Canada Proposes Biofuel Credit Boost for Domestic Output; Industry Calls It Only a First Step

Canada has unveiled proposed biofuel rules that give domestically produced biofuels higher credit multipliers, aiming to close the competitiveness gap with U.S. subsidies. Industry groups say the move is only a first step, with support still far short of U.S. levels and unlikely to spur new investment. (Photo: file image of a canola field, not a specific company site.)

Credits shift from use to production

Reuters reported that the proposed rules would replace a system in which only the use of biofuels earns credits and foreign-produced fuels receive the same amount. Under the new system, Canadian production would earn more credits; to meet low carbon-intensity limits, producers can either make low-intensity fuels themselves or buy credits from others. Canada's government said the changes are designed to close the competitiveness gap facing Canadian low-carbon fuel producers so they can compete fairly with U.S. producers.

Ethanol at 1.3x, below the 1.4x industry sought

The rules set different rates by fuel. For ethanol, Ottawa is proposing a 1.3 times credit multiplier for Canadian production, compared with the 1.4 rate the industry had sought. Andrea Kent, a board member of Renewable Industries Canada, said recognizing the problem and closing the gap to U.S. production subsidies are two different things, and the proposed rules provide only about one-third of the value of support U.S. ethanol producers receive. Mark Walker, executive director of the Canadian Oilseed Processors Association, said the changes are a step in the right direction but would result in net-neutral demand for canola, with the 1.4 times multiplier for biodiesel also falling short of U.S. support and failing to improve the competitiveness of Canadian production.

75-day review; feedstock not limited to Canada

The new rules face a 75-day review period. Canola Council of Canada President Chris Davison said he supports the government's decision to provide incentives for feedstock such as corn, soybeans and canola from Canada, the U.S. and Mexico, rather than Canada-only origin, given the countries' integration under the USMCA trade pact. The U.S. Renewable Fuels Association said it is pleased to see that Canada's proposed regulations will not prevent imported U.S. feedstocks from being processed to meet Canada's biofuels targets; U.S. regulations allow Canadian canola oil and other North American feedstocks to be used as domestic supplies in U.S. biofuels production.

Renewable diesel at 1.5x; Alberta plant built, Saskatchewan project on hold

Renewable diesel will receive a 1.5 times credit multiplier. Imperial Oil has built a major renewable diesel plant in Alberta, while a plant planned in neighbouring Saskatchewan by Federated Cooperatives is on hold due to regulatory worries. Imperial Oil CEO John Whelan said the company held talks with Ottawa as it developed these tweaks to the rules, and it is not uncomfortable with where this is headed. Canada is the world's top canola producer; the industry has long complained that U.S. subsidies are generally higher, discouraging production in Canada, and some Canadian fuel blenders have imported U.S. product because of a shortfall in domestic production.

Sources: Reuters (Ed White, 2026-11-02).