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(Bloomberg) -- The US is moving to curb imports of used cooking oil, preventing foreign supplies used to make biofuels from qualifying for a lucrative tax credit.
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In long-awaited guidance, the US Treasury signaled that fuels made with foreign-sourced supplies won’t be allowed under the so-called GREET model, a Department of Energy tool used to determine the full sweep of greenhouse gases emitted from the transportation and energy industries.
The move comes after a flood of supplies from China reached US shores at cheaper prices than soybean oil produced locally. The decision is a win for American farmers, who have been counting on a boom in soy-heavy biofuels like renewable diesel to sell their crops.
Soybean oil futures for March jumped by the exchange limit in Chicago on Friday, surging 7%, the most since June 2023.
Shares of Bunge Global SA, the world’s biggest oilseed processor, gained 5%. The joint owners of Diamond Green Diesel, North America’s biggest renewable-diesel maker, jumped, with Darling Ingredients Inc. surging as much as 10% and Valero Energy Corp. climbing as much as 4%.
“This tax credit is essential to US competitiveness and to reduce emissions in the transportation sector with more affordable, cleaner fuel,” US Deputy Energy Secretary David Turk said in a statement. “The final guidance released today provides clarity and certainty to America’s world-leading biofuel industry.”
The tax incentive that took effect on Jan. 1 is part of President Joe Biden’s signature climate law, the Inflation Reduction Act. While the guidance gives Donald Trump — a supporter of fossil fuels —something to work from, it’s unclear how far he will take his pledge to roll back the IRA.
US biofuels and corn groups criticized the overall guidance as lacking details on what qualifies for tax credits.
Geoff Cooper, chief executive officer of ethanol trade group Renewable Fuels Association, said it fell short of expectations and doesn’t give producers of corn-based US ethanol the certainty they seek. Emily Skor, CEO of ethanol lobbying group Growth Energy, said the guidance “still lacks the critical details that are needed to help ensure that American biofuel producers and their farm partners can lead the world in clean fuel production.”
The National Corn Growers Association said more clarity is needed about the specific environmental practices that will be required for accessing the credit. “What a missed opportunity for growers,” said President Kenneth Hartman Jr., an Illinois farmer.