State biodiesel production credit front and center as industry leaders meet lawmakers for Iowa Biodiesel Day on the Hill

Biodiesel advocates from across Iowa gathered at the State Capitol Feb. 19 for the Iowa Biodiesel Day on the Hill, urging lawmakers to extend and increase the state’s biodiesel production tax credit.

It’s the single most critical step to stabilize and grow Iowa’s struggling biodiesel industry, supporters said.

Hosted by the Iowa Biodiesel Board, the annual event brings producers, soybean farmers and industry partners together with legislators to discuss the challenges facing biodiesel and the policy solutions needed to keep plants operating and workers employed.

After one of the most difficult years in industry history, Iowa biodiesel production is estimated to have dropped almost a third compared to the previous year.

Most plants have idled periodically or reduced production in the face of uncertain federal policy and unfavorable market conditions, which made operations economically unsustainable.

Against that backdrop, industry leaders stressed that strengthening Iowa’s biodiesel production tax credit is essential to helping the industry bounce back.

“The biodiesel production tax credit is the most important tool the state has to keep our plants running and our people working,” said Grant Kimberley, executive director of IBB. “Extending and increasing this credit to 5 cents per gallon (cpg) and providing long-term certainty through 2030 will give producers the stability they need to make sound business decisions. It’s an investment that pays dividends for Iowa farmers, rural jobs and our energy security.”

The credit is currently set to expire Dec. 31, 2027.

Legislation this session would expand it from 4 cpg to 5 cpg and extend it through 2030.

When the last extension of the credit occurred with the governor’s biofuels access legislation in 2022, Iowa had 11 operating biodiesel plants. Today, only eight remain.

Since the credit is capped per facility, and fewer operating plants are around to claim it, the cost of the credit to the state is expected to stay well within its original budget footprint, Kimberley said.

Federal uncertainty continues to weigh heavily on the industry.

While proposed Renewable Fuel Standard volumes for biomass-based diesel are the highest ever for 2026 and 2027, the rule has not been finalized, leaving producers in a precarious position.

Similarly, guidance on the federal 45Z clean fuel production credit has only recently been proposed and still has unanswered questions, limiting producers’ ability to fully utilize the incentive.

Despite those challenges, biodiesel remains a powerful economic driver for Iowa.

In 2024, biodiesel plants generated more than $1.6 billion in direct sales and supported 1,609 jobs statewide, contributing $520 million in value added to the Iowa economy when accounting for indirect and induced effects, according to a study by Decision Innovation Solutions.

During the Feb. 19 meetings, IBB members also discussed additional legislative priorities, including lifting the cap on Renewable Fuels Infrastructure Program grants for biodiesel projects, requiring B20 compatibility in state-leased diesel vehicles, and improving fuel retailer reporting to ensure accurate tracking of biofuels’ impact.

Kimberley stressed, however, that extending and increasing the biodiesel production tax credit remains the top priority.

“Strengthening this credit ensures our farmers have a strong market for their soybeans, our communities retain good-paying jobs, and our state remains a biofuels powerhouse,” Kimberley said.

Iowa is the nation’s leading biodiesel-producing state and soybean-oil producer.