Biofuels groups are urging Canadian regulators to move with caution amid an amendment process to the national Clean Fuel Regulations. Environment and Climate Change Canada solicited comments from September through January on the proposal, which floated methods of boosting support for biofuels produced domestically rather than abroad.
The credit program is still in its early days. Canada's Clean Fuel Regulations went into effect on July 1, 2023, requiring suppliers of petroleum fuels to either increase their supply of alternative, less carbon-intensive fuels, or buy credits from producers of such fuels. The program works similarly to the United States' Renewable Fuel Standard and California's Low Carbon Fuel Standard, and was introduced several years after British Columbia had adopted a similar program of its own. It sets a path to reduce carbon intensity of the nation’s fuel supply 15% by 2030.
In its first year, the program saw a large number of renewable natural gas producers register their fuels with the Canadian CFR credit market. Market intelligence firm cCarbon found a 417% jump in the amount of RNG registered with the program between 2023 and 2024, as project developers raced to qualify for the new incentive. Like in other North American clean fuel programs, RNG is assigned a strong carbon intensity value by the CFR, making it a potentially lucrative fuel.
Other dynamics in Canada have been similarly supportive of RNG development. Two utilities, FortisBC and Énergir, have minimum RNG procurement requirements, the latter of which is compelled by Quebec law. That means the utilities have an obligation to acquire RNG to blend into their pipeline gas, ensuring an end market for projects like anaerobic digesters and landfill gas facilities that can produce RNG.
Biogas producers were also encouraged by the incentive to sell more RNG through to the creation of the Clean Fuel Regulations. But the program has drawn scrutiny in recent months due to concerns over gasoline prices at the pump. The Conservative Party of Canada signaled it would scrap the Clean Fuel Regulations in its platform released prior to federal elections last year, though discussion of a repeal has quieted after the Liberal Party maintained its control of the national government.
Instead, the regulator Environment and Climate Change Canada announced it was exploring amendments to the Clean Fuel Regulations that would boost domestic supply of alternative fuels. In a discussion paper released in September, the regulator laid out several options, including a minimum domestic content requirement or a credit multiplier for domestic fuels.
"Canadian biofuel producers, and their supply chains, are facing competitiveness and trade challenges, which are putting their operations at risk. This could result in less supply of domestic low-carbon intensity fuels, putting future emission reductions at risk, deepening Canada’s reliance on imports, including from the U.S., and dampening demand for domestic agricultural feedstocks like canola," ECCC noted in its discussion paper.
The actions to protect the domestic biofuels market mirror recent policy changes in the United States. While the One Big Beautiful Bill Act signed into law last year lengthened the eligibility period for the Clean Fuel Production Tax Credit, it also inserted new language reducing the credit's value for fuels produced from foreign feedstocks.
In comments submitted to Environment and Climate Change Canada, the RNG Coalition said it’s stopping "well short" of endorsing changes that could alter the production of clean fuel credits.
The RNG Coalition, a trade group, opposes barriers to trade of biofuels between the two countries, noting that many producers operate in both markets. Landfill companies like WM and GFL Environmental have developed landfill-gas-to-RNG projects in the United States but have pursued fewer projects in Canada. The companies did not respond to a request for comment on the Clean Fuel Regulations proposal.
In comments, the RNG Coalition expressed limited enthusiasm for the domestic content proposals. But the trade group said ECCC could boost markets for RNG by removing or relaxing a cap on the amount of gaseous alternative fuel credits that liquid fuel suppliers can purchase to meet their carbon intensity obligations.
The minimum domestic content requirement would have limited effects on RNG, said Alex Ripley, government affairs manager for RNG Coalition. But the credit multiplier could dampen demand for alternative fuels, leading the RNG Coalition to propose in written comments a corresponding increase in the obligations petroleum fuel producers must meet to prevent that effect.
Despite the uncertainty, credit prices for clean fuels in Canada are currently trading much higher than credits in the California LCFS market. Ripley said the market remains attractive for developers of RNG projects and he expects the Clean Fuel Regulations to be a driver of growth.
“I'm optimistic, I think we have a federal government that is pragmatic,” Ripley said. “The CFR, I expect that will continue to be robust through this year.”
