How a Harris or Trump US presidential win could shape the renewable fuel sector

As the US heads to the polls to vote for its next presidential candidate in what many have characterized as one of the closest races in electoral history, the energy sector hangs in the balance

According to experts, many uncertainties lie ahead for the renewable fuel and feedstocks and electric vehicle (EV) sectors, namely around key policies and what shape they will take should either Democratic candidate Kamala Harris or Republican Donald Trump occupy the Oval Office in January.

Sources feel a Harris presidency could hold oil interests to a stricter, more progressive shift away from petroleum and towards renewables, while a Trump election is likely to have more leniency. In either case, however, delays to key policy deadline dates and decisions are expected.

Feedstocks

Market participants expect heightened trade tensions with China should Trump be voted into office on November 5. Many say trade tensions have affected prices already and could have a “dramatic” impact on the wider industry.

In the past year, US biodiesel producers have imported larger amounts of cheaper foreign feedstocks like used cooking oil (UCO) and tallow, which have weighed on US prices. Scrutiny over Asia-origin UCO flows due to traceability and verification issues has also ramped up, where imported palm oil is thought to have been mislabeled as UCO to obtain US federal tax subsidies due to UCO’s lower carbon intensity score.

Trump however has proposed a 60% tariff on imports from China and a 20% across-the-board tax on all other imports. Meanwhile, the Harris administration would likely carry over most of the current tariffs and policies under the prior administration, and markets should expect the status quo, sources told Fastmarkets, with any restriction on UCO imports likely to drive domestic US UCO prices higher.

Section 45Z

Despite the election outcome, the Clean Fuel Production Credit (CFPC) created by section 45Z of the Inflation Reduction Act (IRA) of 2022 is set to replace the current $1-per-gallon Blenders Tax Credit (BTC) after January 1, 2025, and will be earned by the producer instead of the renewable fuel blender.

Despite the looming deadline, greenhouse gas (GHG) feedstock scoring requirements under the CFPC have yet to be finalized, and this could be delayed further by a win of either presidential candidate, while it remains uncertain whether the credit will apply to fuels produced from foreign-sourced feedstocks.

The tax credit is expected to promote the increased use of more low-carbon intensive (CI) feedstock other than soybean oil, however, which would undermine demand for soybean oil but increase demand for animal fats and greases. The lack of clarity on the credit has made it difficult for biofuel producers to project feedstock demand and biofuel production levels for 2025, which has dampened US animal fat and vegetable oil trading and prices.

A series of protectionist bills have been introduced in Congress to exclude the inclusion of foreign-sourced feedstocks material from qualifying for the credit but if 45Z were to exclude foreign-imported feedstocks, this would boost US demand and likely drive domestic prices higher.

“If we limit the amount of imported waste oils by incentivizing domestic material only, it will further push up the value of those materials,” a trader said. “In pushing for the protectionism of domestic-only producer credits, this could have the exact opposite effect that the soy industry wants.”

President of the Advanced Biofuel Association Michael McAdams told Fastmarkets that “it was not reasonable” to arbitrarily limit qualifying for the 45Z credit to a 50% GHG reduction threshold. At this level, soybean oil may not qualify for the credit. “When you look at the current 40b it begins to reward producers at $1.25, [but] the 45Z does not provide a reward until a 50% threshold is met,” McAdams said.

The 45z may also bring an end to biodiesel imports, adding up to a billion additional gallons to domestic production. While there is segmented interest to limiting feedstocks to only domestic feedstocks, McAdams believes this measure will not advance.

Small refinery exemptions

In July, the US Court of Appeals vacated most of the small refinery exemption (SRE) denials under the US Renewable Fuel Standard (RFS) by the Environmental Protection Agency (EPA) in 2022. During the first term of Trump’s presidency, the administration granted waivers to some smaller refiners, exempting them from biofuel blending requirements and thereby cutting demand for biodiesel – a move, which had a bearish impact on vegetable oil prices.

If Trump is re-elected, it is largely expected that he will grant most outstanding SREs, which could further dampen vegetable oil demand, prices and, according to McAdams, further exacerbate the EPA’s underutilization of renewable fuel capacity in the US.

Yet one source told Fastmarkets that this “play” will not necessarily be available to Trump this time around due to rule changes and a pending case with the US Supreme Court. On the other hand, some sources think a Harris win could mean an outright denial of all pending SREs, which would support higher prices, while a “blanket” denial could end up before the Supreme Court.

Renewable Volume Obligations

In July, the EPA announced it would delay the release of 2026 Renewable Volume Obligations (RVOs) until after the US presidential election in November. The Renewable Fuel Standard (RFS) requires obligated entities to either blend billions of gallons of biofuel into the US fuel mix each year or to purchase tradable credits from other blenders or producers. While the new EPA deadline of March 2025 with a final rule scheduled in December 2025 is likely to be affected by which administration is in office, the extent of the impact remains unclear.

