2e emissions);
8. Other energy input (natural gas, etc.);
9. CO2 Imports, Transfers to Affiliates and Sales to third parties;
10. For a refinery:
1. Crude Slate % by year, by point of origin (geographical locations);
2. Crude Quality Scoring: API, Specific Gravity, Sulphur;
3. Total input barrels: of crude oil and condensate, crude diluents, feedstock processed in process units or blend stock blended into refinery products and finished product additives;
4. Non-crude input barrels: of raw materials processed in process units;
5. The production amounts of petroleum coke, distinguished from carbon on catalyst within the plant; and
6. Fluid catalytic cracker coke on catalyst (% of volume consumed from fresh feed).
1. Total input barrels: bitumen and diluent to be distilled and otherwise processed by the bitumen upgrader, other raw materials that are processed by the upgrader, typically downstream from the bitumen upgrader’s atmospheric distillation unit, and blending components and additives that are blended by the upgrader into its final products;
2. Non-Bitumen/Non-Diluted Bitumen Sensible Heat: raw materials if processed by the upgrader such as hydrogen and hydrogen rich gas, natural gas for hydrogen plant feed, etc.;
3. The mass of carbon actually exported from Upgrader in the form of syngas; and
4. The production amounts of petroleum coke.

#### Credit balance report

Report description

Submission by all voluntary credit creators (i.e. who are not primary suppliers) to report the credit balance in each of their accounts (liquid, solid, and gaseous) after the true-up period and to pledge credits, if desired, for sale in the Credit Clearance Mechanism.

Submission deadline: June 30th of the following compliance period.

Reporting requirements

1. The name of the voluntary credit creator.
2. The number of credits that they created in the compliance period with respect to each class of fuel.
3. With respect to each fuel class, the number of credits that were transferred to another participant in the given compliance period.
4. With respect to each fuel class, the number of credits that were transferred with fuel to another participant in the given compliance period.
5. The number of credits that are in each of their accounts (liquid, gaseous or solid) on December 31st of the given compliance period.
6. The number of credits that are referred to in section 5 of this report and that were created in respect of the liquid class before the end of the given compliance period, which they voluntarily pledge to offer to transfer through the Credit Clearance Mechanism;
7. The number of pledged credits in section 6 of this report that were created for the production or import of low-carbon-intensity liquid fuel; and
8. The number of credits that were transferred in the previous year’s Credit Clearance Mechanism.

#### Credit net proceeds report

Report description

Submission by original equipment manufacturers, charging network operators and other residential charging credit creators to report the net proceeds from the sale of credits and to report how the net proceeds were used in accordance with the Regulations.

Submission deadline: June 30th of the following compliance period.

Reporting requirements

1. The name of the credit creator.
2. The number of credits traded during the compliance period.
3. The total proceeds from the trading of those credits.
4. The taxes collected on those proceeds, by tax type.
5. If the credit creator is an original equipment manufacturers, the amount that they used to:
1. expand the infrastructure for electric vehicle charging in order to facilitate long-distance travelling with an electric vehicle or ownership of an electric vehicle for those without access to residential charging;
2. inform consumers of the benefits of owning or using electric vehicles as compared to vehicles powered by gasoline or diesel, including environmental benefits and comparative costs;
3. offer financial incentives for the purchase or operation of an electric vehicle; or
4. improve or update the electricity grid to accommodate additional electric vehicle charging by transferring revenue to electricity distribution utilities for this purpose.
6. If the credit creator is a charging network operator, the amount that they used to
1. expand the infrastructure for electric vehicle charging in order to facilitate long-distance travelling with an electric vehicle or ownership of an electric vehicle for those without access to residential charging;
2. inform consumers of the benefits of owning or using electric vehicles as compared to vehicles powered by gasoline or diesel, including environmental benefits and comparative costs; or
3. offer financial incentives to the electric vehicle owner.
7. A description of each activity that the credit creator carried out that is described in paragraph 5‍(a) to (f) or 6‍(a) to (c)‍ of this report.
8. The amount of net proceeds from the trading of credits in the compliance period that must be used in accordance the Regulations, and that have not yet been used.
9. The amount of net proceeds from the trading of credits in the proceeding compliance period that must be used in accordance the Regulations, and that have not yet been used.
10. The amount of net proceeds from the trading of credits in the compliance period that ended on the December 31 that is two years before end of the compliance period that were required to be used in accordance with the Regulations, and that were not used.

