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USDA GAIN: Biofuels

04 July 2013

USDA GAIN: Canada Biofuels Annual 2013USDA GAIN: Canada Biofuels Annual 2013

On July 1, 2011, Canada implemented a federal mandate of 2 percent renewable content in the national distillate pool. Proposed regulations, published in the Canada Gazette on May 18, 2013, will extend the Atlantic exemption period until June 30, 2013, and permanently exempt diesel heating oil from the 2 percent renewable content requirement. These regulations are in addition to the mandate of 5 percent renewable content in the national gasoline pool. As the Canadian biofuels industry is continuing compliance preparation, ethanol and biodiesel production has grown in recent years. Ethanol production in 2013 is estimated to increase about 4 percent from 2012 levels, and biodiesel production is estimated to more than double due to new production facilities. At this time, the Canadian biofuels industry remains below Post’s estimates to meet the federal standards, and limited production suggests that Canada will not soon become a major player in the global ethanol market.
USDA GAIN Report - Biofuels

II. Policy and Programs

Context: Canada's Overall Energy Situation Unlike the United States, energy security is not a factor behind the recent and projected growth in Canada’s renewable fuel industry. According to the U.S. Energy Information Administration (EIA), Canada has the world’s third largest proven oil reserves (estimated at 180 billion barrels), behind Venezuela and Saudi Arabia. Canada is one of the world’s top ten oil exporters, and is one of the world’s five largest energy producers.

While Canada is a significant producer of oil, it also ranks among the world’s top ten consumers of petroleum. Between the years of 2006-2011 transportation accounted for about one-third of energy consumption (see Appendix I, Table 9), and motor gasoline and diesel fuel oil accounted for approximately 85 percent of the energy used (see Appendix I, Table 10). A closer look at the use of energy within the transportation industry shows that on average between the years 2006-2010 (most recent available data), the share of energy used for freight averaged a little more than 41 percent per year and the share of energy used for passenger transportation averaged a little under 55 percent (see Appendix I, Table 11).

A breakdown of energy use by fuel type reveals that gasoline and diesel fuel account for an average of 52 percent and 40 percent, respectively, of the fuel type used in the period 2006-2011 and now dominate as the transportation sector’s main energy sources. Table 1 below illustrates current and past fuel consumption for 2006 through a forecasted 2014. Note that this excludes industrial power generation fuel use due to lack of availability. Table 2 illustrates Post’s projections through 2023.

A. National Biofuels Mandate

Canada’s government announced a renewable fuels strategy in late 2006, including a national renewable fuels mandate. Since that time, there have been legislative amendments and federal and provincial incentive programs that have encouraged the development of a Canadian renewable fuels industry. On August 23, 2010, the finalized (official) federal Renewable Fuel Regulations, came into force. The regulations set the five percent renewable fuel mandate for the national gasoline pool to come into effect on December 15, 2010 (full regulations). The commencement date for the mandated average 2 percent renewable fuel content in diesel fuel and heating distillate oil, which is also a provision of the federal Renewable Fuel Regulations, was omitted. The reason for this omission was that the demonstration of technical feasibility under the range of Canadian conditions had not yet been completed. On June 29, 2011, the federal government announced it was moving ahead with a July 1, 2011 implementation date for a federal mandate of two percent of renewable content in diesel fuel and heating oil. A permanent exemption has been provided for renewable content in diesel fuel and heating distillate oil sold in Newfoundland and Labrador to address the logistic challenges of blending biodiesel in this region. Temporary exemptions for renewable content in diesel fuel and heating distillate oil sold in Quebec and all Atlantic provinces were provided until December, 31, 2012, to give eastern Canada time to install biodiesel blending infrastructure. On May 18, 2013, the Regulations Amending the Renewable Fuels Regulations, were published in the Canada Gazette. The amendments extended the Maritime provincial exemption from the 2 percent renewable diesel requirement, increasing it to end on June 30, 2013. The amendments also created a permanent national exemption for the 2 percent renewable content requirement for heating oil. The Renewable Fuels Regulations are annexed to the Canadian Environmental Protection Act, 1999.

The overall structure is similar to the Renewable Fuel Standard in the United States, with the point of compliance at the point of production or importation. The objective of the regulations is to reduce green house gas (GHG) emissions by mandating renewable fuel content based on the gasoline volume, as well as diesel fuel and heating distillate oil volumes, and fighting climate change. The regulations are estimated to result in an incremental reduction of GHG emissions of about one ton of carbon dioxide equivalent (1 MT CO2) per year over and above the reductions attributable to existing provincial requirements already in place. The regulations fulfill the commitments under the federal government`s Renewable Fuels Strategy of reducing GHG emissions from liquid petroleum fuels and creating a demand for renewable fuels in Canada.