Much of the biomass-based diesel sector said the EPA’s last released volumes were too low, particularly due to expected increases in sustainable aviation fuel (SAF) production, and urged the agency to make upward revisions to the volumes to keep feedstock demand and prices supported. One thing that is certain, “we can safely anticipate policy delays,” Paul Winters of Clean Fuels Alliance America said, adding that the presidential transition to either Harris or Trump “will almost certainly delay the March proposal.”

Biodiesel and SAF

Neither candidate has revealed anything biofuel-related ahead of the election. This has come as little surprise to some market participants after Trump characterized 2019 negotiations between biofuel producers and refiners as “more difficult than dealing with the Taliban.”

Moves from a Harris administration in the growing market of SAF would be “predictable”, sources told Fastmarkets. “The only issues might be IRS guidance on 45Z and the overproduction of biodiesel,” versus issues that the market is already facing with the mandate for RINs.

A Trump presidency however would bring a more variable outcome for the SAF market. Given that SAF is embedded in the IRA, sources told Fastmarkets it would be very difficult for Trump to directly change this without Congressional action, although “the idea of forcing a $400 billion infrastructure buildout for SAF is not going to happen, and banning co-processing from having a larger role was a big mistake,” according to McAdams.

Changes to the IRA are unlikely not least because Trump’s party “is not predicted to gain full control of Congress in the upcoming election,” a source said. Fastmarkets understands that Trump may want to push down the value of RINs as he did during his first presidential term, which would appease conventional fuel refinery owners by reducing their cost of compliance with the RFS. Lower RINs values during another potential Trump administration “would make the economics of biodiesel and renewable diesel and therefore SAF very problematic,” the source said, which could be reduced by creating a situation of oversupply through a Trump administration’s influence over the EPA.

Electric vehicles

As the US works toward its decarbonization goals, the ever-pressing topic of electrification remains a flashpoint for the election. While it is expected that a Harris presidency would continue Biden’s EV rollout legacy, which has taken the total number of EVs on US roads to 4.2 million, the traditional assumption that Trump could put the brakes on has been thrown into doubt by recent endorsement from Tesla CEO Elon Musk.

“There’s discussion that Musk will take on a government role in a new department that would investigate government efficiency,” senior research fellow at Chatham House Patrick Schroeder said, adding that it would then be unlikely that Trump would put in place a lot of policies that are counter to Tesla’s business interests.

“This equates to lots of potential conflicts of interest as there are a number of investigations from various US government departments and various US agencies into Tesla including the departments of transportation, justice, labor, interior…” but in any case, potentially makes the landscape for EVs different, Schroeder added.

Under the IRA, the US currently has consumer tax credits for up to $7,500 for new EVs and $4,000s for used EVs, as well as tax credits for home chargepoints. Sources assume Harris would keep these in place, but Schroeder told Fastmarkets Musk would do the same if given a role in a Trump administration, since Tesla has “directly benefitted” from these initiatives.

Learn more about how the US is navigating critical mineral challenges in the global energy transition with Helaina Matza, special coordinator for global infrastructure and investment at the US Department of State.

A Musk scenario aside, according to Fastmarkets energy transition analyst Phoebe O’Hara, Trump could take a more restrictive view of how many EV models qualify for subsidies using Foreign Entity of Concern (FEOC) regulations, as well as remove EPA vehicle emissions standards that were expected to cause 67% of vehicles to become EVs by 2032. O’Hara added that Trump would also look to remove the commitment to 50% of the government fleet being electric by 2030.

Fastmarkets analysts estimate that overall EV sales will reach 10.7 million units by 2035 if Harris wins the election, versus around 5% less – or 10.2 million units – with a Trump administration in power in the same timeframe.

“Just [recently], Trump was in Detroit telling auto workers that he would push back against the current administration’s effort to expand EV use,” Bracewell Policy Resolution Group partner Frank Maisano told Fastmarkets.

Meanwhile, “union rank and file remain a big problem for Harris in Rust Belt States like Michigan and Wisconsin,” he said, adding that “whether Harris can convince key workers in union states, that are worried about their jobs in the new energy transition world, remains her most pressing challenge.” Trump will “continue to try and drive this wedge between unions and Harris, using consumer discontent, auto company backtracking, and worker worries as his hammer,” Maisano concluded.

EV competition from China is another area to watch, with a 100% tariff currently imposed on Chinese EVs coming into the US. “Both Harris and Trump would keep up these tariffs,” Schroder said, adding that “there’s a good chance Trump could probably even increase them, so that is where there is an agreement on both sides in their need to protect domestic industries and the US battery industry.”

Discover how the 2024 US election is impacting and could impact US and global commodity markets with Fastmarkets. Head to our US election hub.

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