On July 14, 2026, Environment and Climate Change Canada (ECCC) made available its Q3 2025 Clean Fuel Regulations (CFR) quarterly compliance credit market report, detailing credit generation from low-carbon fuels (CC2 and CC3 categories) for the third quarter of 2025. The report can be accessed via the ECCC Data Catalogue.
The report summarizes compliance credit creation between July 1 and September 30, 2025. Importantly, in the accompanying distribution email, ECCC provided additional updates on 2025 compliance. No regulatory compliance report has yet been issued for the CFR, but ECCC's emails continue to offer useful supply and demand estimates for what remains a tight market.
Market Implications
This report points to an acceleration in compliance credit creation, even as the 2025 compliance cycle's overall balance remains tight:
- 2.85 million liquid-class CC2 credits (2.94 million including RNG and biogas) were created in Q3 2025, up 24% quarter-over-quarter from 2.29 million in Q2 2025 and up 19% year-over-year from 2.39 million in Q3 2024. This brings total liquid-class CC2 credits created since Q1 2024 to nearly 14.6 million.
- For the 2025 year-to-date (Q1–Q3), ethanol continues to be the largest source of CC2 credits, generating about 54% of the roughly 7.05 million CC2 credits reported. Imported renewable diesel is the second-largest source, at about 26% of the total.
- Given the ramp-up in renewable diesel imports and domestic biodiesel and renewable diesel production through Q3, we continue to expect total CC2 credit generation for full-year 2025 of about 9.6 million.
- ECCC reports that over 3 million credits were created upon the submission of Credit Adjustment Reports (filed June 30, 2026), marking the completion of compliance credit creation for the 2025 compliance period — roughly double ECCC's earlier estimate of 1.5 million of supply tied to credit adjustments.
- For the market as a whole, including surplus credits from earlier years, ECCC now reports over 24 million credits available for 2025 compliance, compared to the 15.6 million tonnes CO2e of deficits estimated for the year. Putting it together, the end-2025 bank is around 8.4 million credits, suggesting a 2025 bank draw.
- ECCC's figures align closely with ClearBlue's modeling on the Vantage platform.ClearBlue calculates a bank-to-deficit ratio is around 0.54 for 2025, indicating continued tight market conditions underpinning high observed credit prices in the program of greater than CAD 400.
- Credit prices are not likely to move higher this year as the primary 2025 compliance deadline has passed as of January 1, 2026. Those unable to secure enough credits will move to regulatory cost containment to attain compliance. The CFR Fund price, meant to constrain prices, is CAD 380 for 2025 compliance. ClearBlue’s estimates for CFR credit “Fair Value” pricing to equalize the program to the US incentive stack is currently around double the Fund price, although the BC LCFS program, when stacked with Canada CFR, is competitive.
- Market players continue to await news from ECCC on forthcoming proposed amendments to the CFR program, expected to support on domestic fuels and feedstocks, with implications for balances and pricing. Policy levers under consideration include domestic blending mandates and credit multipliers for biofuels.
Credit Generation Overview
According to the latest market report, about 2.85 million liquid-class CC2 credits (2.94 million including RNG and biogas) were generated in Q3 2025. Total CC2 credits (liquid and gaseous) rose 24% from 2.29 million in Q2 2025, driven largely by a ramp-up in renewable diesel import volumes and a marked improvement in renewable diesel's average carbon intensity (CI) relative to Q2 2025. We expect credit generation from these pathways to moderate to about 2.6 million credits in Q4 2025, reflecting seasonally weaker biodiesel volumes alongside lower renewable diesel imports as the import advantage that drove the Q3 2025 surge narrows.
Quarterly CC2 credit generation by fuel pathway compared with estimated total credit demand, Q1 2024–Q3 2025. Q3 2025 supply climbed to its highest level of the series but still trails the estimated demand line. Source: ECCC Credit Market Reports; ClearBlue Markets.
Gaseous fuels crediting, including RNG and biogas used for electricity or as a vehicle fuel, remains harder to size given that a portion of import and production volumes are withheld from ECCC's reporting for confidentiality reasons.
Below is a breakdown of credit generation by pathway.
- Ethanol remained the largest source of credits, generating 1.31 million credits, or about 46% of total liquid-class credits (44% including gaseous fuels), in Q3 2025. This represents an 8.3% quarter-over-quarter increase from 1.21 million credits in Q2 2025, and a more modest 5.2% increase year-over-year from 1.24 million in Q3 2024. Volumes rose 10.5% quarter-over-quarter to 1.19 billion liters, from 1.08 billion liters in Q2 2025. Average CI edged up to 39.6 g/MJ in Q3 2025 from 38.6 g/MJ in Q2 2025, continuing the gradual increase observed since the start of 2025, though it remains modestly below the 40.1 g/MJ recorded in Q3 2024. Some producers continue to use default CI values, so incremental credit generation from this pathway may still show up in the more than 3 million credits reported from the 2025 Credit Adjustment Report.
- Imported renewable diesel (HDRD), the second-largest source of credits, saw a sharp increase in credit generation to 918K credits in Q3 2025, up 67% from 549K in Q2 2025, as volumes rose 50% quarter-over-quarter to 480 million liters from 320 million liters. CI improved to 32.0 g/MJ from 37.5 g/MJ in Q2 2025. Year-over-year, credit generation also rose 15.5% from 794K in Q3 2024, as both higher volumes (442 million liters in Q3 2024) and an improved CI (36.4 g/MJ in Q3 2024 versus 32.0 g/MJ in Q3 2025) contributed. Renewable diesel imports are expected to ease in Q4 2025.
