The Clean Fuel Regulations are an important part of Canada’s climate plan to reduce emissions, accelerate the use of clean fuels and technologies, and foster long-term sustainable jobs. But how does it work?

Obligations under the CFR

(Italicized terms are official terms from the text of the CFR)

The CFR set out obligations for entities that import or produce in Canada more than 400 m³/year of gasoline or diesel (primary suppliers). To meet their obligations, primary suppliers must acquire carbon credits (compliance credits) in proportion to the amount of fuel they produce or import. The number of credits that primary suppliers must acquire per m³ of fuel imported or produced increases from year to year.

Thus, in 2030, a producer will have to purchase 4 times as much credits per m³ of fuel than in 2023.

Compliance Credits

Compliance credits, the official name for carbon credits, correspond to 1 ton of CO₂ equivalent (tCO₂e) not emitted. Government-registered entities (registered creators) can create compliance credits by deploying projects that result in GHG emission reductions, such as biofuel substitution projects.

Registered creators may be primary suppliers or not. In other words, producer-importers can create compliance units themselves, but other players can also create compliance units, as long as they are registered with the government.

Acquiring Compliance Credits

Primary suppliers can acquire credits in several ways:

• By becoming registered creators themselves and developing projects that lead to a reduction in GHG emissions
• By purchasing credits from registered creators
  • Either through traditional bilateral contracts
  • Or through a clearance mechanism established by the CFR where registered creators can commit to selling all or part of their credits
• By contributing to registered emission-reduction funding programs, government-registered funds with the goal of reducing GHG emissions. Primary suppliers can only acquire 10% of the credits they need to be in compliance in this way.