Navius has conducted an analysis of the potential impact of U.S. excise tax credits for bio-based diesel production (the U.S. Clean Production Tax Credit, or 45Z) on Canadian renewable fuel credit markets. Changes to the legislation for the American 45Z tax credit in Trump’s “Big Beautiful Bill”, along with allegations of unfair competition from the U.S. industry, raise the priority of this issue once again.

This blog discusses the current U.S. tax credits that apply to biofuels, introduces a simple theoretical model of renewable diesel price with tax credits, and then examines the empirical evidence for the extent to which U.S. tax credits are passed through into non-U.S. commodity markets. It concludes that we do not expect increases to U.S. tax credits to have large effects on the long-run Clean Fuel Regulations (CFR) credit price or fuel prices available to Canadian producers.