B. Federal Programs to Encourage the Development of a Canadian Renewable Fuels Industry

With its announcement of a renewable fuels strategy, the Canadian government launched several programs designed to promote the development of a domestic renewable fuels industry. Several of the programs are designed to encourage agricultural producer involvement in renewable fuels and the usage of agricultural biomass to produce bioethanol. Many federal programs which were announced as part of the renewable fuel strategy expired at the end of March 31, 2011. The federal government has not, as of yet, announced any future measures to replace the programs which have expired.

C. Provincial Mandates and Programs to Encourage Renewable Fuels Industry Development

Provinces have led the way in developing mandates on renewable fuel contents. However, inconsistencies in provincial requirements may frustrate the flow of biofuel trade within Canada. There is concern that, with each provincial government implementing its own complex production and/or consumption incentives with differences in eligibility and duration, there may be barriers to trade and production in areas not well suited to bioethanol production. Canada’s refineries are mostly in western Canada (Alberta) and on the east coast (Newfoundland and Labrador), while most gasoline is used in central Canada (Quebec and Ontario). The federal government has made note of these barriers and sees the federal mandate as a means to work with provinces to harmonize provincial mandates to eliminate inter-provincial trade barriers. However, given the lead provinces have to develop provincial regulations, the ability of the federal government to prevent barriers and uneconomic production is unclear.

Several provinces have implemented provincial mandates on the amount of bioethanol required in the gasoline pool. Certain provinces have also brought in legislation and regulations that have resulted in a renewable fuel standard for diesel fuel coming into force ahead of the federal biodiesel mandate. Table 4 summarizes the incentive measures that are currently in effect, and Appendix II provides detailed information:

Cap-And-Trade Research

Provinces have also taken the lead in cap and trade initiatives. In Alberta, a Green Fund and an Offset System already exists to allow large emitters to purchase carbon credits from farmers, and a law enacted in Saskatchewan in late April 2010 (The Environmental Management and Protection Act 2010) would allow the purchase of carbon credits from farmers within the province. Provincial and state governments in Ontario, Quebec, Manitoba, British Columbia, and California have discussed a protocol under the Western Climate Initiative (WCI). Quebec and California officially implemented the WCI’s cap-and-trade regulations on January 1, 2012, and carbon emitters were given until January 1, 2013 to make necessary adjustments. British Columbia, Ontario, and Manitoba have not yet named a start date for implementation but previously mentioned joining after the program starts.

D. Factors Affecting the Long-term Viability of a Canadian Biofuel Industry

The long-term viability of producing biofuels in Canada will depend on a multitude of factors including federal/provincial regulations and implementation, plant size, production types, co-products, feedstock costs, energy prices, and production/consumption incentives. The required increase in biofuel production set out by the federal mandate will necessitate a buildup of infrastructure to support the industry.

More detailed trade statistics are needed to measure the development of the biofuels market and the markets for the co-products. Canada’s limited production capacity, both in the short and medium term, suggest that Canada will not soon be a significant player in the global bioethanol market. While the possibility of increased bioethanol trade, especially between the northwest United States and Western Canada (wheat-bioethanol to the United States and corn-based bioethanol to Canada), is unlikely to develop quickly, there is an increasing amount of trade in the co-products of bioethanol production, such as distiller’s dried grains (DDGs).

III. Ethanol

A. Production

Bioethanol production in Canada will increase by approximately 4 percent in 2013, due in part to a new plant, which came online this past January (Growing Power Hairy Hill, see Table 22, Appendix III). Ethanol production is estimated to increase to 1,979 million liters, up from the estimated 1,902 million liters in 2012; more specifically, fuel ethanol production is estimated to increase to 1,785 million liters in 2013, up from 1,725 million liters in 2012. Production is forecast to grow slightly further to 2,006 million liters in 2014, due to plants running at a higher percentage of nameplate capacity. Factors most affecting changes in production will include gasoline prices, technological improvements and the impact of federal and provincial mandates.

In 2013, it is estimated that 78 percent of the domestic production of domestic ethanol will be derived from corn, and 21 percent will be derived from wheat. Post forecasts that this will likely remain relatively stable throughout 2014, but there is possibility for further growth of corn as a feedstock; some plants are converting from wheat to corn as a feedstock due to the lower price and higher availability. Overall, Canada’s limited biofuel production capacity, both in the short and medium term, suggests that Canada’s entry into the global bioethanol market is still quite distant.

In 2013, Ontario alone is estimated to account for 58 percent of current domestic bioethanol production capacity. Saskatchewan is estimated to account for 19 percent, Quebec is estimated to account for 10 percent, and Alberta and Manitoba combined are estimated to account for 12.7 percent.

