What the CFR Related Credits Are Worth: A Fuel-by-Fuel Sizing on 2024 and 2025 Data

At a Glance · CFR Related Credits

On ECCC’s own credit-creation data the related credits would add close to one million credits a year, worth about C$330 million to Canadian producers at the third-quarter 2026 price, which is a meaningful transfer to existing plants but only about 11 per cent of the liquid class and about 6 per cent of the 2025 requirement, and because the factor is applied to credits rather than litres, the largest gains per litre go to biodiesel and renewable diesel made from North American oilseeds.

The first effect of the multiplier is therefore on where existing Canadian renewable diesel is sold rather than on how much is made, since a litre kept in Canada now earns the CFR credit, the related credit and, in British Columbia, the provincial credit, while the same amendment adds supply and widens the compliance fund, which together ease the credit price on which every related credit is earned.

A new crop-fed plant still needs a credit price close to today’s market to clear even with the multiplier, so that the build signal is real but conditional, and the plants most likely to reach a final investment decision are those with a British Columbia offtake.

The related credits are still proposed and may change before registration. If adopted in their current form they would apply from the 2026 compliance period, so that fuel produced this year would qualify once the amendments are registered.

The Clean Fuel Regulations create one compliance credit for each tonne of lifecycle emissions avoided when a low-carbon-intensity fuel displaces gasoline or diesel, and until now that credit has been the same whether the fuel was produced in Canada or imported, since the Regulations measure carbon intensity and not origin. The draft amendments add a new subsection 19(3) under which a registered creator who creates credits on fuel produced in Canada, on co-processed fuel from a project in Canada, or on renewable natural gas, renewable propane or hydrogen produced in Canada and used in vehicles may create a further quantity of liquid-class credits, determined by the formula P × N × Fr, where N is the number of underlying credits, Fr is a factor set out in a new Schedule 3.1 for each fuel, and P is the share of the fuel made from North American feedstock, which is set at one for fuel produced in Newfoundland and Labrador and for the vehicle routes.¹

At a P value of 1 the effective credit multipliers would be:

Figure 1 · Effective credit multipliers at a P value of 1, Schedule 3.1. Source: draft amendments, Schedule 3.1.

The related credits are liquid-class credits, outside the gaseous-class caps, and imported fuel earns none. Two features of the formula decide who benefits. The first is that the multiplier is applied to the credit and not to the litre, so that a fuel with a low carbon intensity, which already creates more than twice the credits per litre of an ethanol on the diesel and gasoline references, also earns more than twice as many related credits per litre before the higher factor widens the difference further. The second is the feedstock test in P, under which fuel made from oil or grain harvested in Canada, the United States or Mexico counts in full and fuel made from imported used cooking oil or tallow does not, with the single exception of Newfoundland and Labrador, where the test is waived and which could be particularly relevant to renewable fuel production at Come By Chance.

Environment and Climate Change Canada publishes, in Table 3 of each quarterly credit market report, the volume of each low-carbon-intensity fuel produced in Canada and imported and the credits created on each, and those tables are the direct measure of N under the new formula. In 2024, the first full year of the Regulations, fuel produced in Canada created 2.08 million liquid-class credits against 5.70 million on imported fuel, so that domestic production supplied 27 per cent of the liquid class; ethanol accounted for 1.76 million of the domestic credits on 1.65 billion litres, and biodiesel, renewable diesel and other fuels, which ECCC aggregates for confidentiality, for 0.32 million on 164 million litres.²

In the first three quarters of 2025 the domestic total rose to 2.25 million credits and the domestic share to 33 per cent, with ethanol at 1.38 million credits on 1.22 billion litres, biodiesel, reported separately from the second quarter, at 0.55 million on 233 million litres, and the aggregated renewable diesel and other line at 0.32 million on 170 million litres. Imports supplied the remaining 4.57 million credits, of which 1.81 million came on imported renewable diesel and 2.29 million on imported ethanol.³

Table 1 · Related credits computed on ECCC Table 3 credit creation. Central case: P = 1.0 for ethanol, 0.95 for the lipid fuels on the 2024 feedstock shares; Fr = 0.4 on the aggregated line. Low case P = 0.97 and 0.86, Fr = 0.3; high case P = 1.0, Fr = 0.5.

