Fueling Biofuels: How Legislation and Tariffs Shape Lipid Feedstock Supply

October 19, 2025

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by James Primrose (Stillwell Associates) Two of the world’s largest biofuel markets, the U.S. and Europe, share several common trends. Firstly, there is a growing demand for biomass-based biodiesel (BBD) – a category including renewable diesel (RD) and biodiesel (BD) – and sustainable aviation fuel (SAF). Secondly, both markets have become increasingly dependent on imports of lipid biofuel feedstocks. Finally, for different reasons and through various approaches, both markets are now seeking to restrict the very imports that their expanding BBD sectors rely on.

This article takes a closer look at these dynamics and explores some potential implications.

As shown in Figure 1, imports now account for roughly 30% of the U.S.’s overall lipid biofuel feedstock supply. This share has risen sharply since 2022, coinciding with the recent ramp-up in the BBD Renewable Volume Obligation (RVO) under the U.S. Renewable Fuel Standard (RFS). Concurrently, programs like the California Low Carbon Fuel Standard (LCFS) and similar initiatives on the West Coast have driven strong demand for low-carbon feedstocks such as used cooking oil (UCO), animal fats, and distillers corn oil (DCO). This demand has outpaced domestic supply, making the supply of UCO and animal fats increasingly reliant on imports.

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UCO constitutes the largest volume of lipid feedstock imports, representing around 70% of total UCO supply in 2024 and 2025. Over half of these imports come from China, with Canada, Malaysia, and the UK as other key sources.

Animal fat supply is less import-dependent, at about 30%, reflecting a narrower global supply base. Key import sources include Brazil, Canada, and Australia. Additionally, canola oil usage has grown significantly since 2022, supported almost entirely by imports from Canada.

It’s important to note that despite imports, the U.S.’s combined BD and RD capacity is not fully utilized. In 2024, there was an estimated excess BBD production capacity of about 1.6 billion gallons, compared to a total capacity of roughly 6.6 billion gallons – around 75% utilization. Traditionally a BBD-dominated market (as opposed to an ethanol-dominated one), Europe has seen rising demand for waste feedstocks driven by the double counting provisions under the EU Renewable Energy Directive (EU RED II), alongside plans to phase out food crop-based feedstocks.

Europe’s lipid biofuel feedstock market tells a similar story, as shown in Figure 2 below. Traditionally a BBD-dominated market (as opposed to an ethanol-dominated one), Europe has seen rising demand for waste feedstocks driven by the double counting provisions under the EU Renewable Energy Directive (EU RED II), alongside plans to phase out food crop-based feedstocks.

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. The EU is also highly import-dependent on two feedstock types unique to the region:

Palm Oil Mill Effluent (POME):

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Crude Tall Oil (CTO):

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Like the U.S., Europe’s combined BD and RD capacity is currently operating at around 55% utilization.

The challenges to imports

Given that both BBD sectors operate below maximum capacity and aim to grow, one might expect the U.S. and Europe to encourage more lipid feedstock supplies, including imports. The reality, however, is more complicated.

U.S. Measures Restricting Imports

The U.S. has taken three key steps that seek to discourage lipid feedstock imports:

Tariffs under the U.S. Reciprocal Trade Policy2 potentially affect imports from key countries such as China, Canada, and Brazil.
The 45Z Clean Fuel Production Credit (CFPC) exclude biofuels produced from imported feedstocks – except those from Canada and Mexico.
The EPA’s proposed Set 2 revisions to the RFS may halve RIN generation for biofuels produced from imported feedstocks.

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As table 4 suggests, the economic impacts of the tariffs (if applied) are significant,....

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EU and member-state responses include:

The EU Commission is exploring tighter sustainability regulations, extending traceability systems, and reviewing voluntary sustainability standards.

Germany’s draft EU RED III implementation proposes on-site inspections by its regulators at production facilities including those based outside of Germany, stricter documentation, bans on palm-oil biodiesel, and reduced food-based biofuel caps.

France supports stricter sustainability checks, customs enforcement, and a readiness to reject sustainability certificates from biofuels from suspicious providence

The Netherlands is reviewing double counting rules, chain-of-custody controls, and tightened crop-based fuel caps.

These initiatives have yet to show clear impacts in official trade data, but anecdotal evidence suggests declining UCO and POME imports from Asia. Separately Indonesia has also imposed export taxes on POME to retain supplies for domestic biodiesel mandates and cooking oil security.

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Overall Takeaways

The combination of regulatory, trade, and sustainability challenges is creating uncertainties for lipid biofuel supplies in both the U.S. and Europe.

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These complex trends will be explored further in Stillwater’s forthcoming 2025 Lipid Feedstocks Supply Outlook. READ MORE

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2024 Lipid Feedstocks Supply Outlook (Stillwater Associates)
Feedstock Supply Crunch Looms for European Biofuels (CME Group)
European Biofuel Sector Could Face Feedstock Supply Shortage (Byteseu)

Excerpt from CME Group: A supply shortage in feedstocks used to produce cleaner road, rail and air transportation fuel could be exacerbated in the European Union (EU), one of the world’s largest markets for biofuels, by growing demand stoked in large part by stricter environmental policies in the region.