While the federal and provincial programs have been designed to encourage bioethanol plants with greater agricultural producer/rural community equity or investment, Canadian bioethanol is produced by companies that range from (a) energy companies and energy marketers, to (b) companies which focus on grain-based bioethanol production that often have some degree of producer equity/investment, to (c) co-operatives, to (d) companies focused on a range of activities such as grains, or other sources of renewable fuels. To date, multinationals have not expressed interest in Canadian produced bioethanol, seeing Canada primarily as a market for U.S.–produced bioethanol. This is unlikely to change in the short to medium term as Canada is still working towards building enough production capacity to meet its own domestic mandates.

B. Impacts of Ethanol Production on Feedstock Markets

Corn and wheat are the main feedstock for bioethanol production in Canada and the introduction of the mandatory renewable fuel content by the Canadian government undoubtedly have had and will have an impact on production patterns. At this time, there are no official statistics for the amount of corn and wheat directed into bioethanol production.

i. Ethanol Produced from Corn

Corn remains the main feedstock for Canadian bioethanol production, and Ontario remains the largest corn-producing province in Canada. In 2013 and 2014, corn is expected to account for about 78 percent of bioethanol feedstock, respectively.

ii. Ethanol Produced from Wheat

Wheat is the feedstock for most of the balance of Canada’s bioethanol production. It is forecast to account for about 22 percent of bioethanol feedstock for years 2013 and 2014. The newer wheat bioethanol plants have more flexibility. Pipes are larger and allow the use of other feedstock, such as corn, when wheat feedstock may be too expensive. For example, the Husky Energy wheat-based bioethanol plant in Minnedosa, Manitoba uses corn when wheat feedstock is unavailable or too expensive. However, Husky Energy has agreed that 80 percent of the feedstock used to produce bioethanol will come from Manitoba producers. The agreement is with the Manitoba government and expires in 2017.

As the bioethanol industry grows, demand for different wheat varieties is also expected to grow, resulting in increased competition between wheat end-users, such as the Canadian bioethanol producers, livestock producers and the milling industry. The need for high-yielding, low-protein wheat by the livestock industry and the bioethanol plants are in direct conflict with the needs of the flour industry. Increases in bioethanol efficient wheat is expected to affect production patterns and result in more Canadian wheat farmers seeding area to lower protein/high starch wheat such as Winter Wheat and Canadian Prairie Spring Wheat, rather than higher protein/lower starch wheat varieties used by the milling industry. The livestock sector, especially the hog sector, competes for the same wheat varieties as the bioethanol sector.
Additional layers of complication were removed with the December 15, 2011 decision by Canadian legislators to pass into law the divisive Marketing Freedom for Grain Farmers Act. This Act has transitioned the Canadian Wheat Board (CWB) from a state trading enterprise into a commercial enterprise. Prior to the August 1, 2012 enactment date, the CWB had the exclusive right to purchase and sell western wheat (and barley) for domestic food use or export for the 70 years. However, since the CWB was never very involved in bioethanol production, it is unlikely that this change will have an effect on wheat-based bioethanol production.

C. Consumption

Based on the trend of net national sales of gasoline used for road motor vehicles between 2006 and 2011, and the projected trend for 2011-2014 (see Table 6, below), the federal mandate of 5 percent renewable fuel content requires an estimated minimum of 2,269 million liters for 2013 and 2014 of ethanol production — not just capacity. Production capacity of bioethanol is not expected to surpass 1,802 million liters in 2013 and 2014 (see Table 21, Appendix III).

D. Trade

While there are few reliable trade statistics for Canada’s fuel ethanol due to broad and changing HS codes, Post forecasts that imports will rise to 1,144 and 1,216 million liters per year for 2013 and 2014, respectively, up from an estimated 1,087 million liters in 2012. This increase is expected to be driven by an increasing demand for ethanol because of mandates and industry’s inability to produce the required amount of ethanol. Exports are expected to decrease between 2013 and 2014. This decrease will most likely be due to the need for Canada to meet its own domestic mandates.

Due to the North American Free Trade Agreement (NAFTA), there is no tariff on renewable fuels produced in the United States and imported into Canada. However, Canada does have a tariff on bioethanol imported from other countries such as Brazil ($0.05 per liter).

While the current differences in provincial tax exemptions for renewable fuels do not greatly affect production decisions, the combination of lower oil prices (e.g. return to pre-2005 levels), and higher grain prices could make certain provincial tax-exemption restrictions obstacles to expanding the industry.

In recent years, nearly 100 percent bioethanol trade for Canada has been with the United States. However, the possibility of significant increases in bioethanol trade, especially between the northwestern United States and Western Canada (wheat-based bioethanol to the United States and corn-based bioethanol to Canada), is unlikely to develop in the short to medium term. This is due mainly to the fact that Canada does not have excess bioethanol production capacity, which would permit large volumes of exports to the United States.

