From runways to waterways

From runways to waterways represents the first topic in a five-part series. Future discussions will focus on key areas, including the roles and responsibilities of all stakeholders—industry, government, and communities—in driving the transition to low-carbon fuels. A critical priority will be addressing investment risk, as overcoming financial barriers is essential to scaling sustainable solutions. Additional topics will explore the economic development potential of synthetic fuels and feedstock availability. This approach aims to provide a comprehensive perspective on the collaborative efforts needed to achieve Canada’s decarbonization goals.

The maritime and aviation industries' complex commercial barriers make the adoption of synthetic fuels crucial. Due to the technical limitations of electricity and hydrogen, a transition to synthetic fuels—such as synthetic kerosene, ammonia, and others—becomes imperative. While Canada has made significant strides in this area, there is still much work to be done.

The transition to low-carbon fuels is uniting sectors like agriculture, forestry, and energy with aviation and maritime industries—stakeholders that previously had little reason to work together. This convergence is unlocking new economic opportunities, fostering job creation, and accelerating technological advancements.

Additionally, international regulations and initiatives are driving the aviation and maritime industries forward. For aviation, CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) requires airlines to offset emissions if industry emissions exceed 85% of the 2019 baseline, incentivizing the adoption of sustainable aviation fuels (SAF)¹. In the maritime sector, the International Maritime Organization (IMO) has set ambitious targets, including net-zero emissions by or around 2050, with checkpoints of 20-30% reduction by 2030 and 70-80% by 2040 compared to 2008 levels, pushing the industry to innovate and adopt low-carbon fuel alternatives². At the national level, Canada enforces international standards under the Canada Shipping Act, 2001³ and implements national regulations such as the Vessel Construction and Equipment Regulations (SOR/2023-257)⁴ and Vessel Pollution and Dangerous Chemicals Regulations (SOR/2012-69)⁵.

The aviation and maritime sectors contribute approximately 6% to global CO² emissions. In Canada, these industries account for just under 2% of the country’s total greenhouse gas (GHG) emissions. While this percentage may seem small, the transition in these sectors is critical due to their unique challenges, such as long asset lifecycles (e.g., vessels and airplanes), high costs of acquisition, and the complexity of decarbonizing high-energy-density fuels. These factors mean that the transition will take longer and require significant upfront investment, making early action essential. For Canada, this shift represents a chance to leverage its abundant natural resources, highly skilled clean tech workforce, and supportive government policies to establish itself as a global leader in sustainable transport. While the path forward may face challenges, particularly in aligning industry goals with evolving market dynamics, Canada’s leadership in this space has the potential to strengthen both its economy and its environmental resilience.

Understanding low-carbon pathways

Some sectors, such as buildings, manufacturing, and light road transport, can largely rely on electrification for decarbonization—buildings, for instance, can transition to hybrid and electric heat pumps for heating and cooling, while light road transport can shift to electric, thereby reducing emissions and lowering total operating costs. Nevertheless, heavy-duty transport applications, particularly in aviation and shipping, require solutions beyond electrification due to the higher energy density these sectors demand⁶.

According to Deloitte’s Global outlook, SAFs, particularly synthetic kerosene, will play a critical role in aviation’s transition to a low-carbon future. Globally, SAFs are projected to account for 43% of the sector’s energy consumption by 2040 and 70% by 2050, with cost parity expected by 2045⁷. This presents a significant opportunity for countries to lead in the development and deployment of SAF technologies. For Canada, however, the challenge lies in scaling up production to meet this growing demand. While the country is developing a national strategy to shift from bio-kerosene to synthetic SAFs, no commercially scaled dedicated SAF production plants are currently operating. Instead, pilot programs are leveraging existing refineries for co-processing to accelerate early-stage SAF production capacity⁸. To achieve the forecasted SAF volumes needed for net-zero by 2050, Canada will require an estimated 170 to 200 additional small and medium-sized facilities⁹.

Despite these challenges, Canada is well-positioned to build resilient and innovative SAF value chains. An original analysis for this roadmap highlights that Canada has sufficient sustainable biomass to produce 7-10 billion litres of SAF annually¹⁰. Canada’s forestry sector plays a critical role in this potential, as it is uniquely positioned to address energy challenges and contribute to a more sustainable, circular economy. By converting wood chips, residues, and bark—materials that often have limited alternative uses—into bioenergy, Canada can create new markets for these by-products while reducing reliance on fossil fuels for clean energy production¹¹. Additionally, Canada’s existing refining capacity¹² and access to deep-water ports¹³, such as those in Vancouver, Halifax, and Prince Rupert, provide a strategic advantage for both domestic SAF production and international export opportunities.

