Major U.S. fuel and retail trade groups, including NATSO, SIGMA, and NACS, have come out in strong support of the proposed Biodiesel Tax Credit Extension Act of 2025. Introduced by Representative Mike Carey (R-Ohio) and backed by six bipartisan lawmakers, the bill seeks to extend the federal biodiesel blender’s tax credit under Section 40A for an additional two years. The credit, which expired at the end of 2024, previously provided financial incentives to fuel retailers blending biodiesel or renewable diesel with traditional fuels. The bill would give taxpayers the flexibility to continue using the straightforward 40A credit or opt into the more complex 45Z Clean Fuel Production Credit introduced under recent federal clean energy reforms.
Since the credit’s expiration, renewable fuel volumes have seen a dramatic 59% drop, triggering disruptions across fuel supply chains. The sudden decline has especially impacted the commercial transport sector, which relies heavily on the biodiesel tax credit to power trucks and shipping operations. Industry leaders argue that the uncertainty created by the newer 45Z credit structure has discouraged investment and led to a contraction in renewable fuel production capacity.
A Proven Policy to Support Renewable Fuel Growth
Supporters of the extension argue that the 40A tax credit has a long track record of success. Originally implemented in 2004, it helped transform the U.S. biodiesel tax credit market, increasing production from just 100 million gallons annually in 2005 to more than 4 billion gallons by 2023. Advocates credit the program with encouraging infrastructure expansion, job creation, and more widespread adoption of cleaner fuels across the transportation sector.
David Fialkov, Executive Vice President of Government Affairs for NATSO and SIGMA, emphasized the urgent need for legislative action. “This legislation comes at a critical juncture,” he stated, highlighting the role of the biodiesel credit in maintaining fuel supply stability and enabling fuel retailers to meet customer demand. Fialkov added that restoring the credit would send a clear signal to the market and reinvigorate investment in renewable fuel production.
Matt Durand, Deputy General Counsel at NACS, echoed this sentiment, praising the bill’s simplicity and effectiveness. “This legislation reflects a proven policy for bolstering domestic production and reducing consumer costs,” he said. The industry maintains that extending the credit would immediately alleviate current supply constraints and help stabilize prices across the fuel supply chain.
Broader Economic and Environmental Impact
Beyond the immediate benefits to fuel retailers, the proposed extension is also being championed by trucking firms, shipping companies, and heating oil providers. These groups argue that lower biodiesel tax credit costs translate directly to reduced shipping expenses, which can help curb inflation and make goods more affordable for consumers. Additionally, the bill is seen as a key measure in supporting emissions reductions using existing diesel-powered fleets rather than requiring rapid and costly fleet replacements.
Proponents contend that the 40A credit offers a more accessible and effective path to environmental progress than the still-evolving 45Z system. As policymakers weigh long-term strategies for decarbonizing the transportation sector, the fuel industry hopes this extension will serve as a bridge to cleaner energy without disrupting current operations or supply chains.
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