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Decoding U.S. Renewable Diesel Flow: Market Dynamics Through 2025

Decoding U.S. Renewable Diesel Flow: Market Dynamics Through 2025

Key Takeaways

After being a net importer in 2024, the U.S. saw a 72.62% YoY decrease in 2025 amidst a transition from blenders credit to the Section 45Z Tax Credit.
Domestic supply got redirected, with blending volumes of RD increasing in Oregon by 8.52 percentage points and declining in California (by 8.79 percentage points) and Washington (by 1.06 percentage points) from 2025Q2 to 2025Q3, reflecting Oregon’s relatively stronger program incentives.
U.S. producers, including those in PADD 5, increasingly relied on international export markets, with about 20% of RD volumes exported in 2025 (peaking at 28% in October), reducing availability in the domestic diesel blend.
Exports flowed to Canada and increasingly to the EU, where RED III implementation and the removal of double-counting for waste-based fuels in Netherlands have raised RD demand.

U.S. Renewable Diesel Market Imports

In 2024, Supply of Renewable Diesel (RD) consistently exceeded production, leading the U.S. to rely on significant imports and inventory draws to cater to the domestic Low Carbon Fuel Standard (LCFS). Reflecting this, U.S. RD imports remained relatively elevated throughout 2024. During this period, the supply chain was global in scope, Singapore provided the bulk of supply (69.49%), supplemented by significant volumes from Canada (22.90%), Malaysia (1.12%), Finland (5.14%), and the Netherlands (1.80%).

This landscape shifted in 2025, with total imports contracting by an annual average of 72.62%. This decline was driven by the transition from the Blenders Tax Credit to the Section 45Z Clean Fuel Production Credit on January 1, 2025. Unlike the Blenders Tax Credit, which was origin-agnostic, Section 45Z is a producer-side incentive specifically for clean fuels produced at domestic facilities. By tying credit values to Carbon Intensity (CI) scores and origin of feedstocks, Section 45Z structurally enhanced the price competitiveness of U.S. domestic production and Canadian-feedstock supply. While Canada consolidated its position as the dominant remaining supplier, limited imports from Singapore persisted through 2025, particularly into the PADD 5 region, as they continued to provide Program incentives under state-level programs such as California’s LCFS, even in the absence of federal support.

Source: US EIA

U.S. Renewable Diesel Production vs. Domestic Supply of Renewable Diesel

U.S. production of renewable diesel and biodiesel fell in the 2025Q1 due to uncertainty related to federal biofuel tax credits and negative profit margins. Poor profitability in 2025Q1 contributed to production declines but supply declined even further as seen in the chart below.

Source: US EIA

The softness in domestic market appears to be driven by relatively weaker credit prices, which has reduced the economic incentive for blending (as shown in the chart below, derived using benchmark CI, credit prices, and the average CI of fuels). Credit Price in major U.S. states like California and Washington remained stagnant in 2025, in contrast to rising prices in Canada and Oregon. Combined with declining imports, this imbalance led to a notable reduction in RD blends within the general diesel pool. With blending volumes of RD declining in California (by 8.79 percentage points) and Washington (by 1.06 percentage points) from 2025Q2 to 2025Q3, the contraction became more evident. For California, the volumes fell to ~538 million gallons in 2025Q3 from ~607 million gallons in 2025Q2. While for Washington, RD volumes recorded the steepest decline, falling 65.3% YoY.

Source: cCarbon Research

The Oregon market saw a quarterly increase in RD volumes from 10.12 million gallons in 2025Q2 to 30.10 million gallons in 2025Q3, driven by higher credit prices and a more lenient benchmark CI of 88.87 compared to California (CI of 81.7). The blending volumes of RD increased in Oregon by 8.52 percentage points from 2025Q2 to 2025Q3, reflecting Oregon’s relatively stronger program incentives. Despite this growth, Oregon’s RD blending in diesel pool stood at around 14%, indicating that the market still has substantial capacity to absorb additional volumes given its attractive incentive structure as compared to other US markets.

Source: cCarbon Model Outlook

Overall, US RD supply has remained lower than production since December 2024. To manage this surplus and protect margins, producers have explored supply opportunities beyond the West Coast. While there have been some efforts to establish more domestic demand drivers, however, the market’s primary safety valve has become an international export trade. U.S. surplus production increasingly flowed to foreign markets like Canada and Europe either to capture higher credit price in the Canadian market or to satisfy stringent European mandates, effectively sculpting the U.S. export market.