The mandated demand for renewables under the latest iteration of the Renewable Energy Directive (RED III) necessitates the production of advanced products such as Renewable Diesel as this enables the suppliers to blend beyond the aforementioned B7 limits.1 A similar situation is occurring for Sustainable Aviation Fuel, where a growing share of jet fuel sales must be made from renewable sources. This continued increase in demand for renewables across all transport sectors, spearheaded by biofuels, is creating a supply crunch in the supply of feedstocks.

Higher demand from hydrotreating biofuel producers is creating potential supply disruptions on the feedstock side with many producers chasing the high-cost waste and residue feedstocks compared to the cheaper crop-based alternatives. The more advanced transport fuels, such as Sustainable Aviation Fuel or Renewable Diesel, are where some of the supply tightness is occurring with producers chasing many of the same feedstocks. Many of these feedstocks have risen sharply in the price in the past couple of years or so, according to industry analysts.

The uncertainty over feedstock supply, which is likely to put further pressure on biofuel profit margins, combined with goals to decarbonize are elevating price volatility, leading to potentially higher volumes in Soybean Oil futures and options at CME Group and other related products.

The latest Argus Media report shows that total European biofuel consumption is expected to reach around 30.6 billion litres in 2025, up 10% from 2024.2 In the latest iteration of the Renewable Energy Directive, RED III, the cornerstone of the EU’s environmental policies for biofuels, sets a renewable energy target of 42% by 2030. For the first time there is a specific blend target for Renewable Fuels from Non Biological Origin (RFNBO), which includes the use of renewable hydrogen and e-fuels. In the transportation sector, it sets a target of 29% for renewable energy and a 14.5% reduction in greenhouse gas (GHG) intensity. The overall energy target under RED III has increased from 32% to 42.5% compared with RED II, but the target date for implementation has remained at 2030.

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ReFuel EU Aviation and ReFuel EU Maritime are the two latest EU Directives to support further decarbonization of both the aviation and maritime sectors. The demand from both sectors appears to be gathering pace, albeit from a low base. Regulators have put higher blending mandates in place for these sectors, which should see much higher usage of biofuels going. Currently, the supply of products like sustainable aviation fuel is small at about 2% of the total jet fuel market, but this ramps up quickly to reach 70% by 2050. This combined with renewable diesel is expected to place significant pressure on the feedstock availability.

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Sustainable aviation demand to add to interest in ethanol
Ethanol remains a key biofuel feedstock in the European markets. The blending mandates laid out by each member government have been increasing since 2009, through the introduction of the different iterations of the Renewable Energy Directive. The current blending rate of 10%, based on limits due to engine specifications, remains the benchmark for European gasoline across much of northwest Europe.

The principle production pathway for sustainable aviation fuel involves the hydroprocessing of esters and fatty acids (HEFA) which are blended with conventional jet fuel and fits well with the demand for waste oils and animal fats. This is a well-established production pathway that complements the newer technologies such as alcohol to jet or AtJ, which is likely to involve higher volumes of ethanol in the coming years as demand for more sustainable fuels for aviation increases.

The technology to convert ethanol to jet fuel remains relatively new. This is expected to become more common in the run up to 2030 and beyond, and there are currently 15 production facilities announced as of 2025.

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The introduction of more advanced biofuels, through existing regulations, is likely to have a significant impact across the biofuels markets as blenders hunt for the feedstocks with the lowest carbon intensity to meet ever stringent mandates. Sustainable aviation fuels and alternative marine fuels are expected to be a big consumer of advanced feedstocks in the coming years as the blending mandates increase from the current levels.It remains to be seen what impact this will have on prices, but a period of volatility ahead looks ever more likely. READ MORE

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used cooking oil (UCO) UK (United Kingdom) Transportation Fuels Policy--State Transportation Fuels Policy Trade Policy tall oil Sustainability soybeans renewable fuels of non-biological origin (RFNBO) Renewable Energy Directive (RED/RED II/RED III) Renewable Diesel/Green Diesel/HVO/Paraffinic Diesel regulations palm oil mill effluent (POME) markets/sales market forces Malaysia Lipid LCFS (Low Carbon Fuel Standard) Jetfuel (Sustainable Aviation Fuel (SAF)) Hydrogen/Renewable Hydrogen GHG (Greenhouse Gas Emissions) Intensity European Union (EU) ethanol/bioethanol electrofuels (e-fuels) China Carbon Intensity (CI)/Carbon Footprint Canola/Rapeseed Canada California Brazil BioRefineries/Renewable Fuel Production biodiesel Aviation Fuel/Sustainable Aviation Fuel (SAF) Australia animal fat alcohol-to-jet (ATJ)/ethanol-to-jet (ETJ)

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