Fueling Biofuels: How Legislation and Tariffs Shape Lipid Feedstock Supply 

Two of the world’s largest biofuel markets, the U.S. and Europe, share several common trends. Firstly, there is a growing demand for biomass-based biodiesel (BBD) – a category including renewable diesel (RD) and biodiesel (BD) – and sustainable aviation fuel (SAF). Secondly, both markets have become increasingly dependent on imports of lipid biofuel feedstocks. Finally, for different reasons and through various approaches, both markets are now seeking to restrict the very imports that their expanding BBD sectors rely on. 

This article takes a closer look at these dynamics and explores some potential implications.  

As shown in Figure 1, imports now account for roughly 30% of the U.S.’s overall lipid biofuel feedstock supply. This share has risen sharply since 2022, coinciding with the recent ramp-up in the BBD Renewable Volume Obligation (RVO) under the U.S. Renewable Fuel Standard (RFS). Concurrently, programs like the California Low Carbon Fuel Standard (LCFS) and similar initiatives on the West Coast have driven strong demand for low-carbon feedstocks such as used cooking oil (UCO), animal fats, and distillers corn oil (DCO). This demand has outpaced domestic supply, making the supply of UCO and animal fats increasingly reliant on imports. 

Figure 1: U.S. Lipid Biofuel Feedstock Supply Sources: EIA, USDA Foreign Agricultural Service – GATS,  USDA ERS Oil Crops Yearbook , Stillwater analysis and 2025 Feedstock Outlook 

UCO constitutes the largest volume of lipid feedstock imports, representing around 70% of total UCO supply in 2024 and 2025. Over half of these imports come from China, with Canada, Malaysia, and the UK as other key sources. 

Animal fat supply is less import-dependent, at about 30%, reflecting a narrower global supply base. Key import sources include Brazil, Canada, and Australia. Additionally, canola oil usage has grown significantly since 2022, supported almost entirely by imports from Canada. 

It’s important to note that despite imports, the U.S.’s combined BD and RD capacity is not fully utilized. In 2024, there was an estimated excess BBD production capacity of about 1.6 billion gallons, compared to a total capacity of roughly 6.6 billion gallons – around 75% utilization. 

Europe’s lipid biofuel feedstock market tells a similar story, as shown in Figure 2 below. Traditionally a BBD-dominated market (as opposed to an ethanol-dominated one), Europe has seen rising demand for waste feedstocks driven by the double counting provisions under the EU Renewable Energy Directive (EU RED II), alongside plans to phase out food crop-based feedstocks. The market has also been preparing for the 2025 introduction of the SAF mandate (ReFuelEU Aviation), which excludes food-based feedstocks. Consequently, imports of waste feedstocks now constitute 20-25% of the EU’s total lipid biofuel feedstock supply and about 35% of its waste lipid supply (EU RED Annex IX, Parts A and B feedstocks). 

Figure 2: EU Lipid Biofuel Feedstock Supply[1]  Sources: Eurostat SHARES 2023, Eurostat Energy Balances, Eurostat Comext trade data, Stillwater analysis and 2025 Feedstock Outlook 

As in the U.S., UCO imports have historically represented the largest source of waste oil imports in the EU, again primarily from China, accounting for approximately 50% of the total supply. The EU is also highly import-dependent on two feedstock types unique to the region: 

• Palm Oil Mill Effluent (POME): Waste oil from palm oil mill settling lagoons, imported solely from Indonesia and Malaysia. 

• Crude Tall Oil (CTO): A pulp and paper Kraft mill waste product. With pretreatment, this can be a suitable feedstock for HEFA units, dependent on the unit’s ability to process high Free Fatty Acids feedstocks. Europe’s CTO supply mainly comes from the Nordics but is insufficient to meet demand, leading to imports primarily from the U.S.’s  pulp and paper sector. 

Animal fat imports play a smaller role due to the EU’s strict sanitary regulations, with the UK as the EU’s largest importer in this category. 

Like the U.S., Europe’s combined BD and RD capacity is currently operating at around 55% utilization.    

