WINNIPEG — Canada's biofuels industry has warned that the government's proposed new biofuels rules, unveiled over the weekend, are only a first step, saying gaps remain and the changes are unlikely to spur investment in the world's top canola producer.
Under the proposed rules, Canadian biofuel producers would receive more credits from the government for producing biofuels in Canada, Reuters reported on 2 November 2026. To meet low carbon emissions intensity limits, producers can either produce low-intensity fuels themselves or buy credits from others.
Illustration: A golden canola field with a biofuel refinery in the distance. This is an illustration, not a photograph of a real event.
What Happened
The changes would replace a system in which only the use of biofuels earns credits, and foreign-produced fuels receive the same amount, according to Reuters. The government said the proposal is designed to "close the competitiveness gap facing Canadian low-carbon fuel producers so they can compete fairly with US producers."
Industry reaction, however, was cautious. The industry has long complained that US subsidies are generally higher, discouraging production in Canada, Reuters reported. At the same time, in order to earn the credits, some Canadian fuel blenders have been importing US product due to a shortfall in domestic production.
The rules include different rates for ethanol, biodiesel and other alternative fuels. For ethanol, Ottawa is proposing a 1.3 times credit multiplier for Canadian production, compared to the 1.4 rate the industry had sought.
"Recognizing the problem and closing the gap (to US production subsidies) are two different things," said Andrea Kent, a board member of Renewable Industries Canada. The proposed rules provide only about one-third of the value of support US ethanol producers receive, she said, according to Reuters.
Mark Walker, executive director of the Canadian Oilseed Processors Association, said the changes are a step in the right direction, but would result in "net-neutral" demand for canola. The 1.4 times multiplier for biodiesel also falls short of US support and fails to improve the competitiveness of Canadian production, he said.
Renewable diesel will receive a 1.5 times credit multiplier under the proposal, Reuters reported. The new rules face a 75-day review period, giving industry, provinces, trading partners and other interested parties time to respond before any final version takes effect.
Background
Biofuels such as ethanol, biodiesel and renewable diesel are made from plant and animal feedstocks including corn, soybeans and canola, and are blended into petrol and diesel to lower the carbon intensity of transport fuels. Credit systems are a central policy tool for encouraging that shift: fuel suppliers that exceed emissions-intensity limits must buy credits, while producers of lower-carbon fuels earn them. The value of those credits, and who can earn them, therefore shapes where plants are built and where feedstocks are grown.
Canada is the world's largest canola producer, and canola oil is a major feedstock for renewable diesel and biodiesel. Yet the industry argues that the current credit design has not done enough to anchor production at home. Because foreign-produced fuels have received the same credit as domestic fuels for their use in Canada, the incentive to build Canadian plants and process Canadian crops has been weaker than in the United States, where producers receive larger support, according to industry groups cited by Reuters.
Illustration: A modern biofuel production plant loading low-carbon fuel. This is an illustration, not a photograph of a real event.
That imbalance shows up in concrete investment decisions. While Imperial Oil has built a major renewable diesel plant in Alberta, another plant planned in neighbouring Saskatchewan by Federated Cooperatives is on hold due to regulatory worries, Reuters reported. Imperial Oil CEO John Whelan said the company held talks with Ottawa as it developed these "tweaks" to the rules, and "we're not uncomfortable with where this is headed."
The feedstock question is also a trade question. Canola Council of Canada President Chris Davison said he supports the government's decision to provide incentives for feedstock, such as corn, soybeans and canola used in biofuel, from Canada, the US and Mexico, rather than Canada-only origin, given the countries' integration under the USMCA trade pact.
The US Renewable Fuels Association said it is pleased to see that Canada's proposed regulations will not prevent imported US feedstocks from being processed to meet Canada's biofuels targets. US regulations allow Canadian canola oil and other North American feedstocks to be used as domestic supplies in US biofuels production, Reuters reported — a reminder that the North American biofuel supply chain runs in both directions, even as Ottawa and Washington compete for investment.
