Author
Partner, Disputes, Montréal
On December 1, 2021, the Government of Québec adopted by Order in Council 1502-2021 the Regulation respecting the integration of low-carbon-intensity fuel content into gasoline and diesel fuel (the Regulation), which came into force on December 15, 2021. As an additional measure to reduce the greenhouse gas emissions (GHG) related to the transportation sector, the Regulation lines up with the province’s 2030 Energy Policy and 2030 Plan for a Green Economy. Both policies were adopted within the climate change framework, and with the objective of promoting energy transition, sustainability and a green economy in the province of Québec.
The stated objective of this Regulation is to reduce the dependence on petroleum products and to accelerate the reduction of GHG emissions to 37.5% below 1990 levels by 2030. The Regulation is added to the existing federal Renewable Fuels Regulations, such that a distributor will be required to comply with both the federal and provincial regimes. The Regulation defines a distributor as “(1) a manufacturer that, in Québec, supplies a wholesaler or retailer of gasoline or diesel fuel or that retails gasoline or diesel fuel in Québec; or (2) a person who brings gasoline or diesel fuel into Québec, or causes it to be brought into Québec, and who supplies a wholesaler or retailer of gasoline or diesel fuel in Québec or retails gasoline or diesel fuel in Québec.”
More precisely, the Regulation provides for the integration of low-carbon-intensity fuel content of 10% in gasoline and 3% in diesel starting January 1, 2023, and gradually increasing to 15% in gasoline and 10% in diesel by January 1, 2030, except where otherwise stipulated by the Regulation.[1] According to the Government of Québec, such measures will contribute to the reduction of up to 1.78 million tons of GHG emissions in 2030, helping Québec reach its target reduction in GHG emissions by 2030. Moreover, the Regulation is intended to support and promote the development of the emerging bioenergy sector in Québec.
In order to add a certain degree of flexibility and to ensure compliance with the above-mentioned requirements, the Regulation sets out a mechanism for the purchase and sale of credits where one credit corresponds to one litre of low-carbon-intensity fuel content. A distributor who reaches and exceeds the required minimum percentage for the integration of low-carbon-intensity fuel content in gasoline or diesel may choose either to sell the credits accumulated over a year or to transfer up to 20% of the minimum percentage for the next year. Conversely, a distributor who fails to reach the target set out by the Regulation may purchase the outstanding credits in order to comply with the Regulation.
The Regulation also provides for reporting requirements and, for each petroleum equipment installation, the maintenance of an annual register that should remain available for seven years following the calendar year it covered.
While the government’s initiative to reduce GHG emissions is commendable, distributors will no doubt encounter significant complexity in complying with both the federal and provincial requirements.
[1] Notably, if the fuel is used for scientific research and industrial purposes other than combustion, or for military purposes (diesel only), the requirements established by the Regulation will not apply.
