Introduction to U.S. Biomass-Based Diesel (BBD) and Policy Implications

U.S. Biomass-Based Diesel (BBD), encompassing both traditional FAME biodiesel and renewable diesel (HVO), is a core biofuel category under the Renewable Fuel Standard (RFS). Its feedstock system relies on oilseeds, animal fats, and waste oils, with domestically produced soybean oil as the primary base, while imported used cooking oil (UCO), animal fats, and Canadian canola oil are key imported categories. This report focuses on U.S. biodiesel feedstocks, analyzing their supply structure, import volumes, and policy changes to better evaluate how biodiesel policy adjustments and industry profit shifts impact U.S. soybean oil consumption.

U.S. Biodiesel Feedstock Basics, Consumption, and Imports from 2020-2024

From 2020 to 2024, as second-generation biodiesel capacity expanded, U.S. biodiesel production capacity grew slowly, from about 2.1 billion gallons in 2012 to a peak of around 2.6 billion gallons in 2019. However, renewable diesel capacity surged from about 280 million gallons in 2017 to around 5 billion gallons by the end of 2025. Several companies have announced plans for new renewable diesel capacity, with production expected to start in the coming years. Driven by strong industry demand, total feedstock input for U.S. BBD soared rapidly, with 2024 input nearly three times that of 2020. The chart below shows that post-2020, all production growth came from renewable diesel (HVO) capacity expansion, while traditional FAME biodiesel production and feedstock use plateaued, with most new feedstock demand consumed by renewable diesel. Due to rapid industry growth, domestic supplies could not meet demand, leading to rising import dependency. UCO import dependency exceeded 90%, animal fat import dependency was 30-40%, and canola oil imports mostly relied on Canada.

Overall U.S. Biodiesel Feedstock Consumption Trends

According to the EIA, U.S. biofuels include fuel ethanol (D6/EV1.0), biodiesel (D4/EV1.5), renewable diesel (D4, D5/EV1.7), renewable heating oil (D5/EV1.6), renewable aviation kerosene, renewable naphtha (D5/EV1.5), renewable gasoline, and biobutanol. The EIA monthly reports feedstock inputs for biofuels, which are categorized into four main groups: agricultural and forestry products, waste oils, fats, and greases, vegetable oils, and recycled materials and waste. Agricultural and forestry feedstocks include corn, grain sorghum, residues, and dedicated energy crops, mainly used for ethanol. Waste oils, fats, and greases include poultry, tallow, white grease, yellow grease, algae oil, and others. Yellow grease is primarily industrial-grade used cooking oil (UCO), while tallow is solid fat from animal tissues. Brown grease typically refers to trap grease. Vegetable oil feedstocks include Canadian canola oil, distillers corn oil, soybean oil, and other vegetable oils. Distillers corn oil is a byproduct of ethanol production, while other oils include palm, sorghum, and small amounts of others. Recycled materials include municipal solid waste, yard and food waste, biogas, and other biofuel feedstocks. BBD feedstocks are mainly waste oils, animal fats, and vegetable oils. In recent years, U.S. soybean oil used for biodiesel increased from 3.8 million metric tons in 2020 to a peak of 6.04 million metric tons in 2024. However, due to unclear tax credit policies and poor biodiesel profits, soybean oil use for biodiesel fell to 4.97 million metric tons in 2025, a decrease of 1.07 million metric tons year-on-year. Other feedstocks like animal fats, UCO, and Canadian canola oil also saw increased use, causing soybean oil's share of BBD feedstocks to drop from 62% in 2020 to 33% in 2025. In 2026, under the 45Z biodiesel tax policy and other U.S.-first priorities, soybean oil's share gradually increased to 44-45% (January-May 2026).

