Joint Audit and Evaluation Summary of the Clean Fuels Fund Program

Audit and Evaluation Branch
Natural Resources Canada and Statistics Canada

April 16, 2026

On this page

Program description
Engagement findings
Recommendations and management response and action plan
About the engagement

Program description

Announced in 2020, the Clean Fuels Fund Program (CFFP) aimed to drive investment and growth in Canada’s clean fuel sector by increasing incentives for the development and adoption of clean fuels and technologies and processes. Budget 2021 provided $1.5 billion in program funding to increase the production and use of low-carbon fuels (e.g., hydrogen, biocrude, renewable natural gas (RNG) and diesel, cellulosic ethanol).

To address barriers in relation to the growth of Canadian clean fuel production and supply chains, funding under CFFP 1.0 was administered through three streams:

  • Clean fuel production capacity: to de-risk capital costs in new or expanded equipment or facilities and provide support for feasibility and front- end engineering and design studies for eligible low-carbon fuels.
  • Biomass supply chain infrastructure: to support domestic infrastructure projects for the collection, supply and distribution of biomass materials to be used in clean fuel production facilities.
  • Indigenous-led stream: To be eligible for funding under this Stream, organizations needed to demonstrate a minimum of 50% Indigenous ownership of the proposed project, lower production and carbon intensity thresholds.

CFFP funds were also allocated towards the Clean Fuel Codes and Standards Program ongoing development and alignment of codes and standards related to the production, distribution, and use of hydrogen and other alternative fuels.

Budget 2024 announced the retooling of the program (CFFP 2.0) and its extension to March 31, 2030.

Engagement findings

Overall, the joint engagement found that the CFFP is relevant and has made progress towards its immediate outcomes from fiscal years 2021-22 to 2024-25. Areas for improvement were identified and additional details regarding these findings are outlined below.

Relevance: The evaluation found that the CFFP is well aligned with NRCan and Government of Canada objectives and priorities and complements similar federal, provincial and territorial initiatives that support low-carbon fuels. There remains a clear need to increase production capacity for low-carbon fuels in Canada and to advance the development of codes and standards, particularly for emerging fuels such as hydrogen.

Effectiveness: Oversight and administrative processes are generally in place to support the operations of the CFFP; however, improvements are required for monitoring and reporting on service standards, tracking of consolidated financial information, structured eporting on contribution agreements along with a formal risk-based recipient audit plan.

The CFFP has made progress towards most of its immediate outcomes since its launch.

  • Achieved 86% of its targets for new biomass hubsand the diversification of clean fuels feedstocks;

  • On track to exceed its target to support new/expanded production facilities for non-hydrogen low-carbon fuels;

However, the CFFP is not expected to achieve its targets for liquid fuels production or new or expanded hydrogen production and facilities.

Efficiency: Between 2021 and 2025, the program spent 21% of its initial allocation of $1.1 billion. Underspending led to significant lapses of CFFP funds, with the program lapsing 42% of its initial funding allocation.The program also underspent in salary and O&M budgets, using 56% of its budget. The program took action to mitigate lapses.

Factors limiting progress: 

  • Changing policy, economic and market conditions during the CFFP’s implementation led to significant challenges, influencing uptake, project timelines, costs, and overall viability.
  • Maximum project funding levels were viewed as insufficient to supporting the needs of large-scale facilities.
  • The program’s commissioning date requirement was viewed as not providing enough flexibility to accommodate timelines of large production projects
  • Broad fuels eligibility criteria may have limited the CFFP’s ability to direct limited program resources towards hydrogen and liquid fuels projects, in line with its performance measurement framework.
  • Internal challenges, such as staffing constraints while working within compressed timelines to design and launch the CFFP. 
  • An unexpected surge in applications during the initial launch led to additional operational pressures, contributing to delays in application review and approvals. 

Lessons learned: The redesign of CFFP (CFFP 2.0) positions the program to address some of the key challenges identified by the joint audit and evaluation.

