According to the Iowa Renewable Fuels Association, Iowa produced 31 percent less biofuel in 2025 at 244 million gallons, compared to 2024, which saw 353 million gallons produced. The drop marks Iowa’s lowest rate of production in a decade. 

In October 2025, U.S. biodiesel fuel prices ranged roughly from about $3.7 to $4.3 per gallon according to the U.S. Department of Energy. 

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said two federal policies are to blame for the low production levels. 

Shaw said the Renewable Fuel Standard program, a rule that requires companies to blend a certain amount of biofuel into gasoline and diesel each year, was set too low by the Environmental Protection Agency under the Biden administration at 7.33 billion gallons. 

Shaw also said the biodiesel tax credit, or 45Z, a federal incentive that pays fuel producers for making cleaner fuel options like biodiesel, has yet to be finalized under the Trump administration.

Show said the low biofuel production of 2025 marks a unique year where most blame falls on the federal government. 

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“The reason it was low a decade ago is that we were building the industry up,” he said. “It wasn’t like that was a bad year. A decade ago, this production was a good year.”

Tyler Priest, associate professor in the University of Iowa’s history department with research experience in the history of oil and energy policy, said the future of biofuel production in Iowa is difficult to predict because, unlike oil, the federal government determines the percentage of biodiesel mixed into gasoline, known as a blending requirement.

“This doesn’t really compare to the fuel standard and the mandates for oil,” he said. “It’s a government-mandated blending requirement.”

Priest said despite biofuels’ differences from traditional fuels, it is not immune to market volatility.

Priest said he agreed that the unfinalized 45Z could be the cause behind the slump in biofuel production, but also said that any fuel’s demand is in danger of dropping when producing record numbers year after year. 

According to the Iowa Department of Revenue, 2024 marked the highest production of biofuel in the state’s history. 

“It’s always a bit of booms and busts,” he said. “The demand is elastic in price for essential kinds of energy, so usually when prices go up, demand will come down, and then we’ll bring supply and demand into balance.”

According to the  Iowa Renewable Fuels Association, the state has 10 biodiesel plants. Shaw said two of the plants are not producing any biofuel as they wait for the 45Z to be finalized. 

“It has not been a pleasant time,” he said. “There’s two or three plants out there that are probably hanging on by their fingernails, waiting for the government to put out these rules and regulations that will create the certainty they need to conduct business. So it’s a very nervous waiting time right now.”

Shaw said the plants can easily go back to producing biofuel; they simply need the new 45Z to be put in place. 

“Hopefully these plants can get back to producing,” he said. “If we’re having this conversation in June or July, I think you will see plants go bankrupt.”

Shaw said the economic benefits of biodiesel production in Iowa largely go unseen. Besides helping to reduce emissions for diesel engines, biofuel helps farmers by boosting the price of soybeans, which is what biofuel is made of, and helps cut down residents’ grocery bills, Shaw said.  

“It helps reduce costs for raising livestock, and therefore, there should be a downward pressure on the price of meat,” he said. 

Aaron Lehman, Iowa Farmers Union president, said biofuel made from corn and soybeans is often not seen as a collective whole with other renewable energy sources like solar and wind. 

“The renewable fuel industry as a whole is facing huge challenges,” he said. “Too often, it seems like those renewable fuels are being pitted against others, but they’re all sustainable things that we can do on the farm in our rural communities.”

Lehman said renewable energies must not be seen as competition to one another, but a step forward from fossil fuels. 

“The fossil fuel industry puts in huge resources in the policy realm to discourage good policies for renewable energy, whether that’s the ability for farmers to create energy on their own farm without wind or solar operation, or whether it has to do with the market for renewable fuels,” he said.  

Shaw said he worries that the partial government shutdown can slow the progress of the government regulations being set.

“It means the bureaucrats at the Treasury Department and the bureaucrats at the EPA aren’t there working, and it means these rules don’t get pushed out,” he said. “Meanwhile, these plants sit idle. They’re going to run out of cash, and they’re going to go bankrupt.”