E. Ending Stocks

Due to a relative lack in data availability for stocks, stock data is mostly calculated based on estimated trade balances. The high stocks listed for more recent years in Table 5 may, however, be put toward consumption in order to meet mandated renewable content levels.

IV. Biodiesel

A. Biodiesel Production

The federal biodiesel mandate of 2 percent in diesel fuel and distillate heating oil came into effect on July 1, 2011. A permanent exemption has been provided for renewable content in diesel fuel and heating distillate oil sold in Newfoundland and Labrador (to address the logistic challenges of blending biodiesel in this region) as well as for renewable content in heating distillate oil. Temporary exemptions for renewable content in diesel fuel and heating distillate oil sold in Quebec and all Atlantic provinces have been extended, until June 30, 2013 to give Eastern Canada time to install biodiesel blending infrastructure. This announcement, in combination with the extension of the ecoABC Initiative (a program which assisted in the construction of biofuel facilities that have a minimum of five percent producer investment) which was extended until September of 2012, is likely to help spur investment in biodiesel production facilities. With the ecoABC Initiative and forecasted increased production, industry is preparing to comply with the mandated requirements.

Biodiesel production is projected to more than double in 2013 to 471 million liters, up from an estimated 210 million in 2012, due to new production capacity. In 2014, production is forecast to increase even further to 646 million liters, partially due to the expected completion of a 265 million liter plant. In the longer term, the European Union’s (EU) increased demands for renewable energy has generated a potential and growing market for biodiesel exports from Canada, as has the RFS2 in the United States. With the current plants and four plants under construction, including a 265 million liter Archer Daniels Midland (ADM) plant, the federal biodiesel mandate is likely to be met with domestic production by the end of 2014. ADM, a large American company involved in over 75 countries, is the first instance of multi-national interest in the Canadian biodiesel industry. Despite the current growth, future growth of the Canadian biodiesel industry may be limited due to the industry’s inability to secure cheap feedstock. Most of the current and forecasted increase in biodiesel comes from canola and strong world demand for vegetable oils may hinder Canada’s ability to take advantage of the growing biodiesel market opportunities.

The federal government’s biofuel strategy program is geared more towards bioethanol and is therefore limited in their ability to address the limiting factors for biodiesel market growth. This has implications when trying to determine the profitability for a biodiesel venture. For example, crushing plants can be used to produce oil for both biodiesel production and human consumption, but the federal government does not want to inadvertently subsidize crushing capacity for oils destined for human consumption.

B. Impacts of Biodiesel Production on Feedstock Markets

While biodiesel can be made from a variety of different feedstocks, prices and availability are the determining factors likely to be considered. Canola, largely due to the abundance of the Canadian production, has proven to be the natural feedstock choice. Projected canola-based biodiesel production shows increases from 151 million liters (35 percent production share) in 2013 to 232 million liters (39 percent share) in 2014. Key competitors facing canola oil for use in biodiesel are rendered animal fats (tallow), rendered oils (yellow grease), palm oil (which would be imported as Canada does not produce palm oil), and soybean oil. Canola and soybeans are high-priced feedstock for biodiesel since they are priced as food oils in international markets. Palm oil and rendered fats are priced at feed and industrial use levels.

In fall of 2011, the United States Environmental Protection Agency (EPA) signed the Canadian Aggregate Approach Petition to approve Canadian feedstocks, including canola, for biodiesel production in the United States. This decision provides secure access for Canadian canola as a sustainable feedstock for U.S. biodiesel markets. As a result, it is likely that there will be more Canadian exports of canola to the United States to meet RFS2, with some canola derived biodiesel returning to Canada.

Most of the growth in biodiesel production capacity has occurred in Western Canada, where the majority of the canola is grown, spurred on by provincial mandates in addition to the federal mandate.

Canola production has reached record high levels in recent years. Increased demand for canola oil from the food retail industry has resulted in higher prices. In 2012, canola producers responded by planting record acreage, up 13 percent from an already record 2011 year. In 2013, area seeded to canola is estimated to have fallen 8 percent from the previous year, but remains at a historically high level. Despite the supply response of recent years, some industry observers suggest that canola could remain too expensive, and that a 2 percent biodiesel blend must be met with cheaper feedstock. As demand for the feedstock increases, it is likely that canola prices will also increase.

While canola use for biodiesel by-itself may be expensive, the co-products from biodiesel production may make economic sense. Co-products include meal to be used in animal feed. There are limits on the profitability of using canola as a feedstock if by-products are part of the everyday production process. For example, off-seed canola may not be a suitable feedstock since this meal may not meet quality standards. Despite these limitations, co-products and the production capacity of the plants (these plants could potentially supply the vast majority of the federal 2 percent biodiesel mandate), combined with provincial biodiesel mandates may make the industry profitable, despite higher commodity prices.

