The extensive trade between the United States and Canada ensures that policies in one country will directly affect the other.
Canada and the U.S. share the longest international border in the world, at 5,525 miles, including Alaska. Trade between the countries was valued at $917 billion in 2024. Of that, energy products totaled $151 billion, with crude oil accounting for the largest component of U.S.-Canada energy trade. Furthermore, according to a presentation by the New England-Canada Business Council, 80 percent of New England’s gasoline and diesel come from Canada.
A fortuitous meeting between Oil & Energy colleagues and Michael Pizziferri, Senior Officer – Public and Economic Affairs, Consulate General of Canada in Boston, at the Southern New England Energy Conference led to introductions to Devin Baines, Senior Communication Advisor, Media Relations, Natural Resources Canada and Samantha Bayard, Spokesperson, Media Relations, for Environment and Climate Change Canada, who were gracious in their assistance developing this article.
Canada’s energy programs, such as its federal low-carbon intensity blending mandates for diesel and gasoline and new biofuel production incentive, as well as various regional regulations, can directly affect the fuels and equipment available to the United States, especially those that share a border. The “Annual State Energy Regulatory Round-Up” issue of Oil & Energy seemed to be an appropriate place to review the regulations of our neighbor to the north.
Federal Regulations and Incentives
The Clean Fuel Regulations (CFR), which were enacted in 2022, set requirements to reduce the carbon intensity of gasoline and diesel used in Canada. “The Clean Fuel Regulations are an important part of Canada’s plan to protect the environment and human health by significantly reducing greenhouse gas emissions. On September 5, 2025, and reiterated in Budget 2025, Prime Minister Carney announced the Government of Canada’s intent to make targeted amendments to the Clean Fuel Regulations to support the domestic biofuel sector while maintaining the Regulations’ primary focus on lowering emissions and transitioning to a low carbon economy,” said Bayard.
The CFR also incorporate the minimum volumetric requirements that were in the former federal Renewable Fuel Regulations. The CFR require refiners and importers of gasoline and diesel to incorporate a minimum of five percent low-carbon intensity fuel content in the total volume of gasoline they produce or import for use in Canada, and two percent in diesel. Canada’s 2025 budget confirmed the government’s intention to proceed with targeted amendments to the CFR to support Canada’s low-carbon fuel sector while maintaining the CFR’s primary focus on reducing emissions from fuels and transitioning to a lower-carbon economy. The CFR is also scheduled for a comprehensive review after these targeted amendments are published.
Canada’s 2021 budget invested $1.5 billion over five years to establish a Clean Fuels Fund (CFF) to de-risk the capital investment required to build new or expand existing clean fuel production facilities (including facility conversions). The CFF provides support to expand Canada’s clean fuel production capacity and address gaps and misalignment in codes, standards, and regulations. In 2024, the government announced the retooling of the CFF and its extension to March 31, 2030, while the 2025 budget repurposed a portion of the CFF towards establishment of the Biofuels Production Incentive.
The Biofuels Production Incentive (BPI) launched on January 5, 2026, provides near-term relief and supports the stability of domestic producers of biodiesel and renewable diesel. The BPI is providing $372 million in operational support over two years, starting in 2026-27 to help producers address immediate competitiveness challenges. According to the initial announcement, the BPI was, in part, developed to reduce the country’s reliance on imports from the United States.
In addition, Canada’s Energy Efficiency Act and Energy Efficiency Regulations require products that are imported into Canada or shipped from one province to another for the purpose of sale or lease to meet federal energy efficiency standards. Regulated products include appliances and equipment powered by electricity, home heating oil, propane, and natural gas. The Federal Oil to Heat Pump Affordability (OHPA) Program provides up to $10,000 to low-to-median-income households for the purchase and installation of an eligible heat pump system, including electrical and mechanical upgrades and the removal of an oil tank.
An Oil and Gas Sector Greenhouse Gas Emissions Cap was proposed in 2021 but had not been enacted prior to the 2025 federal election. In November 2025, Prime Minister Mark Carney and Alberta Premier Danielle Smith signed a memorandum of understanding that stipulated that, if Canada and Alberta collaborated to put in place effective carbon markets, enhanced oil and gas methane regulations, and the deployment at scale of technologies such as carbon capture and storage, those actions would create the circumstances whereby the oil and gas emissions cap would no longer be required, as it would have marginal value in reducing emissions.
In 2019, Canada introduced a federal carbon tax on heating oil, which was suspended in 2023. Originally, that tax was to be reactivated in 2027, but, according to Bayard, “the federal government has announced that robust industrial pricing systems are in place across Canada, and that these systems cover a broad range of industrial greenhouse gas emissions. A strong industrial carbon price remains one of the most effective tools to cut pollution, create jobs, and drive clean innovation in a world rapidly moving toward net zero. To strengthen this approach, Canada will enhance the effectiveness of carbon markets to provide confidence that credit prices will remain predictable and sufficient to support clean growth investment, safeguard competitiveness, and protect the environment. As part of this shift, the consumer fuel charge has been removed in its entirety – including on heating oil – effective April 1, 2025.”
Tariffs and Trade
Much of the trade between the two countries had initially been at risk of being subjected to broad tariffs under the Trump administration. However, the President exempted tariffs on Canadian goods produced under the US-Mexico-Canada agreement (USMCA in the United States, or CUSMA in Canada).
According to Baines, “The vast majority of Canadian exports to the U.S. claim CUSMA preference (i.e. are CUSMA compliant) and are therefore exempt from IEEPA tariffs. While communities along the Canada-U.S. border are more directly exposed to U.S. tariffs on Canadian goods, the lower broad-based rate and CUSMA exemption have insulated energy industries and had limited impacts on bilateral fuels trade to date.”
Province Regulations: Space Heating
Regulations subject to change. Please review with appropriate local authorities.
Quebec
- Ban on oil-fired space/water heating in new buildings as of December 31, 2021
- Ban on oil-fired space/water heating in existing buildings as of December 31, 2023
- Ban on fossil fuel heating meant to replace oil-fired space/water heating in existing buildings as of December 31, 2023
- Ban on repairs to existing appliances as of December 31, 2023
- Type of ban: Official Regulation - Passed
Nova Scotia
- Climate Action Plan, 2021 included a commitment to ban the installation of oil-fired equipment in new buildings by 2025.
- Type of ban: Commitment
British Columbia
- After 2030, all new space and water heating equipment sold and installed will be at least 100 percent efficient
- Applies to existing and new installations
- Type of ban: Included in the Zero Carbon Step Code
In addition, there are provincial regulations and incentives related to renewable transportation fuels in Alberta, British Columbia, Manitoba, Ontario, Quebec, and Saskatchewan.
