Biodiesel is booming. It may help the climate, but there's a big environmental risk
Big oil companies are converting refineries to make "renewable diesel" from soybean oil or beef tallow. It's driven by policies intended to help the climate, but there's a big environmental risk.
Ed Cinco of Youngstown, Ohio, has a problem. He's the director of purchasing for Schwebel's Baking Company and he can't get enough soybean oil, a key ingredient in the company's bread and buns. Suppliers won't even talk to him.
"The only quotes I can get, for 2022, are from the person I currently buy from," Cinco says. "So I am basically at [that supplier's] mercy."
Prices are rocketing upward, from 35 cents per pound a year ago to almost a dollar. Cinco says companies that crush soybeans and extract the oil are sending it elsewhere: "They all want to go to biodiesel."
Biodiesel is a version of diesel fuel, which is used by trucks and other heavy-duty engines, that's made from oils extracted from plants, like soybeans or canola, or even animal fat. It's set for an unprecedented boom in the next few years because of government policies aimed at finding alternatives to fossil fuels, and helping the climate. Those incentives are driving up demand for soybeans and other oilseeds, pushing prices higher and squeezing supply.
Farmers are happy about higher prices for their crops, but many environmentalists are worried that the pressure to produce greater supplies of biodiesel could lead to more land-clearing for soybean fields or palm oil plantations, ultimately releasing more greenhouse gases and damaging the environment.
An early version of biodiesel, which can be made in small-scale facilities, has been around for years. It has limitations, though. In cold weather, it can stop flowing. So limited amounts of it typically are mixed into regular petroleum diesel.
The version that's taking off now, called renewable diesel, has none of those drawbacks. It acts and burns just like regular diesel. It's made in giant refineries like the Paramount plant in Paramount, California, near Los Angeles. It's a historic refining site, built a century ago to handle crude oil from wells nearby.
Now a biodiesel company called World Energy has acquired the plant, and it's using new raw materials. Gary Grimes, the plant's director of sustainability and technology, shows me big black rail cars with the word "tallow" stenciled on the side in block letters.
"It's a waste product at slaughterhouses," he says. "From all over the country, and Australia. We bring it in via ocean tanker."
The beef tallow --- or corn and soybean oil, which the plant also uses — gets purified, processed, and eventually flows into a tall shiny steel tower, a kind of distillery that separates lighter fuels from heavier ones. "The gasoline goes over the top, the jet [fuel] comes off the side, and the diesel fuel will come out of the bottom of the tower," says Glenn Clausen, the plant's director of engineering and technical services.
The plant currently produces more than a hundred thousand gallons of renewable diesel fuel each day, and World Energy plans to boost production at least five-fold over the next few years.
It also has lots of company. "There's a large number of refiners that are now stepping into the game, who have deep pockets," says Paul Niznik, an expert on biofuels with the energy consultant Argus Media. Those companies include Marathon Petroleum and Phillips 66, which are converting existing refineries in Martinez, California and Rodeo, California, to so-called renewable diesel production.
According to the U.S. Energy Information Administration, if all these companies follow through on their announcements, production capacity of renewable diesel would go from half a billion gallons a year in 2020 to 5 billion gallons a year a few years from now. That would be enough to supply about 10 percent of the nation's total demand for diesel fuel.
Government incentives are driving this "massive acceleration of growth" in biodiesel, Niznik says. They include the federal government's Renewable Fuel Standard and - even more importantly at the moment - California's Low Carbon Fuel Standard.
This standard requires a steady decrease, year by year, in the "carbon intensity" — or greenhouse impact on the atmosphere-- of fuel sold in the state. According to California's regulators, renewable diesel has less than half the carbon intensity of standard petroleum-based fuels. This is because growing crops like soybean or canola captures carbon dioxide from the atmosphere, and that makes up, in part, for the carbon that's released by burning fuel derived from those soybeans. Renewable diesel is also better for air quality; burning it releases much lower levels of fine particulates, which are linked to lung and heart problems.
Oil refiners that are selling regular gasoline, with a carbon intensity that violates the standard, have to buy their way to compliance by purchasing "credits" from companies that are selling low-carbon fuel, such as renewable diesel. Niznik says the high price of the credits convinced oil companies to jump to the other side of this business. "You look at the guy who's making renewable diesel, who's getting a bunch of credits, which, by the way, you are paying for, and you suddenly realize, 'I need to shift,'" Niznik says. "You have a situation where it looks almost stupid not to get into the business."
As this subsidy-driven boom accelerates, though, it's raising a big question. Are there enough soybeans or slaughterhouses to feed these refineries?
Gene Gebolys, CEO of the World Energy, the renewable diesel producer, dismisses those concerns. "That question is often asked, and the answer is, there is no limit," he says.
Gebolys says that innovation will provide much of the answer. Renewable diesel companies are finding ways to make their product from new feedstock materials like municipal waste or algae. But he's also not apologizing for competing with food companies for soybean oil.
"If we're going to get serious about addressing the challenge of climate change, we have to get over this notion that we've got to protect the status quo at the same time," Gebolys says. "There's going to be change, and so if your cookies cost you ten cents more than they cost you last week, that might be part of it."
Many environmentalists, though, say that the biodiesel boom is putting natural ecosystems at risk.
"My reaction is to be quite alarmed" at that scale of the planned expansion of renewable diesel, says Jeremy Martin, director of fuels policy for the Union of Concerned Scientists.
A third of all soybean oil produced in the U.S. already goes to make biodiesel, even before the dramatic expansion that's now planned. "It's not complicated math to see that something doesn't add up. There just isn't that much feedstock available," Martin says. Other potential sources of biodiesel, like municipal waste, won't fill the gap, at least not within the next few years, he says.
Already, increasing biodiesel production is driving up prices for soybeans. Environmentalists fear that it could persuade landowners around the world to plow up grasslands or clear even more forests to grow oil-producing crops like soybeans, and further expand palm oil plantations. That would be worse for the climate, and for wildlife.
There's probably a place for biodiesel, Martin says. But this is too much, too fast.
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