The challenges to imports

Given that both BBD sectors operate below maximum capacity and aim to grow, one might expect the U.S. and Europe to encourage more lipid feedstock supplies, including imports. The reality, however, is more complicated.  

U.S. Measures Restricting Imports

The U.S. has taken three key steps that seek to discourage lipid feedstock imports: 

1. Tariffs under the U.S. Reciprocal Trade Policy2 potentially affect imports from key countries such as China, Canada, and Brazil.  
2. The 45Z Clean Fuel Production Credit (CFPC) exclude biofuels produced from imported feedstocks – except those from Canada and Mexico. 
3. The EPA’s proposed Set 2 revisions to the RFS may halve RIN generation for biofuels produced from imported feedstocks. 

Table 3 summarizes these impacts and the likely tariff treatment of key 2024 lipid feedstock imports to the U.S. 

Table 3: Summary of CFPC, RFS Set 2 proposal, and potential tariff changes

Table 4 provides an estimate of the economic impact of these changes under prevailing feedstock prices, under the assumption that imports remain the marginal source of supply to the U.S. and hence the marginal BBD price must increase to offset the value loss and maintain margins at or around variable cost, with a consequent upward adjustment to the D4 RIN price.   

Figure 4: Estimated economic impact of CFPC and tariff changes

As table 4 suggests, the economic impacts of the tariffs (if applied) are significant, suggesting an upward movement in RIN prices across the board. In some cases, specifically for Chinese and Brazilian imports, the potential price impacts are likely to be prohibitive in terms of future trade flows.  For example, while overall UCO imports in July (latest customs data) are up 7.6% from the same period last year, Chinese volumes are 43% down compensated by large % increases from places such as Malaysia, Australia and South Korea. Conversely, tallow imports from Brazil are up 40% year-to-July suggesting importers have been upping volumes before the 50% tariff came into force on August 6th. 

European Concerns and Actions

The political discourse in Europe centers on the lack of transparency of the sustainability credentials on imported feedstocks. There are fears that double counting under EU RED encourages adulteration of waste oils with virgin vegetable oils, notably palm oil linked to deforestation. This concern centers on UCO imports from China and POME imports from Indonesia and Malaysia. 

These issues prompted the EU’s Committee on Sustainability of Biofuels, Bioliquids and Biomass Fuels to suspend ISCC3 certification of some waste-based biofuels in early 2025 amid concerns about verification weaknesses, particularly for imports from Southeast Asia.4 

EU and member-state responses include: 

• The EU Commission is exploring tighter sustainability regulations, extending traceability systems, and reviewing voluntary sustainability standards. 

• Germany’s draft EU RED III implementation proposes on-site inspections by its regulators at production facilities including those based outside of Germany, stricter documentation, bans on palm-oil biodiesel, and reduced food-based biofuel caps. 

• France supports stricter sustainability checks, customs enforcement, and a readiness to reject sustainability certificates from biofuels from suspicious providence 

• The Netherlands is reviewing double counting rules, chain-of-custody controls, and tightened crop-based fuel caps. 

These initiatives have yet to show clear impacts in official trade data, but anecdotal evidence suggests declining UCO and POME imports from Asia. Separately Indonesia has also imposed export taxes on POME to retain supplies for domestic biodiesel mandates and cooking oil security. 

Overall Takeaways

The combination of regulatory, trade, and sustainability challenges is creating uncertainties for lipid biofuel supplies in both the U.S. and Europe. 

The U.S. appears better positioned to respond to potential supply shortfalls, largely due to its domestic soybean sector, which can serve as a marginal supply source for BBD feedstocks – though the speed of its supply response and sustainability remain open questions. 

Europe faces a more complex situation. While increasing domestic UCO use is possible, collection rates are already high in many member states. Alternative lipid sources like cover crops or advanced technologies are potential future options exist but have deployment risks and longer lead times. 

These complex trends will be explored further in Stillwater’s forthcoming 2025 Lipid Feedstocks Supply Outlook. Contact us to learn more about this subscription offering.