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Globe and Mail
22-05-2025
- Business
- Globe and Mail
Canada's canola farmers stand to gain from U.S. tax breaks for clean fuel
Embattled Canadian canola farmers are poised to gain from a revised tax credit for clean fuels approved by the U.S. House of Representatives Thursday morning as part of President Donald Trump's 'big, beautiful bill.' The 45Z Clean Fuel Production Credit incentivizes the production of low-carbon transportation fuels in the United States. The tax credit came into force in January as part of former president Joe Biden's Inflation Reduction Act. But certain stipulations made feedstock from Canadian canola ineligible. The Republican bill slashes those requirements. Should the expansion pass through the Senate, it could drive increased demand for Canadian canola – a boost much needed by a sector that recently faced a steep decrease in U.S. sales and tariffs from its second-largest market, China. Political uncertainty north and south of the border has also depressed investment in what was once a booming domestic processing sector. 'We're keeping our fingers and toes crossed that we will see some good news here,' said Chris Vervaet, executive director of the Canadian Oilseed Processors Association. The U.S. tax credit will subsidize the production of transportation fuels with low-life-cycle greenhouse-gas emissions, such as ethanol and biodiesel or renewable diesel. These fuels are sourced from renewable biomass such as corn, soybeans, canola or used cooking oil. It is a win for red farm states, which have been slammed by a trade war with their largest market for corn and soybeans, China. The tax credit is one of the few clean-energy policies from Mr. Biden's 2022 Inflation Reduction Act to survive. (A tax break for buyers of electric vehicles and credits for low-emissions electricity such as wind, solar, battery and geothermal power will be rapidly phased out.) The clean-fuel incentives would be a top-up on requirements under the U.S. Renewable Fuel Standard Program – a federal initiative that requires transportation fuel sold in the United States to contain a minimum volume of renewable fuels. It will help farmers capitalize on growing demand for clean fuel, said John Fuher, vice-president of government affairs at Growth Energy, a U.S. biofuel trade association. According to the group, the credit could add US$21.2-billion to the American economy, and provide farmers with a 10-per-cent price premium on low-carbon corn used at a bioethanol plant. The Biden administration's version of the tax credit represented a loss, rather than a gain, for Canadian canola farmers and processors. To qualify for the tax credit under the previous administration, feedstock had to fall below an emissions threshold. This threshold included emissions caused by switching land to crop production. The indirect land use change (ILUC) policy put Canadian canola above the emissions threshold, making it ineligible for the credits. This had ramifications for trade. There was a 66-per-cent drop between December and March for Canadian crude canola oil exports to the U.S., said Mehr Imran, senior analyst of carbon markets at ClearBlue Markets. The Republican bill eliminates the ILUC policy and stipulates that Canadian and Mexican feedstock would be eligible. Feedstock from other countries – for example, used cooking oil from China – would not. 'We think it is really important that we have open two-way trade between our two countries,' said Geoff Cooper, president and chief executive officer of the U.S.-based Renewable Fuels Association. It is much-needed good news for Canadian canola farmers who have also faced 100-per-cent tariffs on canola oil and meal from China. Beijing's move to introduce the levies in March was in retaliation for Ottawa's tariffs on Chinese-made electric vehicles. Ambitious plans to expand canola crush capacity have also lost momentum. In Canada's largest canola-producing province, Saskatchewan, five new plants were announced starting in 2021. Only one has come online. Others are in progress, behind schedule, indefinitely on pause or have not broken ground. Reasons for delays include trade uncertainty with the U.S. and concerns about a potential new conservative government in Ottawa killing Canada's Clean Fuel Regulations. 'It's always good to have more competition for your product,' said Roger Chevraux, an Albertan canola farmer who serves on the board of the Canadian Canola Growers Association. 'It means we're less vulnerable.' However, the tax credit could have other implications for Canada's refineries, Ms. Imran said. Canada has 10 clean-fuel facilities. While the country is a net exporter of refined petroleum products and crude oil products, it is a net importer of biofuels. There is some investment in clean-fuel processing. For example, on May 2, Imperial Oil Ltd. announced that its highly anticipated renewable diesel facility located near Edmonton will commence operations in mid-2025. U.S. subsidies give refineries south of the border an edge over Canadian plants in provinces without competitive subsidies, Ms. Imran said. 'Canada may want to take a look at the competitiveness of domestic refineries in light of the U.S. incentives.'
