Illinois has been a national leader in the biodiesel space, having taken proactive steps to promote the use of biodiesel and reduce greenhouse gas emissions through sales of blended biodiesel. Since the inception of Illinois’ tax incentive on B11 biodiesel, the state has seen a notable increase in consumption. The state’s legislation includes a gradual increase in blending requirements over time, which means Illinois diesel markets can expect a change in 2024.
The Tax Exemption Program
The Illinois law grants exemption on the state’s 6.25% excise tax for retailers selling blends containing more than 10% but no more than 99% biodiesel. This tax exemption has been in place since 2003, attracting hundreds of millions of gallons of biodiesel into the state. It currently requires a B11 blend to receive the tax discount. However, the required blend to receive the exemption will rise in the near future, with the legislation gradually increasing biodiesel or renewable diesel blend levels subject to the tax exemption to B14 in 2024, B17 in 2025, and B20 in 2026. You can read the full bill here.
- On April 1, 2024: Biodiesel or renewable diesel blends will change from B11 to B14.
- On April 1, 2025: will change from B14 to B17.
- On April 1, 2026: will increase from B17 to B20.
- It’s important to note that during the winter (December to March) of each year – from 2024 to 2026 – the sales exemption requirement will return to B11 to qualify for the tax exemption.
Leader in Biodiesel
Illinois has already established itself as a key player in the biodiesel industry. The state currently ranks fourth in biodiesel production and third in consumption, with an annual consumption of 160 million gallons. More than half of the US biodiesel production capacity is in the Midwest, primarily in Iowa, Missouri, and Illinois. The remainder is mostly located on the Gulf and West Coasts. According to the Energy Information Administration (EIA), Illinois produced 174 million gallons of biodiesel in 2021.
Illinois is a leader in biodiesel production and among the biggest producers of soybeans in the United States. In 2021, the state claimed the top spot in soybean production, producing a staggering 672.6 million bushels, according to the US Department of Agriculture.
The biodiesel industry in Illinois faces competition from renewable diesel (RD), which shares the same chemical structure as petroleum diesel and is known for its cleaner-burning properties. To keep more soybean oil within the state and support local biodiesel refineries, the new law aims to incentivize additional consumption of biofuels within Illinois.
Illinois’ move to extend the tax exemption for biodiesel blend sales represents a new step toward promoting cleaner energy in the state while pursuing other approaches to bolster its position as a leader in the biodiesel industry.