Uncertainty for energy policy as US awaits new administration: 2025 preview

While the US readies for the return of a Trump administration in January, the feedstock and biodiesel industries hang in the balance, awaiting further clarity on import tariffs and the finalization of tax credits. Meanwhile, the electric vehicle (EV) and sustainable aviation fuel (SAF) sectors also face uncertainty as climate-friendly policies and standards are sure to come under the scrutiny of legacy energy company-backing Trump, experts told Fastmarkets.

Feedstocks

US vegetable oil prices are in for more turbulence in 2025, with import tariffs and the finalization of biofuel tax credits expected to have an impact on market direction.

“The next steps for biofuel policy and used cooking oil (UCO) tariffs are the difference between sub-40-cent bean oil and 50-cent bean oil,” Stabro Corp partner Alex Fox said in a December report.

Globally, palm oil prices surged in 2024, with US soybean oil ending the year as the cheapest edible oil. In October, Argentina’s soybean oil basis premiums rose above those in the US for the first time since 2022, making the US Gulf export market a more attractive option for foreign buyers and driving a rush of new US soybean oil exports in the final weeks of 2024.

Contrary to the uptick in foreign exports, demand from the US biofuel sector fell sharply in 2024, after producers slowed or halted feedstock purchases ahead of the transition from the Blenders Tax Credit (BTC) to the 45Z Clean Fuel Production Tax Credit (CFPC) on January 1.

45Z is expected to provide a much lower credit incentive for biofuels produced from soybean oil and canola oil, compared with the flat $1-per-gallon credit that is granted under the BTC.

The US Treasury Department has repeatedly delayed the release of final guidance on eligibility and emissions rates under the new credit. As a result, many smaller biofuel producers told Fastmarkets that they intended to idle production in January due to the lack of CFPC clarity.

While the Treasury indicated it would provide final guidance on 45Z before President Biden leaves office in January, many within the industry have called for a one-year extension of the BTC through the end of 2025. This would give the Treasury extra time to complete the necessary guidance on the CFPC and would be supportive for soybean oil prices.

Although US soybean oil stocks ended 2024 at their tightest levels in years, the US market was previously flooded with cheap imports of foreign feedstocks like UCO and tallow, and this also weighed on US vegetable oil demand and prices.

In a move expected to curtail US UCO and canola oil imports and drive up domestic soybean oil demand and prices, Trump said he intends to impose new tariffs on the imports of all goods from China, Mexico and Canada in January.

Trump has vowed to implement an additional 10% tariff on products, including UCO, from China and place a 25% tariff on goods from Canada, including canola oil. Canada exports about 70% of its canola oil to the US. “[The new tariffs] should be bullish for US soybean oil demand, as food customers should be incentivized to switch from canola oil to soybean oil,” a market source said.

Biofuels

Similarly to vegetable oils, the combination of the transition from the $1 per gallon BTC to the CFPC and anticipated Renewable Fuels Standard (RFS) compliance and policy issues could set an uncertain tone for most standalone biodiesel producers in the new year.

“Many producers do not intend to run due to impossible economics,” a biodiesel producer said, adding that “capital is not free” and that interest rates are higher than net income margins for some producers [and these facilities], which means they “cannot afford to front a non-existing credit to run.”

Advanced Biofuels Association president Mike McAdams does not expect the industry to be on the incumbent Trump administration’s radar in its first year, “with the exception of the CFPC, providing a partial waiver for cellulosic biofuel volumes, and getting the RFS mandates in place for 2026 through 2028.”

Energy, not climate, is expected to be one of the centerpieces of the new administration. US Treasury nominee Scott Bessent has publicly opposed the Inflation Reduction Act (IRA), telling US media that the deficit will be shrunk through “deregulation, energy dominance and re-privatizing the economy.”

He told CNBC on November 6 that “turning off the [Inflation Reduction Act]” was going to be a priority, adding that he expected no pushback from “slowing down or cutting off this IRA.”

“80% of the money going out the door is headed to Republican states with the IRA having strong bipartisan support,” McAdams said in response.

The CFPC meanwhile has received little praise from the biofuels industry, while McAdams expects some “surgical adjustments” from the new administration.

Lack of CFPC clarity is also causing discord among biofuel factions with many hoping for a BTC revival.

“If the biofuel industry can’t present a unified position to Congress, it could end up with nothing,” Clean Fuels Alliance America’s director of public affairs and federal communications Paul Winters told Fastmarkets, adding that unified goals will be necessary to achieve larger biofuel mandates in 2026 through 2028.

Industry members meanwhile believe the new administration will have these mandates ready by November 2025 and remain hopeful they will be larger enough to encourage continued growth.

EVs

Trump’s return to office is meanwhile likely to lead to a dilution of mandates and regulations surrounding cleaner vehicles, experts told Fastmarkets.

While sources broadly feel it is too early to predict what moves the new administration will make, Fastmarkets EV battery raw materials demand analyst Connor Watts said the country is highly likely to remove its targets for EV sales – or as Trump put it “ending the EV mandate” – alongside most of the EPA’s power in improving ICE vehicle emissions.

“This would theoretically improve their competitiveness further relative to EVs,” Watts said, adding that pushback on this will have to come from the Republican states that would like to continue benefiting from the creation of high-skill employment in the form of battery factories supported by the existing suite of legislation.

“Mandates like these will be going back under the radar under a Trump administration that wants to broadly deregulate,” head of global oil and downstream and North America energy research at Energy Intelligence Abhi Rajendran said, adding that “some of those [emissions] standards were being brushed aside anyway because a lot of US carmakers, were, even in Europe, backtracking on commitments to go all electric.”

Meanwhile, the Electric vehicle (EV) and Fuel Cell Electric Vehicle (FCEV) Tax Credit under the IRA could also be cut. The credit, which gives a $7,500 reduction on the purchase of new EVs delivered on or after January 1, 2023, has not had a significant impact on EV adoption, however. Fastmarkets understands that carmakers moved to increase retail prices by the same value shortly after its introduction, so little difference was felt by US consumers.

“While some people were taking advantage of the credit, it remained mostly underutilized,” Rajendran said, adding that its potential axing is not expected to make much difference to a market “that was already slowing down anyway.”

SAF

Prospects for the greener jet fuel remain fragile in the US, driving mixed opinions among the market as uncertainty prevails.

“What will happen with Trump? Nobody knows,” one source said.

The CEO of one SAF startup said that despite not focusing on carbon mitigation, Trump might not discourage SAF production for practical reasons. “It’s good for rural economic development and for job creation,” the CEO said, and helps reduce commodity costs by increasing supply. Expansion of SAF production, is “solving a problem the marketplace wants,” he added.

The first Trump administration was relatively supportive of SAF producers because of the influence of SAF-friendly Senators Chuck Grassley (Iowa) and John Thune (South Dakota), given the fuel’s potential to support agriculture and industry in their states, a third source said, implying that outcomes for SAF could depend on who has the president’s ear over the next four years.

Others have been more pessimistic, worrying that federal SAF tax credits created by the IRA could be repealed or simply wither without necessary guidance from the Internal Revenue Service.

This comes in response to Trump’s September comments labeling the IRA the “Green New Scam” and his vow to “rescind all unspent funds” in the bill. So far Trump has not specified further which programs might be targeted.

An attempt in July by four members of the House of Representatives to extend the expiring BTC by one year has so far appeared to be dying in committee.

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