In recent years, the federal program has created a challenging environment for biodiesel compared to renewable diesel. Initially, the RFS program generated separate markets for biodiesel and renewable diesel. However, these two fuels now compete for limited RFS volumes within the biomass-based diesel category.
The rise of renewable diesel has been primarily driven by policy incentives rather than market demand, leading to renewable diesel production displacing biodiesel production. The two fuels compete for the same feedstocks, but renewable diesel has an advantage because it generates more renewable identification numbers (RINs) than biodiesel.
The Environmental Protection Agency (EPA) assigns equivalence values (EVs) to biofuels to standardize them based on an ethanol gallon equivalent. A higher EV results in a greater RIN generation value per gallon of biofuel. Biodiesel holds an EV of 1.5, while renewable diesel has an EV of 1.7, making RIN generation more appealing for renewable diesel despite the fact that renewable diesel has a higher cost and a greater carbon intensity than biodiesel.
The preferential treatment of renewable diesel has become increasingly evident in recent years. In 2022, renewable diesel consumption in the U.S. surpassed biodiesel for the first time since 2011, and this trend is expected to continue, further displacing biodiesel. Renewable diesel production capacity is approaching that of biodiesel, the difference between the two in 2022 was only 8%, whereas, in 2020, the difference was more than 70% in favor of biodiesel.
Supported by the 2023 , the rivalry between renewable diesel and biodiesel for renewable volume obligations (RVO) will persist for the next three years. If the EPA continues favoring renewable fuel over biodiesel, this could lead to a more pronounced displacement of biodiesel. The expected shift is supported by data from the U.S. Energy Information Administration (EIA) which indicated that , while biodiesel production is likely to decline over the same period.
U.S. biodiesel and renewable diesel production evolution
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Source: SGS INSPIRE analysis of EIA data, 2023
U.S. biodiesel and renewable diesel consumption evolution
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Source: SGS INSPIRE analysis of EIA data, 2023
For more updated information about biofuel production in the U.S., please refer to SGS INSPIRE U.S. and U.S. overview of reports.