Recommendations and management response and action plan
Recommendation Management response and action plan
1. The Assisant Deputy Minister (ADM) of Fuels Sector (FS) should enhance communication and operational practices to support consistent and timely program administration by:
  1. Aligning program service standards with NRCan’s Transfer Payment Standard Operating Procedures; and,
  2. Systematically monitoring, reporting, and improving adherence to all established service standards using accurate performance metrics.
Management agrees.

The program is working on ensuring alignment with department service standards. Tracking is occurring through work planning tools, such as Salesforce, AMI (to ensure accurate payment information is captured), M365 Planner, and recorded in the program’s implementation tracker.
  • All program service standards will be aligned with department standards and updated in the program’s procedure manual.
  • All services standards will be tracked and reported as required.
Position responsible: Deputy Director, Clean Fuels Decarbonization Division (CFDD)
Date to achieve: May 1, 2026
2. The ADM of FS should enhance program governance by formalizing and documenting the process for selecting committee members, including obtaining, documenting, and retaining conflict-of-interest declarations for all individuals involved in the assessment of proposals. This process should be applied to any future assessments or program iterations. Management agrees.

The program has updated the Terms of Reference for the evaluation and investment committees, adding that all members will complete conflict-of-interest declarations prior to joining. In addition, the Terms of Reference will be updated to document the process for selecting committee members.

Position responsible: Deputy Director, CFDD
Date to achieve: October 31, 2026
3. The ADM of FS should enhance program monitoring by:
  1. Ensuring tracking tools are comprehensive and provide consolidated program-level and project-level information on contribution agreements and expenditures across all program streams.
  2. Developing, formally approving, and implementing a risk-based recipient audit plan to monitor compliance with the terms and conditions of contribution agreements and support informed decision-making.
 Management agrees.

The program tracks all project and program level information using a combination of an implementation tracker (Excel), AMI, and Salesforce. These tools track project and program level information (including, for example expenditures, agreement status, and budget commitments), across all program streams.
  1. Using the comprehensive trackers, mentioned above, the program has developed a dashboard to facilitate tracking. The first version of this dashboard will be completed by May 1, 2026, and be updated on a quarterly basis going forward and presented to the ADM Fuel Sector.
  2. The program has a draft risk-based audit plan which has been used to identify projects requiring audit. This plan will be formally approved prior to May 1, 2026, and reviewed periodically. Implementation will be ongoing until the end of the program with the first audits occurring in 2026/27.
Position responsible: Deputy Director, CFDD
Date to achieve: May 1, 2026
4. The ADM of FS should revise the CFFP’s performance measurement framework. The revisions should:
  1. Update the key performance indicators relevant to the outcomes of the CFFP. This could include revising or retiring metrics to communicate more focused results information.
  2. Establish baselines for intermediate and ultimate outcomes.
  3. If related metrics are retained, develop tools to better facilitate data collection for GBA+/demographic information from proponents.
 Management agrees.
  • The program is performing a review of performance indicators to determine whether some should be revised. Following initial review, a workplan for revision will be complete by mid-May 2026.
  • Baseline information (values and methodology) for those indicators and outcomes not flagged for revision will be completed by the end of 3rd quarter, 2026. Baseline information for revised outcomes and indicators will be completed by March 31, 2027
  • As indicated, if retained, data collection methodology and tools will be developed by March 31, 2027.
Position responsible: Deputy Director, CFDD
Date to achieve: March 31, 2027

About the engagement

The engagement covered the period from FY 2021-22 to FY 2024-25.

CFFP underwent a redesign as part ofB2024 which was informed by lessons learned from the program’s initial implementation, extending it to 2030 -though it is too early to assess the impact of these changes.

 Conducted 43 interviews with project proponents, stakeholders, and staff

 Reviewed >200 internal reports and documents

 Compared CFFP with >30 similar domestic and international initiatives

 
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