Why It Matters
The dispute matters because the multiplier numbers, though technical, decide real money. A 1.3 times multiplier for ethanol, rather than the 1.4 sought by industry, means each litre of qualifying Canadian ethanol earns less credit value than producers hoped — and, in Kent's assessment, only about one-third of the support available to US ethanol producers. For biodiesel, Walker argues the 1.4 multiplier leaves Canadian production no more competitive than before, with canola demand effectively unchanged.
If the industry's assessment is right, the proposal may slow, rather than accelerate, the build-out of Canadian biofuel capacity. That would leave Canada continuing to import US product to meet its own blending obligations, even as it grows the world's largest canola crop — an outcome that undercuts both the climate goal of cutting transport emissions and the economic goal of keeping more processing value at home.
Illustration: A stylized map of Canada-US biofuel trade routes with crops in the foreground. This is an illustration, not a photograph of a real event.
The rules also matter for farmers and rural communities across the Prairies. Canola, corn and soybean growers watch biofuel policy closely because new crushing and refining capacity creates a large, steady buyer for their crops. A "net-neutral" result for canola demand, as Walker described it, would mean little new pull on the crop from this round of changes, while a stronger multiplier could have supported new plants, jobs and export earnings.
For climate policy, the stakes are about whether lower-carbon fuels scale fast enough to cut emissions from trucks, farm machinery and other transport that is hard to electrify quickly. Biofuels are not a complete answer — their climate benefit depends on the feedstock, the production process and land-use effects — but governments on both sides of the border are using them as a bridge fuel while electric vehicles and other technologies expand. A credit system that fails to attract investment will deliver that bridge more slowly.
Finally, the proposal is a test of how Canada balances two goals that can pull in opposite directions: favouring domestic production, and keeping North American supply chains open under USMCA. Davison's support for North American, rather than Canada-only, feedstock eligibility shows that parts of the industry value that integration — and the US industry's welcoming response suggests Washington will be watching the final rules for any move toward a closed shop.
What Happens Next
The immediate next step is the 75-day review period. Industry groups, fuel producers, farm organisations and trading partners are expected to file comments arguing for higher multipliers, clearer rules, or other adjustments before the government finalises the proposal. The ethanol gap between the proposed 1.3 and the sought 1.4, and the biodiesel and renewable diesel rates, are likely to be the main points of contention.
Watch for three things during that review: whether Ottawa raises any multiplier in response to industry pressure; whether any stalled projects, such as the Federated Cooperatives plant in Saskatchewan, move forward once the final rules are clearer; and whether US producers or officials respond if the final version shifts further toward favouring Canadian production over imports.
The outcome will also be read alongside the wider North American energy debate, as Canada and the United States each try to build low-carbon fuel industries without losing investment to the other. For now, the industry's verdict is restrained: a step in the right direction, but not yet the step change producers say they need.
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FAQ
What has Canada proposed for biofuels?
Ottawa has proposed new rules under which Canadian biofuel producers would receive more credits for producing biofuels in Canada, replacing a system in which only the use of biofuels earned credits and foreign-produced fuels received the same amount.
What are the proposed credit multipliers?
Reuters reports a 1.3 times multiplier for ethanol, a 1.4 times multiplier for biodiesel, and a 1.5 times multiplier for renewable diesel for Canadian production.
Why does industry say the rules fall short?
Renewable Industries Canada's Andrea Kent said the ethanol proposal provides only about one-third of the value of US ethanol support, and the Canadian Oilseed Processors Association's Mark Walker said the biodiesel multiplier fails to improve Canadian competitiveness and would leave canola demand "net-neutral."
How long is the review period?
The proposed rules face a 75-day review period before they are finalised.
Does the proposal favour only Canadian feedstocks?
No. The proposal provides incentives for feedstock from Canada, the US and Mexico, reflecting integration under the USMCA trade pact — a point welcomed by the Canola Council of Canada and the US Renewable Fuels Association, according to Reuters.
Sources
Reuters, "Canada's proposed new biofuels rules only a first step, industry says," 2 November 2026; Government of Canada statement on closing the competitiveness gap for Canadian low-carbon fuel producers, as reported by Reuters, 2 November 2026.
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