Canola is a variant of rapeseed (or rape, rapa, Brassica napus in Latin and liftit in modern Hebew) from the Brassicaceae or mustard family. Rapeseed is mainly grown as a source for oil. As the older varieties of rapeseed contain a lot of glucosinolates which have a bitter taste, in the old days the oil was used for lamps or engines, not for human consumption. Though rapeseed oil is still used as non-food (e.g. for biodiesel), the creation of better-tasting varieties in the late 20th century has advanced its use in food. In the US, rapeseed oil is usually sold as "Canola" oil, in Europe often what is sold as "vegetable oil" has rapeseed oil as its main ingredient. Rapeseed oil is used in many products, e.g., margerine or chocolate (see the discussion on cocoa beans). Rapeseeds themselves can be eaten if they are from the newer variants, but it is not common to do so. Rapeseed meal, that is a byproduct of oil production, is used as animal feed.
There are some reasons why rapeseed should be considered kitniot. The plant is from the same family as mustard, and mustard is considered kitniot. It is a seed that is eaten which is the definition of Kitniot in Hilchot Kilayim 1:8, although rapeseed is not explicitly listed there AFAIK. Rapeseeds are commonly contaminated with wheat kernels (Chabad: Know Thy Beans). On the other hand, while rapeseed was around in the time of the original degree, it was not fit for eating at that time (Kitniot: A balanced approach).
When we only look at the oil produced from rapeseed, Canola oil, it may be permitted according to the double-doubt reasoning – we are not sure if the seed the oil is made of is actually kitniot, and it is a liquid and liquids cannot be confused with chametz (see my comments about oil in the posts on soy, peanuts, and sunflowers).
You can find all statments on the status of Canola oil in the internet. Those that permit it without problems (Peninei Halachah, Yeshiva.org.il), those who state there is a doubt (R. Kaganoff). And those who consider it kitniot or prefer to err on the side of caution (OU, Star-k, cRc Guide, Kashrut.com, Chabad). If you are looking for more authorative sources than internet pages try the responsa of Avnei Nezer (373 and 533) and Maharsham (I:183) [both relatively late, 19. century].
- Danger of chametz traces: Yes.
- Danger of confusion with chametz (raw): No, also not eaten.
- Danger of confusion with chametz (processed): No, only used as oil.
- Botanical categorization: Brassicaceae, mustard family.
- Known in 13th century: Yes, but inedible then.
- Verdict: Not kitniot