In 2014, while the amount of tallow used for biodiesel is forecast to increase by 16 percent, the share of biodiesel production from tallow (animal fats) is expected to decrease from estimated 2013 levels of 26 percent to 22 percent due to completion of new biodiesel plants using other feedstocks. The share of biodiesel produced from yellow grease is forecast to fall to remain relatively steady at 26 percent of production.

C. Consumption

Based on the trend of net national sales of diesel used for road motor vehicles between 2006 and 2011 (see Table 1, above), and the federal mandate which includes renewable fuel content in both the diesel oil sales for transportation as well other sectors, Post estimates that Canada will consume 713 million liters of biodiesel in 2013 and forecasts consumption at 721 million liters of biodiesel production in 2014 (see Table 7, above). By the end of 2014, the temporary exemptions for eastern Canada and Quebec will have been lifted, the compliance period will have ended, and the full federal mandate should be in force.

D. Biodiesel Trade

Trade data for biodiesel is problematic since Canada did not have an established HS code for biodiesel until 2012. Adding to the complication, a European Union anti-dumping trade investigation which concluded in 2010, revealed inconsistencies between the European Union biodiesel import trade data and the Canadian biodiesel production capacity, which is still in its infancy. The trade data from before 2012 used in this report is therefore based on a conglomeration of industry discussion, United States Department of Commerce data, Natural Resources Canada data, and Global Trade Atlas data. Lack of biodiesel production capacity in some provinces has meant that some provincial mandates have necessitated the importation of biodiesel to ensure compliance, such as BC in 2010. Imports are expected to become less necessary over the next few years as production capacity grows and fulfills more of the federal and provincial mandates. Thus, import amounts are expected to level out in 2013 to 2014. However, this is subject to considerable variation depending on the amount of actual production, which fluctuates due to changing capacity use. Exports are expected to increase in 2013-2014 as U.S. demand for biodiesel increases.

Of note, the two Canadian companies that participated in the EU anti-dumping investigation have been exempt from the anti-dumping duties placed on the Canadian biodiesel industry following the investigation. Future Canadian biodiesel companies who wish to export biodiesel to the European Union will be provided the opportunity to apply for exemptions as well.
More information on the EU investigation is available at:
Council implementing regulation no 443/2011 (anti-subsidy)
Council implementing regulation no 444/2011 (anti-dumping)

E. Ending Stocks

There are no official statistics kept on biodiesel stocks, so Post has estimated stocks based on trade balance calculations. However the biodiesel forecast to be put toward stocks could instead be exported or put toward domestic consumption, depending on Canadian need to meet the mandated renewable content levels.

V. Advanced Biofuels

While Canada is still not a significant producer of advanced biofuels, over the past few years it has been making progress toward beginning full-scale operation plants. In 2009, Enerkem opened a demonstration biofuels and biochemicals facility; in spring of 2012, this plant began production of cellulosic ethanol via treated wood as feedstock at a 5 million liter capacity. Although this may be the only advanced biofuels plant in Canada at the current moment, Enerkem is undergoing construction of a 38 million liter, cellulosic ethanol plant in Edmonton, Alberta. Edmonton will provide 100,000 dry metric tons of municipal solid waste to the plant as feedstock. The plant is expected to be operational in early 2014. Further into the future, Varennes Cellulosic Ethanol L.P., a joint venture of Enerkem and Greenfield Ethanol Inc., is also planning a full-scale, cellulosic ethanol plant in Varennes, Quebec. The plant will use Enerkem’s proprietary thermochemical technology to convert non-recyclable waste into 38 million liters of cellulosic ethanol per year.

There is also Atlantic Canadian interest in producing cellulosic from wood waste or other advanced feedstock. For more information, please see the below section regarding biofuels in Atlantic Canada.

According to the Canada Gazette, as of February 26, 2011, some biodiesel producers may be considering the possibility of renovating existing refineries in order to produce hydrotreated vegetable oil (HVO). These considerations are attributable to some substantial advantages that HVO has over biodiesel, including higher energy content, no need for temperature regulation during transportation, and significant convenience for blenders due to the chemical equivalence to diesel. However, HVO is currently less economic than biodiesel, resulting in less Canadian demand. There are currently no domestic HVO production facilities, and any intentions to start-up such facilities are not expected to be fulfilled in the near future.

Although recent data from F.O.Licht has shown relatively little domestic consumption of HVO, there has been some demand which has, in recent years, pushed imports of HVO to levels comparable to imports of biodiesel.