On those tables the related credits amount to about 0.65 million for 2024 and 0.74 million for the first nine months of 2025, or close to one million credits on a full-year basis, which is an uplift of about a third on the credits Canadian producers already create and of about 11 per cent on the liquid class as a whole, and about 6 per cent of the total reduction requirement of 16.0 million tonnes in 2025. Ethanol takes 81 per cent of the total in 2024 and 56 per cent in 2025 in the central case, and between 52 and 86 per cent across the low and high cases, because it is three fifths of domestic credits in 2025 and because biodiesel and renewable diesel, which carry the higher factors, are produced in Canada in volumes of a few hundred million litres against the 1.5 billion litres of renewable diesel and biodiesel that Statistics Canada records as imported in 2025.⁴

Sustainable aviation fuel is the fuel with the highest factor and the one with no volume. Statistics Canada’s supply and disposition table carries no series for sustainable aviation fuel, so that any production would sit inside renewable fuels except fuel ethanol or inside kerosene-type jet fuel, of which 9.4 billion litres were supplied in 2025; ECCC reports no such fuel produced in Canada in any quarter, and the only line in which imported aviation fuel can sit, aviation and other low-carbon-intensity fuel imported, created 51,000 credits on 56 million litres in the first three quarters of 2025.^3,4 The 0.8 factor therefore applies today to no volume, and a Canadian aviation-fuel plant would earn 1.8 credits for every credit of underlying reduction, a value that is entirely prospective. Renewable natural gas, renewable propane and hydrogen used in vehicles qualify at a P value of one, but the vehicle route was withheld or nil in ECCC’s last annual report and the 182,000 credits created on Canadian renewable natural gas in the first three quarters of 2025 are gaseous-class credits, which earn nothing.

Market Watch subscribers receive the modelled CFR balance, bank and price paths with and without the draft amendments, by year.

ECCC’s compliance credit market dataset for September 2026 reports a volume-weighted average price of C$331 on priced transfers in the third quarter of 2026, and at that price the related credits on the 2025 run-rate are worth about C$330 million a year, with ethanol producers taking more than half, biodiesel producers about C$90 million and the renewable diesel and co-processing line about C$50 million.⁵

Per litre, the related credit is worth about 11 cents to a Canadian ethanol plant, about 30 cents to a biodiesel plant and between 29 and 30 cents to a renewable diesel plant at the carbon intensity of the renewable diesel imported in 2025, the upper figure applying in Newfoundland and Labrador where P is one regardless of feedstock. Those figures are earned on top of the credit itself, so that a Canadian renewable diesel litre that earned about 61 cents in credits at the third-quarter price would earn about 90 cents under the amendment, and an ethanol litre about 48 cents in place of 37.

Table 2 · Credits per thousand litres from ECCC Table 3 (ethanol and biodiesel produced in Canada, 2025 Q1 to Q3; renewable diesel from the imported line, since domestic renewable diesel is withheld). Prices from the ECCC credit market dataset, September 2026, and the compliance-fund price of C$350 indexed to 2026.^5,6

The value, however, is earned on a credit price that the same amendment moves. The related credits add supply against a requirement that the draft does not change, and the increase in the compliance fund limit from 10 to 15 per cent lets more of the requirement be met at a fixed price, so that the two provisions together ease the price in the years in which they take effect, and each related credit is earned at a price below the one that prevailed before the amendment. For an existing plant the arithmetic is still favourable, since the multiplier on volume outweighs a moderate fall in price, but for a plant that has not yet reached a final investment decision the question is whether the credit price holds through three to four years of construction and the first years of operation.

