Quick Facts

  • In 2011, approximately 967 million gallons of biodiesel were produced in the United States, compared to 10 million gallons only 10 years earlier.[1]
  • As of 2011, 158 biodiesel plants were operating in 42 states,[2] with total production 100 times the 2001 level.[3] Production in 2011 rebounded to 967 million gallons with the reinstatement of the biodiesel tax credit, after dropping to 343 million gallons in 2010.[4]
  • U.S. biodiesel is projected to increase in supply, from 0.6 million barrels per day (mmb/d) in 2011 to 0.8 mmb/d by 2020.[5]
  • The EPA recently announced that the 2013 Renewable Fuel Standard mandate for biodiesel would increase to 1.28 billion gallons from 1 billion gallons in 2012.[6]


Biodiesel is a nonpetroleum-based diesel fuel composed of fatty acid methyl ester molecules[7] derived from vegetable oils, animal fats, or recycled greases. It is similar to conventional petroleum-based diesel fuel and can be used in compression-ignition (diesel) engines with little to no modification. Biodiesel also has some favorable properties compared to conventional diesel (e.g., no sulfur content, lower particulate matter, and lower lifecycle greenhouse gas emissions).

Since commercial biodiesel use began in 2001, production and consumption have expanded considerably (see Figure 1). After showing steady annual increases, production and consumption fell from 2008 to 2010, partly because the biodiesel tax credit, providing a $1.00 per blended gallon incentive, expired at the end of 2009. However, production recovered strongly in 2011 after the biodiesel tax credit was reinstated at the end of 2010.[8] Additionally, demand for biodiesel is increasing as blenders need to reach new mandates under the Renewable Fuel Standard (RFS) (for more, see C2ES Renewable Fuels Standard (RFS2))[9] Over 900 million gallons were produced and nearly that much consumed in 2011 (see Table 1).

Figure 1 United States Annual Biodiesel Production and Consumption, 2001 - 2011

Source: Energy Information Agency (2012),

Table 1. Biodiesel Summary, million gallons, 2009 – 2011
















Gross Imports





Gross Exports







Biodiesel production involves the extraction and esterification[10] of oils or fats using alcohols. Compared to the production of other biofuels, the technology used to produce biodiesel is relatively simple and well developed.

  • Biodiesel feedstocks

The feedstocks used in biodiesel production vary by region. The most common feedstocks by region are: soybean oil in the United States; rapeseed (canola) and sunflower oil in Europe; and palm oil in Indonesia and Malaysia. Biodiesel can also be produced from numerous other feedstocks, including vegetable oils, tallow and animal fats, used fryer oil (also called yellow grease), and trap grease (also called brown grease, from restaurant grease traps). The relatively low price of soybean oil in the U.S. makes it the most common feedstock, accounting for approximately 57 percent of U.S. biodiesel production.[11] The chemical properties of the biodiesel (cloud point, pour point, and cetane number) depend on the type of feedstock used (see endnote for further explanation). Following soybean oil, the next three most common biodiesel feedstocks are corn oil, yellow grease, and brown grease.[13]

  • Production pathways

To produce biodiesel, the feedstock is chemically treated in a process called transesterification, in which the oils or fats are combined with an alcohol (usually methanol) and a catalyst to produce fatty acid methyl esters (the chemical name for biodiesel molecules). The major byproduct of the reaction, crude glycerin, is usually sold to the pharmaceutical, food, and cosmetics industries.

Figure 2. Biodiesel Production Pathways

Source: U.S. Department of Energy, Energy Efficiency and Renewable Energy. 2009. “Biodiesel Production.”

Cetane number is the combustion quality of the fuel during compressed ignition. Biodiesel has about 93 percent of the energy content of petroleum diesel, on a per gallon basis, and a cetane number between 50 and 60. For comparison, petroleum diesel sold in the United States has a cetane number between 38 and 42. The chemical composition of biodiesel, especially its higher cetane number, translates to better engine performance and lubrication. However, its lower energy density results in a decrease in fuel economy (2-8 percent).[14]

Since biodiesel’s combustion properties are similar to those of petroleum-based diesel fuel, biodiesel can be legally blended with conventional diesel in any fraction, unlike raw oils not registered with the EPA.[15] As opposed to the use of ethanol, the use of biodiesel does not require many significant modifications to the fuel system. Individual engine manufacturers determine which blends can be used in their engines. The most common blend of biodiesel in the United States is 20 percent biodiesel, 80 percent petroleum diesel (B20). Some newer vehicles are also capable of using pure biodiesel, B100.[16]

Biodiesel is also commonly used as a fuel additive (in lower level blends of 2 to 5 percent) to reduce emissions of particulates, carbon monoxide, hydrocarbons, and other air pollutants from diesel-powered vehicles. For example, low-sulfur diesel fuel currently used in the United States is lower in lubricity—the characteristic of diesel fuel necessary to keep diesel fuel injection systems properly lubricated—than higher- sulfur diesel fuels. Since biodiesel has no sulfur content and high lubricity, it can be blended with low-sulfur diesel to improve lubricity without increasing sulfur emissions.