Detailed Breakdown of U.S. Biodiesel Feedstocks

Soybean Oil: As a flagship domestic feedstock, soybean oil is the foundation of traditional biodiesel, relying on the world's largest soybean crushing capacity. It is primarily produced domestically, with a 19.1% import tariff, and is rarely imported for biodiesel production, only for small-scale replenishment during domestic crushing gaps.

Canola Oil: With over 90% imported from Canada, canola oil is a key imported vegetable oil. Its superior low-temperature fluidity compared to soybean oil makes it suitable for blending in cold northern regions, and its lower carbon intensity gives it a competitive advantage in renewable diesel feedstock choice.

Distillers Corn Oil (DCO): A byproduct of corn ethanol plants, DCO is 100% domestically supplied with no import needs. It is a low-cost auxiliary feedstock that helps smooth overall U.S. biodiesel feedstock costs, supported by large-scale corn ethanol production.

Palm Oil: Mainly used in Indonesia and Malaysia, palm oil is only imported in small quantities in the U.S. Due to rainforest carbon emission controversies, the EPA strictly limits RIN issuance for palm oil biodiesel, keeping its overall share below 3% as a minor supplementary feedstock.

Animal Fats/Tallow: Typically a byproduct of beef cattle slaughter, tallow has stable domestic supply. However, with renewable diesel capacity expansion, supply gaps have widened, requiring imports from Australia, Canada, Brazil, and Argentina. Its excellent low-carbon attributes and high LCFS carbon credits make it a core essential feedstock for renewable diesel.

Poultry Fat: A byproduct of white-feathered chicken slaughter, poultry fat is primarily domestically supplied in small volumes, used as a blending auxiliary with negligible imports.

Yellow Grease (Primarily UCO): This includes used cooking oil, trap grease, and acid oil. It has the highest low-carbon attributes in the U.S., with extremely high California LCFS carbon premiums, making it the fastest-growing imported feedstock in the past five years. Waste oil does not incur ILUC penalties, as it does not require land conversion or upstream emissions from crop cultivation. U.S. domestic UCO collection faces challenges of dispersion and high costs, with production capacity unable to keep pace with refinery expansion, leading to heavy reliance on imports, with China being the world's largest UCO exporter to the U.S. Policy carbon credits directly determine feedstock procurement priorities, with the overall feedstock hierarchy being: UCO, tallow (high carbon subsidies) > canola oil > soybean oil (basic staple) > corn oil > minor palm and poultry oil.

Changes in U.S. Biodiesel Feedstock Imports

In recent years, U.S. biodiesel feedstock imports have increased significantly, with Canadian canola oil and UCO showing the most notable growth, followed by tallow. Consequently, UCO, tallow, and canola oil have the highest import dependency, while soybean and corn oil have very low import volumes. In 2024, feedstock import dependency reached 35%, a key reason for the Trump administration's policy prioritizing domestic feedstocks.

Soybean Oil Imports: U.S. soybean oil imports are very low, at about 100,000-200,000 metric tons annually, with exports typically exceeding 1 million tons. The U.S. is mostly a net exporter of soybean oil. In 2025, poor biodiesel profits reduced demand, leading to soybean oil exports at three-year highs. However, with the 2026 RVO implementation, the U.S. has almost no soybean oil exports left.

UCO Imports: From 2022-2023, China was the largest UCO source for the U.S., accounting for over 55% of imports. In 2024, U.S. Customs, EPA, and USDA strengthened import inspections, with reports of random checks on Chinese UCO for origin and composition to detect adulteration with palm oil. In December 2024, China canceled UCO export tax rebates. Under the 2025 U.S.-China trade war, the U.S. imposed reciprocal tariffs and fentanyl tariffs on Chinese UCO, with total import duties peaking at 43%. The current combined rate is 8% (most-favored-nation) + 12.5% (new Section 301 surcharge) = 20.5%. Non-tariff barriers, high tariffs, and lack of tax credits led to a decline in U.S. imports of Chinese UCO in 2025. The 45Z tax credit policy, finalized in 2026, stipulates that from January 2026, all imported UCO is ineligible for 45Z credits, with only North American UCO qualifying for subsidies. Chinese UCO faces a cost disadvantage of about $0.60 per gallon compared to U.S. domestic UCO, leading to continued declines in U.S. imports of Chinese UCO in 2026, which marginally benefits North American biodiesel feedstocks like U.S. soybean oil, Canadian canola oil, and Mexican UCO.

