With its advanced technology, strong political will and ample biodiesel feedstocks, Canada is poised to create a viable biofuels industry.

But to date, the industry is still rather small, with total production capacity of just more than 800 million liters. Hoping to realize this untapped potential, the nation’s leaders have put their support behind developing a biofuels industry. The government has promised C$2.2 billion to help grow the industry, and is working to establish mandated usage levels for ethanol and biodiesel.

Research into next-generation ethanol facilities also is going strong, with several companies developing facilities that can use feedstocks such as wood chips and wheat straw. The government hopes a strong biofuels industry will reduce ozone depleting gases, help it comply with its Kyoto Protocol obligations and decrease its vulnerability to fluctuations in international oil prices.

Canada has the eighth largest economy in the world and is one of the world’s wealthiest nations. The nation has a mixed market or social market economy, which ranks it higher on the "index of economic freedom" than most western European countries but lower than the U.S.

The economy is dominated by the service industry, which employs about three-quarters of the population. In addition, two of its most important sectors are oil and logging. Canada also has a sizable manufacturing sector in the central portion of the country.

Agriculture and mining accounted for less than 5% of Canada’s labor force by the end of the 20th century. In 2005, agriculture provided one in eight jobs and accounted for 8% of the total GDP. There is a continued trend toward fewer, larger farms and increased concentration. The demand for biofuels has created opportunities and challenges for agricultural producers, according to Agriculture and Agri-Food Canada, through increased demand for agricultural commodities.

Canadian agriculture is private, but it depends on government subsidies to compete with the agricultural sectors of the European Union and the U.S. Several marketing boards for specific commodities are in charge of supply management and establish floor prices. Total government support to the sector reached a record-high level in 2006-07 of $8.4 billion, or 40% of total sector GDP.

Canada’s share of world agriculture and agri-food trade has increased in the last 15 years in response to trade liberalization. In 2006, the country was the fourth-largest exporter and fifth-largest importer of agriculture and agri-food products in the world.

Trade, particularly of natural resources, is a large part of the Canadian economy. The U.S. is its largest trading partner, accounting for 76% of exports and 65% of imports as of 2007.

Canada has 10 ethanol plants in operation with a total capacity of 725 million liters and an additional six plants under construction with a capacity of 775 million liters, according to the Canadian Renewable Fuels Association. Grain-based production accounts for 93% of all ethanol made in the country with corn comprising 73%, wheat 17% and barley 3%. Grain-based production is expected to triple in the next few years.

GreenField Ethanol is Canada’s largest ethanol producer with plants in Tiverton, Ontario; Chatham, Ontario; and Varennes, Quebec. Additional plants are under construction in Hensall, Ontario and Johnstown, Ontario that will bring the company’s total ethanol production to 700 million liters.

GreenField also is working on cellulosic ethanol development in conjunction with Enerkem, a leading gasification and catalysis technology company. The two announced in March plans to design, build and operate commercial cellulose ethanol plants using Enerkem technology. The first plant location has been secured in Canada and the second plant is in development.

Another Canadian company leading the way in cellulosic ethanol development is Ottawa, Ontario-based Iogen Corp. The company has a demonstration-scale facility in Ottawa that converts biomass to cellulose ethanol using enzyme technology.

Long-term, the company plans to commercialize the process by licensing its technology through turnkey plant construction partnerships. Iogen recently received government funding of $500 million to build a cellulosic ethanol biorefinery in Saskatchewan.

The biodiesel industry is significantly smaller with three plants in operation and a total production capacity of 97 million liters. One plant is under construction with a capacity of 225 million liters. The small quantities of biodiesel produced are generally used locally.

Canada has several feedstock possibilities for biodiesel production. The country produces large amounts of canola, soy, mustard and corn, and has the potential to produce more. It is a net exporter of canola oil and non-crushed canola seed. Additionally, the country is a net exporter of tallow and grease, which are other feedstock possibilities.

Despite these pluses, barriers such as cost have prevented the Canadian biodiesel industry from expanding. Biofuels consumption has been relatively low. In 2004, total ethanol production and consumption was 250 million liters. In comparison, Canada used 11.7 million liters of pure biodiesel in 2005.

The country has imported ethanol from the U.S. because there is not enough feedstock to satisfy local demand. Imports totaled 152 million liters in 2005 with imports averaging 123.3 million liters during the last five years.

Government support, including funding for production facilities and mandates for usage, could make the difference in how the industry expands in the future. Gasoline in Canada will require an average of 5% renewable content by 2010, while diesel fuel and heating oil will require an average of 2% renewable content by 2012. To meet those requirements, it’s estimated the country will need 3 billion liters of renewable fuel per year.

Overall, the Canadian government has committed $2.2 billion to boost renewable content in gasoline and diesel fuels. Funding is provided through three main programs:

• ecoAgriculture Biofuels Capital Initiative (ecoABC) and the Biofuels Opportunities for Producers Initiative (BOPI). ecoABC will provide $200 million over a fouryear period ending March 31, 2011 for the construction and expansion of biofuel production facilities. Funding is conditional on agricultural producer investment in the project and the use of agricultural feedstock to produce the biofuel. BOPI will provide $20 million to help farmers and rural communities hire experts who can assist in developing business proposals and other studies to create and expand biofuels production.

• NextGen Biofuels Fund. This fund will invest $500 million over eight years in first-of-kind, large-scale demonstration, next-generation renewable fuel production facilities.

• ecoENERGY for Biofuels. This program will provide operating incentives to stimulate domestic biofuels production. The $1.5 billion program began April 1 and continues until March 31, 2017. Producers of ethanol and other renewable alternatives will be eligible for incentives of up to 10 cents per liter of production and biodiesel producers can receive incentives of up to 20 cents per liter. After three years, the maximum rates will decline. BFB