Biofuel production and consumption have experienced fluctuations over the past century, dating back to the era when Henry Ford’s Model T was capable of operating on ethanol. Although biofuels have periodically declined in popularity, the implementation of the Renewable Fuel Standard in the U.S. in 2007 initiated a renewed phase of building biofuel production facilities. In addition, biofuel production supports the demand for agricultural commodities, including crops such as corn, wheat, soybeans, and canola.In Canada and the U.S., there are three liquid fuel categories that biofuels compete into and substitute for. The largest market is gasoline, followed by diesel, and then jet fuel. All these markets are well supplied with fossil fuels but substituting and blending biofuels can help improve fuel quality and reduce greenhouse gas emissions. U.S. biofuel policies will continue to play a large role in determining where Canadian biofuels are consumed, as well as which feedstocks are utilized. We will investigate each of these markets and identify watch items for Canadian agricultural producers.Canada’s ethanol growth driven by importsEthanol is frequently incorporated into gasoline formulations, representing a significant and established sector within the biofuels market. It typically remains cost-competitive with conventional gasoline and serves to improve octane ratings in final fuel blends when combined with lower-octane gasoline.Canadian ethanol plant production through May decreased by one per cent compared to the previous year, although output during that period has increased by 14 per cent since 2021. The growth in ethanol production is attributed to improved efficiency, resulting in more ethanol produced per ton of grain, with total grain use rising by eight per cent over the same interval. In the last year, ethanol accounted for 9.1 per cent of the gasoline pool consumed in Canada, meaning that, on average, there was 0.091 litres of ethanol in each litre of gasoline (see Figure 1). Since 2018, the proportion of Canadian ethanol in the gasoline pool has remained largely unchanged, reaching 3.9 per cent last year. Imported ethanol now represents a larger portion, with over five per cent of ethanol blended into gasoline in Canada coming primarily from the United States. (ICE TORONTO)

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