One of the disadvantages of biodiesel is that it can gel or freeze, possibly causing engines to stall in cold winter temperatures. For example, 100 percent soy biodiesel can begin to form ice crystals at 32ºF (0ºC), whereas petroleum diesel generally forms ice crystals at about 10º or 20ºF (-12º to -5ºC). Proper blending with petroleum diesel and other fuel additives can counteract this problem; B20 blended with specially formulated cold weather petroleum diesel forms ice crystals at -4ºF (-20ºC).[17]

Environmental Benefit / Emission Reduction Potential

By replacing conventional diesel fuel, the use of biodiesel can lower greenhouse gas emissions from the transportation sector. The potential greenhouse gas reductions from switching to biodiesel from petroleum-based diesel depend largely on the type of feedstock used to produce the fuel.

Depending on the feedstock used, one gallon of biodiesel can reduce greenhouse gas emissions by 12 to over 80 percent when compared to a gallon of conventional diesel, on a lifecycle basis. The California Air Resources Board (CARB), as part of its analyses in support of California’s Low Carbon Fuel Standard, calculated that when soybean oil is used as a feedstock, the average reduction in direct lifecycle emissions per gallon is about 78 percent.[18] This reduction only considers the direct lifecycle impacts of biodiesel production, processing, and combustion, and does not include any potential impacts of indirect land use change (see Obstacles to Further Development or Deployment of Biodiesel). According to CARB, when the indirect land impacts are included, soybean-based biodiesel would reduce greenhouse gas emissions by only about 15 percent compared to petroleum-based diesel.[19]

Using animal fats and recycled greases instead of agricultural crops can result in greater greenhouse gas reductions since energy inputs (e.g., fertilizers and farming equipment) are not directly needed to grow the feedstocks. These feedstocks also have the added benefit of recycling waste products, although the overall availability of these waste feedstocks is limited.


The cost of producing biodiesel depends on a number of factors, including the following:

  • the feedstock used in the process;
  • the capital and operating costs of the production plant;
  • the current value and sale of byproducts, which can offset the per-gallon cost of production; and
  • the yield and quality of the fuel and byproducts.

The overall cost of biodiesel production depends mainly on the feedstock used and its price.[20] The prices of most feedstocks are subject to market fluctuations, which can also make biodiesel production costs vary over time. The price of conventional diesel provides the baseline against which to compare the cost of biodiesel production and determines the economic viability of large-scale biodiesel production.

Biodiesel production costs from waste feedstocks (e.g., yellow or brown grease) depend on the source and procurement method. For example, in some areas, providers of these feedstocks pay biodiesel processors to collect waste materials; in other cases, biodiesel producers have to purchase them directly from these providers. In either case, biodiesel produced from waste feedstocks is cheaper, although the overall supply of these feedstocks is limited.[21]

Soybean oil provides approximately 60 percent of the U.S. biodiesel feedstock, with 7.6 pounds of soybean oil required for each gallon of biodiesel.[22] With consistent low pricing in 2011 (around $0.50 per pound of soybean oil), the market was favorable for increased biodiesel production.[23] Biodiesel costs more than petroleum diesel, but in 2011, the price of biodiesel was competitive, averaging $3.91 per gallon for B20 blend and $4.18 for B99-B100 compared with $3.81 per gallon of petroleum-based diesel (see Figure 3).[24]

Renewable Identification Numbers (RINs) have become increasingly important in overall biodiesel costs. RINs are a traceable serial number attached to a batch of renewable fuel produced, as required by the EPA as part of the RFS. In 2011, biodiesel RINs averaged $0.75 per gallon. Because of the higher ethanol equivalence in biodiesel, one gallon of biodiesel generates 1.5 RINs, earning blenders $1.13 per gallon of biodiesel. These RIN values, coupled with the Biodiesel Tax Credit, encouraged increased biodiesel production at the close of 2011 and throughout 2012.[25]

