Future of Fuel: Across Borders

From the United States, to Canada, the future of fuel continues to be a hot topic and area for growth. Although much progress has been made, we’ll need to see additional discussion, support, and action as new laws are set forth and new policymakers enter the playing field. 

Theme #1: Advancement of Electrification  

Electrification advancement is a key priority from a federal and regional perspective. Although environmental benefits of electrification are clear, how quickly can the market, automakers, and infrastructure ramp up? The passenger market seems to be a clear frontrunner on priority, in fact, President Joe Biden unveiled a $2 trillion plan to rebuild U.S. infrastructure that includes a call to modernize 20,000 miles of roads, renovate more than 10,000 bridges, promote the adoption of electric vehicles (EVs), and set energy industry workers with the task of plugging orphan oil and gas wells (Opis). Commercial applicability will likely be slower and vary based on routes/applications.

In California, two senators are calling on President Biden to follow their state’s lead and set a date for a national ban on the sale of new cars with internal combustion engines (ICE), though it doesn’t sound like there’s any official commitment at this point. In addition, Democrats Diane Feinstein and Alex Padilla asked President Biden to tighten federal fuel economy standards and reestablish California’s authority to set greenhouse gas emissions and zero-emission vehicle standards. Even without policy in place, many automakers are leaning towards a greener future, driving electrification of more vehicles models and creating long term strategy around incorporating cleaner vehicle production.

U.S. House Energy and Commerce Committee Democrats introduced broad climate-change legislation that targets a reduction in U.S. greenhouse gas (GHG) emissions 50% below 2005 levels by 2030 and achieves a “100 percent clean economy” by 2050. Similar bills containing comparable language have already been presented and time will tell if action is placed behind these legislative requests. 

Theme #2: Beyond Borders  

To the North, Canada is driving growth in utilization of renewable natural gas (RNG) which positively impacts regional emission reduction targets.

Canada announced financial support to expand its alternative fueling network, unveiling a $3 million investment for the installation of three new natural gas stations, bringing the total to 22. The new sites will include on-site storage and ease of use dispensers providing resources to drivers traveling along the Trans-Canada Highway. This new investment provides transportation companies with alternative fuel to reduce transportation-related emissions.

From a provincial perspective, British Columbia’s Low Carbon Fuel Standard has been working to improve air quality throughout the region since 2010. Like that of California and Oregon, it rewards consumption of low carbon fuels, such as renewable natural gas. Credit trading is really heating up as of late, with BC-LCFS credit values hitting a record high in the first quarter of 2021. The report said 214,263 credits were transferred in Q1, jumping substantially from the 24,265 credits that changed hands in Q4 of 2020.

Aside from transportation, renewable natural gas is starting to take hold within the thermal market. Enbridge Gas recently announced the details of a new voluntary renewable natural gas program for its customers that will reduce overall emissions from Ontario’s gas supply. The new OptUp Program will offer residential and small business customers who buy their gas from the utility an affordable option to contribute monthly, ultimately helping the natural gas supply.  

Theme #3: Investing in our Future

The power of financial institutions in prioritizing sustainability is key to accelerated adoption and it’s encouraging to see that large financial groups are highlighting opportunities for organizations that embrace sustainability.

According to Axios, BlackRock has named Paul Bodnar, a climate finance and diplomacy veteran who held senior roles in the Obama administration, as its global head of sustainable investing. BlackRock is the world’s largest asset manager and there’s increasing attention to the finance industry’s role in both fossil fuel and clean energy finance with the industry.

Morgan Stanley will support low-carbon solutions by mobilizing $750 billion by 2030. The updated commitment is a three-fold increase on the initial commitment of the $250 billion the U.S. bank announced in 2018 and builds on the company’s commitment to net-zero financed emissions by 2050. according to OPIS.

Reaching $6B in 2020 in the United States, the transportation electrification movement attracted the majority portion of Venture Capital (VC) investments. Most investments were in C and D funding, indicating maturity of companies in this market.

These trends are showing that both global institutions as well as individuals are considering sustainable solutions when pursing their investment goals and growth areas. Why the shift? Driving factors include decision makers questioning companies to seek more sustainable investment solutions. In addition, regulators and governments continue to expand their focus when incorporating sustainability into their investments and their decision making.

Check out prior editions of our monthly Future of Fuel posts that expand upon drivers shaping the alternative fuel market. You can also subscribe below to future editions or reach out to continue the conversation.