As the U.S., especially California, moves to cut carbon emissions, renewable diesel is being eyed to meet the growing demand for low carbon fuels. The California Air Resources Board has stated that biodiesel and renewable diesel are the “biggest carbon cutting technologies from the transportation sector,” suggesting a bright future for renewable diesel in a low carbon environment.
Vegetable oils, used cooking oils, and animal tallow are popular feedstocks in the production of renewable diesel. Both renewable diesel and biodiesel lower carbon emissions compared to petroleum diesel, but renewable diesel is chemically identical to petroleum diesel and can be used in vehicles without being blended. According to the U.S. Department of Energy (DOE), there are five facilities in the U.S. which produce renewable diesel with a combined capacity of 400 million gallons per year. The EPA reported that over 900 million gallons of renewable diesel were consumed in the U.S. in 2019. The balance between production and usage is made up through imports. Nearly all renewable diesel is consumed in California due to its Low Carbon Fuel Standard.
The boom in renewable diesel demand has led to an increased investment in production capacity. Reuters reported projected renewable diesel production capacity will grow to 2.65 billion gallons over the next three years. Here in Nebraska, Cargill and Love’s announced a joint venture to produce and market renewable diesel fuel with a 80 million gallon production facility located in Hastings. Another plant planned for Louisiana will produce 32 million gallons of renewable fuel using wood waste.
The scaling up of renewable diesel production has created a scarcity of feedstocks and higher feedstock prices. Reuters reported that renewable diesel could generate an extra 500 million pounds of demand for soybean oil. A recent Van Trump Report stated that since October 2020, soybean oil prices have more than doubled and soybean oil’s share of the gross soybean crush value is over 45 percent of total value in the beginning of May, up from 30 percent last year. Used cooking oil supplies are scarce because people are eating out less often. Tallow prices are up more than 30 percent from a year ago.
The effects of the increase in demand for renewable diesel vary across agricultural sectors. The rising interest in renewable diesel creates additional markets for Nebraska’s soybean, canola, and sunflower producers, but means higher feed costs and ration changes for cattle producers. How these changes are perceived, then, depends on which side of the market one falls.