Canadian oil refineries are quietly pivoting to an unlikely raw material for diesel: canola. While other vegetable oils and animal fats can also be processed for energy, canola is by far the most abundant in North America. This shift is reshaping the market for Canada's most valuable crop.
The Rise of Renewable Diesel
Seeds from the yellow flowering crop are pressed for oil, which can either be sold on grocery store shelves for cooking or refined into a low carbon-intensity fuel. Refineries process canola further so that it is chemically identical to conventional, petroleum-based diesel. This product, called renewable diesel, is being quietly adopted by the fuel industry to meet emissions targets.
Ten out of Canada's 18 oil refineries have either finished building or are working on adding co-processing equipment for renewable fuels alongside regular operations. According to David Schick, a Western Canada vice-president at Canadian Fuels Association, many refineries are situated near canola fields, providing easy access to this feedstock.
Impact on Farmers
Prairie farmers have noticed the shift in recent years, with incomes rising from refineries rather than deep fryers. Jay Gerry, a canola farmer in southeast Saskatchewan, recalls that his family grew canola for food-grade oil 30 years ago, but now much of it ends up in the fuels market. With renewable fuels and sustainable fuel policies around the world, we have seen an uptick in biodiesel demand, said Gerry, who farms 12,000 acres near Creelman, Sask.
The fuel industry is expected to add $600 million in value at the farm gate in the 2025-2026 crop year, according to Brittany Woods, a senior manager in transportation and trade policy at the Canadian Canola Growers Association. On average, that is an extra $27 per tonne of seed into the pockets of farmers. And there is potentially more growth still to go.
Market Dynamics
In Canada, consumption of canola oil has increased by nearly 60 per cent over the past five years. The growers group attributes the 500,000-tonne increase to the nascent fuel industry. Gerry notes a similar tailwind was felt by American corn farmers more than a decade ago when their crops were used to produce ethanol to blend with gasoline.
Canada's Clean Fuel Regulations are largely driving this trend. Each year, conventional fuel suppliers are federally mandated to sell fuel and, at the same time, reduce emissions. The targets, which started in 2023, are meant to gradually curb carbon emissions annually until 2030, when the targets flatline.
Economic Significance
Canola is by far Canada's most valuable crop, generating $3.7 billion in farm cash receipts during the first three months of the year. The fastest-growing market for canola is now in energy, not cooking. This shift is expected to continue as more refineries adopt co-processing and demand for low-carbon fuels rises.
With the fuel industry adding value at the farm gate and policies supporting renewable energy, canola's role in Canada's energy landscape is set to expand further, benefiting farmers and the economy alike.
