U.S. Senate Republicans on Monday proposed a tax bill that would extend a clean fuel tax credit through 2031, but trim 20 per cent of the value of the credit for biofuels made from feedstocks produced outside of the United States.
Why it matters: The American biofuel sector could prove a huge market for Canadian canola, however the loss of a tax incentive has limited demand.
The tax credit, established by former President Joe Biden’s Inflation Reduction Act but not finalized during his tenure, could prove lucrative for oil and biofuel producers who can demonstrate lower carbon intensity of their fuels.
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The House tax and spending bill passed in May also extends the tax credit, known as 45z, through 2031, but bans most foreign feedstocks from being eligible for credits.
Both the House and Senate bills would exclude the emissions from tilling land to grow feedstocks like corn and soy from calculation of a biofuel’s credit value.
That change would make it easier for corn-based ethanol to qualify for the credits.
As of January 1, Canadian canola oil no longer qualifies for the U.S. 45Z biofuel production tax credit. This has severely limited demand for the Canadian feedstock.
The amount of canola oil used for biofuel production in January 2025 was 193 million pounds, down from 524 million pounds in December, U.S. Energy Information Administration stats show. February and March saw 92 million pounds and 234 million pounds used, respectively. The same months last year saw 296 million pounds and 326 million pounds used.
—With files from Glacier FarmMedia
