Canada's Clean Fuel Regulations (CFR) compliance credit market has just seen its sharpest movements of the year. After trading in the CAD 420–CAD 445/tonne range for most of the summer, credit prices fell roughly 20–27% in the first two weeks of September, landing within a few dollars Credit Clearance Mechanism (CCM) price for 2025 compliance of CAD 326 and below the 2025 Fund price of CAD 380. The CCM and Fund prices rise with inflation each year. With the primary compliance deadline for 2025 having passed, the lower prices likely reflect potential buyers sitting on the sidelines pending the release of proposed “targeted amendments” to the CFR. These amendments, first discussed in 2025, are meant to offset the competitive edge US producers get from the Section 45Z Clean Fuel Production Credit. This US domestic production credit can cross the border with the fuel as it is imported into Canada.
CFR Prices Decline Sharply
Liquid Category 2 compliance credits, the largest segment of the CFR credit market, held near CAD 440–CAD 445/tonne from late April through mid-June 2026, eased modestly to CAD 420 through most of the summer, then broke sharply lower: CAD 420 (Aug. 28) → CAD 395 (Sept. 1) → CAD390 (Sept. 2) → CAD380 (Sept. 4) → CAD 325 (Sept. 8), before recovering slightly to CAD 350 by Sept. 10. The CAD 325 trough was roughly equivalent to the Credit Clearance Mechanism (CCM) cost containment trigger of CAD326/tonne for the 2025 compliance year and well under the Compliance Fund's CAD 380/tonne trigger at which entities short of credits for 2025 compliance can purchase “Fund” credits, which are surplus to the available CFR supply, for up to 10% of their obligations.
Canada CFR Prices Broke Sharply Lower in September
A roughly 20–27% pullback in seven trading suggests the market is pricing in enough near-term uncertainty.
Balances in the CFR market are currently tight. Although there have been no compliance reports issued by regulators, ECCC has communicated that an annual bank draw is expected for 2025 compliance. As communicated to clients in advance of the price rise in 2025, ClearBlue’s CFR price expectations for the near term have tracked the regulatory Fund soft ceiling price. However, market players await direction on the targeted amendments, expected to be proposed in 2026, that will affect the supply-demand dynamics in the CFR.
This year has also seen a significant amount of volatility in US incentives and biofuels trade flows. Below is the latest “stacked incentives” comparison for soy-based renewable diesel that ClearBlue published on September 8. It shows the CFR and the BC-LCFS (which stacks with the CFR) lag the US value stack. It would take a CFR price of between CAD 500 and CAD 800 to equalize the CFR with the US. Shown on the chart, a significant portion of the US incentive stack for the various clean fuel standards is the 45Z value, which crosses the border for US producers.
Stacked Incentives for Renewable Diesel by Jurisdiction: September 8
The Targeted Amendments
On September 5, 2025, the Canadian federal government announced it would pursue “targeted amendments” to the CFR, alongside a CAD 370-million Biofuel Production Incentive running from January 2026 through December 2027. Environment and Climate Change Canada (ECCC) laid out the rationale and options in a December 2025 discussion paper to inform the draft targeted amendments (updated December 19, 2025), with a public consultation through January 15, 2026. The paper is explicit that the US Section 45Z Clean Fuel Production Credit is the benchmark it's designing against. ECCC frames Canadian producers' competitiveness problem directly in terms of the per-liter value US producers capture under 45Z.
ECCC notes that in 2024, more than 70% of CFR compliance credits came from imported fuels, most from the United States. Canadian ethanol, biodiesel and renewable diesel producers are competing against US supply that benefits from 45Z.
The discussion paper puts two options forward:
- A minimum domestic content requirement, obliging primary suppliers to source a set share of that content from Canadian production.
- A credit multiplier for domestic low-carbon fuel, modeled at roughly 1.4x for renewable/biomass-based diesel and 1.14x for ethanol. This option is sized to approximate the per-liter value Canadian producers are giving up by not having an equivalent to 45Z.
