With the federal government’s proposed plan to reduce transportation emissions targeted for a 2022 launch, policy experts say the CFS will boost electric vehicle sales by encouraging new investments in EV charging
Last month, the federal government published the proposed regulations for its Clean Fuel Standard, the policy designed to reduce the carbon emissions of transportation fuels in order to help meet the country’s target of net-zero emissions by 2050.
In addition to reducing the level of total emissions from liquid fuels, the CFS is expected to drastically bolster the strength of electric vehicle charging infrastructure across the country, thereby making it continually easier and less expensive for Canadians to use zero-emission forms of transportation.
As currently proposed, the policy would require fossil fuel suppliers to reduce the carbon intensity of the liquid fuels they produce and sell by approximately 13 per cent from 2016 levels by 2030. Those suppliers can create credits through one of three compliance categories in order to match the outlined performance standard.
Those three categories are “undertaking projects that reduce the lifecycle carbon intensity of fossil fuels,” “supplying customers with low carbon intensity fuels” and “investing in advanced vehicle technologies (e.g., electric or hydrogen fuel cell vehicles).”
That third category is of special interest to the electric vehicle industry, as parties other than fossil fuel providers are free to create and sell credits. For owners of EV charging networks, also known as aggregators, it means that they will earn credits whenever drivers use their charging equipment in public or at their homes, which they are then free to sell.
Reinvestment in infrastructure key
The CFS stipulates that the entirety of revenues from such credit sales would have to be reinvested “in financial incentives for EV owners or buyers and expanding charging infrastructure in residential or public locations.”
As a result, the more credits that charging networks are able to earn and sell through the use of their chargers, the more they will be able to reinvest in their own growth. One result of that, according to Fernando Melo, a consultant at Global Public Affairs, could be a significant reduction in the price of electric vehicle supply equipment (EVSE).
“Eventually, we’re going to see the prices of EVSE decrease because the creators are able to reduce the price of their charging equipment because they’re offsetting it with CFS credits, theoretically,” says Melo, who notes that those savings could be passed along to business owners hoping to purchase chargers for their businesses.
“It’s going to really help everyone involved in the supply chain. For instance, the electrician who does the installation it’ll really benefit because it’ll mean more work. Suppliers of EVSE are going to see more orders,” says Melo.
Lisa DeMarco, a senior partner and CEO at Resilient LLP, says the CFS also creates an opportunity for new players, especially electricity distribution companies, to build charging networks. It represents a “real opportunity to become an aggregator and to gain the credits and it allows for real investment in infrastructure,” says DeMarco.
More charging in more locations
Another natural result of the increased investment in charging infrastructure and decline of associated equipment costs would be a wider availability of charging stations, a fact which could potentially encourage a great deal of Canadians to go electric.
According to Melo, companies considering expanding their networks to underpopulated rural areas, for instance, “might actually have a use case to have a charging port there, because there is that reinvestment requirement and they’re sitting there on that larger and larger pool of money.”
“The everyday driver and Canadian is going to see a lot more charging rolled out across the country,” says Melo.
Melo notes that the CFS is designed to function alongside several other arms of the government’s climate plan in order to encourage Canadians to adopt low-emission forms of transportation.
“This is part of a constellation that’s really going to help drive investment into EVs and that’s going to help bring more and more people on board… it’s a policy that helps reinforce other signals like the carbon price… that are going to help create a drive to electrification.”
The comment period on the proposed regulations closes in early March. If enacted, the CFS comes into effect in late 2022.
This is a great way for the Federal Government to subsidize industry monopolies. With this strategy, it will only spur EV Charging for companies manufacturing EV charging stations and running their own network. By reinvesting 100% of all credits into more infrastructure it will be easy to create dumping in the market killing any competition around. In essence, the network providers will generate credits with the investor’s initial investment. There are many manufacturers of EV Charging stations offering innovative technologies and they won’t have access to credits because they don’t run a network.
The credits should go to whoever invested in the EV charging project. With this current format, we are creating industry monopolies with Federal / public money or investors’ money. If an organization isn’t financially invested in a project, it should not get compensated for it.
Credits should definitely generate credits but it needs to be better allocated to keep competition and innovation in this young industry.
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