Canada: U.S. door may open for canola

U.S. President Donald Trump’s “One Big Beautiful Bill” could contain some beautiful news for Canada’s canola growers.

The U.S. House of Representatives’ ways and means committee has released its draft proposals for the U.S. budget reconciliation bill.

The proposals include provisions to amend the controversial 45Z clean fuel production tax credit so that canola oil-based biodiesel and renewable diesel would be eligible for the credit.

“This is an encouraging development,” said Chris Vervaet, executive director of the Canadian Oilseed Processors Association.

“It’s a long road ahead of us on this still, but getting a little bit of wind back in our sails is refreshing for a change.”

Canada’s canola sector has been dealt a series of policy blows in the U.S. market of late.

Earlier this year, the U.S. Department of Treasury released its preliminary guidance on 45Z, which indicated that canola-based biofuel would not qualify for the credit.

That caused canola oil shipments to the U.S. to plummet. U.S. Energy Information statistics show 92 million pounds of canola oil were used to make biofuel in February 2025 compared to 524 million lb. in December 2024, the month before the 45Z credit was implemented.

So, to hear a budget bill proposal that reverses that stance is music to Vervaet’s ears.

The bill stipulates that eligibility for the credit will be limited to feedstocks produced in the United States, Mexico and Canada.

That is a relief, considering other bills have been pushing for a U.S.-feedstock-only approach.

“To see North American feedstock recognized for eligibility is very encouraging,” said Vervaet.

“That’s a win. That’s something that we’ve been advocating for.”

The budget bill also changes how lifecycle greenhouse gas emissions are calculated, eliminating indirect land use change (ILUC) emissions from the calculation.

Vervaet said that arbitrary ILUC penalty was the main reason canola-based biofuel did not qualify for the 45Z credit under treasury’s rules.

“The removal of ILUC, that would take us to the promised land,” he said.

“That would get our score below that threshold and allow canola to qualify from a technical perspective.”

The other bit of good news contained in the ways and means budget bill is the proposal to extend the 45Z credit through the end of 2031 instead of its current expiry date of Dec. 31, 2027.

Growth Energy also applauded the committee for its proposal to extend the credit.

“By including it in the reconciliation bill, this proposal would give biofuels producers a longer runway to innovate and to make investments in creating new markets for farmers,” chief executive officer Emily Skor said in a press release.

Growth Energy estimates that the credit would add US$21.2 billion to the U.S. economy if implemented properly and provide farmers with a 10 per cent price premium on corn used at ethanol plants.

Vervaet cautioned that the ways and means proposals are just one of many steps in the budget reconciliation process, but it is a vital one.

He is pleased politicians and bureaucrats in Washington appear to be getting the message that biofuel is an integrated market in the U.S. and Canada, with fuel and feedstocks crisscrossing the border daily.

The U.S. Environmental Protection Agency just sent its biofuel blending volume proposal to the White House for review.

Analysts believe the proposal includes a big increase in the biomass-based diesel mandate. A coalition of oil and biofuel groups have recommended a 5.25-billion-gallon mandate for 2026, up from 3.35 billion gallons in 2025.

Vervaet said that would strengthen the case for allowing canola-based biofuels.

“That message has started to resonate,” said Vervaet.

Tags: canola, Canada, canola oil, biodiesel, U.S.