Ontario's ethanol industry…

Ontario's ethanol industry faces a serious threat from heavily subsidized U.S. imports, due to the 45Z as part of the recently passed “OBBB” (One Big Beautiful Bill). This has become further amplified by recent changes to the U.S. Clean Fuel Production Tax Credit. This crisis requires immediate policy action to protect a vital part of our rural economy. In the absence of corrective measures, the devastating impact of U.S. subsidies could lead to the demise of Ontario’s ethanol industry and by extension the loss of a value-added market for Ontario’s grain This is due in part to major policy shifts in the U.S., where the 45Z tax credit has been extended to 2029 and ethanol’s eligibility for the subsidy has been increased through the removal of the indirect land use change (ILUC) penalty. Combined, these regulatory changes significantly improve the economics of U.S. ethanol relative to Ontario, creating an unlevel playing field for Ontario ethanol producers. In addition, there are ongoing discussion in the U.S. government to extend 45Z beyond 2029.

To prevent further erosion of domestic production, Biofuels Consulting strong recommendation is that the current ERO posting should be immediately expanded to incorporate a made-in-Canada ethanol requirement for 7% of the mandated 11% ethanol blend. This aligns with Ontario's production capacity, safeguarding local industry. This would mirror B.C.'s approach, but leverage Ontario's superior ethanol production and grain supply. Most importantly, this immediate action would stabilize the market for Ontario ethanol, protect rural jobs, and support the province’s agricultural sector.

Key points:
1. Market Share Erosion: U.S. ethanol has already gained market share in Canada, dropping Canadian producers' market share from over 60% to just approximately 40%. This will erode further in absence of change to ERO policy. This mirrors recent announcements in the UK, whereby American imports are pushing domestic bioethanol plants to the brink of closure.
2. Policy Imbalance: The U.S. 45Z tax credit and other subsidies create a structural cost advantage for American ethanol. U.S. policies increasingly favor domestic production by granting U.S. biofuels production double the compliance credits relative to ‘foreign biofuels’ from countries like Canada.
3. Economic Impact: The ethanol industry supports thousands of jobs and represents a critical market for Ontario corn farmers. Without action, we risk $1.5 – 2.0 billion in frozen Canadian ethanol investments and the loss of a crucial, value-added market for one-third of Ontario's annual corn crop.
4. Urgent Policy Solution: Ontario's current regulatory consultation presents a critical opportunity to include a "made-in-Canada" ethanol requirement. This would align with British Columbia's approach and protect both renewable diesel and ethanol production.
5. Capacity Exists: Canadian producers can already supply 7% of Ontario's 11% ethanol blend mandate. The barrier is not technical or economic, but rather is policy-based.
6. Time Sensitivity: Delaying action or pushing ethanol to a second consultation would send devastating market signals and risk closure of some Ontario ethanol plants.
Policy Gap: Ontario Ethanol vs. U.S. Subsidies

Ontario's proposed domestic content regulation for renewable fuels includes biodiesel but omits ethanol. The lack of inclusion of ethanol jeopardizes Ontario's ethanol producers and corn farmers, as U.S. policies escalate subsidies for American ethanol. Delaying action or deferring ethanol to a second, separate consultation would further displace Ontario production, risk Ontario ethanol plant closures and inhibit future expansion of Ontario ethanol.
Economic Disadvantage for Ontario Ethanol Producers:
• Ontario currently lacks a policy response to this growing threat. Without immediate action, remaining domestic capacity and local grain demand risk displacement by subsidized U.S. supply.
• U.S. producers benefit from new, long-term tax credits, while Canadian producers face rising input costs, market instability and regulatory uncertainty.
• The average profit margin on Canadian ethanol is from 7-10 cents per litre, based on industry data.
• U.S. subsidies are valued at 5 to 36 cents per litre (CAD), based on 45Z calculations (Table 1). This is well beyond profit margins for Ontario ethanol producers.
• Ontario producers are losing market share due to policy disparities, not quality, cost, or environmental performance.
• In the U.S., a proposed change means that Canadian ethanol only counts for half as much compliance as American ethanol. Given all the efforts made by the U.S. to protect their domestic ethanol production, it makes sense for Ontario to take measures in the same direction for our industry.

Urgency for Action:
• MECP's current proposal protects biodiesel but excludes ethanol, despite:
o Ontario ethanol production supports 33% of Ontario's grain corn market
o Ontario historically has supplied 50–60% of Canada's total ethanol output
• A second consultation would and risk further U.S. displacement and risk Ontario plant closures.

Summary Recommendations
1. Include a requirement for made in Canada ethanol to be blended in gasoline at a rate of 7% out of the 11% currently mandated.
2. Pass the made in Canada requirements for ethanol and biodiesel as soon as possible, following the same regulatory measures implemented by BC.
3. Following the regulatory measures implemented by BC, have these measures remain in place as long as the U.S. measures that have created the supply disruption are in place.