U.S. Renewable Diesel, Biodiesel Output Falls in Q1 2025 Amid Federal Tax Credit Uncertainty: EIA

U.S. biodiesel and renewable diesel production declined significantly during the first quarter of 2025, due to negative profit margins and ambiguity regarding federal biofuel tax credits, according to a June 4 report published by the U.S. Energy Information Administration. The agency projects production of both fuels to rise during the remainder of 2025, but biodiesel production to be lower than during 2024.

During January 2025, U.S. production of biodiesel declined to 60,000 barrels per day (b/d), the lowest volume since January 2015, and around 40 percent lower compared to January 2024. U.S. biodiesel producers moderately increased production during February and March, which led to quarterly production to outturn at around 70,000 b/d, down more than 30 percent compared to Q1 2024.

U.S. renewable diesel production averaged around 170,000 b/d during Q1 2025, down 12 percent compared to Q1 2024. The decline in renewable diesel production was lower on a percentage basis than the decline in biodiesel production, due to renewable diesel production increasing at a faster rate than biodiesel production during 2024. Lower production at renewable diesel plants was to some extent compensated by the approximately 20 percent rise in renewable diesel production capacity since Q1 2024. However, compared with Q4 2024, when renewable diesel production capacity was similar to existing levels, Q1 2025 production was lower by around 25 percent.

Low profitability during Q1 2025 also led to lower production. Diamond Green Diesel, Marathon, and Phillips 66, all reported operational losses from renewable diesel during Q1 2025. U.S. production of biomass-based diesels also declined during Q1 2025 due to uncertainty around federal biofuel tax credits.

The agency projects biodiesel and renewable diesel production to increase during the remainder of 2025 to fulfil existing Renewable Fuel Standard obligations. The agency projects 2025 annual renewable diesel production to rise by around 5 percent from 2024 because of increased capacity. Annual biodiesel production is expected to be 15 percent lower than during 2024 due to low production earlier in 2025 and an expectation that a number of biodiesel plants with lower profitability could cease operations.

In March, the agency reported an increase in the use of biodiesel outside of the transportation sector. Residential, electric power and commercial sectors together accounted for nearly five percent of U.S. total biodiesel consumption during 2023, up from around one percent from a decade earlier. Previously, the agency allocated all U.S. biodiesel usage to the transportation sector, which accounted for 95 percent of the 46 million barrels of U.S. biodiesel consumption during 2023, up by around 12 million barrels from 2013. Biofuel blending mandates for heating oil in several northeastern states is contributing to the increasing use in other sectors.