Growth of the Biodiesel Industry

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Because biodiesel and other biofuels can help countries reduce their dependence on imported fossil fuels, and because biofuels frequently produce less air pollution and less net carbon emissions than fossil fuels, governments around the world became very interested in promoting their use. Governments issued mandates requiring the use of biofuels and offered tax credits for their use. As a result, production of biodiesel grew rapidly. By 2004, there were 25 biodiesel plants in the United States, and by 2009, the National Biodiesel Board listed over 200 manufacturers on its Web site. Worldwide, biodiesel production grew from about 1 billion liters in 2001 to 6 billion liters in 2006 (Pahl, 2005, p. 167; National Biodiesel Board; Worldwatch Institute, 2007, pp. 4-6).

Government policy has been very important to the development of the biodiesel industry in the United States. The Energy Policy Act of 2005,which was intended to reduce the need for imported petroleum, required government fleets to purchase alternatively fueled vehicles. When the Department of Energy decided that biodiesel use could substitute for a portion of a fleet’s vehicle purchase requirement, biodiesel became an attractive option for some fleet operators.

In 2007, the combination of historically unprecedented high petroleum prices and a $1.00/gallon federal excise tax credit in the United States caused the biodiesel industry to expand greatly. This was aided by mandates in states like Minnesota, which required that 2% biodiesel be used in all diesel fuel sold within the state. More recently, the National Renewable Fuel Standard,  released in 2010, requires petroleum companies to buy alternative fuels in proportion to their sales of traditional petroleum fuels. This is expected to cause a similar boost in biodiesel sales.

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