Tallow Imports: The U.S. produces tallow domestically, with imports mainly from Brazil, Canada, and Australia. From July 22, 2026, the U.S. imposed a 25% ad valorem surcharge on Brazilian taxable goods cleared for entry. Brazilian tallow (HS 1502.10.00) is not exempt from Section 301 tariffs, and with an additional forced labor clause surcharge from July 24, total U.S. import duties on Brazilian tallow reach 37.5%. This policy indirectly benefits North American biodiesel feedstocks, including U.S. soybean oil.

Canola Oil Imports: 99% of U.S. canola oil imports come from Canada. In December 2022, the EPA formally included canola oil-based renewable diesel in the RFS compliance list, making Canadian canola oil eligible for U.S. biodiesel feedstock use and RINs. Imports surged thereafter. However, in 2025, due to high ILUC, Canadian canola oil lost 45Z tax credit eligibility, causing a decline in imports. After the U.S. canceled ILUC carbon deductions for canola and soybean oil, Canadian canola oil regained tax credit eligibility in 2026, leading to a recovery in imports. Post-2026, U.S. biodiesel feedstocks will be limited to the U.S.-Mexico-Canada region, increasing demand for Canadian canola oil as a feedstock. This, combined with recent capacity expansion in Canada, may push Canadian canola crushing to record highs in 2026, indirectly increasing Canadian canola meal production and exports, with China being a key importer. It is important to note that actual U.S. canola oil imports far exceed biodiesel use, indicating other industrial demand. The report's estimates for feedstock import/input have been adjusted accordingly.

Current Status of Key U.S. Biodiesel Policies

The rapid growth and structural shifts in U.S. biodiesel feedstock inputs and imports in recent years have been influenced by factors like domestic oil supply bottlenecks, global UCO trade flows, California LCFS premiums, and tax credit policies. However, the core driver of total input changes is the federal RFS mandatory blending policy (RVO).

Tax Credit Policy: The Inflation Reduction Act (IRA 2022) created the Clean Fuel Production Credit (CFPC) under Section 45Z, a landmark tax policy for the U.S. biofuel industry. Originally set to take effect January 1, 2025, it was to replace the decade-old biodiesel blender tax credit (BTC, $1 per gallon). In 2025, the 45Z policy could not be finalized, leading to uncertainty and a significant drop in imports of UCO and Canadian canola oil. However, in July 2025, the Trump administration's "Big Beautiful Bill" underwent major revisions, extending the tax credit period by two years to 2029 (previously ending 2027). From 2026, all feedstocks must originate from the U.S., Canada, or Mexico (USMCA region), with imported UCO and tallow-based biodiesel ineligible for 45Z credits. In February 2026, the Treasury and IRS issued the formal 45Z proposed rule (REG-121244-23), detailing feedstock traceability, sales verification, audit rules, and carbon emission measurement. A hearing was held on May 28, 2026, with only the final rule pending. The table below shows tax credit amounts for different feedstocks in recent years. In 2025, Brazilian tallow and Chinese UCO could still qualify for 45Z credits, but from 2026, only U.S., Canadian, and Mexican feedstocks are eligible, disqualifying Brazilian tallow and Chinese UCO. The IRS released the formal 45Z draft rule in February 2026, which is retrospective, allowing refineries to claim credits for 2025 under interim guidance without retroactive denial.