ECCC does not report domestic renewable diesel volumes separately, instead aggregating them with other domestically produced liquid biofuels for confidentiality purposes. That said, we estimate domestic renewable diesel supply at about 80 million liters in Q3 2025, with most of these volumes supplied by Tidewater Renewables, alongside a gradual ramp-up at Imperial's renewable diesel facility, which we estimate averaged a run rate of about 22% during the quarter.
For full-year 2025, total renewable diesel supply, including domestic production and imports, is projected at about 1.5 billion liters. We expect Imperial to continue ramping up production, with domestic renewable diesel supply rising to about 145 million liters in Q4 2025, alongside an estimated 300 million liters of imports during the quarter. We continue to assess that Braya supplied limited volumes to the Canadian market, with most of its production directed to export markets, particularly Europe and the US. - Biodiesel, another major source of credits, saw a more modest increase in reported credit generation, rising 6.7% quarter-over-quarter to 468K credits in Q3 2025 from 439K in Q2 2025 — a sharp deceleration from the 625% quarter-over-quarter surge seen between Q1 and Q2 2025, when domestic biodiesel volumes were first disaggregated in ECCC's reporting. Year-over-year, biodiesel credits are up a much larger 86%, from 252K in Q3 2024. Domestic supply stood at 114 million liters in Q3 2025, indicating a run rate of about 70%, while imports came in at 85 million liters.
- Renewable natural gas (RNG), the primary source of gaseous-class credits, recorded a modest 5.5% quarter-over-quarter increase in credit generation, to 87.0K credits in Q3 2025 from 82.5K in Q2 2025, a much slower pace than the 118% quarter-over-quarter jump seen between Q1 and Q2 2025. Year-over-year, RNG credits are up sharply, nearly 3.5 times the 25.0K generated in Q3 2024. Volumes rose 10.3% quarter-over-quarter to 77.5 million m³, up from 70.2 million m³ in Q2 2025, and are up 256% year-over-year from 21.8 million m³ in Q3 2024. Average CI edged up to 43.8 g/MJ in Q3 2025 from 41.8 g/MJ in Q2 2025, though it remains well below the 63.1 g/MJ recorded in Q3 2024.
- Biogas credit generation eased to 6,279 credits in Q3 2025 from 11,393 in Q2 2025, at an average CI of 35.3 g/MJ.
Compliance credits generated by fuel pathway, Q1 2024–Q3 2025, including quarterly totals for liquid- and gaseous-class credits. Source: ECCC Credit Market Reports; ClearBlue Markets.
Overall, the Q3 2025 data show ethanol continuing to provide a stable, volume-driven base of credit generation, while diesel-pathway credit generation — both imported renewable diesel and domestic biodiesel — has ramped up meaningfully through the year. As with prior quarters, heavy early-program use of default CI values across several pathways means additional credits are likely to continue showing up retroactively as entities transition to lower, LCA model-based CI values via credit adjustment reports.
Credits and Deficits
ECCC has yet to release a compliance report formally verifying deficits and program balances. In the email accompanying the July 2026 credit report release, ECCC stated that as of July 1, 2026, there were over 26 million active compliance credits in the CFR compliance credit market, of which over 24 million compliance credits created are available for 2025 compliance. Upon submission of 2025 Credit Adjustment Reports (filed June 30, 2026), ECCC reported over 3 million credits created, roughly double its earlier estimate of 1.5 million.
The estimated 2025 reduction requirement remains 15.6 million tonnes CO2e, in line with ECCC's April estimate. This implies an end-2025 bank of 8.4 million credits to carry forward into 2026. ECCC's figures align closely with ClearBlue's modeling on the Vantage platform. The actual credit bank as of end-2024 cannot be verified until ECCC issues its compliance report, but, based on available regulatory reports, there was a draw in 2025 for compliance.
Separately, ECCC is planning a targeted rulemaking later in 2026 aimed at increasing crediting for biomass-based fuels and helping address the CFR's competitiveness relative to comparable US incentive programs. See ClearBlue's prior reports for more detail on the rulemaking process and its potential market implications.
Compliance Cost Containment Mechanisms
The CFR includes two cost-containment tiers designed to guard against extreme compliance outcomes: the Credit Clearance Mechanism (CCM) and the Compliance Fund. The CCM price for 2025 compliance is CAD 326 and the Fund price is CAD 380.
The CCM is primarily a liquidity tool, intended to help match buyers and sellers when individual obligated parties are short on credits for compliance. Because sellers are not compelled to offer credits through the CCM, it is not generally effective at constraining prices when overall market balances are tight.
The Fund operates differently: primary suppliers may contribute to a registered Emission Reduction Funding Program to satisfy up to 10% of their annual reduction requirement, with contribution windows running from January 1 to July 31 and from October 15 to November 30 following the end of a compliance period. Fund credits are not tradable and expire if unused for the compliance period to which the contribution relates, meaning the Fund adds new credits to the system rather than acting as an administrative penalty. ECCC currently lists six Fund projects.
Compliance Calendar
ECCC notes that compliance credit creation for the 2025 compliance period has now been completed with the submission of Credit Adjustment Reports, due June 30, 2026. 2025 compliance is ongoing, with a compliance report deadline of July 31, 2026. The Credit Clearance Market would then run from August 31 to October 31, with compliance true-up following from October 31 to November 30 via additional contributions to a Fund Program and deferral (limited to 10% of the reduction requirement). The final compliance deadline is December 15, 2026.
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