ECCC proposes changes to Clean Fuel Regulations, but industry warns 1.3x multiplier for ethanol falls short

This story was first published on RealAgriculture.com on Oct. 27, 2026.

The Canadian government has unveiled its long-awaited draft amendments to the Clean Fuel Regulations, but farm and ethanol industry groups say the proposed credit multiplier system falls short in helping domestic biofuel producers compete against subsidized U.S. imports.

As part of the announcement on Tuesday, Environment and Climate Change Canada said the draft regulations will be published in the Canada Gazette, Part I on Oct. 30, opening a 75-day public consultation period.

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The announcement delivers on Ottawa’s commitment to move ahead with changes to the Clean Fuel Regulations before year’s end. Farm and biofuel groups — including Grain Farmers of Ontario, the Farms and Fuels Alliance and Renewable Industries Canada — have sounded the alarm that Canadian ethanol producers are struggling to compete with American ethanol imports, which are subsidized through the U.S. Inflation Reduction Act’s 45Z credit and other supports.

The Carney government first committed to updating the Clean Fuel Regulations to support domestic production in September 2025. Environment and Climate Change Canada subsequently outlined two potential pathways in a December discussion paper: a minimum domestic content approach and the credit multiplier approach favoured by the Farms and Fuels Alliance.

In the draft regulatory text shared on Tuesday, Environment Canada opted for the credit multiplier mechanism rather than the domestic content mandate. The formula allows Canadian fuel producers to generate additional “related compliance credits” based on designated credit factors:

• Ethanol and other liquid low-carbon fuels: Assigned a 0.3 factor, resulting in an effective 1.3-times multiplier (a 30 per cent credit top-up).
• Biodiesel: Assigned a 0.4 factor (effective 1.4x multiplier).
• Hydrogenation-Derived Renewable Diesel: Assigned a 0.5 factor (effective 1.5x multiplier).
• Sustainable Aviation Fuel: Assigned a 0.8 factor (effective 1.8x multiplier).
• Co-processed refinery fuels: 0.3 for low-carbon gasoline and 0.4 for diesel.
• Renewable natural gas and hydrogen: Assigned a 0.4 factor.

To qualify for the credit top-up, feedstocks must be harvested, produced, extracted, or collected within North America. The provisions are set to apply retroactively to credits created on or after January 1, 2026.

The proposed 1.3x multiplier for ethanol falls short of the 1.4x minimum requested by Grain Farmers of Ontario, the Farms and Fuels Alliance, and Renewable Industries Canada. Farm leaders have stressed that without sufficient parity, mounting U.S. imports will jeopardize more than $1 billion in planned domestic processing capital and erode demand for Canadian feedstocks like Ontario corn.

“Canada has recognized the competitive disadvantage facing domestic ethanol producers and adopted a mechanism to address it. That’s important progress,” said Andrea Kent, Renewable Industries Canada past president and board member, responding to Environment Canada’s announcement.

“But recognizing the problem and closing the gap are two different things. The multiplier must reflect real-world competitive conditions if we’re serious about attracting investment and expanding Canadian biofuel production, not simply increasing biofuel consumption.”

According to Renewable Industries Canada, U.S. ethanol producers are reporting production tax credits equivalent to approximately 35 cents CAD per litre, while the proposed 1.3x multiplier would only generate an estimated 12 cents CAD per litre in additional credit value. The group also warned that expanded compliance flexibility could weaken the Clean Fuel Regulations credit market, undermining the investment signal for Canadian industry.

In a separate response, the Farms and Fuels Alliance said the 1.3x credit multiplier for ethanol is a “meaningful step, but falls short of the evidence-based 1.4x minimum needed to level the playing field for domestic producers.”

Both the Farms and Fuels Alliance and Renewable Industries Canada say expanded compliance flexibility also risks weakening the market signals needed to attract investment in Canadian ethanol production.

“We look forward to working with the government to secure a minimum 1.4x multiplier in the final amendments and deliver on its commitment to level the playing field for Canadian producers,” said the Farms and Fuels Alliance.

Stakeholders will have until mid-January to comment and suggest changes to the proposed regulations.