In a move to protect the domestic biofuel industry, on February 27, 2025, the Government of British Columbia announced important updates to the province's renewable fuel requirements for diesel and gasoline, effective in the coming years. While no changes were made to the renewable fuel targets for jet fuel, the new regulations introduce significant adjustments for the diesel and gasoline sectors. The renewable fuel blending target for diesel will increase from 4% to 8% starting in the 2025 compliance period and for future periods. The diesel requirements can be satisfied with biodiesel and/or renewable diesel (biomass-based diesel).
Additionally, the regulations introduce Canadian production requirements for both diesel and gasoline renewable fuels. Beginning April 1, 2025, the renewable fuel used to meet the 8% target for diesel must be produced within Canada. However, fuels marketed between January 1 and March 31, 2025, will not be subject to this Canadian production requirement, allowing marketers to rely on eligible renewable fuels from outside the country to meet the 2025 target. For the gasoline sector, a Canadian production requirement will come into effect on January 1, 2026, for the 5% renewable fuel target. The update outlining the changes was released later on Friday by the Ministry.
The changes are designed to strengthen British Columbia’s biofuel industry and reduce reliance on imported fuels. The province is acting to counter the competitive advantage created by US subsidies, particularly those provided under the US Inflation Reduction Act, which have made it difficult for Canadian producers to compete in the market. By requiring renewable fuels to be sourced from Canadian producers, the government aims to protect and foster local biofuel production while addressing these challenges. The influx of subsidized US renewable diesel in the BC market has created financial challenges for Canadian biofuel producers, and these new regulations aim to provide a more stable environment for domestic production.
With production capacity from companies such as Imperial, Tidewater, and other biomass-based diesel plants, Canada is well-positioned to meet over 15% of BC's diesel demand, making it feasible for local producers to meet the new targets. However, the shift to Canadian-made renewable fuels may affect market dynamics, as BC-produced fuels could carry a premium compared to other supplies. The extent of this premium will depend on feedstock costs and competition with US biofuels, particularly if there are challenges in sourcing canola oil.
According to Clearblue’s BC LCFS and federal Canada CFR supply and demand modeling, the current estimated regulatory demand for biomass-based diesel due to carbon intensity reduction requirements of these programs exceeds the revised 8% diesel mandate. Consequently, the impact of this change is not bearish for these programs, as additional supply is required to meet the targets for both BC LCFS and CFR.
ClearBlue will continue to monitor any developments and keep clients updated.