News Release

CANADA'S NEW GOVERNMENT TAKES NEW STEP TO PROTECT THE ENVIRONMENT WITH BIOFUELS

SASKATOON, Saskatchewan, December 20, 2006 - Canada's New Government today took further action to combat climate change, announcing it would regulate the use of renewable fuels in Canada and deliver $345 million to assist farmers and rural communities seize new market opportunities in the agricultural bioproducts sector.

The Honourable Rona Ambrose, Minister of the Environment, announced the Government would regulate an annual average renewable content of five per cent in gasoline by 2010. She added the Government intends to regulate a two per cent requirement for renewable content in diesel fuel and heating oil by 2012.

"Our Government understands Canadians' concerns around the quality of the air we breathe. We know that cleaner fuel means less pollution," Minister Ambrose said. "Requiring the use of renewable fuels fulfills a commitment by our government. Through these regulations, we are keeping with our approach toward meaningful action, and we will ensure that our objectives are met."

The Honourable Chuck Strahl, Minister of Agriculture and Agri-Food and Minister for the Canadian Wheat Board, announced $345 million for two agriculture programs that will help bolster the development of biofuels and other bioproducts. The Agricultural Bioproducts Innovation Program and the Capital Formation Assistance Program for Renewable Fuels Production are designed to create new market opportunities for Canada's agricultural producers.

"Advancing Canada's bio-based economy is a priority for Canada's New Government," said Minister Strahl. "These programs are an important step in achieving the government's objective of five per cent renewable content in transportation fuels by 2010, while also creating new economic opportunities for our farmers and agricultural sector."

"This is a win-win-win situation," added Minister Ambrose. "Canadians will reap environmental benefits, our farmers and rural communities will profit, and by continuing to work towards a viable domestic biofuels industry we will secure Canada's place in the growing bio-economy."

Of the $345 million:

• $200 million through the Capital Formation Assistance Program for Renewable Fuels Production will provide producers with incentives for participation in new renewable fuels production capacity; and
• $145 million through the Agricultural Bioproducts Innovation Program will provide support for cross-sector research networks conducting scientific research and development related to the advancement of a Canadian bio-based economy.

Biofuels are a renewable energy source produced from organic materials. Bioproducts are manufactured from renewable resources such as agricultural crops and organic residual matter, and include products such as biofuels, biofibres and biopharmaceuticals.

Additional information about these Agriculture and Agri-Food Canada programs and how to apply is available at www.agr.gc.ca.

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For more information, media may contact:

Media Relations
Agriculture and Agri-Food Canada
Ottawa, Ontario
613-759-7972
1-866-345-7972

Jeff Howard
Press Secretary
Minister Strahl's Office
613-759-1059

Media Relations
Environment Canada
819-934-8008
1-888-908-8008

Alexandre Vovan
Press Secretary
Minister Ambrose's Office
819-997-1441

Backgrounder

ACTION ON RENEWABLE FUEL

WHAT IS RENEWABLE FUEL?

"Renewable fuel" is a broad term that encapsulates a range of fuels made from renewable resources such as agricultural crops and other organic matter. These include ethanol made from grains, renewable diesels such as biodiesel made from vegetable oils and animal fats, as well as next-generation renewable fuels under development made from non-food agricultural residues, such as wheat straw, and forest biomass. Gasoline vehicles made since 1980s can use up to 10% ethanol in gasoline, and many diesel vehicle manufacturers include in the warranty the use of 5% or higher biodiesel blends.

BENEFITS TO THE ENVIRONMENT AND TO CANADA'S AGRICULTURE INDUSTRY

The transportation sector in Canada accounts for more than 27% of the greenhouse gases emitted in Canada each year. The new federal regulations will require enough renewable fuel to reduce greenhouse gas (GHG) emissions by about 4 megatonnes per year, the GHG equivalent of taking almost one million vehicles from the road. Grain-based ethanol results in life-cycle GHG emission reductions of 30-40% compared to gasoline, and biodiesel made from oil seeds results in life-cycle GHG emission reductions of over 60% compared to conventional diesel. Next-generation renewable fuels, such as cellulosic ethanol, are expected to provide even greater environmental benefits - up to 100% GHG reductions on a life-cycle basis. Life-cycle values account for all GHG emissions resulting from the production of the organic material, fuel production and distribution.

