Canada's Ethanol Boom Stymied by US Subsidies

Canada's ethanol market is booming, thanks to its federal clean-fuel policy. However, instead of benefiting Canadian producers and investors, the demand is increasingly being met by heavily subsidized U.S. ethanol imports.

The USDA reports that U.S. ethanol exports to Canada have more than doubled in five years, from 1.2 billion litres to 2.9 billion litres, a 135 per cent increase. This has led to Canadian ethanol producers competing against American producers who are eligible for a subsidy of up to 36 cents a litre.

Ontario's ethanol sector is particularly affected, as it anchors one out of every three grain bushels and accounts for the majority of Canada's ethanol production. However, the imbalance doesn't stop at the border, subsidized U.S. ethanol enters Canada tariff-free and competes on the same terms as Canadian ethanol.

To address this issue, a policy response is needed to recognize the competitive disadvantage created by U.S. subsidies and help turn growing Canadian demand into Canadian production and investment.