Canada's policy environment is not yet competitive enough to grow a domestic sustainable aviation fuels (SAF) industry, according to Transport Canada's latest growth plan.
The Sustainable Aviation Fuels Blueprint, developed with Deloitte and the Sustainable Aviation Task Force alongside the Canadian Council for Sustainable Aviation Fuels (C-SAF), sets out a pathway toward achieving 10pc SAF use by 2030 and net-zero aviation emissions by 2050.
However, the report identifies high production costs, limited access to imports, and insufficient policy support as key barriers, with producers favoring US projects because of stronger incentives.
Most of the SAF produced worldwide is absorbed by the European Union and the US, leaving Canada competing for scarce imports.
Canadian policy does not yet create a positive operating margin or durable demand signal, so producers favor developing projects in the US, which has 45Z tax credits to help support the industry.
Despite several federal incentive programs such as the retooled C$1.5bln ($1.1bln) Clean Fuels Fund and Clean Fuel Regulations credit framework, Canada has no commercial scale SAF production. A series of project announcements totaling more than 1bn litres of annual production has yielded no final investment decision to date.
The seven-pillar action plan points to several levers that could reshape the investment calculus in Canada. Chief among them is exploring contracts-for-difference structures like the Netherlands' SDE++ program or the UK's Low Carbon Contracts Company, which guarantee a strike price and de-risk first-of-a-kind facilities.
A near-term win could come from regulatory reform rather than new spending such as raising co-processing blend limits from 5pc to as much as 30pc, which would let existing refineries produce SAF alongside conventional fuel without major new capital investment.
Some provinces, such as British Columbia, have already mandated a low carbon fuel standard (LCFS) in a SAF blending mandate starting in 2028 with a 1pc requirement and up to 3pc by 2030, as well as a production incentive with the Low Carbon Jet Fuel Incentive Program providing cash and LCFS carbon offsets.
The report highlights canola, agricultural residues, and forestry residues as Canadian feedstock advantages. But canola-based SAF is ineligible for the European market mandates, which is pushing a North America-first strategy.
The report also calls for a national SAF demand forecast and a book-and-claim framework to let corporate buyers purchase SAF without needing physical uplift, a mechanism smaller carriers have said they need to compete with larger carriers like Air Canada and WestJet for scarce global cargo.
