Glacier FarmMedia — Canada’s canola sector is pleased with the new guidance published for the 45Z Clean Fuel Production Credit in the United States.
Chris Davison, president of the Canola Council of Canada, hasn’t had a chance to do a deep dive into the proposed regulation, but he likes what he has seen on the surface.
“On first blush, there are a number of provisions that can certainly help support Canadian canola’s access to the U.S. biofuel market,” he said.
It took one year for the U.S. Department of the Treasury and the Internal Revenue Service to clarify how the credit will work.
The credit has been available since January 2025, but producers and farmers have struggled to capitalize on it because there was minimal guidance to accompany the credit.
The newly published guidance helps biofuel producers determine their eligibility for and to calculate the credit made available under the One, Big, Beautiful Bill.
WHY IT MATTERS: The U.S. biofuel sector could be a huge customer for Canadian canola oil.
Davison is pleased to see that the credit limits feedstocks to those grown or produced in the U.S., Mexico and Canada.
“That’s a critical provision in terms of helping ensure that the economic benefits of biofuel accrue back to farmers domestically from the (Canada-U.S.-Mexico Agreement) countries,” he said.
It means biofuel made from used cooking oil and tallow from overseas markets does not qualify for the credit.
Canada’s canola industry is advocating for similar measures to be included in Canada’s Clean Fuel Regulations amendments.
The updated 45Z guidance also confirms that fuel made from Canadian canola is an approved pathway and that the indirect land use change penalties associated with agricultural feedstocks have been removed.
Biofuel is a policy-driven market, and there is one big remaining piece of that puzzle, which is when the U.S. Environmental Protection Agency establishes its Renewable Volume Obligations (RVOs) for 2026 and 2027.
The EPA has floated a proposal that imported biofuel and biofuel made with imported feedstock would be assigned half as many Renewable Identification Number (RIN) credits as fuel made with domestic feedstocks.
That idea has been embraced by groups such as the American Soybean Association but strongly opposed by Canada’s canola sector.
The EPA recently said it expects to issue its final RVO rule during the first quarter of 2026.
Davison said the 45Z credit and the RVO ruling will strongly influence Canada’s canola oil sales to the U.S. market.
He is pleased to see that the first domino appears to have fallen in the right direction.
“This is a positive development and we should recognize that,” he said.
“It recognizes that Canadian canola is an important feedstock for biofuel producers in the U.S. as well as Canada.”
Crux, a capital markets platform for the clean economy, estimates that US$1 billion in 45Z credits were transacted in 2025.
It anticipates the new guidance will unlock an additional $1 to $1.5 billion in credits by the end of the third quarter of 2026.
