Biofuel subsidies are playing a growing role in the used cooking oil (UCO) industry and used cooking oil collectors need to pay attention. There are four main types of subsidies, and they all have a big impact on how much you get paid for the used cooking oil you collect:

• The California Low Carbon Fuel Standard (LCFS) credit
• Federal IRS Blenders Tax Credit
• Federal EPA Renewable Identification Numbers (RINs)
• State-by-State Incentives

Increasingly, the agencies that administer these programs are requiring that the "point of origin" of the material be identified, documented, and tracked through the supply chain. This is done for two reasons: to determine the carbon intensity—the amount of greenhouse gases emitted in the production of fuel — of the feedstock, and to identify fraudulent feedstock from companies seeking to claim credits that they do not qualify for.

Claiming credits that a company doesn't qualify for is a crime called mis-labeling. The buyer doesn't just lose credits but also must pay hefty fines, both of which mean that they'll have less money to pay you for your oil.

Buyers are beginning to consider their suppliers as "recordkeeping liabilities." If you can document the origin of every gallon of your oil, your buyers will be confident that they're not taking on any risk by working with you and be willing to pay you top-dollar. Fail to produce those records and you'll get low-balled or even lose your buyers.

Carbon Intensity, Tax Incentives, and the Renewable Fuel Industry

The Federal Government (via the EPA or the IRS) and the state of California CARB (California Air Resources Board) allow biodiesel producers to acquire various credits which are then traded and serve as a financial incentive, or requirement, to produce, distribute and use environmentally friendly fuel. More credits for the biofuel producer means more money not just for the biofuel producer but also for the broker and even the UCO collector.

As long as everyone in the chain — biodiesel producer, broker/trader, and UCO collector — can document the legal sourcing and processing of every gallon of oil, each step of the way, these credits can raise profits for everyone. But in the event of an audit, if one party can't produce the necessary documentation, everyone loses.

Simple right? Conceptually yes. But with multiple overlapping programs, the devil is in the details. Let's look at the world of biodiesel credits.

The World of Biodiesel Credits

Biodiesel credits come from both state and federal legislation. Here are the most important:

1. CARB LCFS Credit (LCFS)

What it is: CARB (California Air Resources Board) created the Low Carbon Fuel Standard (LCFS) in order to develop the alternative fuels markets, reduce greenhouse gas emissions and to reduce the Carbon Intensity (CI) of transportation fuel in California. Each LCFS credit represents one metric ton of carbon dioxide reduced.

Does CARB Verification only apply to California UCO Collections?: No. Because a substantial amount of the UCO collected nationwide is moved into the California market as either feedstock or biofuel, the CARB verification regulations apply to the material collected in all states in most cases. When fuel or feedstock is shipped into the California market, it then receives LCFS subsidies, and is then bound by the LCFS supply tracking regulations.

How it works: Credits are generated by regulated parties (RPs) bringing in/producing/consuming fuel that has a low Carbon Intensity (CI) such as biodiesel.

Carbon Intensity is measured by the lifecycle analysis methodology which measures all greenhouse gas emissions created in the production, distribution, and consumption of a fuel. It is calculated across the entire pathway of the creation of the fuel. For example, this could start with the collection of waste vegetable oil and follow every step in the process of turning it into biodiesel fuel. Since UCO is a waste product, all of the energy that went into its production (farming, harvesting, pressing, processing, bottling, transport to the restaurant) is applied to its first intended use: cooking. Once it is used for cooking, it gains a new life as the lowest possible CI. Consequently, UCO is the MOST subsidized oil that enters the American biofuel system.

Why it Matters to UCO Collectors: If a producer can't sell his product — made in part from your used cooking oil — into California because it won't pass CARB verification, they'll either pay you less for it, or won't buy it from you at all. In order to pass a California LCFS related audit, you need detailed records. Failure of CARB verification could result in fines, loss of credits, and a permanent stain on a collector's reputation.

It matters to UCO collectors because it allows the biodiesel producer to pay more for source verified Low-CI feedstocks. Selling a Low-CI feedstock without records, is like selling a car without a title and smoke coming out the tailpipe. It's risky to the buyer and is not worth as much. The tools to collect that data are of the utmost importance.

2. Biodiesel Blender's Tax Credit (BTC)

What it is: Commonly referred to as the biodiesel tax credit, this is a $1.00 per gallon tax credit applied to biodiesel and renewable diesel at the point where it is first blended with petroleum diesel. It was originally created in the American Jobs Creation Act of 2004 and has been amended several times and extended through 2022. The goal of the BTC is to incentivize the blending and distribution of bio-based blends of fuel. Efforts are being made to extend it to 2025.

Why it Matters to UCO Collectors: The BTC isn't the biggest credit, but it is the most stable. It's always $1 per gallon, no matter the volume of oil. A $1 per gallon revenue boost to producers allows them to bid up the price of feedstock, and according to an analysis done by Reither in the 2010s, about 1/3 (33 cents) of the BTC dollar passes through to the producer.

3. Renewable Fuel Standard (RFS) Program

What it is: Congress created the Renewable Fuel Standard (RFS) program to reduce greenhouse gases and expand the nation's renewable fuel sector. The program regulates oil refiners as well as gasoline and diesel importers and requires transportation fuel sold in the U.S. to meet minimum standards of volumes of renewable fuel.

