Chinese Used Cooking Oil Disrupts US Biodiesel Market

The US biofuels industry is currently straining under mounting tensions. The heart of the turmoil is related to the US importing used cooking oil (UCO) from China.

China’s rapid increase in UCO supply has, in some ways, helped the US meet its ever-growing demand for the resource. But economic factors and accusations of tainted oil supplies have caused several issues within the US market.

Chinese UCO Imports Up at the Expense of US Supplies

Both international competition and domestic regulatory ambiguity are disrupting the US markets. Green diesel and jet fuel alike have endured market strain.

These disruptions mostly stem from a noteworthy increase in US imports of UCO from China. This has adversely affected the demand for US soybean oil and other agricultural items that could be transformed into fuels for vehicles and aircraft.

Importing Chinese UCO is cheaper than buying it from many domestic suppliers in the US. Consequently, fuel producers seeking the most cost-effective fuel production opt for Chinese UCO over US feedstocks.

Governmental Intervention: A Good Idea?

Various agricultural organizations responded by urging the government to step in. They are calling for higher tariffs to mitigate the tide of imports.

Biofuel producers, however, warn of the potential negative repercussions of such government actions. These could negatively impact the already strained supply of low-carbon feedstocks during a highly sensitive period for the industry.

Advanced Biofuels Association president Michael McAdams expressed his concerns that implementing tariff measures would be governmental overreach. He suggested permitting feedstocks to be freely distributed globally according to their best use would be more beneficial.

Claims of “Tainted” Chinese UCO Complicates the Market Further

Beyond the above-mentioned concerns, the quality of imported UCO is also being called into question.

To paint the picture, imported UCO to the US tripled between 2022 and 2023. Fifty percent of those imports were from China—a substantial amount of the overall market. But China’s imports to the US may not be the cost-effective solution many US producers hoped they would be.

China is accused of tainting its UCO supply by mixing it with palm oil. Palm oil wreaks havoc on environmental, conservation, and sustainability objectives because of decreased regulations and deforestation to produce it.

Mixing cheaply acquired palm oil into UCO sells it as a climate-friendly, renewable resource. But the reality is that it undercuts any renewable benefits it purports with the mixture.

Unfortunately, accusations against Chinese UCO are nothing new in the renewables market. Europe has also alleged that China tainted its exports, putting its resources under scrutiny.

The Compounding Market Effects of Fraudulent UCO

The issue extends far beyond biodiesel feedstocks. Fraudulent biofuels could impact the entire market and undermine its credibility.

The Environmental Protection Agency (EPA) and industry stakeholders like the National Oilseed Processors Association have focused on these concerns over Chinese UCO and other food wastes.

EPA spokesperson Nick Conger confirmed they're monitoring the increase of imported UCO. This will inevitably influence the Renewable Fuel Standard Program, the law determining annual biofuel inclusion in the US fuel supply.

The RFS requires producers using UCO or animal waste (such as beef tallow) to maintain records across the supply chain. These records confirm that their ingredients meet the renewable biomass definition. They also detail the ingredients and the extraction process used.

Persistent problems in quality and potential fraud also impact the renewables market altogether. According to Renewable Fuels Association CEO Geoff Cooper:

“We are concerned that unless EPA and other agencies get a handle on this pretty quickly, it could potentially undermine the integrity of the Renewable Fuel Standard.”

Geoff Cooper, CEO, Renewable Fuels Association

The Tension Between Feedstock Companies and Commodity Producers

This current biodiesel market strain reflects a broader clash between raw material purchasers and commodity producers.

Biofuel producers and feedstock suppliers await clarity on a new production tax credit set to take effect next year. In the meantime, multiple trade groups from aviation and renewable gas production have appealed to US Treasury Secretary Janet Yellen for guidance.

Given the issues with Chinese UCO purity and current regulatory confusion, the US bio-based diesel industry is gearing up for its biggest challenge since its inception three decades ago.

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