The U.S. Biofuels Market: Current Landscape and the Path Forward

Biofuels have long been part of the United States’ strategy to reduce dependence on fossil fuels, cut greenhouse gas emissions, and stimulate rural economies. Today, the U.S. remains one of the largest producers and consumers of biofuels globally, particularly corn-based ethanol and biodiesel. However, as the country moves toward more ambitious climate goals, the market is under pressure to evolve and scale up sustainably.

Current Market Landscape

The Renewable Fuel Standard (RFS) remains the primary federal policy driving biofuel demand. It requires fuel refiners to blend increasing amounts of renewable fuels into the transportation fuel mix. In 2023, the EPA finalized new volume targets under the RFS, including significant increases for advanced biofuels and renewable diesel.

Ethanol, mostly derived from corn, accounts for over 90% of U.S. biofuel production. It is primarily blended into gasoline at a 10% rate (E10), with limited but growing use of higher blends like E15 and E85. Meanwhile, biodiesel and renewable diesel, made from soybean oil, animal fats, and used cooking oil, are gaining traction in the heavy-duty transport sector, particularly in states with low-carbon fuel standards.

Despite these advancements, the market still faces challenges such as feedstock limitations, infrastructure gaps, regulatory uncertainty, and a lack of public awareness around next-generation biofuels like cellulosic ethanol, sustainable aviation fuel (SAF), and algae-based fuels.

Steps to Increase Biofuel Use

To unlock the full potential of biofuels, the U.S. can take several strategic steps:

1. Modernize Infrastructure: More investment is needed in blending and distribution infrastructure to support higher ethanol blends and renewable diesel at the pump. Incentivizing service stations to upgrade tanks and dispensers would expand access.

2. Support Feedstock Diversification: Policies should encourage the development of non-food feedstocks like agricultural residues, cover crops, and municipal waste, which offer greater environmental benefits and reduce pressure on food markets.

3. Enhance R&D Funding: Continued investment in advanced biofuel technologies, especially SAF and marine biofuels, will be critical for decarbonizing hard-to-electrify sectors.

4. Strengthen Regulatory Certainty: Long-term clarity and consistency in EPA rulemaking and tax incentives—such as the Inflation Reduction Act’s clean fuel production credit—will increase investor confidence and project development.

5. Expand State-Level Programs: Adoption of low-carbon fuel standards (LCFS) beyond California, Oregon, and Washington would drive demand for low-emission biofuels nationally.

6. Public and Industry Engagement: Educating consumers and collaborating with automakers and fleet operators will accelerate acceptance of high-blend fuels and renewable alternatives.

The U.S. biofuels market has made significant strides, but future growth depends on coordinated policy, innovation, and investment. If approached strategically, biofuels can play a key role in achieving national decarbonization targets—while bolstering energy security and creating economic opportunities across rural America.