Consumers have paid more at the pump this year. Last week, we examined how higher diesel prices affect costs from farm to table. In this report, we take a deep dive into Canadian biofuel production, feedstock use and market conditions, as well as how biofuels compare with their fossil fuel counterparts on cost.
Renewable diesel pushes past ethanol
Canadian biofuel production is expanding, but fuels that replace gasoline and diesel are following different paths. Ethanol production has averaged 156 million litres per month so far this year, up 5% from the same period last year and 20% from 2020. The gains reflect a mature industry focused on operational improvements (Figure 1).
Biodiesel dominated the “other renewable fuels” category until 2023, but renewable diesel, a direct substitute for conventional diesel, is now driving growth. It can earn higher carbon-credit values and, unlike biodiesel, is chemically similar to conventional diesel, allowing year-round use with fewer blending constraints. Canada’s first commercial renewable diesel facility opened in 2023, followed by additional plants in 2024 and 2025. Together, they increased annual capacity from zero to nearly 2.4 billion litres by 2025.
Production of other renewable fuels—biodiesel and renewable diesel combined—averaged 150 million litres per month during the first seven months of the year, up 152% from last year and 294% from 2020. Once equivalent to roughly one-quarter of ethanol output, the category now surpasses it in some months. Monthly output remains volatile as plants face policy uncertainty and changes affecting their economics.
Click here to see more...