June 1, 2023

Forecast of Renewable Diesel Requirements for the Canada Clean Fuel Standard

The Canadian Clean Fuel Standard (CFS) was established by the Canadian federal government to reduce carbon intensity (CI) in transportation fuels. Low CI Renewable Diesel (RD) is blended with higher CI diesel derived from fossil fuels to meet CFS CI requirements. As the Canadian government reduces the CI required over time, more RD will be needed to meet regulatory requirements.

Renewable Diesel Requirements Will be a Function of Overall Vehicle Stock in Canada

To meet government mandates for lower CI fuels, more renewable diesel will be required to be blended going forward. How much will depend on the overall requirements for diesel, which is a function of overall vehicle stock. Diesel vehicles are more fuel-efficient than gasoline cars due to their thicker density, low rpm performance, and higher compression ratio. These diesel traits lead to more torque, which performs reliably over time and distance for heavy load hauling and towing. As such, diesel engines (without long charge times associated with EVs) will likely be the segment that lags in converting to electric or in economic parlance – imperfect EV substitutes.

The following charts illustrate Incorrys forecast for vehicles by fuel type for both yearly market-share and overall vehicle stock.

• Battery electric vehicles (BEVs) increase in yearly market-share (50% in 2035) at the expense of gasoline vehicles while diesel vehicle sales remain static.
• By 2035, Incorrys expects both gasoline and diesel vehicles overall market-share to be reduced as BEVs increase. However, fossil fuel vehicles will still be a major component in overall vehicle stock.

Yearly Vehicle Sales

Overall Vehicle Stock

How Much Renewable Diesel is Required in Canada?

Overall, diesel demand in Canada stagnates through the 2020-2035 period as the electric vehicle market cuts into light duty diesel demand. Incorrys has assumed inputs of fossil fuel at 102 Carbon Intensity (CI) and Renewable Diesel at 40 CI. The following figure illustrates:

• RD requirements to meet CFS CI limits are 77,000 Bbl/d in 2024, increasing to 122,000 Bbl/d by 2030.
• Increased requirements for theoretical renewable diesel are assumed to decrease from 89.5 gCO₂e/MJ in 2023 to 79 gCO₂e/MJ in 2030 (Incorrys has assumed CI limit is flat thereafter).
• Fossil fuel inputs are declining however, success from Canadian Oilsands Pathways Alliance members in implementing Carbon Capture and Storage, process improvements, solvent substitution for steam, and electric efficiency could lower input CI. Lower fossil fuel CI would increase their market and reduce theoretical renewable diesel input requirements.

Canadian Diesel Demand

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Incorrys Takeaway

Diesel vehicles have a specific niche which will make them less susceptible to competition from the EV segment. As such, diesel demand will decline at a slower rate than gasoline vehicles. Increased RD can be substituted to meet CFS CI limits for diesel demand however, increased costs to consumers is expected as expensive new RD processing capacity will be required and biodiesel input will be more costly than fossil fuel.