RICanada Concerned by Ethanol’s Exclusion from Clean Fuels Funding Program

April 18, 2024

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by Meghan Sapp (Biofuels Digest) In Canada, Renewable Industries Canada (RICanada) notes the announcement in Tuesday’s Federal Budget 2024-2025, which included C$776 million towards a retooled Clean Fuels Funding program to support renewable diesel (RD), sustainable aviation fuel (SAF), and renewable natural gas (RNG). However, RICanada is issuing a serious concern over the apparent exclusion of ethanol among the supported biofuel categories.

The Canadian ethanol industry faces significant risks from this exclusion, particularly in Ontario. Local ethanol production not only supports rural economies but also offers a cost-effective method for significant emissions reductions in the transportation sector. READ MORE

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Excerpt from Renewable Industries Canada: Renewable Industries Canada (RICanada) notes the announcement in yesterday's Federal Budget 2024-2025, which included $776 million towards a retooled Clean Fuels Funding program to support renewable diesel (RD), sustainable aviation fuel (SAF), and renewable natural gas (RNG). However, RICanada is issuing a serious concern over the apparent exclusion of ethanol among the supported biofuel categories.

The Canadian ethanol industry, a critical component of our national biofuels landscape and a major economic contributor, faces significant risks from this exclusion, particularly in Ontario. Local ethanol production not only supports rural economies but also offers a cost-effective method for significant emissions reductions in the transportation sector.

Key Points from RICanada in Light of the 2024 Budget:

Economic Impact: The biofuels sector in Canada generates billions of dollars in economic impact and supports tens of thousands of high-quality jobs, mainly in rural areas of Canada. Ethanol production provides a steadfast market for Canadian farmers, enhancing local agriculture and production facilities.
Competitive Disparity: The recent budget's exclusion of ethanol will likely open the Canadian market to heavily subsidized imports, mainly from the United States, where the Inflation Reduction Act (IRA) incentivizes biofuel production including ethanol. This could undermine Canadian producers and rural economic stability.
Global Competitiveness and Market Stability: Aligning Canada's biofuel incentives with those of leading nations like the USA is essential to secure Canada's position in the global clean fuel market and to prevent outsourcing of potential investments. The omission of ethanol from the incentive framework skews the market in favour of imports.

RICanada appreciates the recognition from Deputy Prime Minister and Finance Minister Chrystia Freeland in yesterday's budget, emphasizing the critical role and need to scale up biofuel production and innovation in Canada. We are eager to continue our collaboration with the federal government to refine the Clean Fuels Funding program and for the integration of biofuels into Investment Tax Credits (ITCs), in addition to promoting the establishment of incentives for SAF and RD biofuel production infrastructures. These measures are crucial in catalyzing the growth of the industry, generating employment, and expanding economic opportunities throughout Canada.

About RICanada
Founded in 1984, Renewable Industries Canada (RICanada) is a business coalition representing Canada's first and foremost biofuel producers. RICanada membership includes the country's largest and most innovative renewable fuel producers and industry experts. Member companies produce low-carbon ethanol, biomass-based diesels, sustainable aviation fuel, are innovating towards clean hydrogen production, and have $15 billion worth of prospective projects in Canada. READ MORE

Excerpt from Western Producer: Canada’s biofuel groups and oilseed crushers are pleased with what it saw in the federal government’s 2024 budget.

“The best way to describe it is they’ve got the right tools in the box,” said Doug Hooper, director of policy and regulation with Advanced Biofuels Canada (ABFC).

The Canadian Fuels Association (CFA) applauded the government for announcing up to $1.7 billion in support for the sector.

“Today’s announcement sends a signal that made-in-Canada biofuels are important for this government and that measures to stimulate biofuel investments are essential to increasing production in Canada to the benefit of our economy, energy security and decarbonization,” CFA president Bog Larocque said in a news release.

“At the same time, it is disappointing that ethanol investments in Canada were not openly supported.”

The Canadian Oilseed Processors Association is also satisfied, noting that expanding production and consumption of biofuels is an important market diversification opportunity for the canola sector.

“Overall, we are pleased to see provisions in Budget 2024 that are intended to support biofuel production in Canada,” executive director Chris Vervaet said in an email.

“Implementation of these provisions will be key. The devil will be in the details.”

Ottawa unveiled three tools it will usw to support biofuel projects in Canada.

The first is the newly created biofuel production fund, which will disburse up to $500 million per year to offset the effects of subsidies contained in the U.S. Inflation Reduction Act.

“The biofuel production fund would mirror a production tax credit,” said Hooper.

