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The cash crop has long generated wealth on grocery store shelves and in deep fryers. Now, it’s increasingly a source of fuel
By Nykole King
Canadian oil refineries are quietly pivoting to an unlikely raw material for diesel.
It’s unnoticeable for anyone at the gas pumps, but some of what powers diesel engines nowadays is derived from canola.
Seeds from the yellow flowering crop are pressed for oil, which can either be sold on grocery store shelves for cooking or refined into a low carbon-intensity fuel.
Refineries process the canola further so that it’s chemically identical to conventional, petroleum-based diesel. It’s called renewable diesel, and the fuel industry is quietly adopting it to meet emissions targets.
It means the fastest-growing market for canola — by far Canada’s most valuable crop generating $3.7 billion in farm cash receipts during the first three months of the year — is not in cooking, but in energy.
Ten out of Canada’s 18 oil refineries have either finished building or are working on adding co-processing equipment for renewable fuels alongside regular operations.
“A lot of our refineries are basically situated near, or almost on, canola fields,” said David Schick, a Western Canada vice-president at Canadian Fuels Association.
“We have this feedstock that’s really good for making renewable fuels in close proximity to where we can convert them over into finished products.
Prairie farmers have noticed the shift in recent years, with incomes rising from refineries rather than deep fryers.
Jay Gerry is a canola farmer in southeast Saskatchewan. His family grew canola for food-grade oil 30 years ago, but now much of it ends up in the fuels market.
“With renewable fuels and sustainable fuel policies around the world, we’ve seen an uptick in biodiesel demand,” said Gerry, who farms 12,000 acres near Creelman, Sask.
The fuel industry is expected to add $600 million in value at the farm gate in the 2025-2026 crop year, according to Brittany Woods, a senior manager in transportation and trade policy at the Canadian Canola Growers Association, a farmers’ advocacy body.
On average, that’s an extra $27 per tonne of seed into the pockets of farmers. And there’s potentially more growth still to go.
In Canada, consumption of canola oil has increased by nearly 60 per cent over the past five years. The growers group attributes the 500,000-tonne increase to the nascent fuel industry.
Gerry says a similar tailwind was felt by American corn farmers more than a decade ago when their crops were used to produce ethanol to blend with gasoline.
Canada’s Clean Fuel Regulations are largely driving this trend. Each year, conventional fuel suppliers are federally mandated to sell fuel and, at the same time, reduce emissions.
The targets, which started in 2023, are meant to gradually curb carbon emissions annually until 2030, when the targets flatline.
“In order to get the carbon intensity down, you need to blend higher percentages of (renewable) fuel to do that,” said Schick.
The upgrades to add co-processing units at already-functioning refineries take less time and capital than building them from the ground up, says Schick.
Most facilities are doing these emissions improvements quietly behind the scenes, except for Imperial Oil Ltd. The company’s Strathcona, Alta. co-processing and renewable diesel facility is one of the largest facilities of its kind in Canada.
After a construction period of two and a half years, the $720-million facility is up and running outside of Edmonton and can yield one billion litres of renewable diesel annually.
It requires about 2.5 million tonnes of canola oil to reach maximum production of diesel, though the company hasn’t disclosed the facility’s output since it came online in July 2025.
Chief executive John Whelan has said that the new asset allows the refinery to spend less on imported renewable diesel from the U.S.
“Our renewable diesel facility at Strathcona captured significant value compared to more costly imports during the first quarter, even as we continued to optimize around hydrogen availability,” Whelan said to investors on Imperial’s first quarter earnings call on May 1.
Schick forecasts that the bio-based diesel market, which churned out roughly three billion litres in 2025, will nearly double to around six billion litres by 2030, spurred by federal regulations.
In September, Prime Minister Mark Carney announced that for every litre of biodiesel or renewable diesel, the government would kick in credits to existing refineries.
