Reading the CFR Credit Market: Why 60% of the Volume Moves at Zero

At a Glance — The Two Markets Inside the CFR

Published CFR credit price statistics show a volume-weighted average near CAD $160 per tonne between 2023 and 2025. That average is built from the priced 40% of the market. Roughly 60% of credits transferred and 60% of transactions in the CFR compliance market clear at zero or near-zero price — inside bundled fuel supply contracts and intra-corporate movements of self-generated credits.

Anyone building a project revenue model on the published weighted-average price is anchoring on the wrong distribution. For third-party creators, the price signal that matters is the arms-length priced sleeve — and inside it, clearing has run from $200 to $390.

Between 2023 and 2025, Environment and Climate Change Canada’s compliance credit transfer records show two very different pools of activity.

Source: ECCC, Clean Fuel Regulations compliance credit market data, 2023–2025.

The zero-priced pool is 66% larger than the priced pool by credit volume, and 53% larger by transaction count. It is also growing faster — zero-priced volume rose roughly 18× between 2023 and 2025, against a 3× increase in priced volume.

Combined across both pools, roughly 60% of all CFR credits and 60% of all transactions move at zero or near-zero price. Any interpretation of the market that ignores this half is working with 40% of the picture.

Two structural transaction patterns account for most of the zero-priced flow, and both reflect the way the CFR compliance market is organised around obligated refiners as the primary compliance entity.

2.1 Bundled Low-CI Fuel Purchases

When an obligated refiner buys ethanol, biodiesel, HDR diesel, or another Category-2 low-CI fuel from a producer, the CFR credit associated with that fuel typically transfers to the refiner as part of the fuel supply contract. The economic value of the credit is not paid separately — it is embedded in the fuel price as a premium over the fossil equivalent.

From the producer’s perspective, this is a bilateral transaction that combines fuel and credit into a single settlement. From the reporting perspective, the credit transfer is recorded at CAD $0 because no discrete price was paid for the credit itself. From the market’s perspective, no observable price signal is created for that unit of credit.

This structure is the natural consequence of who the end user of low-CI fuel in Canada is. The physical fuel is blended into gasoline and diesel by the obligated party — the refinery. The counterparty for the fuel and the counterparty for the credit are the same entity. There is no economic reason to unbundle them, and no reporting requirement that forces the credit to carry a discrete price when it moves under a fuel supply contract.

2.2 Refinery Self-Generated CC1 Credits

The second driver is intra-corporate movement of credits that a refiner has generated for itself. Under Category 1 of the Clean Fuel Regulations, projects that reduce the lifecycle carbon intensity of liquid fossil fuel production — CCUS on refinery flue gas, use of low-CI electricity in fuel production, and other approved reduction pathways — create CFR credits directly. A refining company investing in these pathways generates the credit inside its own corporate group rather than acquiring it externally.

When those credits move between subsidiaries, between the generating facility and the compliance registration entity, or into retirement, the transfer appears in the ECCC record as a zero-priced transaction. No market price exists because no arms-length sale took place.

As Canadian refiners commission more CC1 projects — CCUS retrofits, low-CI electricity sourcing, and other in-scope investments — this pool will continue to expand. The zero-priced share is a feature of how the compliance market is organised, not a reporting artefact.

The weighted-average credit price published in the ECCC quarterly reports (~CAD $160/t across 2023–2025) reflects only the priced sleeve of the market — the transactions where an arms-length buyer paid a discrete price to a third-party credit creator. This is the market that matters for:

Inside that priced sleeve, the distribution is wider than the average suggests. Maximum reported prices climbed from CAD $300 in 2023 to $280 in 2024 to $390 in 2025. Minimum reported prices — excluding the zero-priced pool — have consistently touched CAD $1. The priced market spans a near 400× range, and the CAD $160 weighted average sits well below the top of that distribution because a large volume of low-priced transactions cluster near the CAD $1 floor.

The upper end of the priced distribution — CAD $300 to $390 — is where arms-length buyers and sellers with limited contractual overlap actually clear. That number is closer to the marginal cost of compliance in the CFR market today than the headline weighted average.

For anyone building a business case around CFR credit revenue — a new ethanol or biodiesel plant, an RNG project, an EV or charging aggregation programme, a CCUS retrofit outside the self-consumption use case — the published weighted-average price is the wrong anchor for the revenue assumption. Three practical adjustments follow.

Climate Decode · Advisory · For CFR Credit Creators

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The CFR is designed around obligated refiners as the primary compliance entity, so a large fraction of low-CI fuel and Category-1 credit flow moves inside — or bundled with — the physical fuel supply chain that flows to those refiners. The market is working as designed — obligated parties meet their compliance obligation through the most economically efficient combination of fuel purchase, in-house credit creation, and market credit acquisition available to them.

The public price statistics are therefore a partial picture. In the zero-priced pool the credit value has already been paid — as a fuel premium rather than a credit price. Nothing in it traded at a discount; the settlement happened outside the credit ledger.

For market participants outside the refining sector — creators, aggregators, project developers, corporate buyers of voluntary credits paired with fuel — reading the CFR requires distinguishing between the two pools and modelling the priced distribution on its own terms.