Canada Proposes Changes to Support the Low-Carbon Fuel Industry Public Comment DEADLINE tbd

BioRefineries/Renewable Fuel Production Canada Carbon Dioxide (CO2)Federal Regulation Feedstocks Field/Orchard/Plantation Crops/Residues Funding/Financing/Investing Green Jobs hydrogen Ireland Marketing/Market Forces and Sales Not Agriculture Opinions Policy Sustainability

October 28, 2026

Print This Article Share it With Friends

(Government of Canada/Environment and Climate Change Canada) The Government of Canada is helping strengthen Canada’s low-carbon fuel industry by proposing changes to the Clean Fuel Regulations. This will support domestic production and encourage long-term reductions in greenhouse gas emissions. These amendments are part of the Government’s broader efforts to build Canada strong by strengthening economic resilience, supporting Canadian workers and businesses, and ensuring Canada remains competitive in the face of rapid change.

The proposed amendments will be published in the Canada Gazette, Part I, on October 30, 2026, followed by a 75-day public consultation period. By creating the conditions for long-term investment and growth, together these proposed amendments would:

Close the competitiveness gap facing Canadian low-carbon fuel producers so they can compete fairly in the domestic low-carbon fuel market.
Create conditions for more investment in clean technology projects in the fuels sector, like carbon capture and storage at low-carbon fuel (for example, ethanol) facilities and co-processing bio-based feedstocks, like canola oil, along with crude oil at refineries.
Make it easier and cheaper for companies to comply with the Regulations and supply fuels to Canadians and businesses that lower emissions gradually and reliably.

The Clean Fuel Regulations encourage companies to invest in cleaner technologies and reduce emissions throughout the fuel supply chain. Since the Regulations came into effect, the credit market has grown to more than $3 billion, supporting investment in low-carbon fuels, agriculture, forestry, and clean technology. The value of the Clean Fuel Regulations credit market is reflected in the investments, jobs, facilities, feedstock demand, and domestic production capacity that those credits help create and sustain across Canada.

These proposed amendments support the Government’s goal of building a stronger, more competitive, and more resilient Canadian economy while continuing to reduce emissions. The Government of Canada is laying the foundations for a more prosperous Canada.

Quotes

“Our government designed these proposed amendments to support Canada’s low-carbon fuel sector and ensure resilient long-term emissions reductions while building the decarbonized industries of the future. We look forward to continuing to work with industry, provinces and territories, Indigenous partners, and other stakeholders as we advance these measures to support a strong, competitive, low-carbon fuel sector and Canada’s clean economy.”

– The Honourable Julie Dabrusin, Minister of the Environment, Climate Change and Nature

Quick facts

A strong Canadian low-carbon fuel industry is critical to maintaining a reliable supply of low-carbon fuels and achieving sustained greenhouse gas reductions over time from the almost 200 million litres of gasoline and diesel consumed per day.
Canada’s Biofuels Production Incentive program complements the proposed amendments and is open for intake until December 2027.
- The program provides up to $372 million in production-based support for domestic biodiesel and renewable diesel producers, helping sustain domestic production capacity, strengthen Canadian value chains, and support jobs across the sector.
To date, the Clean Fuel Regulations have driven billions of dollars in investments in clean technologies and low carbon fuel production, supporting and growing sustainable jobs for Canadians. This includes:
- Co-processing projects at six refineries across Canada and allowing renewable feedstocks, like crop-based oils and other biogenic materials, to be refined along with crude oil.
- Ongoing operations and expansion of several Canadian liquid low-carbon fuel producers, as well as the construction of new facilities, and new canola crush plants to provide feedstocks for these facilities.
- Diversification of our low-carbon fuel supply, with investments in new hydrogen and renewable natural gas facilities.
The Clean Fuel Regulations have generated more than $185 million in credits for residential and public electric vehicle charging. By creating compliance options that direct Clean Fuel Regulations credit revenue into charging infrastructure, it supports electric vehicle adoption through lower charging costs and more charging stations for Canadians while also reducing emissions.

Associated links

READ MORE

Related articles

ECCC proposes changes to Clean Fuel Regulations, but industry warns 1.3x multiplier for ethanol falls short (RealAgriculture)
Draft amendments to the Clean Fuel Regulations signal progress towards a competitive Canadian biofuel sector (Biidaaban Renewable Energy/PR Newswire)
Clean Fuel Regulations amendments don’t go far enough: ethanol producers (Western Producer)
Canada’s proposed CFR amendments target domestic low-carbon fuel production (GasWorld)

Excerpt from RealAgriculture: Farm and biofuel groups—including Grain Farmers of Ontario (GFO), the Farms and Fuels Alliance (FFA) and Renewable Industries Canada (RICanada)—have sounded the alarm that Canadian ethanol producers are struggling to compete with American ethanol imports that are subsidized through the U.S. Inflation Reduction Act's 45Z credit and other supports.

The Carney government first committed to updating the CFR to support domestic production in September 2025. ECCC (Environment and Climate Change Canada) subsequently outlined two potential pathways in a December discussion paper: a minimum domestic content approach, and the credit multiplier approach favoured by the FFA.