Supplementary Knowledge: The California Low Carbon Fuel Standard (LCFS) carbon intensity (CI) coefficient, measured in gCO2e/MJ, is assigned by the California Air Resources Board (CARB) for each fuel production pathway (e.g., different feedstocks for biodiesel, soybean oil biodiesel, waste oil biodiesel, ethanol). The LCFS mandates an annual reduction in the diesel baseline CI. The CI factors vary significantly between feedstocks, directly impacting biodiesel profits and consumption. Higher values indicate more LCFS carbon credits generated per unit of biofuel energy. UCO has the highest carbon credit potential among feedstocks. LCFS carbon credits and 45Z tax credits significantly influence biodiesel/ renewable diesel profitability, affecting feedstock preferences.

Imported Fuel RIN Halving (IRR) Policy: To reduce the impact of imported feedstocks, the EPA initially planned to grant imported fuel only half the RINs of domestic fuel. However, industry feedback was polarized, with agriculture and domestic biofuel producers strongly supporting it, while refiners and importers warned of higher gasoline and diesel retail prices, supply chain disruption, and legal loopholes. After considering comments, the EPA decided in the final RVO rule to delay the IRR policy to the 2028 compliance year.

RVO Policy: In August and November 2025, the EPA approved 191 small refinery exemption (SRE) petitions for 2023-2025, totaling 28.9 billion RINs. Exemptions relieved refineries from RIN obligations, but created excess carryover RINs, depressing RIN prices and weakening investment incentives for domestic biofuels. To ensure blending targets, the EPA decided to redistribute 70% of the exempted volume to 2026 and 2027, requiring market participants to use carryover RINs to meet those obligations. The remaining 30% was retained for liquidity to prevent RIN market collapse and maintain compliance for refiners. Specifically, 2026 absorbs all 2023 exemptions plus half of 2024 exemptions; 2027 absorbs the remaining half of 2024 exemptions plus all estimated 2025 exemptions. This redistribution applies only to BBD, advanced, and total renewable fuel categories, excluding cellulosic fuel. After the SRE redistribution plan was finalized, on March 27, 2026, the EPA officially announced the final 2026-2027 RVO rule. Including SRE redistribution, the actual 2026 BBD RVO is 9.07 billion RINs, and 2027 is 9.2 billion RINs, as shown in the chart below.

Potential Impacts of the U.S. RVO Policy

In recent years, actual U.S. BBD production has significantly exceeded RVO volumes, and actual capacity has also exceeded RVO, making the RVO a floor for blending obligations rather than a forward-looking guide. This is a key reason for the substantial increase in 2026-2027 RVO targets. Based on the RVO plan and the nested nature of RFS volume requirements, the EPA estimates 2026-2027 renewable fuel supply as shown in the table below. The EPA also estimates that implementing the RVO will increase U.S. soybean oil prices by 28 cents per pound in 2026 and 35 cents per pound in 2027. According to EPA estimates, 2026 U.S. BBD production will be about 6.074 billion gallons. In 2024, reported BBD production was 4.83 billion gallons, and 2025 domestic consumption corresponded to 3.93 billion gallons. To achieve the 6.074 billion gallon RVO, 2026 compliance BBD production must increase by 45-50% compared to 2025 and 25.8% compared to 2024. Based on the annual feedstock usage chart, if 2026 U.S. BBD production meets EPA's estimated supply, total feedstock input is forecast to increase to 21.7 million metric tons, up 4.45 million from 2024 and about 6.8 million from 2025. If 40% of this is soybean oil, new soybean oil consumption for biodiesel would increase by 2.7 million metric tons year-on-year. Subtracting the 2025 increase in U.S. soybean oil exports, 2026 calendar year U.S. soybean crush is estimated to increase by about 10 million metric tons. Additionally, marginal fluctuations in 2026-2027 U.S. soybean oil biodiesel use or feedstock share will depend on relative profit differences between feedstocks. Currently, renewable diesel profits from U.S. soybean oil remain more favorable compared to other feedstocks.