Concern about rising prices and unstable sources of petroleum fuels is driving the search for U.S. domestically produced, renewable transportation fuels, such as biodiesel. Federal incentives of up to $1.10 per gallon have been supplemented by additional incentives and mandated biodiesel use in many states. The Renewable Fuel Standard in the Energy Independence and Security Act of 2007 requires the domestic use of 1 billion gallons of biomass-based diesel fuel by 2012, most of which likely will be biodiesel.
U.S. biodiesel production is primarily from soybean oil, but recent high prices have forced many producers to use lower-cost feedstocks such as animal fats and used frying oils. A large portion of domestic production currently is exported to Europe, where the devalued dollar and combined U.S. and European subsidies contribute to the competitive price of imported biodiesel.
Although vegetable oils can be used directly in diesel engines, experience has shown that excessive deposits in the engine cylinder degrade engine performance and increase emissions over time. Conversion to methyl esters allows vegetable oil to be used in diesel engines with fewer problems. These methyl esters have become known as “biodiesel.” This document reviews the technology of biodiesel production and the issues and policy implications associated with the expanded use and production of biodiesel.