The Canadian government plans to end its subsidy for production of biofuels when its current program ends in 2017, a newspaper reported on Saturday.
The Globe and Mail quoted a letter from Natural Resources Minister Joe Oliver to the biofuels industry on Thursday explaining that Ottawa needed to cut spending to tame its deficit.
Oliver said that the ethanol industry now produces the necessary volume of renewable fuel for Canada to meet its target of 5 percent ethanol in the country's gasoline supply, the newspaper reported.
But the minister also noted that the Canadian biodiesel industry had been unable to produce enough of that fuel, forcing some refiners to import to meet a 2 percent biodiesel target.
The production of fuel from feed stocks such as corn, wheat, canola and animal fat has been lauded as a way for Canada to reduce greenhouse gas emissions.
However, ethanol and biodiesel fuel producers have required government subsidies and some critics complain that demand for fuel production has driven up the price of grain.
The government's ecoENERGY for Biofuels program was originally to have spent C$1.5 billion ($1.47 billion) supporting the industry between 2008 and 2017. It has actually committed only C$1 billion and stopped taking new applications for support in 2010, the newspaper said.
Ottawa plans to keep its existing commitments but wind down the program in 2017, the paper said.
According to the program's website, it has committed funding to about two dozen projects, including some owned by Suncor Energy Inc, Husky Energy Inc, Maple Leaf Foods Inc and BIOX Corp.
Plans have also been announced for new plants, notably a biodiesel plant that U.S. agrifood giant Archer Daniels Midland Co plans to build in Alberta.
The Globe and Mail quoted Scott Thurlow, president of the Canadian Renewable Fuels Association, as saying that new biodiesel plants could go forward if the government continued its subsidy.