Canada
Canada’s aviation industry is making concerted efforts to reduce greenhouse gas emissions, with Canada’s Aviation Climate Action Plan, 2022-2030, setting a target of a 10% reduction in emissions by 2030. SAF is seen as a critical pathway to achieving this goal. Canada is uniquely positioned to advance this aviation sector’s decarbonisation objectives, given its existing refining capacity, abundant and sustainable feedstock, and innovative technology providers, it is uniquely positioned to progress the aviation sector’s decarbonisation goals.
However, attracting the necessary investments for SAF production remains a near-term challenge. Beyond funding avenues like the Clean Fuels Fund and Strategic Innovation Fund, targeted incentives for developers may be needed. Moreover, the current project pipeline for upcoming SAF capacities could face competition from the US, where the biofuel producers anticipate generous tax credits for domestic production.
GDP (Current Prices) USD (2023) | 2,140 Bn |
Real GDP Growth Forecast (2024-2028) | 1.74% |
10-year Govt Bond Yield (12-month rolling average) | 3.46 |
Country Credit Rating | AAA |
Average Daily Flights | 14,328 |
Existing Fuel Consumption | 7,013 million litres |
Usage Mandate | 10% SAF by 2030, rising to 25% by
2035 |
Projected SAF Capacity Under Development (MT/Year) | 1,514,000 by 2027 |
Policy Support |
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Aviation Industry Backdrop
Canada’s total air transport passenger volume grew 27% year-on-year in 2023 but still lag pre-pandemic levels (Statistics Canada, 2024). Jet fuel consumption trends mirror the aviation sector’s business recovery – in December 2023, total jet fuel use reached 612 million litres, approaching the 670 million litres in December 2019 (Canada Energy Regulator, 2024). Total 2023 fuel consumption rose 21% over 2022. Within the North American, Canada’s aviation market closely rivals Mexico’s in available seat capacity (Air Service One, 2024).
Aerospace manufacturing is a globally competitive segment of Canada’s aviation. This export-oriented sector saw revenue jump 30% in 2023 (AIAC, 2024). Canadian-designed aircraft like the Bombardier C series(now Airbus 220) have been environmental pioneers, with the A220 being the first to receive an Environmental Product Declaration (Government of Canada, 2022). The manufacturing sector is key to Canada’s long-term aviation net zero goals. The National Research Council’s Aerospace Research Centre develops technologies for sustainable aircraft configurations, electric propulsion, clean fuel, and batteries (Government of Canada, 2024). In June 2023, the government announced a CAD350 million investment in the new Initiative for Sustainable Aviation Technology (ESG Today, 2023).
Biofuels already see strong Canadian demand, largely from the transport sector, driven by clean fuel regulations to cut emissions. Canada is the top market for US ethanol, with 2023 imports surging 40% to reach 1.76 billion litres. Federal funding for new domestic biofuel facilities further boost demand (CBC, 2024). The emerging SAF market presents a ripe opportunity for prospective Canadian renewable fuel suppliers.
Source: OECD.Stat, 2024
Note: Thousand tonnes of CO2-equivalent
Policy Regulation
The Canadian Net Zero Emissions Accountability Act mandates a binding national net zero target by 2050. The Aviation Climate Action Plan outlines the roadmap for net zero aviation emissions by 2050 with SAF as a cornerstone. The Plan aims for a 10% SAF use by 2030 (Transport Canada, 2022), but enabling a domestic SAF ecosystem is a challenge. Supportive measures include funding support for SAF projects. Some which are mentioned below:
- The Strategic Innovation Fund supports nascent industries like SAF. In May 2023, for instance, the government allocated CAD86 million to convert an oil refinery into a biorefinery producing renewable diesel and SAF (Biomass magazine, 2023).
- The CAD1.5 billion Clean Fuel Fund, de-risks capital investments in low-emission fuel projects, including SAF (Government of Canada, 2024). For example, Azure Sustainable Fuels Corporation secured CAD5 million for a SAF project feasibility study (NRC, 2024).
Regulations like the Clean Fuel Regulation (CFR) complement policy goals. CFR requires fuel suppliers to reduce lifecycle emissions from 2023 to 2030. The reduction requirement starts at 3.5 gCO2e/MJ in 2023, increasing by 1.5 gCO2e/MJ each year, reaching 14 gCO2e/MJ in 2030 (What are the Clean Fuel Regulations). A voluntary credit system incentivises supplier emission reductions. Budget 2024 aims to boost SAF through annual CFR compliance payments of CAD500 million and CAD776.3 million under the Clean Fuels Fund over the next six years (Government of Canada, 2024).