The program will be funded by Clean Fuel Regulations (CFR) compliance payments. Details of the program will be announced in the 2024 Fall Economic Statement.

If done properly it will level the playing field with the United States.

“That’s a very important attribute that we were looking for,” said Hooper.

Ottawa will also retool the Clean Fuels Fund, extending it for four years and pledging to deliver funding faster.

A total of $776.3 million will be available to be deployed from 2024-25 to 2029-30 to support clean fuel projects.

“By the end of this year, Natural Resources Canada will launch another call for proposals under the extended Clean Fuels Fund,” the government said in its budget.

Lastly, the Canada Infrastructure Bank will invest at least $500 million in biofuel production under its green infrastructure investment stream.

Hooper said that will be a valuable source of debt-financing for the industry because the loans will be made at better-than-market rates.

The Canada Infrastructure Bank can also underwrite policy risk to protect biofuel manufacturers against developments such as the CFR being replaced or repealed if a new government is elected or there are changes in carbon pricing.

“For biofuel project developers, mitigating those risks are a key issue they need to resolve in their final investment decisions,” said Hooper.

CFA said $12 billion in biofuel projects are waiting final investment decisions in Canada over the next year. Those projects could create 23,000 direct and indirect permanent long-term jobs.

“While we still have work ahead of us to level the playing field with clean fuel production tax credits provided by the IRA in the U.S., today’s budget will help stimulate more investments in Canadian biofuel product, and that is good news,” said Larocque.

“In the days ahead, we will work with the government to ensure these measures are implemented in an effective and timely manner.”

Hooper said investors needed clarity on what tax credits are available and how much money there is for building out new capacity.

“This will encourage those entities to sharpen their pencils and see if they can get the projects over the start line,” he said.

Hooper said it is good news for farmers because building value-added biofuel plants at home means more domestic demand and improved basis levels for crops that they grow.

And there are other benefits as well.

“We don’t talk about energy security very much in Canada, but it’s a real thing,” he said.

Canada is import-dependent on diesel fuel, jet fuel and biofuel.

Canada consumes about four billion litres of biofuel annually, and that amount is set to grow exponentially due to the CFR.

“That could double or triple by the end of the decade, which is not that far away,” said Hooper.

If Canada fails to build out its biofuel capacity between now and 2030, it will erode the country’s ability to meet that demand with made-in-Canada fuels. READ MORE

Excerpt from Canadian Biogas Association: The Canadian Biogas Association (CBA) is pleased to see the development of Canada’s biogas & RNG industry included as a priority in today’s federal budget. The CBA is optimistic that the budget’s announcement of several new streams of funding for biofuel projects will begin to move the biogas & RNG industry forward. The announcement is a positive signal to our sector, which will create jobs and investment opportunities in Canada.

Budget 2024 included three sources of funding that will support Canadian biofuel production, with RNG listed as one of three priority fuels, alongside sustainable aviation fuel and renewable diesel. The government announced intentions to rework the Clean Fuels Fund to more efficiently deliver $776.3 million over four years, with a continuous intake process set to be launched by the end of 2024. The budget announced $500 million in biofuel production investments by the Canada Infrastructure Bank and an intention to dedicate $500 million from Clean Fuel Regulations compliance payments towards further support for biofuel production. More details are expected later this year, and the Canadian Biogas Association will continue to work closely with government over the coming months as these funding avenues are developed.

Biogas & RNG production empowers Canadian farmers, municipalities, and industry to transform organic waste into a clean energy source. Yet today, Canada is only achieving about 13 per cent of its available biogas and RNG potential, and further investments in domestic projects have been largely stalled due to more substantial American incentives such as an investment tax credit of 30 to 50 per cent for new American biogas projects. Today’s recognition of biogas & RNG’s potential along with the funding announcement begins to recognize that, with competitive policies in place, Canada can attract over $1.5 billion in new biogas and RNG investment and generate 4.4 petajoules of annual clean energy by 2030.

Still, more must be done to restore Canada’s competitivity for investment in this important sector. The Canadian Biogas Association remains committed to ensuring that this program is implemented with Canada’s biogas & RNG producers and customers in mind. The association urges the Canadian government to build on today’s announcement and introduce additional incentives to close the competitivity gap with the United States.

“The Canadian Biogas Association is thrilled to see biogas & RNG listed as a top priority for the biofuel funding announced today, but our work is far from done,” says Jennifer Green, the CBA’s executive director. “Our members are looking to the Canadian government for leadership and collaboration to build a robust and competitive market for biogas & RNG. This is a good start, but our industry has lots of catching up to do. We look forward to continuing to work with the government to strengthen Canada’s biogas sector.” READ MORE