In 2025, Ethanol Isn’t Just a Climate Story—It’s a Plan for Rural Growth

by Andrea Kent (Renewable Industries Canada/Ethanol Producer Magazine) ... In 2024, U.S., ethanol exports reached an impressive 1.9 billion gallons with over a third destined for Canada. These figures represent more than mere statistics; they demonstrate how our cross-border partnership fulfills both Canadian biofuel mandates and supports U.S. agricultural economics. However, the focus of renewable-fuels policy is clearly shifting.

Robust policy initiatives like Canada’s Clean Fuel Regulations (CFR), the U.S. One Big Beautiful Bill (and the now extended 45Z production tax credit) and British Columbia’s Low Carbon Fuel Standard (LCFS) domestic-content requirements are reshaping the industry dynamics. Today, our sector trades not just in ethanol volume but in carbon intensities and energy-security assurances. The emerging reality is clear: biofuel policy and trade have become inextricably linked. Success on both sides of our border requires understanding this new dimension while preserving the shared values that unite the Canadian and U.S. ethanol industries. Namely, that a strong domestic ethanol sector directly supports the vitality of rural communities and the prosperity of farmers.

For the United States, maintaining global market leadership and safeguarding their position as the world’s leading ethanol exporter is crucial, while also bolstering rural America’s economy. For Canada, strengthening its rural economy is equally important, and ethanol policy offers a two-part approach. First, ethanol producers and farmers should collaborate more closely on policies that increase the value of local crops, as demonstrated in the recently launched Farms and Fuels Alliance initiative. Second, Canada’s national Clean Fuel Regulations are designed to encourage lower-carbon fuels. This positions Canada to be not only a clean fuel importer but an innovator as well, provided the proper policy signals are in place. Both countries can pursue these goals simultaneously, fostering modern trade relationships and ensuring long-term economic success on both sides of the border.

The pandemic taught us the high cost of disruption, but policy changes today could reshape our markets profoundly as well. Together, the U.S. and Canada can create better rules for biofuel trade and develop policies that strengthen the ethanol industry and local farming communities in both countries. By embracing the new reality where policy and trade are intertwined, we can secure decades of rural renewal. READ MORE

Excerpt from Canadian Packaging: Canadian ethanol plant production through May decreased by one per cent compared to the previous year, although output during that period has increased by 14 per cent since 2021. The growth in ethanol production is attributed to improved efficiency, resulting in more ethanol produced per ton of grain, with total grain use rising by eight per cent over the same interval. In the last year, ethanol accounted for 9.1 per cent of the gasoline pool consumed in Canada, meaning that, on average, there was 0.091 litres of ethanol in each litre of gasoline (see Figure 1). Since 2018, the proportion of Canadian ethanol in the gasoline pool has remained largely unchanged, reaching 3.9 per cent last year. Imported ethanol now represents a larger portion, with over five per cent of ethanol blended into gasoline in Canada coming primarily from the United States.

Figure 1: Growth of ethanol’s share in Canadian gasoline is increasingly coming from imports

Since Canadian ethanol plants have been unable to meet domestic consumption, growing demand in other parts of the world will likely be met by producers in the U.S. Since Canada’s Clean Fuel Regulation (CFR) will continue to reduce the carbon intensity required in gasoline until 2030, additional ethanol – which helps reduce the carbon intensity – will be required. If ethanol production in Canada were to double, the country would continue to rely on imports from the United States; however, this increase in production would require an extra four million tons of grain.

Biodiesel and renewable diesel facilities in Canada have recently experienced significant market volatility. Last year, domestic production increased notably within the ‘other renewable fuels’ category (see Figure 2), coinciding with the commissioning and subsequent ramp-up of two new renewable diesel plants. However, as the new year commenced, both U.S. and Canadian facility run rates declined sharply due to ongoing uncertainty regarding the U.S. blender tax credit, prompting the industry to adopt a cautious approach while awaiting further developments.

Figure 2: Canada’s biodiesel and renewable diesel production fluctuates with U.S. policy

Several policy changes have influenced the current environment, including the 45Z Clean Fuel Production Credit from the Inflation Reduction Act of 2022, legislation recently passed by the U.S. House of Representatives, and updates from the Environmental Protection Agency (EPA). The U.S. tax credit for biofuels has shifted from being granted at the point of blending to a producer-based model. This change excludes Canadian imports of biodiesel and renewable diesel, as only U.S.-produced biofuels now qualify. This adjustment may reduce opportunities for Canadian exports of these biofuels, leading domestically produced biodiesel and renewable diesel to seek alternative markets.

Canada exports more vegetable oil – mainly canola – to the U.S. for biofuel production than it uses domestically. In the past year, Canada used just over one million metric tons of vegetable oil for its own biodiesel and renewable diesel, but exported 2.8 million tons to the U.S. With remaining policy uncertainty, Canada’s growing oilseed-crushing industry will be watching for opportunities.

The EPA is also proposing to reduce Renewable Identification Numbers (RINs) by 50 per cent for biofuels made from imported feedstock. As a result, U.S. biofuel plants using Canadian canola oil would earn 12 cents less per pound from RINs than those using U.S. soybean oil. Canadian canola oil could be redirected to other markets, such as human food, in the event of reduced U.S. biofuel demand. At the same time, the EPA announced higher-than-expected 2026 and 2027 blending targets, boosting North American oilseed markets. Soybean oil futures surged, and oilshare – soybean oil’s share of crush revenue – reached a five-year high (Figure 3).

Sustainable Aviation Fuel (SAF) is produced using methods like those for renewable diesel. These fuels are required to be compatible with existing aircraft engines without modification. Several facilities in the U.S. are increasing SAF production, while Canada does not currently have operational plants, though future development is anticipated. SAF production typically uses biodiesel feedstocks such as vegetable oils, representing a potential growth market for oilseeds.

U.S. measures aim to promote domestic biofuel production, which may decrease the demand for Canadian biodiesel and renewable diesel exports. READ MORE