The federal government’s Biofuels Production Incentive is now in effect, marking a shift from policy announcement to on-the-ground support for Canada’s domestic renewable fuel sector as it grapples with intensifying trade pressures and global competition.
Announced by Prime Minister Mark Carney on Sept. 5, 2025, the incentive officially took effect Jan. 1 and is designed to stabilize and protect Canadian biofuel production capacity. The program will provide more than $370 million over two years, offering per-litre support to Canadian producers of biodiesel and renewable diesel from January 2026 through December 2027. Facilities will be eligible for support on up to 300 million litres of production each.
Industry groups say the measure is an important, if incomplete, step. Fred Ghatala, president of Advanced Biofuels Canada Association, said the incentive helps counter the disadvantage Canadian producers have faced since the introduction of the U.S. Inflation Reduction Act and its Clean Fuel Production Credit, which reduced American production costs and redirected investment south of the border.
The incentive forms part of a broader federal strategy aimed at protecting and transforming strategic industries affected by U.S. tariffs and ongoing trade uncertainty, especially amid China’s continued tariffs on imports of Canadian canola seed, meal, and oil.
Alongside the incentive, Ottawa has proposed targeted amendments to the Clean Fuel Regulations, intended to strengthen domestic low-carbon fuel production while maintaining emissions-reduction goals. A public consultation on those amendments opened Dec. 3 and runs until Jan. 15, 2026.
The Canadian canola sector has been critical of the of the Biofuels Production Incentive, arguing it falls short of what is needed to offset the closure of the Chinese market to Canadian canola seed and products.
Concerns have also been raised about the lack of clarity around foreign used cooking oil-based fuels, which industry estimates displaced nearly 1 million tonnes of domestic canola demand in 2024.