Figure 3. Cost per Gasoline-Gallon Equivalent (GGE) of Biodiesel (B99/B100), Biodiesel (B20), and Diesel (2000 - 2012)

Source: Department of Energy, Alternative Fuel Data Center,

Current Status of Biodiesel

Using vegetable oil for fuel has been around since the invention of the diesel engine itself. The first diesel engine, invented by Rudolf Diesel in 1898, ran on a “biofuel”—peanut oil—although this was not the same as biodiesel used today since it was not transesterified. Although this engine type was later modified to run on petroleum-based fuels, the development of biodiesel continued throughout the 20th century. Unlike other biofuels, biodiesel can be produced using relatively little equipment; in fact, instructions and materials for “home brewing” biodiesel are readily available via the Internet.[26]

Globally, biodiesel production has increased from 71.3 thousand barrels per day in 2005 to over 400 thousand barrels per day in 2012 (see Figure 4).[27] Between 2005 and 2012, production more than doubled in Europe.[28] In 2011, the European Union still accounted for a plurality of the world’s biodiesel production, at roughly 44 percent, down from 55 percent in 2009. The United States produced about 16 percent of the world total in 2011, up from 10 percent in 2009.[29]

In the United States, the Energy Independence and Security Act (EISA) of 2007 mandated one billion gallons of biodiesel use annually by 2012. EPA extended that mandate to 1.28 billion gallons for 2013 (see C2ES Renewable Fuels Standard (RFS2)). By the end of 2011, an estimated 7.1 percent of total U.S. soy crops (5.45 million acres) were used for biodiesel. Preliminary figures for 2012 show these figures jumping to 13.6 percent of total U.S. soy crop (10.02 million acres) as soybean oil use increases to fulfill an estimated 66 percent of the 2012 biodiesel mandate in the RFS2.[30] Projections for 2013 and 2014 show these figures leveling off at around 14.5 percent of the total soybean crops.[31]

Figure 4. Biodiesel Production (Thousand Barrels Per Day), 2005 - 2011

Source: EIA, (2012)

In the United States, between October 2010 and September 2011, 4.2 billion pounds (14 percent) of domestic soybean oil was used to produce biodiesel – up from 1.1 billion pounds of soybean oil in 2010.[32]  This figure is expected to increase to 5.2 billion pounds of soybean oil in 2012, or about 27 percent of total domestic soybean oil production.[33] Additionally, 2.5 billion pounds of animal fat was used for biodiesel in 2010, increasing to 7.3 billion pounds in 2011.[34] As of 2011, a total of 158 biodiesel plants were operating in 42 states,[35] with a total annual production capacity of 2.7 billion gallons.[36]

Increased consumption of soy-based biodiesel can result in increased prices for that feedstock. Improving biofuel conversion efficiency, feedstock yields, and technologies to advance other feedstocks can lessen the pressure on a single feedstock.[37] Significant research efforts are underway to develop new feedstocks like jatropha, algae, and camelina, many of which could contribute to the biodiesel supply over the longer term. Researchers are also studying synthetic biofuel production that generates a diesel-type fuel through biomass gasification and catalytic conversion using the Fischer-Tropsch process (biomass-to-liquid, or BtL).[38] Fischer-Tropsch diesel has better cold weather performance compared to current biodiesel and could be substituted more easily and directly for petroleum-based diesel.

Finally, efforts are also underway to make renewable jet fuel. Typical biodiesel cannot be commingled with jet fuel in any product pipelines in any quantity. Instead, researchers are treating oil  from renewable sources with hydrogen to produce a drop-in biofuel, called hydrotreating, which allows it to be used alongside traditional jet fuel, without adverse effects on existing infrastructure and equipment.

Obstacles to Further Development or Deployment of Biodiesel

  • Economic issues

The growth of the biodiesel industry has been significant in recent years, but it is not expected to continue growing at the same pace given challenging economic conditions and the leveling off of government requirements after 2012, though EPA increased the 2013 requirements above the mandated level for that year.[39] If the price of petroleum-based diesel drops and the relative costs of biodiesel increase, possibly by allowing policies promoting biodiesel to expire, the incentive to produce the fuel will be reduced. In the United States, biodiesel production dropped in 2009 (to 516 million barrels) and again in 2010 (343 million barrels), while global production from 2009 to 2010 showed the smallest increase (9 percent) since data gathering began.[40] Though the market rebounded strongly in 2011, uncertainties of long-term market conditions remain because of price fluctuations and the unclear future of tax incentives.

