What the US Election Results Mean for Biofuels

As the dust settles on the 2024 US election, many businesses across the biofuels and low carbon feedstocks industry are left with several questions. The shift in party control will inevitably change the market's trajectory. But what sorts of changes can those across the value chain expect in 2025?

Biofuel Incentives and Tax Credits: Will They Remain in Place?

Under a Trump White House, with a Republican majority in the Senate and very likely the House as well, current biofuel incentives may face some changes.

The 45Z tax credit from Biden’s Inflation Reduction Act, otherwise known as the Clean Fuel Production Credit, provides federal tax credits for those producing lower emission fuels. The support has enlivened the biofuels industry for many producers who aim to take advantage of the credit beginning in January 2025.

One of the missing pieces to 45Z is full clarity on exactly what it entails and how it can be utilized by businesses. Some analysts predict some clarification and guidance between now and when Biden’s term concludes in January. Most of the ambiguity revolves around how to measure the carbon intensity of fuels—a key element to identifying how much benefit businesses could receive under 45Z.

Even with this clarification, however, differing interests could change exactly what this credit covers and who could benefit from it. For one, Trump has already made clear his administration’s assessment of clean energy as a so-called “green scam.” What exactly this will mean for climate policies and green energy incentives remains to be seen.

Despite these potential changes, there may be some good news for those within US-based renewable fuels. With a Republican majority in Congress, agriculture could see a relaxing of some of the restrictions Biden’s climate regulations have placed on them. The relief could help strengthen this sector for broader focus in biofuel production.

Additionally, those in advanced manufacturing would likely still benefit from tax credits. According to an AP News report, providing tax incentives to these operations holds weight as pro-business within the US, likely protecting them from any substantial cutbacks. Which manufacturers this would apply to and to what extent is not yet clear, either.

Imported Feedstock Supply Sources Could See Shifts

On the feedstock side of the market, imports will very likely face scrutiny under the shifting party dynamics.

Republicans could set their sights on the growing number of imported feedstocks supplying domestic refineries. Chief among these import locations is China with waste feedstocks like used cooking oil (UCO) driving biodiesel production in the Gulf.

Chinese imports already experienced some controversy earlier in the year when the EU ruled to place anti-dumping tariffs on China’s flooding of the European supply chain. Claims of potentially fraudulent stock—blending climate-destructive palm oil into waste oil and touting it as 100% renewable—only exasperated the situation.

Read More: EU Anti-Dumping Ruling on China Marks Serious Shift in Biofuels Market

Many US-based feedstock producers have already expressed their concerns about these imports. Besides the direct impact on domestic operations, the risk of fraud and other market manipulation has led many in industries such as agriculture to call for restrictions.

Furthermore, Trump’s promise to impose tariffs on Chinese imports could directly impact the trade flows for these materials. One of the most apparent risks of this proposal is higher prices across the value chain straight down to the consumer in the form of higher prices.

With prices already an issue in biofuel production compared to traditional fuels, this could also slow down US-based adoption, usage, and production. However, other feedstock pathways such as agricultural waste and woody biomass from forestry could also step in to cover these gaps.

Read More: Forest Waste Comes into Spotlight as Feedstock Solution for Biofuels

Forecasts in Biofuels Still a Matter of Opinion

Overall, reactions to the outcome of the US election have been mixed relative to the biofuels industry. Fears about conservative policies and past approaches to renewables concern many market members. But broader global demand increases and the market’s adaptability could position it favorably into the future.

According to our assessment, several pathways are possible. The results of the US election mean that we could see possible controls on feedstock imports coming through the US. The trade flows could change based on restrictions on accessibility or newly introduced tariffs.

Because of the ambiguity, those in the industry are weary of longer-term planning. The market is therefore looking at the short-term due to the uncertainty of the trading environment coming into 2025.

For those developing a strategy on how to respond and move forward in the biofuels market, indecision looms. Therefore, many are hesitant to commit to anything long-term until more information is available.

Market Intelligence, Expertise Crucial for Informed Strategy and Decisions

As the news over the US election resonates across the biofuels market, the importance of quality data and expert insights becomes even greater.

Quality, well-vetted data on pricing, ESG scores, carbon savings, and other factors are paramount to making strategic decisions on low-carbon fuels and feedstocks. And insights and commentary from experienced market experts can help you make sense of an often-complex emerging market.

Prima CarbonZero from ResourceWise is your source for the best possible market intelligence in this space. Our award-winning data covers all key fuels and feedstocks—including future fuels from emerging spaces such as sustainable aviation fuel and bio-bunkering. Our analyst insights also deliver timely, evidence-driven commentary about the news and industry development important to you.

In a business climate carrying so much uncertainty, market intelligence is your beacon of light to find a solid pathway. Learn more about Prima CarbonZero today and schedule a demo to see exactly how our platform can help.