In addition to gasoline, the program will require diesel fuel and heating oil to have an average of 2 percent renewable content by 2012. To meet those requirements, it's estimated Canada will need 792 million gallons of renewable fuel a year. Canadian production is currently about 211 million gallons per year.

Producers of ethanol and other renewable biofuels will be eligible for incentives of up to 10 cents per liter of production; biodiesel producers can receive incentives of up to 20 cents per liter for the first three years.

"We owe it to future generations to take action on climate change," said Gary Lunn, Canada's minister of natural resources. "The ecoENERGY for Biofuels initiative shows our commitment to taking real action towards a healthier environment and a stronger economy for all Canadians."

The biofuel production incentive program runs from April 1, 2008, to March 31, 2017, and will be administered by Natural Resources Canada.