VI. Biomass for Heat and Power

A. Wood Pellets

There is current interest in exporting wood pellets from Canada to Europe to meet the increased demand for biofuels in European countries. The EU has been increasing funding for renewable energy production, including doubling the financial allotment of funds to renewable energy in 2007. In 2004, the EU announced that by 2020, 20 percent of its total energy consumption requirements will be renewable energy sources, greatly higher than the 12.4 percent in 2010. The pellet industry in Canada, especially in the west, has grown rapidly. According to the Canadian Wood Pellet Association (WPAC), in 2012, Canada had 42 pellet plants with 3 million tons annual production capacity, compared to 2010’s 33 plants and 2 million tons capacity.

The province of British Columbia accounts for about 65 percent of Canadian production capacity. Collectively, the provinces of Alberta, Quebec, New Brunswick, Nova Scotia, and New Brunswick account for 35 percent. According to Executive Director Gordon Murray of the Canadian Wood Pellet Association, it is estimated that 90 percent of Canadian pellets were exported to Europe during 2010.

Canadian pellet consumption has remained relatively steady throughout the past several years, and there are no official statistics reflecting possible increases. However, a report released by the WPAC notes that demand for wood pellets may increase in the coming years due to Canadian desire to reduce carbon emissions in the coming years. The targeted reductions would require about 14 million tones of wood pellets to replace coal by 2020. While this desire remains somewhat impractical, Post estimates that 2013 and 2014 will show consumption increases, while not as large as mentioned above, that will reflect rising demand.

B. Fuels Produced from Other Biomass

There has been growing interest and investment in producing bioenergy from sources other than corn and wheat. Recently, there have been announcements of joint ventures to make cellulosic bioethanol and biogas, including a joint cellulosic bioethanol venture announced by GreenField Bioethanol and Enerkem. Enerkem, a Quebec-based gasification and catalysis technology company, has developed technology to convert biomass such as municipal solid waste and wood residue into cellulosic bioethanol. Its commercial-scale demonstration facility in Westbury, Quebec, which was completed in 2009, reached 1,000 hours of operation in 2010 and agreed to sell all ethanol produced to GreenField Ethanol. Enerkem continues to grow, and is in the construction phase of its second plant, in partnership with the City of Edmonton and Alberta Innovates. The commercial waste-to-biofuels production facility is scheduled to begin ethanol production in the beginning of 2014. It is expected to have a production capacity of 38 million liters of ethanol per year.

Biogas is also of increasing interest and investment. Two of the three bio-energy projects that received funding under Alberta’s Biorefining Commercialization and Market Development Program and the Bio-energy Infrastructure Development Program are for the development of biogas as an alternative source of energy. Kingdom Farm Inc. received a significant grant to review the potential for bio-gas from large scale Alberta hog operations. Highmark Renewables Research also received a significant grant from AVAC Ltd. for a bio-gas feasibility study at a large scale dairy facility.

Most fuels derived from non-grain biomass remain at the research level. One company moving to commercialize this technology is Lignol Energy Corporation, which specializes in cellulosic bioethanol and biorefining. Lignol announced the completion of a fully integrated industrial-scale biorefinery pilot plant in Burnaby, British Columbia in 2009. This plant is an end-to-end producer of cellulosic bioethanol. On June 15, 2010, Lignol signed a research and development agreement with Novozymes, the world’s leading producer of industrial enzymes, to make biofuel from wood chips and other forestry residues. The partners aim to develop a process for making biofuel from forestry waste at a cost as low as $2 per gallon, a price competitive with gasoline and corn bioethanol at the current United States’ market prices. On February 7, 2012, it was announced that Sustainable Development Technology Canada (SDTC) awarded $2.06 million to Lignol, in addition to $4.2 million already contributed.

Ontario Power Generation (OPG) is looking to buy two to three million tons of biomass annually by 2015 – the date at which the Ontario government has mandated an end to burning coal for electricity generation. Biomass is targeted to replace coal as soon as technical obstacles are overcome. OPG will phase out the use of coal at its thermal electricity stations by the end of 2014. However, for biomass to completely replace coal, it must find a more efficient and condensed solution for transport and handling.

B. British Columbia Biofuel Policies

Biofuels Strategy/Policy Documents:
In 2008, the province of British Columbia (BC) committed to bioenergy and renewables and set an objective to lower greenhouse gases emissions 33 percent by 2020. The province, under its Ministry of Energy, Mines and Petroleum Resources, unveiled two strategy documents/plans related to using bioenergy resources to reduce greenhouse gases. The first is the BC Energy Plan, unveiled late February 2007. This document sets out the necessary steps for reducing BC’s greenhouse gas emissions and commits to investments in alternative technologies, including biofuels for transportation. The second is the BC Bioenergy Strategy, which aims for BC biofuel production to meet 50 percent of the province’s renewable fuel requirements by 2020. The BC Bioenergy Strategy was made public at the end of January 2008.

