$1 billion in ethanol projects in Ontario and Quebec is stalled while Canada’s biofuel sector waits for promised amendments to the Clean Fuel Regulation announced in September 2025.
A U.S. 45Z clean-fuel tax credit gives American ethanol shipped into Canada a 30-cent-per-litre advantage, letting imports capture more of Canada’s growing ethanol demand.
Industry executives say the problem is not market access but policy design: Canada’s rules treat domestic and imported biofuels equally, leaving local producers unable to secure financing for new plants.
The regulation requires fuel producers to cut lifecycle carbon intensity 15% below 2016 levels by 2030, and biofuels can reduce emissions by 80% to 90% in sectors such as transport.
Ottawa faces a trade-off as it weighs an ethanol 'equalizer'—supporting domestic investment could strengthen the sector, but any move seen as discriminating against U.S. imports risks trade fallout.