Prime Minister Mark Carney spent last week in Brussels telling the European Parliament that Canada is ready to build new alliances "deliberately, systematically, and rapidly." Europe, he said, is already rebuilding its defence industrial base "at speed." Canada wants to move at that pace too.
It's the right instinct. But speed has to run in both directions. A government that can move rapidly to court new markets should also move rapidly to fix a regulation at home that is doing the opposite of what Carney just promised abroad.
Fuel ethanol is a striking example. And if Canada is, in fact, serious about building in this country, we need to start paying attention.
Canada has built a fast-growing ethanol market through its federal clean-fuel policy. But instead of turning that demand into new Canadian plants, jobs and investment, we’re increasingly handing the growth to heavily subsidized U.S. producers. There is nothing hypothetical about it: the trade data show the trend month after month. The Canadian policy response simply has not kept pace.
USDA reports 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. As the U.S. industry itself has celebrated, Canada is now approaching a billion gallons of American ethanol imports annually.
Iowa understands the opportunity. Canada is already its largest export customer, buying roughly $5 billion in goods last year. Its corn industry celebrates record ethanol exports because they mean more Iowa corn finding premium markets abroad.
Good for Iowa. The obvious question is why Canadian policy isn’t doing more to ensure Ontario corn, Canadian workers and Canadian ethanol capture more of the demand we created here.
Ontario’s ethanol sector anchors one out of every three grain bushels, accounts for the majority of Canada’s ethanol production and supports six ethanol facilities and nearly $1 billion in rural infrastructure.
Those plants now compete against U.S. ethanol producers eligible for a subsidy of up to 36 cents a litre under the 45Z production tax credit.
The imbalance doesn’t stop at the border. Subsidized U.S. ethanol enters Canada tariff-free and competes under the Clean Fuel Regulations on the same terms as Canadian ethanol. American producers can benefit from a U.S. production subsidy and then generate Canadian clean-fuel credits on the same litre.
Canada’s ethanol producers receive no equivalent support.
Five years ago, Canadian and American ethanol competed much more evenly in this market. Today, imports dominate. That matters not just to existing producers, but to decisions about where the next generation of low-carbon fuel investment gets built.
There is a relatively simple policy response. And now is not the time to short-change our own producers.
A credit multiplier of at least 1.4x for Canadian-made ethanol under the Clean Fuel Regulations would recognize the competitive disadvantage created by U.S. subsidies and help turn growing Canadian demand into Canadian production and investment.
It requires no government cheque and no new federal spending. Nor should it add costs at the pump: ethanol already costs about 7.4 cents per litre less than gasoline.
Ottawa also needs to explain another inconsistency. Its counter-tariffs are intended to help Canadian industries compete against U.S. products, yet American fuel ethanol remains excluded.
Ethanol is not the biggest issue in the Canada-U.S. trade dispute. Autos, steel and forestry face larger challenges. But ethanol may be among the easiest to address.
Ontario grows the corn, has the plants, the workers and the infrastructure. Canada has created the market. What we’re missing is a national policy that cares whether the next litre — and the investment behind it — is produced in Chatham or Iowa.
As the prime minister asks investors in Toronto to bet on Canada, Ottawa has an opportunity to make the same choice.
Building Canada isn’t just about attracting investment from around the world. It’s about making sure our own policies don’t send Canadian opportunities, jobs and capital across the border.
As any investor will tell you, creating a market is only half the equation. If we create the market here but design the rules so the investment happens there, we’re not building Canada.
We’re losing on home ice.
Stu Porter is an internationally recognized biofuels expert and President of Biofuels Consulting Canada Inc. He has nearly 20 years' experience as a renewable fuels consultant.