The country also benefits from one of the cleanest electricity grids globally. In 2022, Canada generated 639 terawatt-hours (TWh) of electricity, with more than 80% coming from non-emitting sources¹⁴. Looking ahead, Canada’s clean energy sector is expected to grow significantly, with the gross domestic product (GDP) projected to reach $107 billion in the next five years, driven by $58 billion in annual investments and the creation of over 600,000 jobs¹⁵. This clean energy capacity allows Canada to produce low-carbon fuels with a significantly smaller carbon footprint compared to many global competitors.

Similar to aviation, decarbonizing the maritime sector requires a transition to clean energy sources. In the short term, electric ferries are already being deployed for regional vessels and ferries and operating in some Canadian regions today. For instance, BC Ferries currently has six Island Class electric-hybrid ferries in operation¹⁶. 

Liquefied natural gas (LNG) also serves as a transitional fuel for certain vessels particularly ocean going vessels such as car carriers and containers, offering immediate emissions reductions compared to conventional fuels¹⁷. Canada currently has four LNG plants serving the domestic market, along with LNG import facilities in Saint John, New Brunswick and Hamilton, Ontario. These facilities enable LNG availability for truck-to-ship and ship-to-ship bunkering, especially in British Columbia¹⁸. As the adoption of LNG continues to grow, it may serve as a bridge until other low-carbon alternative fuels are produced at scale and become cost-competitive. Furthermore, international shipping, particularly for car carriers, dry bulkers, and container vessels, still relies on liquid fuels due to their higher energy density and superior storage capabilities, which are essential for long-distance travel.

As a result, synthetic liquid fuels, particularly methanol and ammonia, are emerging as the leading long-term decarbonization pathway for maritime transport. Methanol, while easier to handle and store than ammonia, still faces challenges related to its lower energy density and the need for large-scale production of green methanol to fully decarbonize the value chain. That said, methanol is expected to be commercially ready sooner than ammonia, thanks to existing infrastructure and its simpler handling requirements¹⁹. Ammonia, on the other hand, offers high energy density and zero carbon emissions when produced renewably, but poses significant safety and infrastructure challenges due to its toxicity and the need for specialized storage and handling systems²⁰. Both fuels are expected to become more cost-competitive by 2035, though overcoming these technical and logistical hurdles will be critical to their widespread adoption²¹.

To accelerate the commercialization of low-carbon fuels and achieve cost parity sooner than projected, Canada must streamline its permitting and regulatory processes. For instance, the transition to green methanol and ammonia as maritime fuels requires timely and efficient Final Investment Decision (FID) approvals, which are often hindered by complex permitting requirements. The current permitting process for large-scale low-carbon fuel production facilities can be slow, with environmental assessments, zoning approvals, and safety regulations creating significant obstacles to rapid development. To address these challenges, Canada must modernize its regulatory framework, streamlining review and approval processes to better accommodate new technologies and emerging business models²². By creating a more predictable and efficient regulatory environment, Canada can reduce the time from concept to construction, thereby attracting private investment and fostering innovation in clean fuel technologies.

The role of infrastructure in enabling decarbonization

While the development of low-carbon fuels is critical, equally important is the infrastructure to support their adoption. Canada’s commitment to the Clydebank Declaration, signed at the 2021 United Nations Climate Change Conference (COP26), positions the country to play a leading role in establishing green shipping corridors—zero-emission maritime routes between two or more ports. These corridors will require investments in fueling infrastructure, such as bunkering facilities for methanol and ammonia, as well as upgrades to port operations to support the transition to low-carbon fuels²³. The Deloitte Global Report emphasizes that new refueling stations, fuel production and storage facilities as well as ports, and airports will act as key transportation multi modal hubs to handle low-carbon fuels and ensure their widespread availability. Given Canada's vast geography and its key maritime and aviation hubs, significant investment in infrastructure will be necessary to ensure these fuels are both accessible and scalable. To maximize efficiency, Canada may initially adopt a regional hub-and-spoke model for SAF production, leveraging local feedstock supplies and existing infrastructure. However, since petroleum aviation fuel producers currently own and manage the hubs and pipelines, new partnerships will be essential. Collaboration between new-to-market SAF providers and established infrastructure owners will be critical to enabling market access and integrating SAF into existing jet fuel production and distribution systems²⁴.