In the draft regulatory text shared on Tuesday, ECCC opted for the credit multiplier mechanism rather than the domestic content mandate. The formula allows Canadian fuel producers to generate additional "related compliance credits" based on designated credit factors:

Ethanol and other liquid low-carbon fuels: Assigned a 0.3 factor, resulting in an effective 1.3-times multiplier (a 30% credit top-up).
Biodiesel: Assigned a 0.4 factor (effective 1.4x multiplier).
Hydrogenation-Derived Renewable Diesel (HDRD): Assigned a 0.5 factor (effective 1.5x multiplier).
Sustainable Aviation Fuel (SAF): Assigned a 0.8 factor (effective 1.8x multiplier).
Co-processed refinery fuels: 0.3 for low-carbon gasoline and 0.4 for diesel.
Renewable natural gas and hydrogen: Assigned a 0.4 factor.

To qualify for the credit top-up, feedstocks must be harvested, produced, extracted, or collected within North America (Canada, the U.S., or Mexico). The provisions are set to apply retroactively to credits created on or after January 1, 2026.

The proposed 1.3x multiplier for ethanol falls short of the 1.4x minimum requested by GFO, the FFA, and RICanada. Farm leaders have stressed that without sufficient parity, mounting U.S. imports will jeopardize more than $1 billion in planned domestic processing capital and erode demand for Canadian feedstocks like Ontario corn.

"Canada has recognized the competitive disadvantage facing domestic ethanol producers and adopted a mechanism to address it. That's important progress," says Andrea Kent, RICanada past president and board member, responding to ECCC announcement. "But recognizing the problem and closing the gap are two different things. The multiplier must reflect real-world competitive conditions if we're serious about attracting investment and expanding Canadian biofuel production, not simply increasing biofuel consumption."

According to RICanada, U.S. ethanol producers are reporting production tax credits equivalent to approximately 35 cents CAD per litre, while the proposed 1.3x multiplier would only generate an estimated 12 cents CAD per litre in additional credit value. The group also warns expanded compliance flexibility could weaken the CFR credit market, undermining the investment signal for Canadian industry.

In a separate response, the FFA says the 1.3x credit multiplier for ethanol is a "meaningful step, but falls short of the evidence-based 1.4x minimum needed to level the playing field for domestic producers."

Both FFA and RICanada say expanded compliance flexibility also risks weakening the market signals needed to attract investment in Canadian ethanol production.

"We look forward to working with the government to secure a minimum 1.4x multiplier in the final amendments and deliver on its commitment to level the playing field for Canadian producers," says the FFA.

Stakeholders will have until mid-January 2027 to comment and suggest changes on the proposed regulations. READ MORE

Excerpt from GasWorld: Recent policy changes in the US have increased competitive pressures on Canadian low-CI fuel producers.

US production is supported by renewable fuel requirements, low-carbon fuel programmes, and economic incentives, including the 45Z Clean Fuel Production Tax Credit.

The 45Z credit supports US transportation fuel production based on lifecycle carbon intensity, incentivising the domestic production of low-carbon fuels.

According to the ECCC, assuming input costs and production efficiency are equal in both countries, the 45Z credit allows US low-CI fuel producers to offer their fuel at a lower price than Canadian producers.

Through the proposed CFR amendments, the Canadian government aims to increase the competitiveness of domestic low-CI fuel production.

Canadian RNG market

In 2024, 292 biogas and RNG projects utilised over 2 million tonnes of organic matter, representing only 14% of available domestic feedstock, according to the Canadian Biogas Association (CBA).

Under the CFR draft amendments, half of the existing 10% cap on gaseous-class credit use will be allocated to credits generated from Canadian production.

In combination with the 1.4x credit multiplier on domestic RNG production, the CBA said this cap reduces the amount of domestic RNG that can participate in the regulation.

The CBA argues that less Canadian RNG would be able to participate than imported RNG, going against the government’s overall target to reduce import dependency.

Sarah Stadnyk, Director of Policy and Communications at CBA, said, “There is more work to be done ahead of the final amendments.

“Maintaining the limiting cap on gaseous credit use as proposed will continue to undermine the policy certainty and Canadian opportunity the amendments are intended to provide,” she noted.

The proposal follows a similar approach in Ireland, where a planned multiplier for domestically produced biomethane was challenged by the European Commission over concerns that it discriminated against imports. READ MORE

Tags

Transportation Fuels Policy Sustainability Renewable Natural Gas (RNG) Renewable Diesel/Green Diesel/HVO/Paraffinic Diesel regulations oil refineries Mexico markets/sales Investing Hydrogen/Renewable Hydrogen Green Jobs GHG (Greenhouse Gas Emissions) Intensity GHG (Greenhouse Gas Emissions) fermentation ethanol/bioethanol environmental policy Electric Car/Electric Vehicle (EV) co-products co-processing Clean Fuel Standard/Policy (CFS) carbon/CO2 sequestration Carbon Dioxide (CO2) carbon credit markets carbon credit carbon capture and storage (CCS) Canola/Rapeseed Canada BioRefineries/Renewable Fuel Production biodiesel Battery Electric Vehicles (BEV) Biogas methane/biomethane Ireland 45Z Clean Fuel Production Tax Credit tax policy tax credits Carbon Intensity (CI)/Carbon Footprint market forces Regulations-Federal

Comments are closed.