The Canadian government ratified the Kyoto Protocol in December 2002. The protocol calls for greenhouse gas emissions to be reduced by 6 percent below the 1990 level (approximately 35 percent below what they are expected to be in a business-as-usual situation) by 2008–2012. To help meet this target, both federal and provincial governments in Canada have developed programs (in some cases mandates) for ethanol and biodiesel production and use in fuel blends. Various subsidy schemes have been designed to stimulate development of a biofuels industry in Canada. While the programs have been promoted on the basis of environmental concerns, a major driver has been the search for new markets for Canadian agricultural commodities that face chronically depressed prices. The purposes of this article are to review the current state of policies, programs and production of ethanol and biodiesel in Canada and to assess the prospect of these biofuels to significantly reduce production of greenhouse gases in Canada.