Canadians are getting fed up. In hockey arenas and grocery store aisles alike, frustration is mounting — a conviction that our nation deserves more respect in its relationship with America.
While citizens simmer with discontent, Ottawa’s response to looming U.S. tariff threats has been predictably measured, if uninspired. Yet, amidst the standard political theatre lies a powerful, overlooked weapon in Canada’s trade arsenal: America’s deep dependence on Canadian markets for its fuel ethanol.
Ethanol isn’t just a trade footnote — it’s a vital lifeline for American farmers and a subsidy mechanism for ethanol producers in Republican strongholds. If Canada wants to send a message, targeting U.S. ethanol imports could be the move that finally gets Washington’s attention.
For years, Canada has quietly been the biggest buyer of American ethanol, absorbing nearly 40% of total U.S. ethanol exports — more than 1 billion gallons annually. This isn’t just trade; it’s economic life support for America’s heartland. Midwestern corn farmers, whose crops feed ethanol plants, depend heavily on Canadian consumption. If Canada tightens its border to American ethanol, the economic tremors will ripple through Republican states — fast — jeopardizing tens of thousands of jobs and shaking an industry that many U.S. politicians have built their careers on protecting.
Meanwhile, Canada’s domestic ethanol industry is no passive player. For decades, it has driven rural revitalization and a sustainable energy transition, helping Canada meet climate goals while creating jobs. Domestic production supplies a significant portion of the ethanol blended into Canadian gasoline, directly supporting our farmers, processors, and rural communities while reducing harmful emissions from tailpipe pollution.
Yet, despite its efficiency and innovation, Canada’s ethanol industry is fighting an increasingly unfair battle. American producers receive major subsidies under the U.S. Inflation Reduction Act (IRA), specifically the 45Z tax credits — benefits no Canadian company can access. Worse, these American producers can “double dip” by stacking U.S. subsidies with Canada’s Clean Fuel Regulations credits when selling into Canadian markets. This market distortion hands U.S. producers a major cost advantage and, put simply, transfers wealth from Canadian consumers to American ethanol producers.
Fortunately, just as Canadian shoppers are reconsidering their purchases at the grocery store, Canada has the power to reconsider allowing unrestricted access to a market that American ethanol producers cannot afford to lose. With U.S. tariffs already in place, Canada has clear options to level the playing field and strengthen its ethanol industry. British Columbia has already responded, mandating Canadian content requirements for renewable fuel blending — a policy that maintains environmental goals while supporting domestic jobs. Ottawa and agricultural powerhouses like Ontario and Quebec should take note.
Here’s what Canada can do:
1. Implement a targeted import tax on U.S. ethanol — generating revenue to support Canadian industries forced to pay U.S. tariffs. Even at a 25% rate, the cost increase for gasoline would be just 1.5 cents per litre. Meanwhile, the impact on U.S. ethanol would be significant: a direct hit to a US$4.3 billion export market that depends on Canada to stay afloat.
2. Fix Canada’s Clean Fuel Regulations — disallow foreign credit generation and/or apply a credit multiplier to domestically produced ethanol, ensuring Canadian producers remain competitive and that rural communities continue to benefit from local ethanol production.
These measures wouldn’t just be defensive, they present an opportunity to strengthen Canada’s energy independence and invigorate rural economies.
For decades, Canadian ethanol has been a success story creating jobs, boosting local economies, and supporting environmental goals. By leveraging our ethanol sector, we send a clear trade message to Washington: Canada will no longer serve as a wide-open market for subsidized American ethanol.
What’s at stake isn’t just trade policy — it’s Canada’s right to a fair energy future. As America moves forward with tariffs, they should know they risk more than just diplomatic tensions. Canada’s ethanol market holds a strategic card that affects America’s farming heartland. The real question for Washington isn’t whether they can stack the deck with tariffs on Canadian goods — it’s whether American farmers are prepared for the consequences when Canada finally plays its ethanol card.
— Stu Porter is an internationally recognized biofuels expert. He was previously the Director of BBI Biofuels Canada and is currently President of Biofuels Consulting Canada Inc. with almost 20 years’ experience as a renewable fuels’ consultant.