Let’s Repeal Quebec’s Policy on Gas from Renewable Sources

Economic Note showing that despite the government’s intervention, consumers are uninterested in this resource, which is particularly expensive compared to conventional natural gas

Annex

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This Economic Note was prepared by Gabriel Giguère, Senior Policy Analyst at the MEI. The MEI’s Energy Series aims to examine the economic impact of the development of various energy sources and to challenge the myths and unrealistic proposals related to this important field of activity.

Several years ago, the Quebec government decided to promote the growing integration of gas from renewable sources in Quebec’s energy basket.(1) This type of gas includes gas produced from organic material or renewable energy sources. This approach has led to the adoption of a regulatory framework and the granting of subsidies for this type of energy.(2) Despite this government intervention, consumers are uninterested, notably because this resource is particularly expensive compared to conventional natural gas.(3) This costly approach thus artificially creates a supply of a resource with very little demand.

Artificial Promotion

The integration of this resource in the Quebec government’s energy plans culminated in the imposition of a regulatory obligation by the Coalition Avenir Québec government in 2019.(4) This regulatory framework sets a minimum annual target of gas from renewable sources distributed in Quebec, expressed as a proportion of the average quantity of natural gas delivered in the three years preceding the rate year(5):
2020: 1%
2023: 2%
2025: 5%
2028: 7%
2032: 10%

This represents very high targets, given that consumption of gas from renewable sources represented just 0.5% of total natural gas consumption in 2024-2025.(6)

These annual regulatory targets exert pressure on natural gas distributors in Quebec, namely Enbridge Gaz Québec, and especially Énergir, which represented 97% of distribution in 2025.(7)

Consumption of gas from renewable sources represented just 0.5% of total natural gas consumption in 2024-2025.

To this regulatory rigidity in terms of supply is added the government’s intention to develop the production sector by integrating it into the Plan for a Green Economy and its related subsidies. For several years now, the government has thus devoted tens of millions of dollars a year to financing very costly gas from renewable sources projects.(8)

Too High a Price

Gas from renewable sources is significantly more expensive than conventional natural gas. For the year 2025-2026, it cost 94.88 cents per m3, compared to 27.81 cents per m3 for conventional natural gas(9) (see Figure 1). It was therefore 3.4 times more expensive, taking into account the effect of Quebec’s emissions cap-and trade system. Faced with such a large discrepancy, it is natural for consumers to opt for the less expensive resource.

Moreover, once produced, this gas offers no practical advantage over conventional natural gas. Indeed, once injected into a gas pipeline network, it is indistinguishable from conventional gas and is delivered mixed with it to consumers.(10)

The Quebec government is trying to ignore price signals by imposing minimum supply targets. This regulatory framework also distorts these signals, as it puts upward pressure on the price of conventional gas. Indeed, the province’s cap-and-trade system adds an extra cost for clients of conventional gas, artificially reducing its affordability. This additional cost is nearly 9 cents per m3, around a third of the total price of conventional natural gas in 2025-2026. Without this system, natural gas would cost around 19 cents per m3, one-fifth the price of gas from renewable sources.(11)

Using only gas from renewable sources would increase energy costs for an elementary school by $34,251 a year.

For purposes of illustration, using only gas from renewable sources would increase energy costs for an elementary school by $34,251 a year. For a hospital, Énergir indicates that the extra cost could total nearly $150,000 a year.(12)

The distributor projects an increase in the supply costs of gas from renewable sources per m3 in the coming years.(13) This will automatically entail upward pressure on the sale price of this resource, such that the price gap with conventional gas will likely get wider.(14)

Mandatory Quotas without Real Demand

There is a significant mismatch between the regulatory targets and consumers’ demand for gas from renewable sources. In 2024-2025, only one-quarter of the volume required to hit the target was purchased “voluntarily,” the balance being a socialized cost paid by all clients(15) (see section below). According to Énergir’s projections, this mismatch should persist, as demand will remain very low over the next few years.(16)

Indeed, while Énergir clients’ voluntary consumption remains very low and is expected to stagnate over the next two years at a level below 20 million m3, the regulatory obligation to distribute gas from renewable sources is at much higher levels. Concretely, the government has set targets that are over 6.5 times higher than Énergir’s projections of its clientele’s voluntary consumption(17) (see Figure 2).

The gap between the regulatory target and voluntary demand is growing. Notably, in 2028-2029, the regulatory obligation increases to 7%, and the gap rises to around 350 million m3 for that year and the next, an increase of over 25% over the previous two years.(18) This increased gap would be even more dramatic without the expected increase in voluntary consumption due to a single industrial client’s supply.(19) Other than this single purchaser, there is no increase in demand from Énergir’s clients.

Moreover, if the gap is expected to shrink slightly between 2026-2027 and 2027-2028, it is almost solely due to the City of Montreal municipal regulation that requires new buildings beyond a certain size to use gas from renewable sources.(20) Owners of these buildings are thus not allowed to purchase conventional natural gas from Énergir.

The government has set targets that are over 6.5 times higher than Énergir’s projections of its clientele’s voluntary consumption.

Without this municipal requirement, the consumption of this resource would increase just 1.1% between 2026-2027 and 2027-2028. This shows how weak the increase in demand is for this period.(21)

In parallel, the provincial energy regulator, the Régie de l’énergie, had approved back in January 2024 an obligation for all new buildings to purchase only gas from renewable sources.(22) This decision was reversed by the regulator in February 2025, however, which allowed new consumers to choose their contract and corresponding price for the type of gas they prefer.

Recall also that in November 2024, the Quebec government, through Environment Minister Benoît Charette, indicated its intention (reiterated in April 2026) to increase the share of gas from renewable sources in the building sector’s gas consumption to 100%.(23) This would make the current regulation harsher, increasing costs for consumers all while remaining completely disconnected from their actual demand.

The Cost of Socialization

This low demand has a direct impact on consumers’ natural gas bills in Quebec. In order to address the situation, Énergir distributes the cost among its entire clientele, in particular those whose contracts include little or no gas from renewable sources. Concretely, these clients who did not choose to purchase it and pay its higher rate will have to absorb the socialized cost of the unmet target.

Given the substantial gap between the cost of conventional natural gas and gas from renewable sources, the socialization cost imposed on clients who don’t want it could be very high, approaching $200 million in 2026-2027 and 2027-2028.(24) They will exceed $300 million for the two subsequent years, topping one billion dollars over the four-year period.

The socialization cost imposed on clients who don’t want it could be very high, topping one billion dollars over the four-year period.

These ever-rising costs result not only from the lack of demand growth among Énergir clients, but also from transferring the financial consequences of the Quebec regulation on the distributor’s entire clientele.

Conclusion

The Quebec government’s attempt to compel consumers to use gas from renewable sources is a costly failure. Faced with very high prices and an almost non-existent demand, the government must stop imposing upon Énergir the obligation of gradually increasing the quantity of this gas in its distribution network. To do so, the Regulation respecting the quantity of gas from renewable sources to be delivered by a distributor should be abolished, and the goal of supplying 100% of the needs of the building sector abandoned. Finally, the socialization of the costs should stop, as it artificially increases the price of conventional gas, the resource Quebec consumers actually want.