  • Land use change

As with other biofuels produced from agricultural feedstocks, the production of biodiesel has direct and indirect impacts on land use. The clearing of grassland or forests to plant biofuel crops is a direct land use change that can affect the greenhouse gas emissions due to the loss of a carbon sink. The practice of clearing peatland in Malaysia and Indonesia to produce palm oil for biodiesel has raised particular concerns about land and net greenhouse gas impacts of biodiesel.[41]

Indirect land use change occurs when increased demand for a crop for fuel production leads to increased prices for the crop. This in turn results in food and fuel crops being planted in additional locations, increasing the land use emissions associated with crop production. Although it is important to include emissions across the complete lifecycle of fuel production and use when examining potential greenhouse gas reductions from biodiesel use, accounting for land use changes is particularly challenging and uncertain, and it requires a number of estimates and assumptions.

  • Impact on agricultural commodities and environmental resources

Like corn ethanol, biodiesel produced from soy, palm, rapeseed, or sunflower oil competes with other uses for those products, including food, feed, and timber. In addition to impacts on land use and agricultural prices, biofuel production can also affect water supply; habitat and ecosystems; and soil, air, and water quality.

  • Infrastructure Limitations

Today, most biodiesel is transported by rail because rural production sites are typically far from biodiesel consumers.[42] Even where pipeline infrastructure exists, biodiesel is often prohibited because of its solvent properties and related concerns about equipment damage. There are some exceptions where low-level blends (B5 and lower) of biodiesel are able to use existing infrastructure, such as in the Colonial Pipeline, which allows for low percent blends on its Georgia pipeline, or Kinder Morgan’s Plantation System, which allows low blends from Mississippi to Virginia.[43]

In contrast to existing infrastructure issues, existing retail infrastructure is relatively adaptive to distributing biodiesel because of the ability to more easily update and install retail infrastructure. Low percent blends of biodiesel can be sold at any pump while higher blends (above B20) require a new or upgraded pump. B20 stations increased over 11 percent between January 2011 (637 stations) and January 2012 (710 stations).[44]

Policy Options to Help Promote Biodiesel

Federal, state, county, and local governments currently support biofuels in a variety of ways. Similar to policies to promote corn ethanol, government support includes: (1) mandates on the minimum levels of biodiesel consumption, and (2) subsidies or tax credits for biodiesel production and/or use.

  • Mandates requiring biofuel use

Under authority given to it by the EISA of 2007, the EPA mandates annual renewable fuel volumes for sales of cellulosic, biodiesel, advanced biofuel, and total renewable fuels from 2008 to 2022. The EPA’s current policy is called the Renewable Fuels Standard (RFS2) (see Table 2 for the requirements over time). In order to qualify under the RFS2, biomass-based diesel fuels must meet a 50 percent reduction (below traditional diesel fuels) in lifecycle greenhouse gas emissions. The RFS2 made important changes from the RFS1 (mandated under the Energy Policy Act of 2005); including the extension to 2022 of renewable fuel mandates and the inclusion of biodiesel in addition to gasoline replacements.

Table 2. RFS Ethanol Equivalent Volume Requirements, 2011 – 2013 (billion gallons unless noted)

Fuel Type



2013 (proposed)

Cellulosic biofuel

6.6 million

10.45 million

14 million





Advanced biofuel




Total renewable fuel (Including ethanol)




Note: Volumes are ethanol-equivalent, except for biodiesel that is actual volume,

Source: EPA (2013)

  • Subsidies and tax credits

Currently, suppliers of biodiesel can claim a $1 per gallon tax credit. The tax credit has been in place since 2005, though it has lapsed twice, in 2010 and 2012. It was reenacted retroactively for 2012 and covers biodiesel production activity through 2013.[45] Additionally, many state and local policies encourage biodiesel in the form of infrastructure grants, alternative fuel tax credits, use in public school bus fleets, blending tax credits, and production incentives. For more on state level policies, see C2ES resource Biofuels: Incentives and Mandates.

As with other biofuels, policies should consider lifecycle emissions to ensure that biodiesel production contributes effectively to greenhouse gas emission reductions. Policies that do this include the federal RFS2 and California’s low carbon fuel standard, which is specifically designed to lower the overall carbon intensity of the transportation fuel supply. For more information on biofuel policies, see Climate TechBook: Biofuels Overview.

