The global biofuels market has been growing in recent years as the twin benefits of finding alternatives to oil and reducing carbon footprints have encouraged its growing use.
However, questions have lingered until now over what the situation might be regarding biofuel use in the United States.
At present, the US is a substantial importer of biofuels and the feedstocks used to make them.
But the Trump administration had been planning to penalise imports of them from March, in line with the administration’s ‘America first’ philosophy and desire to place tariffs on most imports.
However, according to an exclusive insight claimed by Reuters, a compromise is on the cusp of being reached over blending quotas for 2026, which will come into force in March.
According to two sources claimed by the news agency, the arrangement will see a range of between 5.2 billion and 5.6 billion gallons of bio-based diesel being permitted in 2026 and 2027.
This figure, which will be administered by the US Environmental Protection Agency (EPA), is close to the original proposal of 5.61 billion gallons and marks a compromise between the differing levels requested by the oil and domestic biofuel industries.
Why Does The Deal Mark A Compromise?
Compromise is not normally a word associated with the Trump administration, which is heavily aligned with Big Oil and has shown antipathy to green industries.
However, a complicating factor in this situation is that the biofuels industry is a significant part of the US agriculture sector and this lobby hailed one aspect of the new EPA plan, which involves substantially cutting the value of government-issued renewable fuel credits for imported biofuels, as a victory, making the plan a good one for domestic producers.
Indeed, it was big oil that wanted to see more imported biofuels, arguing that import restrictions would push fuel prices higher, a sensitive subject at a time when the cost of living is a major area of contention, with voters often unhappy with an administration that had taken office with pledges to keep consumer prices down.
The news was welcomed on the markets, with the Chicago Board of Grade soybean futures rising by 1.3 per cent and shares in soyoil, which provides feedstock for biofuels, up by 3.5 per cent to their highest level in four months.
StoneX grain broker Craig Turner commented: “This administration has put a priority on petroleum and I think there was a little concern that green energy might be left behind. Based on this story, that’s not the case.”
What Does The Biofuels Agreement Mean For The Industry?
All this may stabilise demand for biofuels and, with them, the equipment used to produce them in the US or the countries that import to the US. Pressure relief valves will remain in demand in a way that wind turbine blades will not.
Given the antipathy of the Trump administration to green energy, most notably wind farms, as well as the president’s claims that climate change is a “hoax”, the news suggests one potential risk to the growth of the biofuels industry has been averted.
This is happening at a time when the global adoption of biofuels continues to increase. Among the developments of note is the growing use of biofuel in shipping.
The decision by Norwegian tanker operator Odfjell to establish an ‘operational green corridor’ on a 5,000 nautical mile route from Norway to Brazil was described by Energy Digital as marking “an important moment for the decarbonisation of commercial fleets”.
Powered by B24 biofuel, there will be between 12 and 15 journeys made on this corridor this year, each lasting around 40 days.
It will cost more to power the vessels, but Odfjell has made the decision to absorb this cost in order to make it more operationally practical to make the switch.
Its CEO, Harald Fotland, explained: “By covering the additional cost ourselves, we eliminate the financial element and move directly into operational implementation.”
Will Shipping Be The Next Big Advance For Biofuel?
The significance of this step may lie in the willingness of other shipping firms to follow suit and use biofuel, because the Paris Climate Agreement targets for emission reductions only include activity in the territories of the countries signed up to the deal.
International waters are not covered, leaving shipping as a significant hole in the plan.
Indeed, it may be that a growing willingness of global shipping to adopt biofuel could at least partly counterbalance the withdrawal of the US under Trump from the agreement, although it remains to be seen whether US-based shipping companies are as keen as others to adopt biofuel.
However, in light of the new agreement in the US over biofuel imports, it may be that American shipping firms are happy to use more biofuel and will be given no disincentive to do so by the administration.
