Leveling The Playing Field

by Katie Schroeder (Biodiesel Magazine) In the pursuit of supporting biofuels, both sides of the U.S.-Canada border have implemented incentive structures to encourage the production or use of renewable fuels over fossil fuels. However, the U.S. 45Z Clean Fuel Production Credit has proven to be a powerful driver of domestic production by granting producers monetary compensation aligned with a lower CI score. U.S. biofuel producers responded, but with increased production came the need for somewhere to send that fuel. Less than two years before the Inflation Reduction Act’s 45Z took effect in 2025, Canada’s Clean Fuel Regulations—which incentivize the use of renewable fuels—were rolled out nationwide.

Almost simultaneously with the rollout of 45Z, trade turbulence between the U.S. and Canada began, followed by tensions with China that caused disruptions for Canadian biofuel producers, oilseed processors and farmers. Biofuel producers are encouraging the Canadian government to take a strong stance in support of the domestic industry in response to the United States’ 45Z credit. In September 2025, Canadian Prime Minister Mark Carney announced a Biofuels Production Incentive totaling $370 million over two years, designed to support the country’s biofuels industry. At the time, Biodiesel Magazine reported that the incentive would be applied on a per-liter basis to producers of biodiesel and renewable diesel from January 2026 through December 2027, capped at 300 million liters per facility.

Fred Ghatala with Advanced Biofuels Canada calls the BPI a “step toward” addressing the competitive landscape that has emerged in North America. He explains that the complete renewable diesel and biodiesel supply chains—from feedstock origination to processing to end use under Canada’s federal Clean Fuel Regulations and various provincial policies—can now take place in Canada for “one of the first times in the history of the Canadian biofuel sector.” Canada has roughly 2.4 billion liters (634 million gallons) of installed renewable diesel capacity and 500 million liters of installed biodiesel capacity. Including coprocessing volumes, biodiesel and renewable diesel production can now equate to more than 10% of Canada’s diesel use.

With the introduction of the CFR and British Columbia’s Low Carbon Fuel Standard, Canada became a top destination for renewable fuels due to the monetary incentive created by compliance credit values. Canadian producers have struggled to maintain ongoing production, since U.S. producers can access production credits under 45Z, then export fuel to Canada and also receive credits under the CFR, BC LCFS, and other provincial programs with compliance credit systems.

Tidewater Renewables Ltd., Canada’s first greenfield renewable diesel facility, brought a countervailing (anti-subsidy) and anti-dumping complaint to the Canadian International Trade Tribunal regarding imported U.S. renewable diesel. The Canadian Border Services Agency’s investigation was dropped by the tribunal in early May 2025. However, concerns about an even playing field for Canada’s renewable diesel industry remain.

“Essentially, the BPI helps us survive so that we can thrive in the near- to medium-term to expand and increase agricultural economic resilience, domestic energy security, Canadian GDP and of course reduce GHG emissions in the process,” Ghatala says.

Canadian canola farmers and processors are seeking new markets after China—Canada’s second-largest market for canola behind the U.S.—closed its doors by implementing prohibitively high tariffs on canola seed, oil and meal.

A “North American ring fence” made up of policies that favor regionally produced feedstocks could help create market diversification opportunities for farmers in both the U.S. and Canada, Vervaet says. “We actually think that makes a lot of sense, and we believe something like that could be in scope for these targeted amendments and could go a long way ensuring that as biofuel production grows in Canada, we see canola’s utilization grow in lockstep.”

Expanding domestic renewable diesel is a strong start toward creating a sink for canola oil, but Baines sees sustainable aviation fuel as the next step. He would like to see the government encourage development of this type of value-added manufacturing rather than relying on exporting canola seed in raw form. READ MORE