Renewable Fuel Standard:
Since January 1, 2010, but amended in June 2011, British Columbia’s Renewable and Low Carbon Fuel Requirements Regulation has required:

  • A provincial annual average of five percent renewable content in gasoline sold in British Columbia.
  • A provincial annual average of three percent renewable content in diesel sold in British Columbia in 2010 and four percent in 2011 onward.
  • A 10 percent reduction in the carbon intensity of transportation fuels by 2020.

Consumption Incentives:

Motor Fuel Tax Act and Carbon Tax Incentive
The incentives for bioethanol and biodiesel when blended with gasoline or diesel were discontinued, effective January 1, 2010. Fuel with at least 85 percent bioethanol, natural gas and propane (effective July 1, 2010) when used in a motor vehicle are exempt of the Motor Fuel Tax Act. Under specific conditions hydrogen is also exempt from the Motor Fuel Tax Act.

C. Manitoba Biofuel Policies

Biofuels Strategy/Policy Documents:
Manitoba is developing its bioethanol and biodiesel industries under the Energy Development Initiative section of the Ministry of Innovation, Energy and Mines. Information on Manitoba’s biofuels initiatives is available on the province’s Energy Development Initiative website.

Renewable Fuels Mandate:
The implementation of The Bio-fuels and Gasoline Tax Amendment Act was enacted in the fall of 2007. The mandate requiring that 8.5 percent of the gasoline sold in the province must be bioethanol came into effect on January 1, 2008, beginning with a 5 percent bioethanol requirement for the first quarter of the year and moving to 8.5 percent for the remainder of 2008 and subsequent years. In December, 2007 the Province of Manitoba passed the Biofuels Act which includes strict licensing and fuel quality requirements and the option for a future biodiesel mandate.

Production Incentives:
The gasoline tax exemptions for bioethanol have been replaced by a direct producer grant that decreases over a period of eight years. The staggered, decreasing production incentives are as follows: 20 cents/liter producer incentive beginning January 1, 2008 until December 31, 2009; 15 cents/liter production incentive beginning January 1, 2010 until December 31, 2012; 10 cents/liter producer incentive beginning January 1, 2013 until December 31, 2015. To be eligible for the incentive, bioethanol must be produced in Manitoba and sold in Manitoba to fuel suppliers. More information on the program is available at: Bioethanol Fund Grant Regulation.

D. Ontario Biofuel Policies

Biofuels Strategy/Policy Documents:
Ontario is the largest bioethanol-producing province in Canada and has been a leader in building bioethanol production capacity in Canada. Ontario’s bioethanol strategy has two components; (1) a renewable fuel standard mandate, and (2) the Ontario Bioethanol Growth Fund (OEGF) that was created in 2005.

Renewable Fuels Standard:
As of January 1, 2007, the gasoline tax exemption of 14.7¢ a liter on the bioethanol portion of the bioethanol-blended gasoline is no longer in effect. At the same time, a mandate that requires on average, no less than 5 percent bioethanol be blended in the gasoline sold in Ontario came into effect.

While Ontario currently has no regulations for a provincial renewable diesel requirement, it was announced on May 2, 2013, that the government will undertake a formal consultation on the creation of a renewable diesel mandate. The CRFA recommended a 2 percent biodiesel mandate for Ontario, but upcoming consultations will determine the details of the potential mandate. For updates on the regulations, visit

Provincial Programs to Support the Development of a Regional Biofuels Industry:
The Ontario Bioethanol Growth Fund (OEGF) provides:

  • C$32.5 million for capital assistance to help meet financial challenges; cannot exceed 10¢ per liter;
  • C$60.5 million per year from 2007-2017 for operating assistance to address changing market prices; no operating grant will exceed 11¢ per liter of bioethanol;
  • C$16 million in support of independent retailers selling bioethanol blends Independent Gasoline Blender’s Transition Fund;
  • C$7.5 million in private and public funds for research and development opportunities.

The OEGF is fully subscribed and is no longer taking applications.

According to the most recent data, Ontario boasts approximately 38 percent of Canada’s total population, 39 percent of net gasoline sales and 58 percent of bioethanol production capacity.

E. Quebec Biofuel Policies

Biofuels Strategy/Policy Documents:
Quebec currently has no mandate in place for renewable fuel content in gasoline. However, it contributes to national compliance with the federal Renwable Fuels Regulations.

Production Incentives:
Quebec currently has in place a temporary refundable tax credit (maximum C$0.185 per liter), granted for a maximum of 10 years to corporations that produce bioethanol from renewable material and sell the bioethanol for use in Québec. It began April, 2006 and expires in 2018. An eligible corporation’s bioethanol production must be sold in Quebec to a person holding a collection officer’s permit issued under the Fuel Tax Act. Additional conditions for the credit limit a maximum bioethanol production credit of 126 million liters and no tax credit for the month in which the average monthly price of crude oil is equal to or greater than USD$65, or the total cumulative production of bioethanol exceeds 1.2 billion liters. The reasoning for this limitation is that it was assumed that bioethanol would be competitive with gasoline if the price of crude oil exceeded USD$65 a barrel. More information is available on the web site of Revenue Quebec.

