Canadian Renewable Diesel Producers Still Facing Headwinds
The start-up of Imperial’s new renewable diesel plant in Strathcona County, Alberta is a positive step forward for cleaner fuel production in Canada. Once producing at full capacity, the plant could add about 1 billion litres of a renewable fuel that works seamlessly in today’s diesel engines to Canada’s annual supply.
As of 2024, Canada consumed approximately 6.5 billion litres of biofuels annually, but more than 60% was imported, mainly from the United States. By 2030, Canada’s total biofuel demand is expected to reach ~10 billion litres — driven by clean fuel regulations and growing climate commitments.
Canadian bio-based diesel production capacity stood at ~1.7 billion litres per year as of 2024. That number will need to more than double to meet a demand expected to jump to ~4 billion litres per year by 2030.
Growing Canada’s renewable diesel production isn’t just key to reducing emissions from the transportation sector, it’s also a strategic opportunity to strengthen our energy security and our economy. With the right policies in place, renewable diesel production could contribute an additional $35 billion a year to Canada’s economy and support an additional 47,500 jobs across the country by the end of the decade, strengthening rural economies and benefiting the agriculture and forestry sector.
But Canadian renewable diesel producers continue to face significant headwinds: U.S. producers have a competitive edge due to meaningful U.S. Government incentives like the 45Z Production Tax Credit (PTC), which provides an estimated $0.16/L to U.S. producers on average. This allows them to sell their products in Canada at a lower price than domestic producers.
Canada doesn’t offer a comparable incentive and as a result, Canadian producers are struggling to compete – and it’s already having real consequences.
Over the past several months, some production has been halted, trade tensions have emerged, and some producers have warned they may need to scale back or shut down operations altogether due to economic pressures. At the same time, major projects that had been announced are now on hold, casting uncertainty over the growth of Canada’s biofuels sector.
Even as a large fuel producer with a well-established supply chain, extensive infrastructure in place and proximity to high quality feedstock, Imperial’s new facility received support from two provincial governments (Alberta and British Columbia) and Strathcona County to narrow the competitive gap with its U.S. counterparts. But without a federal incentive, that gap remains significant and will prevent renewable diesel and other biofuel producers to invest in growing Canada’s domestic production.
To continue growing the low-carbon fuel sector, Canada needs a production tax credit, similar to the U.S. 45Z incentive. This would help:
- Keep existing producers competitive and protect Canadian jobs
- Attract new investment into Canada’s biofuel manufacturing sector, strengthening the Canadian economy and creating new jobs
- Ensure Canadians benefit from cleaner, made-in-Canada fuels and reduce our reliance on imported biofuels
Without this support, Canada will miss out on economic growth, energy security, and emissions reductions as demand for biofuels is set to soar and investments – and Canadian feedstock – head south of the border.
