Environment Minister Rona Ambrose has announced a $345 million funding and regulatory package to promote renewable fuels such as biodiesel and ethanol as part of the clean air plan.

Ambrose unveiled plans to require that diesel fuel and heating oil contain 2 per cent renewable biodiesel content by 2012, and that gasoline and diesel fuel contain five per cent renewable content by 2010.

The move is part of the government's bid to improve its environmental image.

She made the announcement alongside Agriculture Minister Chuck Strahl in Saskatoon, saying the plan would result in a major reduction in Canada's greenhouse gas emissions.

"The regulations that I'm announcing today will have a real impact, reducing greenhouse gas emissions by an estimated four megatons annually. Translate that into something we can all relate to and it's like we're moving the equivalent of almost one million vehicles off the roads every year," she said.

Strahl announced funding commitments of $345 million designed to promote bioproducts research and development. He said the government's focus on biofuels will create new economic opportunities for farmers.

He said $200 million would go towards a program under which farmers can obtain part ownership in biodiesel plants expected to sprout in coming years.

However, details were sketchy about how the plan will unfold.

He also announced $145 million over five years towards an agricultural bioproducts innovations program to help farmers move into the future.

Biofuels are a renewable energy source produced from organic materials such as canola, wheat and soy.

Ambrose stressed the renewable fuel legislation will only move forward if the opposition parties support the government's unpopular Clean Air Act.

Barb Isman, president of the Canola Council of Canada, told The Canadian Press the new measures are welcome but will not kickstart the renewables industry unless there are tax changes in the next federal budget to make Canadian farmers competitive with those in the United States and Europe.

CTV's Roger Smith said the announcement could be Ambrose's last as environment minister. Speculation is  that she will be moved from her post in a possible cabinet shuffle in January.

With files from The Canadian Press