Green Technologies Demonstration Program

The purpose of the program is to finance demonstration projects of innovative technologies and procedures that have strong potential for reducing greenhouse gas emissions in Québec. It pursues the objectives of two different green development strategies, the Development Strategy of the Quebec environment industry and green technologies and the Québec Energy Strategy 2006-2015. The program focuses on reducing greenhouse gas emissions by supporting the development of technologies that limit or reduce greenhouse gas emissions; improving energy efficiency so as to reduce consumption of fossil fuels; replacing fuels and fossil fuels with renewable energy; contributing to the development of Québec industry and job creation in the green technology sector.


While some corn production takes place in Quebec, Quebec’s focus is on the development of cellulosic bioethanol. It is Quebec’s intention to use wood from its forestry industry to grow its bioethanol market. This technology seems to be moving closer to commercialization given the joint venture announcement between Enerkem, a Quebec-based gasification and catalysis technology company, and GreenField Bioethanol, Canada’s leading bioethanol producer. Enerkem was founded in 2000 and currently operates two plants in Canada: a pilot facility in Sherbrooke, QC and a commercial-scale plant in Westbury, QC. It has currently constructing its waste-to-biofuels plant in Edmonton, AB, Canada, which has received over C$23 million from the government of Alberta and the City of Edmonton. Additionally, Enerkem, in joint with GreenField Ethanol Inc., has proposed a plant in Varennes Quebec, Varennes Cellulosic Ethanol L.P. The Quebec government announced that it will be injecting $27 million into the plant. Varennes Cellulosic Ethanol L.P. will use Enerkem’s proprietary thermochemical technology to convert non-recyclable waste into 38 million liters of cellulosic ethanol per year.

According to the most recent data, Quebec boasts approximately 24 percent of Canada’s total population, 21 percent of net gasoline sales and 10 percent of bioethanol production capacity.

F. Saskatchewan Biofuel Policies

Biofuels Strategy/Policy Documents:
Saskatchewan’s “Go Green” strategy promotes environmentally friendly transportation. Initiatives include working with industry to develop E85 (fuel blends with 85 percent bioethanol and 15 percent gasoline) corridors in the province, developing a 1.4 billion liter biofuels industry in Saskatchewan, and implementing a Government and Crown vehicle purchase policy that requires all vehicles to be hybrid electric, alternative or flex-fuel, or within the top 20 percent efficiency in their class.

Renewable Fuels Mandate:
Saskatchewan currently has a 7.5 percent bioethanol content requirement in its gasoline.

Production Incentives:
Saskatchewan does not provide fuel tax exemptions for alternative fuels but does provide grants to fuel distributors through the Bioethanol Fuel Grants Program. To be eligible for the grants, the bioethanol used by the distributor has to have been produced at a facility located in Saskatchewan from biomass grown in Saskatchewan. The program provided a 15 cent per liter grant to eligible distributors who blend Saskatchewan produced ethanol for domestic consumption. A program review indicated that the objectives of the program have been largely met, and a phase out program started April 1, 2013. This reduced the grant from 15 cents per liter to 10 cents per liter with an annual cost of $16 million (down from $24 million).

According to the most recent data, Saskatchewan boasts approximately 3 percent of Canada’s total population, 3 percent of net gasoline sales and 19 percent of bioethanol production capacity.

G. Biofuel Policies in Atlantic Canada

Biofuels Strategy/Policy Documents:
Biomass developments are increasing in Atlantic Canada. The Atlantic Council for Bioenergy Co-operative (ACBC) was founded in 2010 with the vision of bringing a vibrant, sustainable bioenergy industry to Atlantic Canada. While Atlantic Canada may lack the arable area for traditional biofuels feedstock, options are being explored in the realm of cellulosic ethanol and renewable diesel via wood waste and other advanced feedstock. Although, little information is available currently, an ACBC media conference will be held in early July, 2013 to discuss and announce plans to develop a thriving renewable energy supply in Atlantic Canada. This information will be posted on ACBC’s website shortly thereafter.

Currently, however, Nova Scotia is the only province to include a tax credit on biodiesel. The remaining Atlantic provinces have no incentives, mandates or tax credits regarding biofuels and are the only governments in Canada that do not have a biofuels or bioenergy policy in place. The New Brunswick Department of Environment has indicated that it will consider implementing the federal national standard in New Brunswick, but has not committed to an official provincial mandate.

July 2013

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