#### Carbon-intensity pathway report

Report description

Submission by participants that create credits for low-carbon-intensity fuels produced or imported, or for electricity, where a non-default provincial electricity grid carbon intensity value is obtained. This report is, to demonstrate that the low-carbon intensity fuel or the electricity it supplied in the compliance period is accurately represented by the approved carbon intensity value or the use of disaggregated default values.

Submission deadline: June 30th of the following compliance period.

Reporting requirements for low-carbon-intensity fuels

1. The name of the primary supplier or voluntary credit creator.
2. The name of the facility where the fuel was produced.
3. The name of the fuel
4. The unique alphanumeric identifier for the approved carbon intensity of the fuel, provided by Environment and Climate Change Canada.

Additional requirements when disaggregated default values are used to obtain a low-carbon-intensity fuel intensity value:

1. For the previous compliance period
1. the type of each feedstock used to produce the fuel;
2. the region where each of those feedstocks were extracted or cultivated;
3. the mode of transport used for the last stage of transport of each of those feedstocks to the facility and the mode of transport used for the finished fuel from the facility to the terminal ;
4. the type and quantity of thermal energy consumed at the facility;
5. the quantity of electricity from the grid as well as the type and quantity of electricity produced on site;
6. the lifecycle carbon-intensity determined for the fuel; and
7. third-party verification opinion respecting the accuracy of carbon intensity value.

Additional requirements when the Fuel Lifecycle Assessment Modelling Tool is used to obtain a low-carbon-intensity fuel intensity value:

1. For the previous compliance period
1. a copy of the updated Fuel Lifecycle Assessment Modelling Tool inputs and outputs that were used to support the carbon intensity determination (with input data for a 12 month consecutive period, in which the facility is in steady state operation)
2. the lifecycle carbon intensity determined for the fuel; and
3. third-party verification opinion respecting the accuracy of carbon intensity value.

Reporting requirements for electricity

1. The name of the primary supplier or voluntary credit creator.
2. The name of the location where the charging stations are located.
3. The unique alphanumeric identifier for the approved carbon intensity of the electricity, provided by Environment and Climate Change Canada.
4. For the previous compliance period;
1. the source and quantity of electrical energy supplied to electric vehicles at the charging stations;
2. the lifecycle carbon intensity determined for the electricity; and
3. third party verification opinion respecting the accuracy of carbon intensity value.

#### Verification report

Report description

The report must be submitted by both Primary Suppliers and Voluntary Credit Creators after submitting regulatory reports or applications requiring third-party verification (i.e., annual verification of Credit Creation Reports; Credit Net Proceeds Report; Carbon-Intensity Pathway Report; Compliance Report; Credit Clearance Mechanism Compliance Report; and applications for approval of carbon intensity determination).

The report confirms that submitted data and regulatory reports or applications are accurate and reliable, and were prepared in accordance with the regulatory requirements.

It includes the Verification Opinion issued by the Verification Body who conducted the verification process.

Submission deadline: June 30 of the following compliance period.

