Demand for biofuels sparks Canadian boom. But will U.S. subsidies pull investment south?
CBC
Canada's biofuel industry is seeing a major uptick in investment spurred on by growing global demand for biofuel and, in particular, the implementation of the country's new Clean Fuel Regulations.
In recent years, much of the investment in Canada's biofuel sector has targeted the production of renewable diesel, a biomass-based fuel that is chemically equivalent to petroleum diesel and can either be blended with it or used as a replacement fuel.
As that industry grows, so does Canada's canola processing sector. Canola is a popular low-carbon feedstock for renewable diesel that can be grown in large quantities, often near the refineries where it's being processed.
But the boom times could end as quickly as they began thanks to a new tax credit coming through the U.S. Inflation Reduction Act (IRA). A manufacturing vacuum that's already sucking investment in clean tech down south could claim Canadian biofuel production as its next victim.
"If [the credit] goes ahead as proposed, it's a full-on wrench [in the Canadian industry]," said Ian Thomson, president of Advanced Biofuels Canada, a lobby group.
Just this year, construction wrapped up on Canada's first renewable diesel refinery in Prince George, B.C., Saskatchewan's Covenant Energy announced plans to move ahead with a renewable diesel facility on the edge of Lloydminster and Imperial Oil committed $720 million to build a renewable diesel project near Edmonton.
Investment has been driven in part by provincial policies, like B.C.'s low-carbon fuel standards, and by Canada's Clean Fuel Regulations. The federal regulations came into effect this month and require liquid fossil fuel suppliers to gradually reduce the carbon emissions from the fuels they produce and sell over time.
Companies can choose for themselves how they meet these targets — such as by building a carbon capture and storage (CCS) facility at one of their refineries or offering electric vehicle charging. One of the main ways transportation fuel suppliers plan to do so is by blending biofuels into their product.
"That's a primary topic right now," said David Schick, vice-president of Western Canada and regulatory affairs for the Canadian Fuels Association, which represents companies that process crude oil and bring products to the market.
"Our members who provide most of the transportation fuel in Canada, up to about 95 per cent are coming up with ways to have more biofuels in the fuel mix in order to meet compliance obligations."
Interest in renewable diesel is also growing south of the border, due to the U.S. Renewable Fuel Standard and state-level policies in California, Washington and Oregon.
All that demand has been good news for Canadian canola producers. While renewable diesel can also be made with soybeans, animal fats, used cooking oil and even algae, the canola industry has been an enthusiastic supporter of the renewable fuel sector as a market for canola.
Since 2021, there have been five major canola crushing announcements in the Prairies. Together, they're expected to increase the country's canola crush capacity by seven million metric tonnes — about 60 per cent above current levels, according to the Canola Council of Canada.
At least one of those plants, in north Regina, is slated to be co-located with a renewable diesel facility.
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