Ethanol industry wants changes to Canada’s Clean Fuel Regulations
Canada’s ethanol industry is urging urgent amendments to the Clean Fuel Regulations, warning subsidized U.S. ethanol imports are hurting domestic producers and delaying $1 billion in projects. Industry groups seek ethanol-specific credits, while biofuel demand boosts Canada’s canola sector, crushing capacity, and farmer incomes.
Canada’s ethanol industry is pushing hard for changes to the Clean Fuel Regulations (CFR).
Andrea Kent, vice-president of industry and government affairs with Greenfield Global, said Canada’s national biofuel policy needs to be fixed in a hurry.
“Let’s be really, really clear, what we’re seeing on the ethanol side is that the threat has already arrived,” she said during a recent webinar hosted by the Canadian Agri-Food Policy Institute and RealAgriculture.
Kent said Canada’s CFR treats ethanol imports the same as domestic production.
“If you’re a subsidized import you’re getting a double dip,” she said.
That is exactly what is happening with imported ethanol from the United States, which comes into the country after receiving the U.S. 45Z Clean Fuel Production Credit worth upwards of $0.30 per litre.
Canada imported 792 million gallons of U.S. ethanol in 2025 and is on pace to purchase even more in 2026.
Kent said Canadian ethanol demand is growing because it is a clean-burning fuel that is sold at a discount to gasoline and works in every car on the road.
“That growing market share is being captured by imports,” she said.
And that is a lost opportunity for Canadian corn growers.
The Canadian government announced in September 2025 that it would be making “targeted amendments” to the CFR to support the development of Canada’s low-carbon fuel sector.
“We currently have $1 billion in shovel-ready projects in Ontario and Quebec that are waiting for these amendments,” said Kent.
The ethanol sector wants something similar to what biomass-based diesel producers received in September when Ottawa announced $372 million in production incentives for that industry to make them more competitive with their U.S. counterparts.
Ethanol producers want a targeted amendment that introduces an ethanol-specific credit multiplier that will give Canadian producers additional compliance credits to help offset the 45Z subsidy on imported U.S. ethanol.
Shaun Haney, founder and owner of RealAgriculture, said Canada is going to have to be careful how it positions any CFR amendments that protect the Canadian ethanol industry from U.S. imports.
He noted that energy has been a key component of U.S. President Donald Trump’s new trade deals.
Kent said she hasn’t heard anything about ethanol being brought up in the crosshairs of the Canada-United States-Mexico Agreement negotiations.
“The U.S. isn’t going to raise it as an issue,” she said.
Canada’s ethanol producers are concerned that the targeted amendments may now be potentially delayed until 2027, further stalling investment in Canada’s ethanol sector.
“No bank is pulling the trigger right now until there’s a Canadian equalizer of some sort for ethanol in our national policy,” said Kent.
She worries that Canada is following the path of the United Kingdom, which lost its ethanol sector due to the lack of an appropriate trade response to the U.S. 45Z tax credit.
Chris Vervaet, senior associate with Bjornson and Associates, said the situation is better for Canada’s canola biomass-based diesel sector.
There is now demand for two billion litres of biodiesel and renewable diesel in Canada thanks to the CFR. That is double what it was five years ago.
That is seven to eight per cent of all the diesel fuel consumed in Canada.
“That’s really starting to move the needle,” he said.
An estimated 500,000 tonnes of canola oil or one million tonnes of seed is now being consumed by Canada’s biofuel sector annually.
By the end of 2026 Canada will have 15 million tonnes of canola crushing capacity, enough to process about three-quarters of Canada’s annual production.
Yorkton, Sask., alone has 4.5 million tonnes of crush capacity.
“Just let that sink in for a second,” said Vervaet.
“That’s approximately the amount of seed that we would sell to China on any given year.”
The growth in crush over the past few years has entirely been driven by demand from the biofuel sector, he said.
Brittany Wood, senior manager of transportation and trade policy with the Canadian Canola Growers Association (CCGA), said farmers are directly benefitting from the CFR.
The association recently completed an analysis showing the CFR has contributed nearly $600 million in value to the canola market in 2025-26. That amounts to $27 per tonne or $0.62 per bushel.
Vervaet noted that while Canada’s CFR has been a boon for the biomass-based diesel and canola sectors, it is a “precarious” policy fraught with challenges.
Biofuel policy was once a non-partisan issue, but that is no longer the case, and it faces a “stroke of pen” risk if there is a change in government. He would like to see it become non-partisan again.
Vervaet hopes the CFR will be amended to create a “ring fence” that prioritizes North American feedstocks.
He would also like to see the 238-page CFR simplified.
“It’s full of nuance and it’s full of technical mumbo jumbo,” he said.
Vervaet also noted that while the CFR is only a few years old, it is already time to start figuring out what federal biofuel policy will look like beyond 2030.
Wood said her organization has another concern surrounding potentially fraudulent used cooking oil (UCO) feedstock from overseas suppliers.
“We have definitely spoken to government about this concern several times,” she said.
The CCGA wants Canada to follow the lead of the European Union and the United States, which have safeguards in place to prevent fraudulent UCO from collecting biofuel credits.
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Source : The Western Producer
