The biofuels industry in the United States stands at a critical juncture, bolstered by legislative efforts to extend tax credits and facing new opportunities and challenges amid tariff turmoil. As the nation seeks to balance energy independence, environmental sustainability, and economic stability, biofuels—derived from renewable sources like corn, soybeans, and organic waste—are gaining traction. Here we explore the current state of biofuels production, recent legislative initiatives to support the sector, and how these developments could provide a lifeline to farmers grappling with trade disruptions.
The State of Biofuels Production
Biofuels, including ethanol, biodiesel, and renewable natural gas, are a cornerstone of the U.S. renewable energy landscape. In 2024, the U.S. produced approximately 17.5 billion gallons of ethanol, primarily from corn, and over 2.5 billion gallons of biodiesel, largely from soybean oil and other feedstocks, according to the U.S. Energy Information Administration (EIA). The renewable fuel standard (RFS), established under the Energy Policy Act of 2005, mandates blending biofuels into transportation fuels, driving consistent demand. Recent advancements have expanded the use of biofuels in aviation, with sustainable aviation fuel (SAF) projected to reach 3 billion gallons annually by 2030, as highlighted at the High-Performance Low-Carbon Liquid Fuels Summit in April 2025.
The industry is evolving rapidly. Companies like LanzaJet are pioneering SAF production from ethanol, aiming to decarbonize aviation. Meanwhile, innovations in feedstocks—such as landfill gas and organic waste—are diversifying biofuel sources, reducing reliance on traditional crops. However, the sector faces challenges, including high production costs and competition from fossil fuels, particularly under shifting policy priorities.
Legislative Efforts to Bolster Biofuels
Recent bipartisan legislative initiatives signal strong support for biofuels, particularly through tax credits that incentivize production. The Farmer First Fuel Incentives Act, reintroduced in April 2025, aims to extend the Clean Fuel Production Credit (45Z) through 2034, beyond its current expiration in 2027. This credit, part of the Inflation Reduction Act, provides financial incentives for producing low-carbon fuels, including biofuels from U.S.-grown feedstocks. The bill enjoys bipartisan support from senators in agriculture-heavy states, such as Amy Klobuchar (D-Minn.), who stated, “By extending the credit for another ten years, this legislation gives farmers and biofuel producers the certainty they need to provide consumers with affordable, lower-carbon fuel options.”
Another legislative proposal would introduce a $1-per-gallon tax credit for renewable natural gas used as fuel, further expanding the scope of biofuel incentives. These efforts reflect a growing recognition of biofuels’ role in reducing emissions and supporting rural economies. However, the fate of these credits remains uncertain under the Trump administration, which has prioritized fossil fuels while expressing mixed support for biofuels. President Trump’s “Unleashing American Energy” executive order in January 2025 included biofuels alongside oil and gas, suggesting potential alignment with industry goals, but policy reversals on climate initiatives have created ambiguity.
Tariff Turmoil and Opportunities for Biofuels
The reimposition of tariffs by the Trump administration, including 25% levies on Canada and Mexico and up to 125% on China, has roiled agricultural markets. These tariffs, which began in March 2025, have prompted retaliatory measures, with China imposing tariffs of up to 15% on U.S. farm imports. Farmers, already reeling from a $49 billion agricultural trade deficit in 2024, face reduced export markets for crops like soybeans, a key biofuel feedstock. The National Farmers Union has urged Congress to support the Trade Review Act of 2025 to reassert oversight over tariffs, reflecting widespread concern among farmers.
Yet, amidst this turmoil, tariffs could paradoxically boost domestic biofuel production. As E&E News reported, “Trump’s tariffs offer new boost for biofuels” by increasing the cost of imported biofuels, such as ethanol from Brazil. This creates a competitive advantage for U.S. producers, encouraging investment in domestic facilities. For instance, higher tariffs on Brazilian ethanol could spur expansion of corn-based ethanol plants in the Midwest, directly benefiting farmers.
However, tariffs also pose risks. Increased costs for imported agricultural equipment and packaging, as noted by farm economist Cody Heller, could strain farmers’ budgets. Moreover, retaliatory tariffs may limit access to export markets, forcing farmers to rely more heavily on domestic biofuel demand.
A Boon for Farmers
The convergence of legislative support and tariff-driven domestic demand presents a significant opportunity for U.S. farmers. Biofuels rely heavily on agricultural feedstocks, with corn and soybeans accounting for a substantial share of production. Extending the 45Z tax credit would provide long-term market stability, encouraging farmers to invest in crops for biofuel production. As Sen. Joni Ernst (R-Iowa) emphasized during Agriculture Secretary Brooke Rollins’ confirmation hearing, biofuels policy, including the Renewable Volume Obligations under the RFS, is critical for rural prosperity.
Farmers stand to gain economically and environmentally. Biofuel production creates local jobs, supports rural infrastructure, and offers a hedge against volatile commodity prices. For example, the ethanol industry supports over 70,000 direct jobs and contributes $43 billion to GDP annually, according to the Renewable Fuels Association. Additionally, biofuels reduce ‘greenhouse gas’ emissions by up to 50% compared to fossil fuels, aligning with consumer demand for sustainable products.
However, challenges remain. Farmers fear that tariff-induced market disruptions could outweigh these benefits without adequate support. The American Farm Bureau Federation has warned that tariffs threaten farmers’ livelihoods. To mitigate this, experts suggest expanding domestic biofuel markets and investing in infrastructure to process feedstocks locally.
Looking Ahead
The biofuels industry is poised for growth, driven by legislative efforts to extend tax credits and a tariff environment that favors domestic production. For farmers, this offers a pathway to economic resilience amid trade uncertainties. However, success hinges on consistent policy support and strategic investments in innovation, such as next-generation biofuels and SAF. As the High-Performance Low-Carbon Liquid Fuels Summit underscored, “the potential for biofuels to transform energy and agriculture is immense,” but it requires collaboration between policymakers, industry, and farmers.
By leveraging tax incentives and navigating tariff challenges, the U.S. can strengthen its biofuels sector, reduce reliance on foreign energy, and empower farmers to thrive in a rapidly changing global market. The road ahead is complex, but the promise of biofuels as a sustainable and economically viable solution remains bright.