Canada: Energy & Climate Change Update - June 2009

The California Low Carbon Fuel Standard

Reducing the greenhouse gases (GHGs) associated with fuels used in a jurisdiction should help lower GHG emissions. That is the aim of a low carbon fuel standard (LCFS), an approach being widely adopted throughout North America as part of the climate change initiatives of state, provincial and other governments.

Low Carbon Fuel Standards

An LCFS is a performance standard that prescribes a reduced GHG emission intensity overall for fuels used in a jurisdiction. Usually GHG emissions are calculated for LCFS purposes using a full fuel cycle analysis, sometimes referred to as a "wells-to-wheels" analysis; this takes into account GHGs at all stages in each fuel's lifecycle, including the production (extraction, processing or refining), transportation, distribution and use of the fuel.1 LCFS would set an overall maximum allowable level of GHG emissions per unit of fuel energy produced, and generally incorporates flexibility mechanisms allowing for the trading of emissions credits among fuel suppliers which are below or above that level. The allowable level of GHG emissions are to be reduced each year as required to meet the overall GHG emission reduction objective. It is hoped that by adopting an LCFS, overall emissions can be lowered on a cost efficient basis.

The California LCFS

The California LCFS was initiated through Executive Order S-1-07, issued on January 18, 2007. The Order calls for a reduction in the carbon intensity of California's transportation fuels by at least 10 percent by 2020. The California Air Resources Board (ARB) is tasked with putting the new LCFS into effect through regulation. The California LCFS is to be measured on the full fuels cycle basis referred to above, "and may be met through market-based methods by which Providers exceeding the performance required by a LCFS shall receive credits that may be applied to future obligations or traded to Providers not meeting the LCFS."2

On April 23, 2009, the ARB approved a regulation to implement the California LCFS. The Regulation will apply to any transportation fuel that is sold, supplied or offered for sale in California, and to any person who, as a regulated party (defined in s. 95481 and specified in s. 95484(a)) is responsible for a transportation fuel in a calendar year. The types of transportation fuels to which the LCFS applies include (see s. 95480.1(a)) California reformulated gasoline, California diesel fuel, fossil compressed natural gas (CNG) or fossil liquefied natural gas (LNG), biogas CNG or biogas LNG, electricity, compressed or liquefied hydrogen, a fuel blend containing hydrogen, a fuel blend containing greater than 10 percent ethanol by volume, a fuel blend containing biomass-based diesel, denatured fuel ethanol, neat biomass-based diesel, and any other liquid or non-liquid fuel.

Certain alternative fuels—electricity, compressed and liquefied hydrogen, a hydrogen blend, fossil CNG derived from North American sources, biogas CNG, and biogas LNG (see s. 95480.1(b))—are presumed to be compliant with the carbon intensity standards set out in the regulation through December 31, 2020, but may opt-in to the LCFS if they choose to generate credits. By opting-in, a party becomes a regulated party and must meet the LCFS reporting obligations and requirements.

The regulation uses 2010 as a base year but the only requirements for 2010 are to report. Carbon intensity reduction requirements begin in 2011 with a required one-quarter-percent reduction over 2010 levels in that year, and then gradually increasing to a 10-percent reduction over 2010 levels by 2020 (meeting the 2020 target).

LCFS Adoption and Implementation in California

The ARB has identified the LCFS as an early action item with 2010 as the implementation target. The current timeline is as follows:

January 1, 2010 – LCFS Regulation comes into effect, requiring all regulated parties to meet reporting standards that year including quarterly progress reports (May 31, August 31, November 30, February 28), as well as annual compliance reports (due on April 30th following the reporting year) for 2010 and each year thereafter. There will be no reduction requirements until 2011.

January 1, 2011 (and for each year thereafter) – Regulated parties must meet the average carbon intensity requirements set forth in Table 1 and Table 2 of s. 95482 (as described above) for their transportation gasoline and diesel fuel, respectively, in each calendar year.

Implications of the LCFS for Canada's Oil Sands

The California LCFS could have significant impacts on Canada's oil sands. In an April 2009 letter to California Gov. Arnold Schwarzenegger, Canadian federal Natural Resources Minister Lisa Raitt said the state's LCFS "discriminated" against oil sands and "could be perceived as an unfair trade barrier" between the two countries.3 The lifecycle emissions of oil sands crude is higher than conventional oil,4 perhaps by up to 30 percent on a "wells-to-wheels" basis, creating a barrier for the Canadian oil sands industry to send its product to the American market. The actions to introduce an LCFS in California may be followed in other jurisdictions.5 These LCFS actions could force oil sands producers to divert their exports to markets that do not have such standards, or to invest in expensive abatement technology, beyond what Canadian federal and provincial rules demand.6

What can be done?

Canadian oil sands producers and other interested persons are canvassing alternatives including lobbying both in California, federally in the U.S., at other state and industry levels and with Canadian governments and industry participants. As well, legal challenges on a constitutional basis in the United States or by the Canadian government under the WTO or NAFTA rules or even a case under Chapter 11 of NAFTA by one or more aggrieved plaintiffs are possible. We will continue to monitor these developments.


1. Full Fuel Cycle Assessment Well to Wheels Energy Inputs, Emissions, and Water Impacts (February 2007), online:

2. Office of the Governor of the State of California, Executive Order S-01-07, online:

3. Lisa Raitt quoted in Sheldon Alberts', "U.S. low-carbon bill could put whammy on oilsands" CanWest News. Don Mills, Ont.: Apr. 28, 2009.

4. Ibid.

5. Members of the Midwest Governors Association have signed an "Energy Security and Climate Stewardship Platform and Greenhouse Gas Accord" that includes the development of low carbon fuel standards. Signatories include: Wisconsin, Minnesota, Illinois, Indiana, Iowa, Michigan, Kansas, Ohio, South Dakota, and Manitoba.

A group of northeastern states has agreed to reduce greenhouse gas emissions from transportation fuels and other sources by developing a regional low carbon fuel standard. Participating are: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont.

Both British Columbia and Ontario have committed to developing an LCFS in line with California's.

6. Shawn McCarthy, "California rule could hit oil sands producers" The Globe and Mail. Toronto, Ont.: Apr. 25, 2009. pg. B5.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.