Reporting requirements

1. The following information with respect to the participant:
1. Participant name;
2. Head Quarters civic address of its physical location and geographical coordinates;
4. the name, title, civic and postal addresses, telephone number and if any, email address and fax number of a the authorized official; and
5. the name, title, civic and postal addresses, telephone number and, if any, email address and fax number, of a contact person, if different from the authorized official.
2. The following information with respect to each facility:
1. Facility owner;
2. Facility name and ID , if provided by Environment and Climate Change Canada;
3. Facility civic address of its physical location and geographical coordinates, and boundaries;
4. If applicable, the facility’s National Pollutant Release Inventory identification number assigned by the Minister – S.48 of CEPA;
3. Information respecting the person responsible for the facility:
1. An indication as to whether this person is the owner or operator of the facility and their name and civic address;
2. Name, title, civic and postal addresses, telephone number and, if any, email address and fax number of their authorized official;
3. Name, title, civic and postal addresses, telephone number and, if any, email address and fax number of a contact person, if different from the authorized official; and,
4. A statement that it is t the responsible person responsibility to prepare the report
4. Information respecting the verification
1. Name and civic address of the verification body
2. Name, telephone number and email address of the lead verifier (Designated Signing Authority) for the verification team that conducted the verification
3. Name and contact information of the accreditation organization by which the verification body is accredited and the date of the verification body’s accreditation
4. Name, telephone number and email address of the Independent Reviewer
5. Names and functions of individual members of the verification team
6. Identification of the Report, including the data and compliance or credit creation period addressed
7. Description of the objectives and scope of the verification,
8. Identification of the verification criteria
9. The final verification plan including the strategic analysis and risk assessment
10. Description of the data sources and information supporting the verification report
1. For the verification of carbon-intensity values, a detailed description of entities in the supply chain contributing to carbon -intensity parameters
11. Details of the verification evidence gathering activities and their results , including:
1. A summary of the assessments, data sampling, test, and reviews that were conducted during the verification;
2. The results on :
1. the assessment of the data management system and controls, if applicable;
2. the assessment of the data and information;
3. the assessment against the criteria;
3. A description of the verification activities undertaken, including information on where each activity was undertaken;
4. The date of the site visit(s);
12. A record of the material discrepancies, omissions, and misreporting; and gaps, identified during the verification, in the data, information or methods used in the preparation of the application, quarterly or annual report and the effect on the resulting calculations required by the Clean Fuel Standard regulations, identifying:
1. Unresolved and resolved material qualitative verification findings, including the actions taken to resolve those findings and the evaluation of those actions and decision to accept them;
2. Unresolved and resolved material quantitative verification findings of omissions, discrepancies and misreporting or misstatements; including the actions taken to resolve those findings and the evaluation of those actions and decision to accept them;
13. An assessment of the impact of:
1. Unresolved qualitative verification findings;
2. Unresolved quantitative verification findings of omissions, discrepancies and misreporting or misstatements on the compliance report or other information that is being verified;
14. A declaration that the verification was done in accordance with ISO 14064-3;
15. The verification body’s conclusions with respect to the application, quarterly or annual report, including the level of assurance and any qualifications or limitations;
16. A declaration – signed and dated by the lead verifier – stating that the independence requirements are compliant with and that any real or potential threat to the verification body’s independence have been effectively managed;
17. A declaration – signed and dated by the Independent Reviewer- stating their approval of the verification report;
18. If a modified opinion is expressed, a description of the reason for the modification;
19. A verification opinion by the verification body as to whether assertion and supporting data – as reported by a person responsible for the covered facility in the report or the application, as the case may be – are free from material misstatement, and as to whether the report/ application was prepared in accordance with the regulations; and
20. The date of the opinion.

### Annex IX: Process for correcting errors

#### Scenario 1: Credits were created with erroneous data (i.e. invalid credits)

Long description

Box 1

• Invalid credits were issued
• The organization or third-party verifier finds error
• Go to Box 2
Box 2
• Credit creator to notify Minister within 5 days
• Go to Box 3a or 3b
Box 3a
• If the invalid credits are in the original credit creator's account
• Go to Box 4a
Box 3b
• If the invalid credits are no longer in the credit creator's account (ie., traded or used)
• Go to Box 4b
Box 4a
• Invalid credits are revoked by Minister
• End
Box 4b
• Minister creates a Credit Correction Obligation
• Go to Box 5
Box 5
• Credit creator to replace credits within 90 days by creating or acquiring credits of the same class and category and notirifes the Minister upon total replacement.
• In the case where credits of same class and category are not available, the credit creator may replace the invalid credits with credits of same class.
• Go to Box 6
Box 6
• Credits retired by Minister upon receipt of notification
• End

#### Scenario 2: Credits were never created

Long description

Box 1

• Organization noticed that credits were not created due to unintentional omission of information
• Go to Box 2a or 2b
Box 2a
• By January 31 of the following compliance period
• Go to Box 3a
Box 2b
• Post January 31 of the following compliance period
• Go to Box 3b
Box 3a
• Business as usual (ie., missing information from a quarterly report may be included in a subsequent quarterly report or annual report pertaining to the dame compliance period)
• End
Box 3b
• No retroactive credit creation
• End