New regulations support the use of biofuel to reduce the carbon intensity of Canada’s gasoline and diesel supply. This has helped drive the boom in canola processing capacity on the Prairies. Compliance and farmer participation in the market is a streamlined process requiring a few simple steps.

Canada’s Clean Fuel Regulations boost canola demand

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The Government of Canada’s Clean Fuel Regulations provide incentives, through carbon credits, to develop and adopt clean fuels, technologies and processes. The goal is to gradually reduce the carbon intensity of gasoline and diesel fuel to 15 per cent below 2016 levels by 2030. Lower carbon intensity means lower emissions.

The regulations are not a tax, but a technology-enabling regulation. Industry, not consumers, are required to reduce emissions from transportation fuels sold in Canada. Fuels that are below the carbon intensity mandate earn credits, and the lower a fuel’s carbon intensity, the more credits it can earn. This supports investments in emission reduction technologies.

Carbon intensity and the credits generated are the de facto currency of the Clean Fuel Regulations, driving market competition to adopt the most efficient greenhouse-gas-reducing technologies. While the Clean Fuel Regulations do not specify the technology that must be used to achieve those reductions, supported technologies include carbon capture and storage, low carbon hydrogen, electrification and biofuels.

A single renewable diesel production facility with annual production of one billion litres would require one million tonnes of canola oil to run at full capacity. This is equivalent to 2.5 million tonnes of seed.

Clean fuel regulations in Canada and other countries, particularly the United States and Europe, have been a catalyst for private sector investment in low carbon fuel production. More than $8 billion in capital projects are under construction or announced in Canada. Biofuels derived from low carbon feedstock like canola are among the largest areas of investment, particularly in renewable diesel production.

Renewable diesel can replace up to 100 per cent of conventional diesel used in a diesel engine. This includes tractors and trucks.

Renewable diesel production capacity in Canada could exceed four billion litres by the end of this decade, creating new opportunities for canola demand. To put this into perspective, a single renewable diesel production facility with annual production of one billion litres would require one million tonnes of canola oil to run at full capacity. This is equivalent to 2.5 million tonnes of seed.

To meet this burgeoning demand, five new canola processing investments have been announced in Canada since 2021, adding nearly seven million tonnes of canola processing capacity, a 60 per cent increase from current capacity. Three are under construction. Combined, these investments exceed $2.5 billion, adding 400 new direct jobs and thousands of new indirect/induced jobs to local communities.

The rules of engagement

The most notable rule of engagement for the Clean Fuel Regulations is that any crop feedstock must be traced through the supply chain via an attestation to ensure it complies with the land use and biodiversity (LUB) criteria and is eligible.

Crops grown in Canada already meet the LUB criteria, through exemptions and provisions in the regulations that recognize crops in Canada as sustainable. This significantly streamlines the attestation requirements for Canadian farmers. A farmer needs to provide only three items to confirm compliance and support traceability:

  1. A statement confirming the crop was grown in Canada and therefore eligible for the exemptions and provisions in the regulation.
  2. A single set of GPS coordinates to represent the harvested area. Examples include the farmyard or where the bins are located.
  3. A statement recognizing that the attestation may be subject to third-party verification.

The industry is working with the grain value chain, including farm organizations, to develop attestation content that is simple and consistent for everyone to use.

Once complete, the content can be incorporated into standard contracts, added to the existing grain producer declaration or serve as a standalone document.

We are optimistic about the opportunities the Clean Fuel Regulations has initiated for our industry and look forward to working with our fuel and farm customers to maximize participation.