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Iowa’s biodiesel industry calls for fuel tax incentive extension

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Biodiesel producers, soybean farmers and other supporters in Iowa have urged state lawmakers to extend a break in fuel tax for diesel that contains at least 11% biodiesel.

To date, the policy has almost tripled the number of retailers selling biodiesel fuel in the US state of Iowa, increasing availability for consumers while boosting Iowa’s farmers and economy.

The Fuel Tax Differential equates to a $0.03 (€0.02) per gallon reduction in the cost of fuel tax for biodiesel blends of B11 or higher. The provision is expected to expire this year without legislative intervention.

A bill to extend the support to June 2026 passed the Senate Ways and Means Committee and is now on the House debate calendar.

Approximately 47% of on-road diesel fuel gallons sold in the state of Iowa contain B11 or higher, according to the Department of Revenue. Research also shows that 771 retailers carried biodiesel in 2018, which was almost triple the number in 2010.

“This policy has had extraordinary success at boosting biodiesel availability and use in Iowa, and that benefits all Iowans,” said Grant Kimberley, executive director of the Iowa Biodiesel Board (IBB). “Biodiesel provides thousands of jobs, supports our struggling farm economy, and benefits the environment.”

The IBB is calling for the biodiesel fuel tax differential to be continued, by either removing or extending the current expiration date. “We believe the fuel tax differential is a necessary component of Iowa’s biodiesel promotion program and is key to maintaining Iowa retailers’ competitiveness against other states that provide biofuel incentives,” Kimberley added.

In 2019, Iowa was the leading producer of biodiesel in the US, producing 310 million gallons. A study carried out by ABF Economics found that biodiesel supports around 3,875 full-time equivalent jobs and contributes around $489 million (€439.1 million) to Iowa’s GDP annually.