Canada’s biofuel production incentive officially takes effect

Canada’s biofuel production incentive officially took effect on January 1, providing immediate support for domestic biofuel capacity and national energy security, according to Canadian Advanced Biofuels Association (CAB). CAB President Fred Ghatala said the measure marks a shift from policy intent to concrete implementation, following its announcement by Prime Minister Mark Carney in September.

Ghatala noted that Canadian producers have faced a competitive disadvantage since the U.S. Inflation Reduction Act and the 45Z clean fuel production credit significantly lowered U.S. production costs and reshaped capital flows. The new incentive is expected to support jobs, domestic feedstocks, and fuel supply, helping retain clean fuel investment in Canada amid trade and policy uncertainty.

While welcomed as a short-term boost for 2026–2027, Ghatala emphasized that long-term competitiveness will require coordinated federal and provincial policies to provide lasting investment certainty for Canada’s biofuels sector.