Alternative diesel fuels the law of unintended consequences

In our increasingly urgent quest to clean up our climate-altering, carbon-fueled culture, biodiesel and renewable diesel have become two new darlings of alternative fuel advocates.

While diesel fuel may be diesel fuel, biodiesel and renewable diesel are not the same thing.

According to the U.S. Department of Agriculture, both are “produced from the same renewable feedstocks such as vegetable oils, animal fats, or used cooking oil.”

The key “difference is that renewable diesel is produced using a hydrogen treatment which makes it chemically equivalent to petroleum diesel.”

That means renewable diesel “can be blended at higher levels and transported using existing pipelines.”

Production of U.S. biodiesel peaked at 1.8 billion gallons in 2018-2019 while renewable diesel production — just 40 million gallons in 2010 — passed 2.3 billion gallons in 2022-2023.

That rapid rise also increased U.S. soybean oil use; 46% of all U.S. soybean oil in 2022-2023 was used in the production of alternative diesel fuels.

Also, “imports of animal fats and vegetable oils … to use as feedstocks for renewable diesel production” increased, notes USDA.

Other U.S. trade operations were affected, too.

As “U.S. soybean crush expanded to produce more (soybean) oil, driven by high soybean oil prices fueling strong crush margins … U.S. soybean exports declined on expanding Brazilian supplies.”

In addition to that surprising development, the “United States became a net soybean oil importer for the first time in 2023.”

Few market watchers saw either price-rattling change coming.

Likewise, few predicted that California’s adoption of its Low Carbon Fuel Standard in 2007 would create “a flood of credits from renewable diesel and manure biomethane” digesters.

That flood means the Golden State “now consumes more than half of the national (biodiesel) supply even though California consumes only 7% of the nation’s overall diesel fuel.”

It’s a modern example of the Law of Unintended Consequences: California’s highly incentivized alternative diesel program is so lucrative that it sucks up half the nation’s vegetable- and tallow-based diesel supply and, in the process, all but ensures other states’ air will become dirtier because very few other states have similar incentives to create renewable diesel markets.

Here’s another unintended consequence: According to recent reporting by the Food and Environment Reporting Network, “the United States imported near-record volumes of renewable diesel each of the first five months of this year … which were 29% higher than in the same period in 2023.”

Moreover, “the imports … came from one producer, Neste, and were shipped almost wholly to the West Coast.”

In other words, California’s renewable diesel markets — and now Oregon and Washington’s similar programs — are so subsidy lucrative that one company, Neste, based in Espoo, Finland, is sending an average of 30,000 barrels of renewable diesel per day to the West Coast to meet the government-generated demand.

Also, according to the U.S. Energy Information Administration, “the larger imports were probably driven by the expansion of Neste’s plant in Singapore and increased storage capacity at a terminal in Los Angeles.”

So, Neste, a tightly-held company where the “Prime Minister’s Office in Finland … owns 35.91% of the shares,” has sent an average of 3 million gallons of renewable diesel fuel 7,600 miles from Singapore to Los Angeles every day for nearly half of 2024.

Additionally, according to Finnish press reports, “Neste consumes 1% to 2% of the world’s palm oil production” in its alternative fuels program.

As such, if any aspect of the California alternative diesel game is green, it’s likely due to the U.S. dollars underwriting it, not any environmental benefits generated by it.