Canadian biofuel watches policy developments

SASKATOON — Canada’s biofuel producers are breathing a sigh of relief surrounding the country’s Clean Fuel Regulations.

“With the election results, the CFR is on much more stable footing than it was looking leading into the election,” said Fred Ghatala, president of Advanced Biofuels Canada.

That is because the Liberals won, and they are the ones who created the CFR.

But it is far from a perfect program. Advanced Biofuels Canada feels there is much more lobbying to do.

“The CFR needs a demand signal that extends beyond 2030,” said Ghatala.

As well, there needs to be a response to the U.S. Inflation Reduction Act and the 45Z clean fuel production credit contained in that act.

That credit is only available to U.S. biofuel producers, who can then export their subsidized fuel to Canada to meet the demand created by the CFR, undercutting Canadian producers.

Ghatala said the Liberals mentioned in pre-election budgets and fall economic statements that they would create a program through the Emissions Reduction Fund that would level the playing field.

Advanced Biofuels Canada wants to push that initiative over the finish line so that Canadian biofuels made with Canadian feedstocks would be competitive with imported U.S. biofuels.

That is critical because 45Z has changed the landscape south of the border. Preliminary guidance from the U.S. Internal Revenue Service dictates that canola-based biofuel does not qualify for the 45Z credit because it does not meet carbon intensity thresholds.

It has caused canola oil shipments to the U.S. to plummet. U.S. Energy Information statistics show that 92 million pounds of canola oil were used to make biofuel in February 2025 compared to 524 million pounds in December 2024, the month before the 45Z credit was implemented.

Canada’s biofuel producers were happier with the previous program, which featured a blender’s tax credit that was available to both domestic and imported biofuels.

Legislation has been introduced in the U.S. House of Representatives to bring back that program.

The bill would retroactively reinstate the credit as of Jan. 1, 2025, through Dec. 31, 2026.

Ghatala isn’t holding his breath on that one, noting that only three to five percent of bills introduced in U.S. Congress ever become law.

What holds more promise is that the U.S. House of Representatives’ ways and means ommittee is starting it budget mark-up process.

U.S. President Donald Trump has promised massive tax cuts, and the committee will have to slash spending to help pay for those cuts.

The Inflation Reduction Act is likely to be one of its targets, so the fate of the 45Z tax credit hangs in the balance.

The other bit of encouraging news from south of the border is that the U.S. Environmental Protection Agency (EPA) is likely weeks away from announcing its renewable volume obligations for the Renewable Fuel Standard Program.

A coalition, led by the American Petroleum Institute, is asking the EPA to set the biomass-based diesel mandate at 5.25 billion gallons for 2026.

That would be a 57 per cent increase over the disappointing 2025 mandate of 3.35 billion gallons.

“That would be a big shot in the arm for domestic U.S. production and that would likely pull in Canadian feedstocks,” said Ghatala.

Meanwhile, a Canadian renewable diesel producer suffered a setback in its attempt to level the playing field with imported product from the U.S. market.

The Canadian International Trade Tribunal has terminated its preliminary inquiry into imports of U.S. renewable diesel.

It said there was no reasonable indication that the product was being unfairly subsidized and dumped into the Canadian market, causing injury to domestic producers.

The investigation was launched following a Dec. 30, 2024, complaint filed by Tidewater Renewables Ltd., which owns a renewable diesel plant in Prince George, B.C..

The tribunal is expected to release the reasons for its decision on May 23.

Tidewater said it will wait for the release of that document and then assess all its options and remedies, including “promptly filing” an amended or new complaint.

“While we are disappointed with the tribunal’s decision, Tidewater Renewables remains committed to free and fair trade in Canada’s renewable diesel market,” chief executive officer Jeremy Baines said in a press release.

“Our view remains that the facts support a finding that unfair trade practices by the United States have caused a flood of subsidized and dumped renewable diesel into Canada. This flood of imports has significantly injured Tidewater, currently the sole Canadian producer of renewable diesel.”