Canadian Farms and Fuels Alliance Pushes for Ethanol Clean Fuel Credit Reform

Canada's Farms and Fuels Alliance has called on the Government of Canada to deliver this summer on Prime Minister Carney's September 2025 commitment to amend the Clean Fuel Regulations with a minimum 1.4x credit multiplier for Canadian-produced ethanol, arguing the change is needed to restore a level playing field against heavily subsidised American ethanol imports. The Alliance states that approximately 70 percent of ethanol blended into Canadian gasoline now comes from outside Canada's borders, up from less than 50 percent just five years ago, with the competitive imbalance accelerated by the United States' 45Z Clean Fuel Production Credit, which provides American ethanol producers federal support worth up to 36 cents per litre under a programme now extended through 2029 under the One Big Beautiful Bill Act. More than $1 billion in private, shovel-ready ethanol investment, including major projects in Ontario and Quebec, remains on hold while companies await a clear and bankable policy signal from the Canadian government.

 

The Competitive Imbalance and Policy Gap

 

Canada's Clean Fuel Regulations were designed before the scale of US ethanol subsidy now in place through the 45Z Clean Fuel Production Credit existed, creating a structural gap where subsidised American ethanol entering Canada receives the same CFR credit treatment as domestically produced ethanol despite benefiting from substantial federal support unavailable to Canadian producers. Andrea Kent, Vice President of Policy and External Relations at Greenfield Global, said Canada's ethanol producers have done everything asked of them, bringing forward sound technical evidence and working constructively with government to demonstrate the economic opportunity, and that it is now time for the government to deliver a solution that closes the competitive gap for Canadian ethanol within Canada's existing policy framework. The Alliance's position is that a minimum 1.4x CFR credit multiplier for domestic ethanol would recalibrate the regulation to reflect current market conditions without requiring new government spending, since the credit multiplier operates within the existing regulatory framework rather than creating a new subsidy programme.

Canada's domestic ethanol industry has invested billions of dollars in production facilities, supports thousands of jobs in rural communities and purchases approximately one in three bushels of Ontario corn, representing a significant agricultural and industrial value chain that the Alliance argues is being undermined by the current policy gap. Kevin Norton, Chief Executive Officer of Alco Energy Canada, said this is not a request for new spending or a new programme, characterising the requested change as a practical adjustment to ensure the Clean Fuel Regulations deliver on the commitment the government has already made rather than a novel policy ask requiring fresh fiscal commitment.

 

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Investment Implications for Ontario and Quebec

 

The more than $1 billion in private, shovel-ready ethanol investment held pending clearer policy signals represents a substantial pipeline of potential rural economic development and biofuels production capacity expansion that remains stalled by regulatory uncertainty rather than by commercial or technical infeasibility. Jeff Harrison, Chair of Grain Farmers of Ontario, said Ontario farmers are ready to help meet growing demand for low-carbon fuels, with the demand present, the investment ready and the feedstock being grown domestically, arguing that what is needed is a policy framework allowing Canadian ethanol producers and farmers to compete on a level playing field against subsidised imports. The Farms and Fuels Alliance's membership purchases more than 158 million bushels of locally grown corn annually and supports thousands of rural jobs across Ontario and Quebec, illustrating the scale of the agricultural supply chain that depends on a commercially viable domestic ethanol production sector.

The policy debate reflects broader tensions in North American clean fuel and biofuel policy, where divergent national approaches to subsidising domestic renewable fuel production create cross-border competitive distortions that can undermine the policy objectives each country's clean fuel regulations were designed to achieve. Canada's Clean Fuel Regulations aim to reduce the carbon intensity of transportation fuels, but if that reduction is increasingly delivered through imported rather than domestically produced ethanol, the policy may fail to deliver the rural economic development and domestic biofuels industry growth that was part of the original regulatory design intent alongside the emissions reduction objective.

 

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Outlook for Canadian Clean Fuel Regulation Amendments

 

The Farms and Fuels Alliance's call for the credit multiplier to be included in Canada Gazette Part I amendments this summer creates a specific near-term timeline against which the government's delivery on Prime Minister Carney's September 2025 commitment can be assessed, with the Alliance characterising swift action as essential to provide the clear and bankable policy signal that the more than $1 billion in pending investment requires. Whether the government proceeds with the requested 1.4x credit multiplier amendment will have direct implications for the commercial viability of stalled Ontario and Quebec ethanol projects and for the broader trajectory of Canada's domestic biofuels industry relative to increasingly subsidised American competition. Sustained policy clarity that enables Canadian ethanol producers to compete effectively against US imports would support continued investment in domestic biofuels production capacity and the rural agricultural and industrial employment that the sector sustains across corn-growing regions of Ontario and Quebec.

 

Source: BUSINESS WIRE