His government is injecting $370 million into the sector to counterbalance U.S. subsidies. The American clean fuels credit supports domestic production but excludes Canadian biofuels producers, which face higher costs and sell at higher prices, making them uncompetitive in the market.
Canada’s tiered subsidy system, which came into effect at the start of the year, means that three major producers can claim up to $40 million a year, says Colleen Lamothe, vice-president of Advanced Biofuels Canada.
The Liberal government has also committed to making targeted amendments to the Clean Fuels Regulation, with industry expecting to see the draft in the coming weeks.
The industry relies on policy signals for investment, and expectations are that these changes will give a clear indication of demand and create a more level playfield with the Americans.
Aggressive climate policy is widely associated with former prime minister Justin Trudeau, but this low carbon fuel system actually started under Stephen Harper in 2011. At the time, the Conservative government mandated two per cent renewable content in diesel, paving the way for a boom in canola-based energy.
When the Liberals brought in their own clean fuel policies, they emphasized emissions reductions, rather than energy independence and economic value for the agriculture sector, said Schick.
“When the Liberal governments in Canada moved towards just the decarbonization focus, they lost the narrative and importance around rural development, diversifying markets, innovation and supporting farmers in general,” he said.
Still, the sector relies so heavily on public support that it becomes susceptible to any change in government policy. Provinces can also bring their own programs, with B.C. doubling its mandated renewable fuel content from four per cent to eight in February last year.
Since renewable diesel facilities first came online in November 2023, their fuel has become a preferred option in Canada over biodiesel, a less refined product which needs to be blended into diesel at small quantities.
Biodiesel, though cheaper to produce, is more sensitive to cold weather and has slightly higher emissions than its canola-based counterpart.
The oilseed is an expensive raw material, however — typically much pricier than crude oil. But an ongoing global energy crisis has made the cash crop more attractive over the past several months as the effective closure of the Strait of Hormuz chokes off crucial sources of crude, sending prices higher.
Other vegetable oils and animal fats can also be processed and used for energy, but canola is by far the most abundant in North America.
Roughly 40,000 Canadian canola farmers had a bumper harvest in 2025, with a record 21.8 million tonnes of canola seed.
Another record was put on the books last year with crush facilities turning 11.5 million tonnes of that canola seed into 4.8 million tonnes of oil.
That’s despite a year when China, one of Canada’s most significant trading partners on canola, slapped punitive tariffs in retaliation for Canadian duties on its electric vehicles.
China put a 100 per cent import duty on Canadian canola oil and meal in March 2025, and then in August of that year it hit back again with an anti-dumping duty of nearly 76 per cent on canola seed.
The governments have since negotiated a preliminary agreement-in-principle in which Canada accepts some Chinese EV imports, while China scraps levies on canola meal, with seed tariffs remaining at a lower rate of 15 per cent as of March this year. Canola oil, however, still faces a 100 per cent import tax into China.
Twenty-nine per cent of Canadian canola produced last year was exported to other markets, such as the U.S. and Europe, as a source of fuel, based on data from Statistics Canada. There are no published figures showing exactly how much canola stayed in Canada for fuel production in 2025.
But Canada is planning to pump out more.
Crushers had the capacity for around 13 million tonnes last year, with plans to reach 15 million tonnes by the end of 2026.
Cargill Ltd. recently unveiled its new crush facility outside of Regina, with a capacity to process one million tonnes of seed annually.
Gerry, the Saskatchewan farmer, has been hauling canola seed to the Cargill facility, about an hour’s drive from his fields. The longer drive is worth it, however, seeing as it means a five to 10 per cent higher return than what the nearby grain elevators would offer him.
“It does give us a crop that does pencil (in) profitably for 2026-27 so that’s always good news,” said Gerry, who along with other Saskatchewan farmers produces more than half of all the canola in Canada.
“We certainly need a higher price for the commodity we’re producing because the cost of producing that commodity has increased as well.”
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