This year, trucks and other heavy-duty motors in America will burn some 3 billion gallons of diesel fuel that was made from soybean oil. They're doing it, though, not because it's cheaper or better, but because they're required to, by law.
The law is the Renewable Fuel Standard, or RFS. For some, especially Midwestern farmers, it's the key to creating clean energy from American soil and sun. For others — like many economists — it's a wasteful misuse of resources.
And the most wasteful part of the RFS, according to some, is biodiesel. It's different from ethanol, a fuel that's made from corn and mixed into gasoline, also as required by the RFS. In fact, gasoline companies probably would use ethanol even if there were no law requiring it, because ethanol is a useful fuel additive. That's not true of biodiesel.
"This is an easy one, economically. Biodiesel is very expensive, relative to petroleum diesel," says Scott Irwin, an economist at the University of Illinois, who follows biofuel markets closely. He calculates that the extra cost for biodiesel comes to about $1.80 per gallon right now, meaning that the biofuel law is costing Americans about $5.4 billion a year.
Irwin explains that use of biodiesel is driven by three different parts of the Renewable Fuel Standard. The law includes a quota for biodiesel use, but in addition to that, biodiesel also is used in order to meet the law's demand for "advanced biofuels." Finally, there's an overall quota for biofuels of all sorts, and companies are using biodiesel to meet that quota as well because they've run into limits on their ability to blend ethanol into gasoline.