Canada’s hydrogenation-derived renewable diesel capacity is held in three facilities, in British Columbia, Alberta and Newfoundland and Labrador, with 2,380 million litres of production capacity on ECCC’s own count in the discussion paper that preceded the draft, alongside refinery co-processing at Burnaby, and Statistics Canada records 1.07 billion litres of renewable diesel and biodiesel produced in 2025 of which 46 per cent was exported, down from 83 per cent in 2024.^4,7

The Newfoundland plant idled in January 2025 on thin margins after the United States replaced its blenders’ credit, which imported fuel blended in the United States could earn, with the section 45Z production credit, which only fuel produced in the United States can earn, and restarted in June 2025, which shows how sensitive those economics are to the credit stack on each side of the border.⁸ The related credit is in substance Canada’s answer to that asymmetry, since a litre of United States renewable diesel sent to Canada arrives carrying 45Z while a litre of Canadian renewable diesel sent to California earns the LCFS credit and the RIN but no production credit of its own.

The amendment changes the destination economics of the existing capacity more than it changes the capacity, in that a litre kept in Canada now earns the CFR credit, the related credit and, in British Columbia, the provincial credit stacked on top, so that the first effect of the multiplier is to bring exported volume home rather than to build a fourth plant, and California’s crop-feedstock cap from 2028 pushes in the same direction for the 95 per cent of Canadian renewable diesel that is made from canola and soybean oil.⁹

The cost of a new plant tests that signal directly. On the cost stack carried in the Climate Decode model, drawn from the Deloitte HDRD business case and Statistics Canada’s plant input tables, a crop-fed hydrotreater in Canada pays about C$2.15 a litre for canola oil and about C$0.40 a litre for conversion, hydrogen, operating cost and amortised capital, with the renewable naphtha and propane co-products returning about a tenth of that, so that renewable diesel costs about C$2.30 a litre to make against a fossil diesel rack of C$0.90 in 2025 and about C$1.38 in 2026 to date.

The gap of C$0.90 to C$1.40 a litre has to be recovered from credits, and at the credits a canola renewable diesel creates it requires a credit price of about C$440 at this year’s diesel price and about C$650 at last year’s, before any multiplier. The related credit at 1.5 lowers those thresholds to about C$295 and C$435, against a market that traded at C$331 in the third quarter of 2026, whereas a plant whose output is sold in British Columbia, where the provincial credit adds about C$0.29 a litre at the 2026 price, clears at about C$200 at this year’s diesel price and about C$345 at last year’s.^10,11 The build signal is therefore real but conditional, in that the multiplier closes about a third of the gap between a new plant’s cost and the fossil rack, the diesel price closes or opens the rest, and the plants that reach a final investment decision will be those with a British Columbia offtake.

Table 3 · Entry economics of a new crop-fed renewable diesel plant against the credit price, on the Climate Decode CFR model cost stack. A built-and-idle plant restarting avoids only the C$0.17/L capital leg, which is why existing capacity responds to price before new capacity does.

For ethanol the related credits are in the main a transfer to existing plants rather than a growth signal. Canada produced 1.78 billion litres of fuel ethanol in 2025 and exported 119 million, so that more than 90 per cent of output already stays in the country, while blenders used 4.41 billion litres and imported 2.66 billion,⁴ and the E10 and E15 blend wall caps the pool that any new plant could serve. The ethanol leg of the multiplier therefore grows only if new Canadian plants displace imported ethanol litre for litre, which requires domestic capacity to more than double, and not through any increase in blending. Biodiesel sits between the two, with 233 million litres produced for the Canadian market in two quarters of 2025 and a factor of 0.4 that, at 30 cents a litre, is, with renewable diesel, among the largest per-litre gains of any fuel actually produced today.

