U.S. Biofuels Growth Potential Under Threat

There is significant potential for growth in the U.S. biofuels market, as hard-to-abate industries look for cleaner fuel alternatives. The aviation sector is driving sectoral growth, with many major airlines investing heavily in the production of sustainable aviation fuels (SAFs). 

Agriculture is also supporting biofuels growth through the development of greener fertilizers, while heavy industry is expected to invest more in the development of clean fuels to support decarbonization efforts in the coming years. However, the current uncertainty surrounding the clean energy industry, under the Donald Trump administration, could hinder the expansion of the biofuels sector. 

The U.S. Biofuels Market

Biofuels are liquid fuels and blending components produced using biomass materials known as feedstocks, such as waste crops and algae. Most biofuels are used as transportation fuels, but they may also be used for heating and electricity generation. They are viewed as a cleaner alternative to fossil fuels, emitting lower levels of greenhouse gases when burned.

Some of the most common biofuels in the U.S. include:

• Ethanol—an alcohol fuel blended with petroleum gasoline for vehicles; accounted for the largest share of U.S. biofuel production (82%) and of consumption (75%) in 2022
• Biodiesel—a biofuel usually blended with petroleum diesel for consumption; accounted for the second-largest share of U.S. biofuel production (9%) and of consumption (9%) in 2022
• Renewable diesel—a fuel chemically similar to petroleum diesel fuel used as a drop-in fuel or a petroleum diesel blend; percentage share of total U.S. biofuel production was about 8% and for consumption about 9% in 2022
• Other biofuels—include renewable heating oil, renewable jet fuel (sustainable aviation fuel, alternative jet fuel, and biojet), renewable naphtha, renewable gasoline, and other emerging biofuels that are in various stages of development and commercialization

In 2022, approximately 18.7 billion gallons of biofuels were produced in the United States and about 17.6 billion gallons were consumed. The U.S. exported around 1 billion gallons of biofuels in 2022. Fuel ethanol was the most exported form of biofuel. 

The U.S. biofuels market value stood at around $64 billion in 2024 and is expected to reach around $106 billion by 2034, growing at a CAGR of 5.17%. 

U.S. Biofuel Groups Call for Political Support

In February, oil and biofuel groups – including the American Petroleum Institute and the Renewable Fuels Association and Growth Energy – wrote a joint letter calling on the Trump administration to increase the volume of renewable fuels that must be blended into the U.S. fuel mix starting in 2026. The collaboration between the two industries is unusual as they typically have not agreed on the Renewable Fuel Standard (RFS) program. 

Later that month, the National Association of State Departments of Agriculture Winter Policy Conference (NASDA) members voted to amend the group’s biofuels policies to boost support for U.S.-produced biofuels. The policy change is expected to help increase biofuel production and eliminate trade barriers for the export of biofuels. 

“NASDA recognizes the importance biofuels play in the future of agricultural production, energy independence and our economy,” NASDA’s CEO Ted McKinney said. “State agriculture departments see greater demand for biofuels as a win-win for their mission to enhance agricultural production and strengthen rural economies across the nation.”

Biofuels Funding and Challenges

In January, before President Joe Biden left office, the U.S. Department of Energy (DoE) Bioenergy Technologies Office (BETO) and the U.S. Environmental Protection Agency announced $6 million in financing for three projects to advance biofuel development. Funding comes from the Inflation Reduction Act (IRA). The projects will support research to improve performance and reduce costs of high-impact biofuel production technologies; scale up production systems with industry; and support the U.S. bioeconomy. They also support the goals of the DoE’s Synthetic Aviation Fuel (SAF) Grand Challenge. 

However, since President Trump came into power in January, the biofuels sector has faced greater uncertainty over its role in the U.S. energy industry. In response, several U.S. and Canadian biofuel companies have reduced production to restrict potential losses due to the uncertain policy environment. 

The looming U.S. trade war with Canada puts several sectors under threat for fear of price hikes related to the imposition of tariffs from both sides of the border. In addition, some fear that the existing U.S. biofuel subsidy programs, including a Biden administration tax credit that states how much producers pay for the oils and fats they make into biofuel, will be discontinued.

If the sector contracts, it could harm rural communities and decelerate decarbonization efforts. The Director of Energy at Capstone LLC in Houston Paul Niznik explained, “If this uncertainty drags on, which is what we expect, the biodiesel and renewable diesel industry will contract but not disappear. It will shrink, painfully at times.” 

The U.S. biofuels industry has expanded rapidly in recent years in response to the growing demand for clean fuels to help decarbonize hard-to-abate industries. This growth was expected to continue over the next decade, supported by federal financial incentives. However, the current uncertainty around the Trump administration’s clean energy policies and the potential imposition of tariffs on foreign goods could result in a mid-term contraction of the biofuels industry. 

Stay In The Know with Shale

While the world transitions, you can count on Shale Magazine to bring me the latest intel and insight. Our reporters uncover the sources and stories you need to know in the worlds of finance, sustainability, and investment.

Subscribe to Shale Magazine to stay informed about the happenings that impact your world. Or listen to our critically acclaimed podcast, Energy Mixx Radio Show, where we interview some of the most interesting people, thought leaders, and influencers in the wide world of energy.