Biofuels Markets Report

September 02, 2026

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by Andrew Snook (Canadian Biomass) While challenges remain, Canada’s biofuels sectors are ripe with opportunities -- Canada's biofuels sector faces challenges but also significant growth opportunities, according to industry leaders. The wood pellet sector is concerned about potential surpluses due to U.K. subsidy changes in 2027, yet markets like Poland show promise. Biogas production is expanding, with nearly 300 projects generating renewable natural gas (RNG) from various feedstocks. Advanced biofuels are gaining attention amid regulatory support, with a focus on decarbonizing transportation. Key developments include the Convertus York Biofuel Facility and NB Power's potential conversion of its Belledune Generating Station to biomass.

Wood pellet producers are exploring new markets, particularly in Poland.
Canada's biogas sector has nearly 300 projects producing RNG, with a projected fourfold increase in production.
Advanced biofuels are supported by new regulations and government initiatives aimed at reducing emissions.

This story highlights the evolving landscape of Canada's biofuels industry, which is crucial for energy security and environmental sustainability.

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According to the Canadian Biogas Association’s (CBA) 2026 Canadian Biogas & RNG Market Summary Report, Canada’s biogas and RNG sector has nearly 300 projects currently in operation producing RNG from a combination of agricultural, municipal, industrial, wastewater, and landfill feedstocks.

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“We are anticipating a fourfold increase in RNG production over the next few years based on the projects in development,” says Sarah Stadnyk, director of policy and communications at the CBA.

There are 26 new RNG projects scheduled to come online within the next few years, and the CBA expects they will each provide more than 25 PJ of RNG.

“With RNG we’re seeing these opportunities, and it’s really a mixture of landfill gas facilities and also agricultural and standalone facilities that process organics,” Stadnyk says. “We’re also encouraged seeing more municipalities implementing green bin programs, so that’s really great; because that organic waste can be destined for anaerobic digestion.”

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“We are having great conversations with government and seeing more awareness for biogas and RNG, but the lack of clear political signals in terms of policy and programs does limit the investment and development in the sector,” Stadnyk says, adding that better certainty related to the Clean Fuels Regulations (CFR) is needed. “The CFR is valued and supported by the industry, but delays with getting approvals under the CFR create material and financial risk, specifically with carbon intensity (CI) approvals that are needed to generate credits. Streamlining CI approvals will help projects generate credits and gain certainty in the market.”

Another way that the federal government can assist biogas producers is through an amendment to the Clean Technology Investment Tax Credit (ITC). Currently, there is a waste biomass ITC that covers biogas to electricity projects. This is seen as an opportunity for biogas projects, however the CBA says that biogas is trending towards RNG production, not electricity generation projects.

“The CBA will continue to advocate for the further expansion of Canada’s suite of ITCs to support and accelerate investments in biogas and RNG equipment and to fully realize Canada’s biogas and RNG’s potential,” Stadnyk says.

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Advanced biofuels

When it comes to growth Canada’s advanced biofuels sector, opportunities and challenges largely revolve around the fact that biofuels are a regulation-driven market.

“Regulations are created through policy. Policy can reflect politics, and politics are very divisive at the moment,” says Fred Ghatala, president of Advanced Biofuels Canada (ABFC).

While there is significant politically fuelled risk, Ghatala says there has never been a stronger focus on Canada’s biofuel sector than under the current government. He adds that this is reflected by the recently released report as part of the federal, provincial, territorial table on biofuels called, Growing a Resilient Canadian Biofuel Sector.

“It points to a more strategic approach to the biofuel sector,” Ghatala says. “It’s a welcome focus on a sector that does so many things; from providing a trade turbulence-resistant market for our domestically produced feedstocks in agriculture, forestry, and recycled products to creating made-in-Canada investments that support good-paying jobs, while enhancing energy security and reducing GHG emissions in the process.”

Renewed focus on the decarbonization of the transportation sector – including the harder to decarbonize sub-sectors like aviation, marine and rail – has been welcomed by the ABFC and its producer members. Ghatala says the global market now reflects the strong US Renewable Volume Obligation, which is causing installed production capacity to be used at rates that have not been seen in the last five years.

“The U.S. is trending towards over 90-per-cent capacity utilization of biodiesel and renewable diesel production assets, which is causing Canadian fuels and feedstocks to also participate in the large RVO that was put in place by the U.S. Environmental Protection Agency EPA,” he says. “At the same time, we have the federal Biofuel Producers Incentive (BPI) that became effective January 1, 2026, and runs for two years. This is a near-term response to the US 45Z incentive. At the time of this interview, we’re also expecting the CFR targeted amendments to be released to respond to the current trade dynamics of 45Z-enabled biofuels being exported from the U.S. into the Canadian market.”

Renewable fuels are increasingly becoming an ongoing part of Canada’s fuel supply. According to 2024 data, there is more than nine-per-cent renewables in gasoline and over seven-per-cent renewables in diesel. Ghatala expects the 2025 data to show continued growth.

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ABFC recognizes the actions taken by the governments of British Columbia and Ontario to ensure that Canada’s biofuel sector can survive during this period of trade turbulence.

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ABFC believes that co-processing will be part of the renewable fuel production landscape in Canada; and that policy must be designed to ensure that the standalone low-carbon fuel business model is able to endure and expand alongside co-processing.

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Canada’s CFR is internationally viewed as a strong policy design, and this will create opportunities to expand the country’s biofuels markets overseas. Ghatala says the country’s CFR includes all of the key components of a strong policy design such a compliance credit trading market; a science-based lifecycle analysis approach; clear land use and biodiversity criteria; and compliance pathways that encourage emission reductions from the traditional oil and gas sector.

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Another area of strength for Canada is having plentiful agricultural and forest feedstock supplies. On the agricultural side, the increasing crush capacity in the canola sector is the condition precedent for added-value agricultural processing to make these feedstocks into renewable fuels.

On the forestry side, Ghatala says government activities such as the Canadian Forest Sector Transformation Task Force and initiatives like the Bioeconomy Development Opportunity (BDO) Zone Initiative are useful to unlock the potential of increased forestry participation in the renewable fuel sector.

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Renewable fuels and forest residuals

With the number and size of wildfires growing in Canada and other parts of the world, finding ways to use some forest residuals as feedstock for various biomass applications to help mitigate forest fires is growing. This includes advanced biofuels.

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The ABFC members are encouraged by applications overseas in Nordic countries where co-processing is occurring using forestry-derived materials. READ MORE