Under Climate Decode Market Watch the Clean Fuel Regulations are modelled as one market among six, with the British Columbia, California, Oregon and Washington fuel standards and the United States Renewable Fuel Standard competing for the same pool of renewable diesel, biodiesel, ethanol and feedstock, and the CFR model carries the related credits fuel by fuel, with the Schedule 3.1 factors, the North American feedstock share from Statistics Canada’s plant input tables, the Newfoundland and Labrador exemption and the 2026 start date, alongside the 15 per cent fund limit and the 5 per cent limit on imported gaseous credits.

The outlook runs through 2035 and is calibrated weekly against ECCC’s credit creation and transfer data, and it treats the repatriation of Canadian renewable diesel as the central mechanism by which the multiplier reaches the market, since that volume is already built and its destination responds to the relative credit stack in Canada and California.

On that modelling the near term brings more supply and easing pressure on the credit price and on the cost of compliance, the domestic share of the liquid class rises as exported volume comes home, and the renewable diesel gap that the requirement opens towards 2030 remains, so that the question the draft leaves open is the one it was written to answer, which is how Canada builds the capacity the Regulations assume. The modelled balance, bank and price paths by year, with and without the amendments, are available to Market Watch subscribers.

Table 4 · Direction of the main indicators against the market without the amendments. Revenue at the third-quarter 2026 volume-weighted average credit price; supply and per-litre value sized on ECCC credit-creation data to 2025 Q3. Direction from Climate Decode’s CFR market model, against the market without the amendments. Modelled balance, compliance-cost and price paths are available to Market Watch subscribers.

Climate Decode Platform

Market Watch models the CFR alongside the BC, California, Oregon and Washington fuel standards, and our clean fuels advisory turns it into credit generation and project decisions.

Climate Decode · Advisory

What the related credits mean for you

If you want to understand how the related credits could change your credit generation, project economics or market position, reach out to Climate Decode.

Notes and Sources

1. Environment and Climate Change Canada, Regulations Amending the Clean Fuel Regulations and the Environmental Violations Administrative Monetary Penalties Regulations, draft text, file 81000-2-6067, dated 22 October 2026 and published 27 October 2026, section 6(2) (new subsections 19(3) to (6)) and Schedule 3.1. link
2. Environment and Climate Change Canada, Clean Fuel Regulations 2024 Quarterly Credit Market Report, Q1 to Q4, version 3 (4 December 2025), Table 3 and Figures 1a to 1c. link 1 link 2
3. Environment and Climate Change Canada, Clean Fuel Regulations 2025 Quarterly Credit Market Reports, Q1, Q2 and Q3, Table 3. link
4. Statistics Canada, Table 25-10-0081-01, Supply and disposition of refined petroleum products and renewable fuels, 2024 and 2025. link
5. Environment and Climate Change Canada, CFR Compliance Credit Market Dataset (Monthly and Quarterly), September 2026 edition, volume-weighted average price on priced transfers, third quarter 2026. link
6. Clean Fuel Regulations, SOR/2022-140, compliance fund price of C$350 per tonne, indexed annually; Climate Decode indexation to 2026. link
7. Environment and Climate Change Canada, Discussion paper to inform the draft targeted amendments to the Clean Fuel Regulations, Annex II, Table 2. link
8. Government of Newfoundland and Labrador, Provincial Government Announces Financial Support for Braya Renewables, 11 September 2025, on the shutdown of 6 January 2025 and restart in June 2025. link
9. California Air Resources Board, Low Carbon Fuel Standard amendments, limit on crop-based feedstocks from 2028. link
10. Natural Resources Canada and Deloitte, HDRD Business Case; Statistics Canada, Table 25-10-0082-01, renewable fuel plant inputs; U.S. Energy Information Administration, U.S. Gulf Coast ultra-low sulfur diesel spot price; Climate Decode CFR model cost stack. link 1 link 2 link 3
11. Government of British Columbia, Renewable and Low Carbon Fuel Requirements, credit market data; Climate Decode conversion to cents per litre at the 2026 price. link

Related-credit volumes and values are Climate Decode calculations on ECCC credit-creation data under the draft formula, which may change before registration. This article is analytical research provided for information only and is not investment advice.