Canada’s Clean Fuel Regulation (CFR) FAQs

Each credit represents the life cycle emission reduction of one tonne of CO2-equivalent. Entities that reduce the carbon intensity of fuels or supply fuels with a carbon intensity below the established benchmark generate CFR credits (as further described in the next section). For example, electric vehicle charging and the use of biogas / renewable natural gas (RNG)  or hydrogen are eligible to generate CFR credits. Credits are registered and traded via the Credit and Tracking System (CATS), a web-based platform where credit verification, validation and compliance reporting are managed. The CFR incentivizes suppliers of carbon-intensive fuels to reduce emissions beyond what they are required to do as part of their regulatory compliance because of the opportunity to generate and sell credits.  

The CFR regulation is purposefully broad, with no explicit distinction between on- and off-road vehicle opportunities. There are a wide variety of vehicle and fuel applications that can generate credits. The fueling or charging of any vehicle that would most commonly be using fossil fuels but is instead using a fuel with a lower CI can generate credits. Electric transportation applications are a common source of CFR credits including:

• Battery electric and hydrogen fuel cell electric forklifts
• Electric yard trucks/tractors and other off road cargo handling equipment
• Electric cargo handling equipment
• Electric marine vessels
• Electric cargo and delivery vans and box trucks
• Battery and hydrogen fuel cell electric medium and heavy duty trucks and tractors
• Shore powered refrigerated trailers run on electricity

Credits are generated based on the quantity and carbon intensity of low-carbon fuel supplied. Entities who undertake credit generation activities are referred to ‘registered creators,’ and there are numerous credit generating activities available, including: 

• Reduction of fossil fuel CI throughout its lifecycle (e.g. through carbon capture and storage, on-site renewable energy, etc.)
• Supply of low-carbon fuels or energy (i.e. ethanol, biodiesel, etc.) 
• Direct supply of low-carbon hydrogen  
• Electric vehicle charging 
• Biogas and RNG fueling 

The monetary value of the credits varies based on the supply and demand of the CFR credit market. Registered creators can generate credits on either a quarterly or annual basis through a variety of crediting pathways. These credits are later sold on the open market for purchase by deficit generators who have an annual compliance target. To earn credits, organizations must demonstrate that their clean fuels meet the eligibility criteria set out in the regulations, comply with reporting requirements, and undergo verification by a third party. 3Degrees has a unique three-phase process for CFR participation that ensures the maximum financial gain for a partner’s existing assets, while providing a foundation for future growth. 

Yes, the CFR program applies to any transportation fuel that is sold, supplied, or offered for sale in Canada. Credits may only be generated once for any given quantity of fuel; fuel used to generate credits in another jurisdiction may not also be used to generate Canadian CFR credits. If fuel is subsequently exported, any credits associated with its volume must be canceled.

CFR revenue earned from the sale of compliance credits by certain voluntary participants must be used to fund further decarbonization activities, such as deploying electric vehicle (EV) charging infrastructure, installing electricity distribution infrastructure that supports EV charging, or providing financial incentives for consumers to purchase EVs. Even where this is not explicitly required, the CFR program is designed to provide money to the entities responsible for growing the market for low-carbon fuels across Canada. This cycle of incentive and reinvestment aims to rapidly expand the clean fuel industry for businesses and consumers alike.

To ensure your organization is maximizing the benefits of the CFR, working with a third-party advisor can remove the administrative burden and mitigate regulatory risk, while ensuring a profitable return on investment. For entities interested in leveraging the CFR, 3Degrees can serve as a registered creator and a carbon intensity contributor, helping our partners generate credits to sell into the market and providing fuel pathways consulting support as needed. If your business is interested in CFR opportunities, contact us for help navigating the process.