The US oilseed sector is calling for biofuel produced from imported feedstocks to be excluded from tax credits, according to an Agri-Pulse report.
Rising demand for renewable fuel and subsequent tax credits to boost production had led to a significant increase in imported feedstocks like used cooking oil (UCO) and tallow, the 10 July report said.
Some industry sources have claimed the increase in imported feedstocks could undermine the domestic oilseed industry and result in fraudulent materials entering the market, Agri-Pulse wrote.
US imports of animal fat and vegetable oil more than doubled between 2020 and 2023, according to the US Department of Agriculture (USDA)’s Foreign Agricultural Service (FAS).
Imports of UCO from China, which more than tripled in 2023, have contributed significantly to the increase, according to FAS data.
Federal policies including the national Renewable Fuel Standard and a blender’s tax credit, alongside California’s Low Carbon Fuel Standard, have driven greater demand for renewable diesel, Agri-Pulse wrote.
Biofuel tax credits also offer more for feedstocks like UCO or tallow that have a lower carbon intensity as measured by the Energy Department's GREET model.
As a result, these incentives and the subsequent rise in imports was impacting domestic soyabean processors, the report said.
“Every pound of imported feedstock really does take a pound of domestic soyabean capacity,” National Oilseed Processors Association (NOPA) president and CEO Kailee Tkacz Buller was quoted as saying.
“We’ve made all this capacity for homegrown soyabean oil, and instead foreign feedstocks are coming in to fill that void that we’re here to fill.”
NOPA, which represents US soyabean crushers such as Cargill and ADM, said the rise in imports comes alongside a 30% expansion of the domestic soyabean crushing capacity and investment of billions of dollars in increasing renewable fuel volumes.
In addition to Chinese imports, NOPA and others in the industry are closely tracking all imported feedstocks, including tallow and yellow grease, according to the report.
Against this backdrop, the 2023-2025 Renewable Fuel Standard (RFS) volumes set by the Environmental Protection Agency (EPA) “were so completely off the mark” that it constrained the market and disadvantaged domestic feedstocks in comparison to imported UCO and tallow, Clean Fuels Alliance America (CFAA) director of public affairs and federal communications Paul Winters was quoted as saying.
According to NOPA, biofuel tax credits included in the Inflation Reduction Act (IRA) are incentivising the sharp increase in feedstock imports.
As a result, the group plans to push for the new 45Z tax credit to be solely for domestic feedstock producers. The current 40B credit for sustainable aviation fuel (SAF), which is set to be replaced by the 45Z incentive next year – allows registered fuel importers to receive incentives.
“We’re okay with it [imported feedstock] coming in, but we don’t think it should qualify for the tax credit,” NOPA’s Buller said.
There was now an oversupply of oils and fats in the US market, which was impacting domestic prices, CFFA’s Winters added.
Additionally, the domestic and international supply of soyabean and soyabean oil is “depressing” prices, according to the report.
According to an S&P Global Commodity Insights study commissioned by NOPA and published on 9 July, domestically produced feedstocks are on track to support an additional 1.4bn gallons (5.3bn litres) of renewable diesel and biodiesel by 2030.
The report’s findings made it clear the US oilseed industry was more than capable of meeting demand for fuel, Buller was quoted as saying in a statement.
Meanwhile, the industry is also pushing for greater traceability and verification of feedstock imports due to allegations that some of the product entering the US market is fraudulent, according to the report.