Canada’s stable regulatory environment, commitment to emissions reductions, and strong policy frameworks provide a solid foundation for attracting both domestic and international capital. While the Clean Fuel Standard (CFS) currently focuses on reducing the carbon intensity of ground transportation fuels, there is a clear opportunity to expand this framework to include the aviation and maritime sectors as part of Canada’s broader decarbonization efforts. By integrating SAFs and clean marine fuels into future updates of the CFS, the government could establish clear incentives for their production and use. This would spur innovation in fuel production and adoption, similar to how the CFS has driven the use of cleaner alternatives for land-based transport.

Strategic investments in clean fuel infrastructure could also unlock significant export opportunities for Canada, thanks to its abundant natural resources. Many states in the U.S. and countries in Europe have committed to decarbonizing their aviation and maritime industries, and these regions will increasingly rely on international markets to meet their targets^25,26. As such, the U.S. and Europe represent key export destinations for Canadian low-carbon fuels. Canada’s ability to produce these fuels at scale, coupled with its well-established transportation infrastructure, positions the country as a strong and reliable supplier. Canada’s west coast ports, such as Vancouver and Prince Rupert, and east coast ports like Montreal, offer direct access to U.S. markets, serving as key hubs for exporting clean fuels.

Domestically, Canada’s regional markets for low-carbon fuels present considerable growth potential. Provinces such as Alberta and British Columbia (BC) are rich in feedstocks and possess the necessary infrastructure to support clean fuel production²⁷. Key ports like Vancouver and Montreal are strategically positioned to serve as vital hubs for exporting these fuels. The widespread adoption of low-carbon fuels in these regions would enhance Canada’s energy security by diversifying its energy sources and fostering a more resilient, self-sufficient energy system.

For aviation, the initial focus will be on upgrading airports to accommodate the blending, storage, distribution, and refueling of SAFs. In the short term, mobile blending equipment can provide a flexible solution to integrate SAFs into existing systems while permanent infrastructure is developed. However, as Canada transitions to a dual-fuel system—where both SAFs and traditional jet fuel are in use—airports will need to manage multiple infrastructure requirements to ensure seamless operations. Synthetic kerosene offers a significant advantage in this regard, as it requires minimal retrofits to airport infrastructure due to its compatibility with existing fossil kerosene systems²⁸. In contrast, the maritime sector presents more complex challenges, requiring substantial investments in new infrastructure to support the adoption of low-carbon fuels like methanol and ammonia. Key investments include the development of bunkering facilities for these fuels, upgrades to port infrastructure to ensure safe storage and handling, and the establishment of supply chains for green methanol and ammonia production²⁹. As highlighted in the Deloitte Global Report, the development of new fueling infrastructure is necessary, particularly to support ammonia, methanol and hydrogen-powered vessels³⁰.

Key investments for Canada’s aviation and maritime sectors

For Canada to stay competitive in the race to decarbonize, targeted investments in both aviation and maritime infrastructure are critical. Reports such as the Deloitte Global Report and Deloitte Canada’s Reaching Cruising Altitude, highlight the need for collaboration between governments and private sector stakeholders to develop the necessary infrastructure. Canada possesses a strong innovation ecosystem and significant clean energy potential, providing a solid foundation to become a leader in sustainable fuel technologies and infrastructure projects. However, the country faces systemic challenges in attracting the required investments, including regulatory hurdles, fragmented policy support, and intense competition from global markets with more robust clean energy incentives. For example, while Canada benefits from abundant renewable resources and a highly skilled workforce, it often struggles to compete with the aggressive funding mechanisms and tax credits offered by global leaders like the European Union’s Renewable Energy Financing Mechanism. To unlock its full potential, Canada must address these barriers by streamlining regulations, improving policy coherence, and creating more attractive investment frameworks. By taking these steps, the country can better leverage its clean energy advantages and secure the investments needed to accelerate the transition to sustainable fuels³¹.

In the meantime, the federal government has taken proactive steps to support the aviation sector’s transition. In 2021, the Government invested $1.5 billion³²  to support clean fuels, including the Canadian Infrastructure Bank’s involvement in funding research and infrastructure projects³³. More recently, in 2023, the federal government allocated an additional 350 million specifically for the development of low-carbon aviation fuel technologies, signaling its commitment to reducing aviation emissions. These funds will be directed toward key areas such as³⁴:

• Hybrid and alternative propulsion systems;
• Aircraft architecture and systems integration;
• Transition to alternative fuels; and
• Aircraft support infrastructure and operations.

