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Canada CFR Q2 2025: Rise in Domestic Flow and Total Credits Generation by Low CI Fuel Types

Canada CFR Q2 2025: Rise in Domestic Flow and Total Credits Generation by Low CI Fuel Types

Overview

Environment and Climate Change Canada (ECCC) has published the compliance credit market report for the Q2 2025 compliance period. The report primarily highlights credits generated from low CI fuels under compliance category 2, as well as from the production or import of renewable propane and renewable natural gas (RNG) used for vehicle fueling under compliance category 3. A total of 2.38 MT compliance credits were generated in Q2 2025, with overall credit generation increasing by 37% QoQ and 9% YoY. The report also provides insights into credit transfers, including the average credit price.

Key takeaways from Q2 2025

In Q2 2025, domestically produced low CI fuel volume in diesel pool, including RD and biodiesel, while imports declined by 35% YoY. As a result, total low CI fuel volume in the diesel pool fell by 16% YoY from 614.3K to 538.9K cubic meters.
RD credits declined by 17% YoY in line with a 19% drop in volumes, while biodiesel credits increased by 50% YoY despite lower volumes, supported by a sharp decline in weighted average CI from 45.4 to 19.5 gCO₂/MJ.
Ethanol remained a key credit generator, with credits rising by 8% YoY due to higher volumes and lower weighted average CI.
SAF volumes, entirely import-driven under the CFR, surged by 301% YoY to 30.1K cubic meters, marking the highest level recorded. However, SAF credit growth was limited to 23% YoY due to an increase in CI from 29.7 to 70 gCO₂/MJ.
However, credits from imported RNG remained lower than those from domestically produced RNG due to higher CI pathways.
Biogas volumes declined by 50% QoQ, but credits increased by 68% QoQ, driven by a reduction in CI from 60.6 to 25 gCO₂/MJ.
As per ECCC, the average compliance credit price reported in the primary market for which rebounded from Q1 2025’s average price of $93.08.

cCarbon’s forecasting accuracy & Outlook

ECCC has estimated total active compliance credits at 22.0 MT for 2025, excluding CC1 credits and CC3 credits from charging stations and hydrogen fuelling stations. ECCC also indicates that around could be forthcoming in the credit adjustment report. In comparison, cCarbon’s base case projects 23.2 MT of active compliance credits by year-end, implying an accuracy of around 95 The modest variance is mainly because cCarbon’s model includes projected CC1 credits, CC3 credits, and fund credits, resulting in a slightly higher credit generation estimate
Overall, ECCC-reported credit bank levels, calculated as the difference between active compliance credits and deficits, show a declining trend from around 9 MT credits in 2024 to 6.4 MT credits in 2025, based on ECCC’s estimated data. However, following the reporting of CC1 and CC3 credits through the annual compliance report, the bank is expected to increase to nearly 8 MT credits, while still remaining below 2024 levels. This tighter market balance has contributed to the rise in credit prices.
Q2 2025 reflects higher credit generation compared to the previous five quarters, largely driven by an increase in domestically produced liquid low CI fuel volumes. This shift coincided with uncertainty in US markets, particularly around the 45Z incentives and RFS volumes for 2026/27, which likely dampened volumes of imported RD.
However, by Q4 2025, Statistics Canada data indicates that Canada returned to being a net exporter of RD, BD and other low CI fuel volumes in diesel pool. This trend is likely driven by rising RIN prices and tighter CI requirements in other West Coast markets, resulting in relatively stronger incentives compared to the CFR or even a stacked CFR/BC LCFS incentive. cCarbon’s outlook suggests that, in the near term, the continued strength in RIN prices coupled with incentives from the US state LCFS markets will encourage some Canadian producers to prioritize supplying south of the border.

Conclusion

Q2 2025 shows higher domestic flows of low CI fuels in the diesel pool, and Statistics Canada data indicates that this trend continued in Q3 2025. However, cCarbon’s latest for Q4 2025 shows a sharp decline in low CI fuel volumes in the diesel pool, with Canada becoming a net exporter.

Under the CFR, , with imports playing a key role in meeting supply. However, as discussed in our latest article “,” the introduction of 45Z incentives, rising D3 RIN prices, and improving incentives in European markets may reduce imports into Canada from the US in the near term. This could shift the CFR market toward a more deficit-heavy position.

To address these, ECCC has proposed amendments to the CFR aimed at supporting domestic production and supply, including the introduction of credit multipliers to better align with US incentives. Assuming the implementation of this potential multiplier provides a strong, clear and durable market signal, domestic low CI fuel flows are expected to strengthen in the coming years.