U.S. Exports of Renewable Diesel

Throughout 2025, U.S. renewable diesel exports followed a structurally higher trajectory, shifting from net importer status in 2024 to net exporter, with renewable diesel exports averaging 20% of total production. October marked the peak, with exports reaching 28%.

Source: US EIA

The chart below shows that even PADD 5 regions exported renewable diesel despite hosting LCFS markets, reaching 11.2% in 2025 with a peak of 27.44% in October.

Source: US EIA

The surplus primarily flowed toward Canada and key European markets, including the Netherlands, Belgium and Norway. Throughout the year, credit prices in Canada grew, even higher than the Oregon market, offering U.S. producers some of their strongest margins. In Europe, RED III has raised transport ambitions, doubling the headline target for renewables in transport from 14% under RED II to at least 29% (or a 14.5% reduction in emission intensity) by 2030. The directive also introduces additional sub-targets, including a combined 5.5% target for advanced biofuels and Renewable Fuels of Non-Biological Origin (RFNBOs), with a minimum 1% RFNBO share. Further incentives are provided through accounting multipliers—1.2× for advanced biofuels and 1.5× for RFNBOs—when used in aviation and maritime applications, alongside an indicative 1.2% renewable fuel target for maritime transport. These measures are expected to strengthen demand for waste-based biofuels, including renewable diesel. Additionally, SAF production continued to compete with RD for common feedstocks such as used cooking oil and animal fats, tightening feedstock availability and potentially creating opportunities for imports of renewable diesel from external markets, including the United States.

In contrast to RD flows into EU, the occasional RD exports to UK seen in 2025 are expected to disrupt in 2026, following an investigation that found subsidized imports were causing material injury to UK RD producers. The Trade Remedies Authority has recommended new countervailing duties of between £257.80 and £303.56 per tonne. These steep costs effectively price U.S. RD out of the UK market, making future trade flows economically unviable.

Looking ahead to 2026, the EIA’s March Short-Term Energy Outlook (STEO) forecasts continued growth in U.S. renewable diesel production, projected to average 230,000 barrels per day (b/d) in 2026 and rise to 280,000 b/d in 2027, partly driven by certainty around Section 45Z tax credits. Renewable diesel supply is expected to follow this trend, averaging 210,000 b/d in 2026 and expanding to 270,000 b/d in 2027. While the U.S. is positioned to remain a net exporter of renewable diesel, the geopolitical landscape of 2026 has introduced significant turbulence. The conflict in the Middle East and disruptions in the Strait of Hormuz have sent traditional diesel prices soaring, with diesel futures rising nearly twice as fast as crude oil. These high domestic prices, driven by global supply constraints, are likely to provide a strong margin for U.S. producers to increase blending into the domestic diesel pool. Consequently, if domestic margins, lifted by high selling prices, match or exceed those of international markets, the anticipated export surge may be sidelined as producers find it more profitable to keep supply within the U.S. for the duration of the crisis.

Meanwhile, with the EU’s RED III framework increasing demand, particularly in markets like the Netherlands, where the January 2026 removal of double counting for waste-based biofuels has doubled the fuel volume required to meet targets, creating a strong price pull for U.S. exporters. This regulatory pressure may keep European premiums high enough to outbid even a surging U.S. domestic market. However, the global RD landscape is becoming increasingly competitive. The February 2026 partnership between Eni and Q8 to build a major biorefinery in Italy signals a shift, as these international projects come online, U.S. exporters will face a more crowded market abroad, which could make supplying the domestic market increasingly appealing.

Conclusion

The U.S. renewable diesel market has undergone a massive shift. In just a year, the country went from being an importer to a net exporter. While domestic supply slowed down in 2025, U.S. producers reallocated their fuel to higher-paying markets in Canada and Europe and protected their margins. Looking into 2026, stricter European mandates are creating significant opportunity for U.S. exports. Yet sustaining a net export position will depend not only on regulatory demand in Europe but also on how U.S. producers navigate geopolitical disruptions and elevated domestic margins. Global supply shocks could redirect volumes inward, even as European premiums continue to pull products overseas.

Watch out for our next article where we provide more detailed coverage on these factors in the next inline on the series, specifically looking at the current margin loss vs. gain in different regions, clarity over 45Z credit, and how the geopolitical situation is reshaping the pricing gap.