Canada proposes changes to Clean Fuel Regulations

The government of Canada announced Oct. 27 that it 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 Oct. 30, 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 coprocessing biobased 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.

Covenant Energy, a Saskatchewan-based biofuel company, welcomes the proposed amendments, which support renewable diesel and sustainable aviation fuel (SAF) through distinct credit multipliers of 1.5 and 1.8, respectively.

“By supporting low-carbon fuels produced at home, Covenant Energy believes that these amendments will help incentivize Canadian investment and home-grown production of biofuels—if the government adds a proper balancing mechanism to ensure demand stays whole,” the company said.

Because a credit multiplier awards more credits for each liter of eligible fuel, without a balancing mechanism fuel suppliers could meet their CFR obligations with fewer total liters of low-carbon fuel.

Covenant Energy urges the government of Canada to account for this in its final publication of the amendments to ensure that the overall demand for biofuels does not decrease.

“Otherwise, a measure designed to support domestic production and Canadian agriculture could shrink the market it is meant to strengthen,” the company said.

Covenant Energy said it looks forward to working with the federal government to finalize amendments that deliver on their intent.

"These amendments are a welcome signal to current and prospective Canadian biofuel producers, and to the farmers who grow valuable Canadian feedstocks, such as canola,” said Josh Gustafson, the president and CEO of Covenant Energy. “They recognize the value of home-grown biofuels, and the distinct investment needed to produce each fuel. But to work as intended, final regulations need to include a mechanism that balances the additional credits so that our overall demand for Canadian product does not fall.”

Renewable Industries Canada also welcomed the proposed amendments, including credit multipliers for Canadian-made biofuels.

“The proposal marks meaningful progress in addressing the competitive disadvantage created by U.S. production subsidies, but the recommended 1.3 multiplier for ethanol falls short of the industry’s evidence-based 1.4 minimum,” the organization stated.

Andrea Kent, the past president and board member of Renewable Industries Canada, said, “Canada has recognized the competitive disadvantage facing domestic ethanol producers and adopted a mechanism to address it. That’s important progress. 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.”

The government noted that, since the CFR policy came into effect, the credit market has grown to more than CAD$3 billion (USD$2.14 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.

“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,” said Julie Dabrusin, Canada’s minister of the environment, climate change and nature. “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 regulatory text of the proposed amendments can be found here.