No Bull Insights | Biofuels Blast: Part Two

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In Part One, we walked through how policy reshaped the biofuels landscape over the past two years. The shift from the $1-per-gallon blending credit to the 45Z Clean Fuel Production Credit dramatically altered production economics in 2025, triggering a pullback in biomass-based diesel output and effectively eliminating biomass-based diesel imports.

Those changes didn’t stop at fuel production—they fundamentally reshaped feedstock demand. Crop-based feedstocks lost ground under the original 45Z framework, while lower carbon-intensity feedstocks captured market share, with tallow briefly overtaking soybean oil as the largest biomass-based diesel feedstock.

Heading into 2026, however, amendments to 45Z reset the playing field. The removal of ILUC penalties and the exclusion of non-USMCA feedstocks materially improve soybean oil’s credit value, while restoring eligibility for canola oil and introducing ethanol into the program.

With those economics now defined, 45Z now stands as the only federal biofuel incentive in place—leaving the market waiting on the next major policy driver: EPA’s long-awaited Renewable Fuel Standard volume mandates for 2026 and 2027.

And that’s where the story picks up.

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