Oilseed markets to be impacted by U.S’ clean energy decision

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In June, significant decisions are expected in the oilseed market, particularly for canola, and the future of bio-based diesel and aviation fuel in the United States. The U.S. Environmental Protection Agency (EPA) submitted its final rule on biofuel blending for 2023-25 to the White House, with the initial proposal receiving criticism for its lack of growth targets. Lobbying efforts may have influenced the EPA to increase renewable diesel targets in the final submission. The EPA’s rules will be made public by June 14.

The Biden administration’s focus on a greener economy is at odds with the cautious approach of the EPA. The Inflation Reduction Act includes substantial subsidies for clean fuels, but these favor domestic producers, creating protectionist measures that limit access to the U.S. market for international producers, such as Canada.

Debt limit negotiations in the U.S. have not prioritized clean fuel subsidy cuts. Oilseed commodity markets have declined, driven by good weather in the U.S. Midwest, Brazil’s record soybean crop, and questions about the policy environment around renewable diesel. Canola prices have been less affected due to slower seeding progress and a tighter supply-demand situation.

Uncertainty regarding U.S. clean fuel policies, particularly renewable diesel, has implications beyond American producers. A Canadian renewable fuel project was canceled due to changes in the U.S. tax credit system and construction cost inflation. Canada and the U.S. have established a joint energy transformation task force to address subsidy conflicts and coordinate energy policy. Some projects, including Tidewater Renewables’ plant in British Columbia and Imperial Oil’s plant in Alberta, are still progressing.

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