Canada’s Clean Fuel Regulations present opportunities for home-grown biofuel: Senator Lewis
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Canada’s Clean Fuel Regulations (CFR), which took effect July 1, 2023, require producers and importers of gasoline and diesel to reduce the life cycle carbon intensity of gasoline and diesel used in Canada. The regulations established a credit market; one way to create credits was to supply low-carbon intensity fuels (for example: biodiesel, other renewable diesels and ethanol).
These regulations present an excellent opportunity for refiners of low-carbon intensity fuels as well as domestic grain and oilseed producers, but the United States is the main supplier of ethanol and biodiesel in the Canadian market; in fact, Canada is the number one export market for American biofuel producers. In 2024, 73% of the Clean Fuel Regulations credits generated came from imported fuels, the majority of which came from the U.S.
Biodiesel made from Canadian-grown plants, for example, competes with that made with used cooking oil (UCO), which is given a lower carbon intensity score under the CFR. This is problematic because, as noted by The Western Producer, “There are suspicions that some of the imported UCO-based biofuel is mislabeled palm oil biofuel, which has sustainability concerns due to the deforestation associated with palm plantations.” In 2025, both the U.S. and the European Union tightened regulations about used cooking oil. As a result, an ever-increasing supply of potentially fraudulent UCO is available for the Canadian marketplace.
Low-carbon intensity fuel made with ethanol also faces challenges. Ethanol is a liquid alcohol made by fermenting sugar or converted starch contained in agricultural or forest products; in Canada, ethanol is made mostly from corn and wheat. Canadian ethanol, however, competes against imports from the U.S.
As detailed in a November 2025 article by Matthew Frank in The Carillon, the American ethanol industry has several advantages over the Canadian ethanol industry. Then-U.S. president Joe Biden’s 2022 Inflation Reduction Act offered tax credits and grants for American ethanol and biofuel producers, allowing them to scale up production. Then, in 2025, President Donald Trump’s One Big Beautiful Bill Act extended existing tax credits and removed land use emissions penalties for ethanol production. Robert Parsons, an instructor at the University of Manitoba, told The Carillon that those tax credits add up to roughly 34 cents per litre for American biofuels, whether the fuel stays in the U.S. or is exported.
Meanwhile, Canadian ethanol producers have to pay the industrial carbon tax on emissions. Domestic producers compete with American producers to sell their products to Canadian consumers, but it isn’t a level playing field. They simply can’t turn the same profit as their American counterparts. Canadian businesses struggle while subsidized American product floods the Canadian market.
It’s worth reiterating that the CFR exist because biofuels help reduce greenhouse gas emissions. As Natural Resources Canada notes on its ethanol webpage: “Ethanol reduces greenhouse gas emissions because the grain or other biomass used to make the ethanol absorbs carbon dioxide as it grows. Although the conversion of the biomass to ethanol and the burning of the ethanol produce emissions, the net effect can be a large reduction in GHG emissions compared with fossil fuels such as gasoline.”
Biofuels also encourage regional economic growth and job creation. In the U.S., more than 40% of the corn crop and 40% of the soybean crop go into plant-based fuels.
In September 2025, in recognition of the challenges facing the domestic biofuel sector, Prime Minister Mark Carney announced that the federal government would make targeted amendments to the CFR. A backgrounder published by the Prime Minister’s Office said: “many Canadian [biofuel] facilities are idling or shutting down. The loss of this sector would deepen Canada’s reliance on imports from the United States and dampen demand for domestic agricultural feedstocks like canola.”
If Canada can get the new CFR right, it can be a win-win situation. Grain and oilseed producers will expand an important domestic market, and Canadian consumers of gasoline and diesel fuel will be able to reduce their environmental impact with every fill of the tank.
Senator Todd Lewis represents Saskatchewan in the Senate.
This article appeared in the May 6, 2026 edition of The Hill Times.
Canada’s Clean Fuel Regulations (CFR), which took effect July 1, 2023, require producers and importers of gasoline and diesel to reduce the life cycle carbon intensity of gasoline and diesel used in Canada. The regulations established a credit market; one way to create credits was to supply low-carbon intensity fuels (for example: biodiesel, other renewable diesels and ethanol).
These regulations present an excellent opportunity for refiners of low-carbon intensity fuels as well as domestic grain and oilseed producers, but the United States is the main supplier of ethanol and biodiesel in the Canadian market; in fact, Canada is the number one export market for American biofuel producers. In 2024, 73% of the Clean Fuel Regulations credits generated came from imported fuels, the majority of which came from the U.S.
Biodiesel made from Canadian-grown plants, for example, competes with that made with used cooking oil (UCO), which is given a lower carbon intensity score under the CFR. This is problematic because, as noted by The Western Producer, “There are suspicions that some of the imported UCO-based biofuel is mislabeled palm oil biofuel, which has sustainability concerns due to the deforestation associated with palm plantations.” In 2025, both the U.S. and the European Union tightened regulations about used cooking oil. As a result, an ever-increasing supply of potentially fraudulent UCO is available for the Canadian marketplace.
Low-carbon intensity fuel made with ethanol also faces challenges. Ethanol is a liquid alcohol made by fermenting sugar or converted starch contained in agricultural or forest products; in Canada, ethanol is made mostly from corn and wheat. Canadian ethanol, however, competes against imports from the U.S.
As detailed in a November 2025 article by Matthew Frank in The Carillon, the American ethanol industry has several advantages over the Canadian ethanol industry. Then-U.S. president Joe Biden’s 2022 Inflation Reduction Act offered tax credits and grants for American ethanol and biofuel producers, allowing them to scale up production. Then, in 2025, President Donald Trump’s One Big Beautiful Bill Act extended existing tax credits and removed land use emissions penalties for ethanol production. Robert Parsons, an instructor at the University of Manitoba, told The Carillon that those tax credits add up to roughly 34 cents per litre for American biofuels, whether the fuel stays in the U.S. or is exported.
Meanwhile, Canadian ethanol producers have to pay the industrial carbon tax on emissions. Domestic producers compete with American producers to sell their products to Canadian consumers, but it isn’t a level playing field. They simply can’t turn the same profit as their American counterparts. Canadian businesses struggle while subsidized American product floods the Canadian market.
It’s worth reiterating that the CFR exist because biofuels help reduce greenhouse gas emissions. As Natural Resources Canada notes on its ethanol webpage: “Ethanol reduces greenhouse gas emissions because the grain or other biomass used to make the ethanol absorbs carbon dioxide as it grows. Although the conversion of the biomass to ethanol and the burning of the ethanol produce emissions, the net effect can be a large reduction in GHG emissions compared with fossil fuels such as gasoline.”
Biofuels also encourage regional economic growth and job creation. In the U.S., more than 40% of the corn crop and 40% of the soybean crop go into plant-based fuels.
In September 2025, in recognition of the challenges facing the domestic biofuel sector, Prime Minister Mark Carney announced that the federal government would make targeted amendments to the CFR. A backgrounder published by the Prime Minister’s Office said: “many Canadian [biofuel] facilities are idling or shutting down. The loss of this sector would deepen Canada’s reliance on imports from the United States and dampen demand for domestic agricultural feedstocks like canola.”
If Canada can get the new CFR right, it can be a win-win situation. Grain and oilseed producers will expand an important domestic market, and Canadian consumers of gasoline and diesel fuel will be able to reduce their environmental impact with every fill of the tank.
Senator Todd Lewis represents Saskatchewan in the Senate.
This article appeared in the May 6, 2026 edition of The Hill Times.