Everything You Ever Wanted to Know About Biodiesel (Charts and Graphs Included!)

by Jeremy Martin (Union of Concerned Scientists) Most discussions about biofuels center on ethanol, but biodiesel—a diesel-substitute made from vegetable oils and animal fats—is increasingly important as well. But where does biodiesel come from, and what does it mean for the climate? Like most important things, the answers aren’t black or white—but they’re critical to get right.

More than 80 percent of biodiesel is made from vegetable oil (the rest is mostly animal fats). The soybean and canola oil that make up the majority of biodiesel is basically the same as the cooking oil you buy at the grocery store, while the corn and used cooking oils are inedible varieties generally used for animal feed and other purposes.

Using more oils and fats for fuel instead of food and animal feed has consequences for competing users of these products and for the global agricultural system. Of particular importance from a climate perspective is the relationship between rising biodiesel use in the United States and palm oil expansion in Southeast Asia, which is a major driver of deforestation and global warming pollution.

Figure 1 shows that palm oil itself is not a significant direct source of US biodiesel production.

Some trucks can use up to a 20 percent biodiesel blend, but distribution challenges associated with marketing different blends for different vehicles have limited the adoption of these higher blends.

Today, biodiesel accounts for about 3 percent of the diesel fuel sold. For comparison, 10 percent ethanol is blended into most of the gasoline sold today.

But counterintuitively, increased demand for soybean oil actually makes input costs cheaper for the meat industry. To understand this mystery, read on!

As you would expect, increased demand for soybean biodiesel will raise demand and prices for soybean oil, but meal goes the other direction. As more soybeans are crushed to supply oil, the price of soybean meal will fall as increased production meets unchanged demand.

Since soybean prices depend on the sum of oil and meal prices, the net result is that soybean prices are only weakly linked to soybean oil prices.

It is clear from the data that expanded use of soybean oil to make biodiesel was matched by growing volumes of imported vegetable oil, but the question of causality is a little trickier. That is because in the same timeframe that soy biodiesel consumption was growing, concern about the health impact of trans fats, mostly hydrogenated soybean oil, led to decreased consumption of trans fats, which were replaced in Oreos and many other prepared foods with other oils.

Rather, rising imports of palm and other oils were caused by changes in US food preferences attributable to health concerns; expanded production of soybean biodiesel was an outlet for the unwanted soybean oil, providing a substitute market while also displacing fossil fuel use and lowering the cost of soy meal for meat producers.

While the majority of biodiesel is made from the same vegetable oil used for cooking, about 40 percent is made from inedible and recycled oils and fats that are not used directly as human food. This share has stayed fairly constant even as biodiesel production has increased.

The corn ethanol boom of 2005 to 2010 saw a huge increase in production of distillers’ grains, an animal feed co-product of ethanol production that is left behind once the corn starch is made into ethanol. Ethanol producers learned that they could extract corn oil from the distillers’ grains, reducing the fat content of the animal feed in the process.

This distillers’ corn oil smells like a brewery and is not sold for human consumption, but it works for biodiesel and animal feed and sells at a significant discount to edible corn oil. Removing a portion of the oil from distillers’ grains of animal feed reduces its caloric content, but it does not reduce its value significantly. So this approach is quite profitable, and most ethanol producers adopted it.

For the last few years, overall production of used cooking oil has been basically steady while biodiesel use grew from a small share to consuming 60% of domestic used cooking oil in 2015. The increase came mostly from reducing exports rather than increasing diversion from waste streams.

The potential for significant and sustainable growth in domestic biofuel production depends upon moving beyond food-based fuels made from vegetable oil or corn starch and turning instead to biomass resources. These resources have the potential for significant—but by no means limitless—expansion as the technology to convert them to cellulosic fuels scales up. READ MORE