Building on federal efforts, the BC Government has taken significant steps to advance sustainable aviation through a Memorandum of Understanding (MOU) with Vancouver International Airport (YVR). Signed in 2024, this agreement focuses on accelerating sustainable aviation practices, including the development of low-carbon fuel infrastructure and the integration of cleaner technologies. As part of this initiative, BC’s Ministry of Transportation and Infrastructure has invested over $625,000 in infrastructure and efficiency improvements for regional airports, supporting the movement of people and goods while promoting sustainability³⁵.

Furthermore, airport ground operations can reduce aircraft emissions by minimizing the use of fossil fuel-powered auxiliary power units. This can be achieved by providing electric power and pre-conditioned air to aircrafts at the gates, as well as improving efficiencies on the taxiway. Many Canadian airports have already invested in infrastructure that will enable an aircraft to plug-in while at the gate³⁶. On June 29^th, 2022, the Federal Government announced it will invest up to $261 million to improve efficiency and infrastructure at Toronto’s Pearson, Montreal-Trudeau, Vancouver (YVR) and Edmonton (YEG) International Airports³⁷. These investments are already delivering results: YVR is implementing a geoexchange system to provide clean energy for heating and cooling its 4.1 million sq ft terminal, reducing reliance on electricity and fossil fuels³⁸. Meanwhile, YEG is developing the world’s largest airport-based solar farm with Alpin Sun, which will generate 200,000 MWh annually, boosting regional economic and environmental benefits³⁹.

In the maritime sector, the federal government’s Green Shipping Corridor Program⁴⁰ provides critical funding for projects aimed at establishing green shipping corridors and decarbonizing the maritime industry. This program plays a key role in facilitating the development of vessel-compatibility and port infrastructure. On November 12, 2024, the Government of Canada announced an investment of up to $25.2 million for four projects under the Green Shipping Corridor Program, supporting shore-power and alternative fuel solutions within the maritime sector. Specifically, the funding will be directed towards⁴¹:

• update current infrastructure.
• upgrade and construct fueling infrastructure to support greener fuel use; and
• conduct a study to explore the feasibility of establishing a new public port.

Complementing these efforts, BC’s Low Carbon Fuel Standard (LCFS) has been instrumental in driving the adoption of low-carbon fuels in the transportation sector including marine and aviation. By requiring fuel suppliers to reduce the carbon intensity of transportation fuels, the LCFS has incentivized the use of renewable and low-carbon alternatives, such as biodiesel and hydrogen, in marine operations⁴².

Additionally, the Vancouver and Prince Rupert ports are well-positioned to become global leaders in the adoption of alternative marine fuels. For instance, Vancouver, with its commitment to becoming a net-zero port by 2050, has an EcoAction incentive program that recognizes shipping lines making voluntary investments in fuel, technology, or environmental management by offering up to 75% off harbour due rates⁴³. The port authority is also working to facilitate the use of alternative marine fuels, including biofuels, LNG, methanol, ammonia, and hydrogen⁴⁴. Similarly, the Port of Prince Rupert is advancing sustainable practices through initiatives like its Green Wave program, which incentivizes shippers to reduce emissions and adopt sustainable practices. A recent $7.6 million investment in Fairview Shore Power, supported by Canada’s Low Carbon Economy Challenge Fund, allows compatible vessels to switch to clean electricity while berthed, preventing approximately 75 tonnes of GHG emissions per vessel. PRPA is also piloting programs to expand the use of electricity, hydrogen, and renewable diesel as low-carbon energy sources⁴⁵.

Investing in low-carbon pathways and infrastructure presents a significant economic and environmental opportunity for Canada. By leveraging its vast natural resources, fostering innovation in clean technologies, and integrating low-carbon fuels into its transportation systems, Canada can play a pivotal role in achieving its decarbonization goals. Now is the time to act, positioning Canada as a global leader to drive economic growth while meeting our net zero ambition.

This article builds on Deloitte Canada’s broader marketing vision, expanding upon the insights from the global report Low-Carbon Fuels: The Last Mile to Net-Zero and our Canadian-specific work, such as the Reaching Cruising Altitude report. The goal is to provide valuable Canadian context and perspectives, highlighting both the progress made and the work still required at the national level. Deloitte has been actively supporting the Government of Canada’s efforts in decarbonizing the transportation sector, including the SAF Blueprint and the Marine Climate Action Framework.

Acknowledgements
A special thanks to our writers and team Basil Subhani, Arvind Ramakrishnan, Nathan Steeghs, Maya Caron, Ebony Clark, and Karen Hamberg.

Endnotes