Provincial regulations also play a role. British Columbia’s (“BC”) Low Carbon Fuels Act sets SAF blending mandates and ambitious carbon intensity reduction targets. BC requires fuel suppliers to blend 1% SAF by 2028 and 3% by 2030 (Ethanol, 2024). In January 2024, Manitoba and the federal government jointly invested CAD6.2 million, including CAD5 million from the Clean Fuels Fund, to assess SAF production feasibility from local canola and soybean oil, as part of a CAD12.3 million project (Travel and Tour World, 2024).
Market Opportunity
Canada’s aviation market is dominated by Air Canada and WestJet, both of which have engaged in SAF trials and pilot programs, demonstrating the feasibility and benefits of using sustainable fuels. Air Canada committed CAD50 million to SAF and low-carbon aviation fuel development (Air Canada, 2021), and signed strategic SAF offtake agreements in 2023. In November 2022, WestJet operated all San Francisco to Calgary flights with SAF for a three-month period (WestJet, 2022).
Notable SAF Off take Deals by Canadian Airlines
| Company | Particulars |
|---|---|
| Air Canada |
|
| Westjet | In April 2024 the airline announced its planned SAF purchase from Shell Aviation (Neste, 2023). |
Source: Canadian Biomass Magazine, SAF Investor and Neste
A collective effort from all industry stakeholders is evident as Canadian aerospace manufacturers are also investing in sustainable technologies, including greener aircraft systems and alternative propulsion. In 2022, Bombardier launched the EcoJet Research Project, aiming to cut emissions by 50% through aerodynamic and propulsion enhancements (Bombardier, 2023).
SAF manufacturing investments are driven by government funding support through the Clean Fuel Fund and partnerships. Refinery conversions have attracted investor interest to leverage existing biofuel capacity, but most prospective suppliers expect subsidies or fiscal incentives to establish production facilities.
Major Initiatives in SAF Supply
| Particulars | |
|---|---|
| Skyservice Business Aviation | In 2021, Skyservice became the first private aviation company in Canada to offer SAF for private aircraft clients (Skyservice, 2021). |
| ABB and Cap Clean Energy | In March 2024, ABB (Bioenergy Times, 2024), a leader in electrification and automation technology partnered with Cap Clean Energy in establishing SAF production facilities across Manitoba, Alberta and Saskatchewan provinces in Canada. |
| Braya | A $300 million preferred-equity investment from Energy Capital Partners towards Brayas’s biorefinery conversion (biodiesel, SAF and other fuels) projects in Canada (BDD, 2023). |
| Tidewater Midstream and Infrastructure | Front-end Engineering Design work is underway for the planned SAF project in British Columbia, which is based on Tidewater’s Prince George refinery and its recently commissioned renewable diesel facility (BDD, 2024). |
Outlook
By 2035, Canada is expected to produce enough SAF to meet 25% of its total jet fuel demand, potentially reducing emissions from Canadian departures by 15-20% (Bennett Jones, 2023). In this regard, many projects have been planned, involving biorefinery conversions or producing SAF as a by-product of renewable fuel facilities.
Despite increasing demand for SAF, Canada has insufficient supply-side initiatives and trails the US in offering producer incentives. The US offers incentives up to $1.75 per gallon of SAF, along with additional state measures. Unless matched by Canada, the US Inflation Reduction Act’s biofuel producer incentives could divert potential SAF developers to build US facilities instead.
The market would need additional government support to drive adequate investments. Domestic SAF incentives are vital to fostering Canada’s entire SAF ecosystem, including developers, suppliers, technology providers, airlines, and aerospace companies. All the same, maintaining a long-term commitment to Canada’s aviation emission reduction targets will drive continued demand for SAF.
Projected SAF Output from Existing and Proposed Renewable Fuels Facilities (million litres)
| Facility | SAF fraction (estimated) | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 |
|---|---|---|---|---|---|---|---|---|
| Braya | 15% | 122 | 122 | 313 | 313 | 313 | 313 | 313 |
| Tidewater | 15% | 26 | 26 | 26 | 26 | 26 | 26 | 26 |
| Covenant | 15% | 48.8 | 48.8 | 48.8 | 48.8 | 48.8 | 48.8 | 48.8 |
| ReFuel | 15% | 26 | 26 | 26 | 26 | 26 | 26 | 26 |
| Green Energy Transformation | 15% | 56.6 | 56.6 | 56.6 | 56.6 | |||
| SAF+ | 100% | 30 | 30 | 30 | 30 | |||
| RETI | 15% | 25 | 25 | 25 |