Related C2ES Resources

Climate TechBook: Biofuels Overview

Climate TechBook: Ethanol

Biofuels for Transportation: A Climate Perspective

State Map – Biofuels: Incentives and Mandates

Further Reading / Additional Resources

U.S. Energy Information Administration,

National Biodiesel Board

Biomass Research and Development Board

U.S. Department of Energy (DOE), Office of Energy Efficiency and Renewable Energy



[1] Energy Information Administration (EIA), Petroleum and Other Liquids Navigator, Biodiesel Overview.

[2] National Biodiesel Board,

[3] U.S. Energy Information Administration (US EIA), Biofuels issues and trends, (2012),

[4] Energy Information Administration (EIA), Petroleum and Other Liquids Navigator, Biodiesel Overview.

[5] EIA AEO,

[6] EPA, EPA Proposes 2013 Renewable Fuel Standards (2013),

[7] Methyl ester is the chemical name for biodiesel molecules.

[8] US EIA, Biofuels issues and trends, 2012.

[9] US EIA, Biofuels issues and trends, 2012.

[10] Esterification is the general name for a chemical reaction in which two reactants (typically an alcohol and an acid) form an ester, a type of organic compound, as the reaction product.

[11] Using annual estimates. During November 2012, 244 million pounds of soybean oil was used, followed by 48 million pounds corn oil, 35 million pounds yellow grease, and 28 million pounds white grease. EIA, Monthly Biodiesel Production Report: February 1, 2013,

[12] Cloud point refers to the temperature below which the wax in diesel (or biowax in biodiesel) precipitates out and begins to “cloud.” Pour point is the temperature at which the diesel fuel thickens and will no longer pour, usually a temperature lower than the cloud point. Cetane number is a measure of the ignition quality of diesel-based fuels; a higher cetane number results in improved combustion.

[13] EIA, Monthly Biodiesel Production Report: Feb 1, 2013,

[14] U.S. Environmental Protection Agency (EPA), Biodiesel: Technical Highlights, updated February 2010.

[15] EPA, Guidance for Biodiesel Producers and Biodiesel Blenders/Users, 2007,

[16] U.S. Department of Energy (DOE), Energy Efficiency and Renewable Energy, B20 and B100: Alternative Fuels, updated 3 February 2009.

[17] NREL, Biodiesel Handling and Use, 2009,

[18] CARB. (2011, July 1). Detailed California-Modified GREET Pathway for Transportation Fuels. Retrieved July 11, 2011, from California Air Resources Board:

[19] Ibid.

[20] EIA, Biofuels in the U.S. Transportation Sector, updated February 2007.

[21] International Energy Agency (IEA), IEA Energy Technology Essentials: Biofuels Production. Paris: IEA, 2007.

[22] US EIA, Biofuels issues and trends, 2012.

[23] U.S. Energy Information Administration, Biofuels issues and trends,

[24] EIA, Weekly Retail Gasoline and Diesel Prices: Annual,

[25] US EIA, Biofuels issues and trends, 2012.

[26] For example:

[27] Energy Information Administration (EIA), International Energy Statistics, Biodiesel Production tables,

[28] Ibid.

[29] Ibid.

[30] Wisner, R. Soybean Oil and Biodiesel Usage Projection & Balance Sheet (2013),

[31] Wisner, R. Soybean Oil and Biodiesel Usage Projection & Balance Sheet (2013),

[32] EIA, Biofuels issues and trends, 2012.

[33] EIA, Biofuels issues and trends, 2012.

[34] EIA, Biofuels issues and trends, 2012.

[35] National Biodiesel Board,

[36]U.S. Energy Information Administration, Annual Energy Outlook 2011,

[37] Biomass Research and Development Board, Increasing Feedstock Production: Economic Drivers, Environmental Implications, and the Role of Research (2009),

[38] The Fischer-Tropsch process is a chemical reaction in which synthesis gas (often called syngas) – produced from a mixture of carbon monoxide and hydrogen from biomass or fossil fuels, such as natural gas and coal – is converted into liquid diesel

[39] C2ES, Renewable Fuel Standard 2,

[40] Energy Information Administration (EIA), International Energy Statistics, Biodiesel Production tables,

[41] Rosenthal, Elisabeth. "Once a Dream Fuel, Palm Oil May Be an Eco-Nightmare," New York Times, 31 January 2007.

[42] EIA, Biofuels issues and trends, 2012.

[43] EIA, Biofuels issues and trends, 2012.

[44] DOE AFDC, “Alternative Fueling Station Total Counts by State and Fuel Type,”

[45] U.S. DOE, Alternative Fuels Data Center, Biodiesel Income Tax Credit,