Material Insights · Understanding the Material World

Biodiesel (FAME) and Renewable diesel and SAF

FAME biodiesel and hydrotreated renewable diesel and SAF are two routes for the same fats and oils. Renewable diesel is a better fuel and earns more credit per gallon in the US, so as waste oil supplies run out the two compete hard for feedstock, with policy deciding who wins.

Biodiesel (FAME) (chemical) and Renewable diesel and SAF (chemical): 4 relationships.

How they are linked

1. Competing for the same fats

Substitution · Strong · Both bid for oils and waste fats

Both routes start from triglycerides: vegetable oils, used cooking oil and animal fats, and policies that reward low-carbon fuels push both towards the same waste oils.

  • nearly 100% of estimated used cooking oil and animal fat supply used for biofuels over 2022 to 2027, IEA forecast
  • 17% to 23% share of world vegetable oil going to biofuels, rising over 2022 to 2027, IEA forecast
  • twentyfold rise in EU and US waste oil imports since 2020, IEA 2025

In its 2025 outlook the IEA expects biofuels to take 27% of world vegetable oil production by 2030, and waste oils to supply about 55% of SAF feedstock. As hydrotreating capacity has grown, competition for waste oils has intensified, and several biodiesel, renewable diesel and SAF producers had tight to negative margins in 2025.

Sources: European Technology and Innovation Platform Bioenergy; IEA; S&P Global Commodity Insights

2. Drop-in quality

Substitution · Medium · Renewable diesel can replace FAME

Hydrotreating removes the oxygen from fats with hydrogen and gives a paraffinic fuel chemically like fossil diesel or jet, while FAME keeps its oxygen and behaves differently in engines and in cold weather.

  • above 80 cetane number of HVO, against about 50 for fossil diesel
  • 14.2 bn litres world HVO output, 2019

HVO has fewer cold flow problems and meets diesel standards such as EN 590 at high blend ratios. The cost is higher investment per plant and a hydrogen supply, today mainly fossil, so FAME plants remain cheaper to build.

Sources: European Technology and Innovation Platform Bioenergy

3. Credits favour renewable diesel

Policy · Strong · US and EU rules shape the split

The US Renewable Fuel Standard gives more credits per gallon to renewable diesel because it carries more energy, and EU rules set dedicated targets for fuels made from wastes and residues, which both routes can use.

  • 1.5 and 1.7 RIN equivalence values per gallon, biodiesel and non-ester renewable diesel

The higher credit per gallon favours renewable diesel where the two routes compete for the same feedstock. In Europe, the waste and residue targets reward the same feedstocks, so the two routes compete for policy credit as much as for oil. India's indicative SAF targets, 1% in 2027 and 2% in 2028 for international flights, will add a third claim on the same waste oils.

Sources: IEA; US Code of Federal Regulations (Cornell LII); S&P Global Commodity Insights

4. Price link: feedstock competitor

Cost and price · Strong · Both ways

Both biofuels are priced against fossil diesel plus credit values, and both pay for the same oil feedstocks.

  • 0.48 monthly change correlation, with a diesel price proxy
  • 0.73 12-month change correlation, same series
  • 0.61 fitted elasticity

The link holds because diesel and feedstock prices drive both. It weakens when credit values for one route change, for example when policy rewards renewable diesel or SAF over FAME.

Sources: Material Insights (World Bank, FRED, IMF data)

For investors

Key learnings

  1. Feedstock, not plant capacity, is the binding limit: used cooking oil and animal fats are close to fully used, so new hydrotreating capacity bids up waste oil prices.
  2. Renewable diesel has a RIN equivalence value of 1.7 per gallon against 1.5 for biodiesel in the US, which tilts margins towards hydrotreating.
  3. Several producers on both routes had tight to negative margins in 2025, so changes in credit values and feedstock costs can decide which plants run.

What to track

  • Used cooking oil and tallow prices: Rising prices squeeze both routes and favour the one with higher credits (Weekly · trade press)
  • US D4 RIN and LCFS credit prices: Higher credits lift margins for both, more for renewable diesel per gallon (Daily · trade press; monthly · EPA EMTS data)
  • Soybean and palm oil prices: Show feedstock cost for the vegetable oil based plants (Monthly · World Bank Pink Sheet)

For policymakers

Key learnings

  1. Mandates for SAF and renewable diesel draw on the same limited waste oils as biodiesel, so stacking targets can raise feedstock prices without raising supply.
  2. India set indicative SAF blending targets in 2023 of 1% in 2027 and 2% in 2028 for international flights, which will need feedstock that biodiesel could otherwise use.
  3. Tracing waste oil origin matters: EU and US imports have risen twentyfold since 2020, with nearly 60% coming from China and Indonesia.

What to track

  • Used cooking oil collection and exports: Shows how much domestic feedstock is available for SAF and biodiesel (Annual · FSSAI, trade data)
  • SAF blending against target: Shortfalls signal feedstock or cost limits (Annual · Ministry of Civil Aviation)
  • Waste oil imports into the EU and US: Rising imports raise fraud and diversion risks (Monthly · Eurostat, US Census trade data)

India

India has indicative targets to blend 1% SAF into jet fuel on international flights in 2027 and 2% in 2028. Its SAF and biodiesel plans will draw on the same limited supply of used cooking oil and other wastes.

Sources

  1. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)
  2. Hydrotreated vegetable oil (HVO) factsheet, European Technology and Innovation Platform Bioenergy (2020)
  3. Is the biofuel industry approaching a feedstock crunch? (Renewables 2022), IEA (2022)
  4. EU-US waste oil imports surge twentyfold as biofuel demand hits vegoil supply: IEA, S&P Global Commodity Insights (2025)
  5. 40 CFR 80.1415: How are equivalence values assigned to renewable fuel?, US Code of Federal Regulations (Cornell LII)
  6. India announces SAF targets, biogas blending mandates, S&P Global Commodity Insights (2023)