CBC
15-04-2025
- Business
- CBC
Canola farmers feel forgotten amid trade war, ongoing Chinese tariffs
China imposed 100% tariffs on Canadian canola oil and meal in March On Margaret Rigetti's family farm near Moose Jaw, Sask., hundreds of thousands of dollars in fertilizer and seed are waiting to go in the ground for spring seeding, but there's lingering fear about what tariffs on canola will mean for this season's crop. "There's a lot of unknowns," Rigetti said. "It really leaves us wondering if planting this canola crop is the right thing to do." Canola producers were hit with retaliatory tariffs from China last month, in response to Canada's duties on electric vehicles, aluminum and steel. The 100 per cent tariff affects exports of canola oil and meal. The Chinese tariffs were announced amid the ongoing threat of tariffs from the United States, causing canola prices to rapidly drop and become volatile, before picking up in recent weeks. Rigetti, who is also a director on the board of Sask OilSeeds, said the stakes are high for an industry that was built around free trade. Canada exports 90 per cent of its canola production. "We're glued to the news and getting whipsawed around," she said. "We seem to be in the crosshairs of two global superpowers having a trade war, and they both happen to be our biggest customers." Canada sends about $5 billion of canola products to China annually. The vast majority is seed. Canola meal, subject to tariffs, is a high-protein animal feed, produced after the seeds have been crushed at processing plants. About one-fifth of Canada's canola exports to China last year was meal, valued at about $918 million, according to Statistics Canada. The U.S. is the top export market, with $7.7 billion of canola goods going from Canada in 2024. U.S. fuel program impacting demand A growing source of demand for canola is for use as a biofuel, a base product for creating renewable diesel and aircraft fuel that produce fewer emissions than traditional fuel. The bulk of the market for biofuel is currently in the U.S., where a recent regulatory change is yet another blow for the canola industry. In January, the U.S. announced canola based biofuel will not qualify for the Critical Fuels Production Credit — also known as the 45Z tax credit — a disappointment to canola crush processors. "Without eligibility for that tax credit, we find ourselves having a difficult time to compete in the US biofuel market," said Chris Vervaet, executive director of the Canadian Oilseed Processors Association. "The immediate impact is, where do we sell our products tomorrow?" Amid all that uncertainty, plans for several multi-billion dollar canola processing plants in Saskatchewan have been put on hold in recent months. The facilities are part of the province's strategy to increase the value-added agriculture sector to $10 billion of revenue by 2030. Added layer of volatility Henry An, a resource economist at the University of Alberta, said the value of agricultural commodities already fluctuates from unpredictable weather and the political climate is an added layer of volatility. "We don't know how rough it's going to be. We don't know if it's going to change tomorrow, next week. Everybody's just kind of on edge," he said. The uncertainty looms especially large for the roughly 40,000 farmers that grow canola across Canada, the start of a supply chain that also includes grain elevators, railways, ports and manufacturers. The federal government recently announced an increase to the AgriStability program to support farmers, raising the compensation rate and doubling the $3-million payment cap. Rigetti said Western Canadian farmers question why Ottawa would prioritize tariffs for an emerging EV industry in Ontario at the expense of one of the country's most lucrative agricultural products. She feels farmers have been forgotten in the trade war. "If our canola industry is going to be sacrificed for a Canadian trade policy that prioritizes other industries like auto or dairy, we have to understand — the hurt to our farms and our communities is going to be devastating."
