U.S. biodiesel demand is being spurred by three separate types of energy policy.
Renewable Fuels Standard (RFS2)
The Renewable Fuels Standard which requires biodiesel blending by petroleum refiners and importers is the industry's most significant market driver today.
Under RFS2, Obligated Parties, including petroleum refiners and fuel importers, must show compliance with these standards. July 1, 2010, RFS2 was implemented, stipulating volume requirements for the amount of biomass-based diesel that must be utilized in the United States each year. Currently, biodiesel meets two categories of an Obligated Party's annual renewable fuel volume requirement, or RVO, biomass-based diesel and advanced biofuel. According to the National Biodiesel Board, biodiesel is the only commercially significant RFS2-compliant biomass-based diesel fuel produced in the United States. The EPA recently proposed a requirement for domestic use of biodiesel by Obligated Parties of 1.28 billion gallons in 2014.
Federal Biodiesel Tax Credit
The federal biodiesel tax credit incents blending across all levels of the diesel supply chain; in particular regional jobbers and truck stops have access to more competitively-priced biodiesel encouraging blending tanks, retail pumps and other infrastructure to be installed.
The federal biodiesel tax credit was first enacted in 2004. The credit provides a $1 refundable tax credit per gallon of blended biodiesel.
State Biodiesel Requirements and Incentives
The final piece of policy comes at the state level. Nearly every state in the nation has some sort of biodiesel incentive, requirement or executive order calling for blending and utilization.