ECCC has indicated it will decide on a direction sometime in 2026 and publish draft regulatory text in the Canada Gazette, Part I. A final rule will follow. A separate, broader review of the CFR, including covering what the regulation looks like after 2030, is expected to start once the targeted-amendments work wraps, likely sometime in 2027.
What US 45Z actually is
Section 45Z, the Clean Fuel Production Credit, was created by the US Inflation Reduction Act of 2022 (P.L. 117-169) to replace the old biodiesel and renewable fuel blender's credits that expired at the end of 2024. As originally enacted, it applied to qualifying transportation fuel produced domestically in the US and sold between January 1, 2025 and December 31, 2027.
The credit is emissions-based: it equals an “emissions factor” multiplied by an applicable dollar amount, calculated using the 45ZCF-GREET model. The base applicable amount is $0.20/gallon for non-aviation fuel, rising to $1.00/gallon if prevailing-wage and apprenticeship requirements are met; sustainable aviation fuel originally carried a higher $0.35/$1.75 base/bonus structure.
The 2025 One Big Beautiful Bill Act substantially reworked 45Z. It extended the credit through December 31, 2029, brought the SAF credit down to the same $1.00/gallon maximum as other fuels, and excluded indirect land-use-change emissions from the CI calculation, which raises the credit value available to crop-based fuels like corn ethanol and soy biodiesel/renewable diesel. The Act also limited eligible feedstock to the US, Mexico or Canada for fuel produced after 2025.
Therefore, Canadian-grown feedstock still qualifies for 45Z, but the production credit itself only pays out on fuel produced in the US. For example, a Canadian producer making renewable diesel from Canadian canola gets no 45Z credit while a US Gulf Coast refiner using the same canola does.
The US IRS followed with proposed regulations on February 3, 2026 (IR-2026-20) covering eligibility and feedstock sourcing. Most recently Notice 2026-53 issued September 8, 2026 sets 2026 emissions rates for manure-derived fuels like Renewable Natural Gas and allows certain regenerative-agriculture practices to be reflected in a fuel's carbon intensity.
What to watch
The targeted CFR amendments will change the program’s supply-demand dynamics. Given tight balances, there is room to expand crediting. However, ClearBlue’s analysis has suggested a 1.4x multiplier for biomass-based diesel could be aggressive in terms of increasing CFR credit supply relative to the program stringency. ECCC's own discussion paper acknowledges the multiplier approach "may create a downward pressure on credit price, reducing the incentive for investments in actions that create credits under other CFR compliance categories (e.g. carbon capture and storage, electric vehicle charging)." ECCC assumed a 2030 CFR credit price of CAD 300 when calculating both the 1.4x (biomass-based diesel) and 1.14x (ethanol) multipliers.
While the public comments have not been made public, stakeholders have been lobbying to get increased value from the CFR. The Renewable Fuels Association favors a credit multiplier rather than a domestic content mandate. On the gaseous side, the RNG Coalition warned that a multiplier would squeeze RNG/biogas credits unless obligations on petroleum suppliers rose in step, and pushed instead for relaxing the 10% limit on the use of gaseous class credits. On the oil-sands side, the July 2, 2026 trilateral MOU between Canada, Alberta and the Oil Sands Alliance addressed a long-standing complaint from CCS developers. Previously, CFR credits for upstream carbon-capture projects like Pathways could only be claimed on the share of crude or bitumen actually refined in Canada. The MOU commits to a floor of at least a 20% credit-creation rate for such projects regardless of export volumes, with room to claim more if a higher domestic-refining share is documented.
ClearBlue will provide updated analysis once the targeted amendments proposal is released. Contact us for more information on our Clean Fuel Standards Market Intelligence, Advisory, Project Development and Credit Monetization.
Related ClearBlue Markets Posts
- “Canada CFR Q3 2025 Credit Market Report and Compliance Update”
- “ECCC Launches Targeted CFR Review Aligned With Canada's New Biofuel Production Incentive”