Increased renewable fuels production in Canada will increase the demand for feedstock and open new markets for Canadian agricultural crops. Also, opportunities for greater involvement in biofuels production facilities will allow agricultural producers to become participants in the value chain and increase their share of the benefits from renewable fuels production in Canada.

The expansion of renewable fuels production capacity will also create increased opportunities for developing value-added co-products and help pave the way for the eventual establishment of biorefineries that produce a range of value-added products, beyond fuels and feed production, from agricultural biomass.

Through development and implementation of programs focused on agricultural participation in the Canadian renewable fuels industry, the federal government is ensuring that the 2010 and 2012 targets are implemented in ways that result in the greatest possible benefit to the agriculture sector, including through investment in biofuels production facilities by agricultural producers.

REQUIRING USE THROUGH REGULATION

The Government intends to develop and implement a federal regulation requiring renewable fuels. This will be done under the Canadian Environmental Protection Act, 1999 (CEPA 1999). Amendments to the Fuels Division of CEPA 1999 are proposed under Canada's Clean Air Act and are needed for an effective and efficient regulation.

The regulation will require an average annual renewable fuel content of at least 5% calculated based on the volume of gasoline, commencing in 2010. The requirement could be met by renewable content in either the gasoline or diesel/heating oil pools. Canada's New Government also intends to put in place an additional requirement for an average 2% renewable fuel content in diesel fuel and heating oil, upon verification of renewable diesel fuel use under the range of Canadian conditions. This is intended to come into effect by no later than 2012. While gasoline is used almost entirely on-road, a large share of the diesel fuel pool is not used for transportation. The requirement of 2% renewable content in the diesel and heating oil pool is approximately equivalent to a renewable fuel content requirement for 5% for on-road diesel fuel.

The requirement for 5% of gasoline will amount to a requirement for about 2.1 billion litres of renewable fuel per year in 2010; 2% of diesel fuel and heating oil will require almost another 600 million litres in 2012.

The regulations are expected to be complex and take at least two years to develop. Design and implementation of a regulation will require consultation with provinces, territories, affected sectors and other stakeholders. A Notice of Intent will be issued in early 2007, with discussions, consultations and studies undertaken throughout 2007.

CAPITAL FORMATION ASSISTANCE PROGRAM

The Capital Formation Assistance Program is a $200 million, four-year program designed to encourage agricultural producers' participation in the renewable fuels industry. The program will provide repayable capital funding arrangements to renewable fuels projects based on agricultural producers' contributions to the biofuels facilities. It will also build on the existing Biofuels Opportunities for Producers Initiative's technical feasibility and business planning components by providing agricultural producers with incentives for participation in new renewable fuels production capacity, starting on April 1, 2007.

The individual capital funding arrangements will be based on the level of producers' contributions to eligible project costs and capped at the lesser 25% of total project costs or a maximum of $25 million per project. Measures will be in place to ensure participation opportunities for all regions in Canada.

For more information on the Capital Formation Assistance Program, call 613-759-6175.

THE AGRICULTURAL BIOPRODUCTS INNOVATION PROGRAM

The Agricultural Bioproducts Innovation Program (ABIP) is a $145 million, five-year program designed to promote research, development, technology transfer and the commercialization of agricultural bioproducts, including biofuels, in Canada.

The program will benefit farmers by generating new agricultural knowledge and technology and facilitating its transfer to those that can commercialize these innovations for the benefit of farmers and others in Canada's bioeconomy.

The program will support the establishment, development and operation of bioproducts research networks that focus on:

• Feedstock production through the development of crop platforms and cropping systems suitable for conversion to bioproducts;
• Developing effective and efficient technologies for biomass conversion; and
• Product diversification through technologies relevant to production of bioproducts (e.g. industrial chemicals, biomaterials and health products).

Through ABIP, each bioproduct research network may receive a total of up to $25 million beginning in 2007 and ending in 2011. Eligible network participants include universities, the private sector, federal government departments and agencies, and other public sector research organizations.