How it works: A company receives RIN credits based on the amount of renewable fuel it produces. More renewable fuel means more RIN credits. Petroleum fuel producers must attain a certain number of RIN credits relative to their fuel production annually to remain in compliance with the EPA's standards. Failure to meet the requirement leads to a substantial fine for the company.

However, since the goal is not to reduce one specific company's output but to create an industry-wide reduction of greenhouse gases, obligated parties can meet their renewable volume obligations (RVOs) in one of two ways. First, of course, they can make sure they themselves actually produce and sell the required amount of renewable biofuels. But, if they can't meet the requirement they have another option. They can purchase RINs from companies that obtained MORE RINs than they needed.

Why it Matters for UCO Collectors: A large market in the sale and trading of RINs exists. The producer you sell to wants those RIN credits, either to avoid a fine or to sell to other companies for increased profits. While RINs do not require point-source verification of feedstock, they do exclude certain (mostly foreign) oils from the program, and as a result it is helpful to have records proving that your material is, in fact, used cooking oil, and not fraudulently mis-labeled non-qualifying material.

4. State By State Incentives

While California's state laws may be some of the most influential in the business, many other states offer their own tax credits and incentives to encourage use of renewable fuels. Detailed documentation is key to complying with all of them.

What do these credits amount to for a UCO collector?

The complexity of these credits makes it impossible to determine exactly how much each one affects the price that a UCO collector receives for a gallon of grease. Kristof Reiter, owner of Reiter Trading, an oil and grease broker, was quoted in an interview as stating, "It is impossible to state with certainty but, all in, I would estimate that about 1/3rd of the subsidy value makes its way down to the collector in the form of a higher price paid for their commodity. Essentially, the system of federal and state credits supports the market price of feedstock by at least a dollar per gallon, or roughly 25% presently. And this doesn't even take into account the overall price support that biofuels supply to the agriculture complex as a whole."

The Global Used Cooking Oil Market is anticipated to reach USD 11.6 billion by 2032, at a CAGR of 6.4% over the predicted period from 2022 to 2032. The global Used Cooking Oil (UCO) market will expand significantly due to increased awareness of sustainable energy resources and environmental conservation. The latest developments in technologies used to convert waste cooking oil into high-quality refined oil will benefit the overall market's expansion. The rapidly evolving food and foodservice sector, which includes novel preparations, has had a direct impact on UCO's overall production. Increased government initiatives to promote UCO utilization for industrial applications are projected to fuel market growth in the coming years.

Market Overview

The global used cooking oil market refers to the market for the collection, processing, and distribution of used cooking oils that are generated from homes, restaurants, and food processing industries. Used cooking oils are recycled and used as raw materials for producing biofuels, animal feed, and other industrial applications. The repeated use of cooking oils in hotels, restaurants, food processing units, and household sectors leads to the used cooking oil (UCO), also known as waste vegetable oil. It is leftover cooking oil made from sunflower, corn, canola, olive, palm, rapeseed, soya, and other oils and fats. It is also available in a variety of mixed compositions. UCOs that have been recycled and processed are commonly used in the production of soaps, composts, oleochemicals, hydrogenated vegetable oils (HVO), industrial greases, biodiesels, and animal feed. In comparison to conventional materials, UCO is highly cost-effective, environmentally friendly, and readily available in bulk quantities for mass production of a variety of products.

The market for used cooking oil is driven by the increasing demand for sustainable and eco-friendly energy sources, as well as the growing need for waste management solutions. The increasing awareness of the harmful effects of traditional fossil fuels on the environment and the need to reduce greenhouse gas emissions are also driving the demand for biofuels.

Report Coverage

This research report categorizes the market for the global used cooking oil market based on various segments and regions and forecasts revenue growth and analyses trends in each submarket. The report analyses the key growth drivers, opportunities, and challenges influencing the used cooking oil market.

Driving Factors

The increasing demand for sustainable and eco-friendly energy sources has led to a rise in demand for biodiesel. Used cooking oil is a key raw material used in the production of biodiesel, which is a renewable and cleaner energy source than traditional fossil fuels. This has led to a surge in demand for used cooking oil, thereby driving the growth of the market. Several governments around the world are promoting the use of biofuels to reduce greenhouse gas emissions and achieve their carbon reduction targets. This has led to the implementation of various regulations and incentives that support the growth of the used cooking oil market.

The awareness about the benefits of using used cooking oil as a raw material for the production of biofuels, animal feed, and other industrial applications has been growing steadily. This has led to a surge in demand for used cooking oil, driving the growth of the market. Used cooking oil is also used as a key ingredient in animal feed. The increasing demand for animal feed, especially in developing countries, has led to a rise in demand for used cooking oil, further driving the growth of the market.

Restraining Factors

The collection of used cooking oil requires a robust infrastructure that includes collection centers, transportation, and storage facilities. In many parts of the world, there is a lack of such infrastructure, which can limit the growth of the used cooking oil market. The quality of used cooking oil can vary depending on the source and the way it has been used. This can lead to concerns about the quality of the raw material used in the production of biofuels and other products, thereby limiting the growth of the market. The market for biofuels is becoming increasingly competitive, with several alternative raw materials being used in the production of biofuels. This can limit the growth of the used cooking oil market, as it faces competition from other biofuels.

Market Segmentation

The Global Used Cooking Oil Market share is classified into source and applications.

By Source: Food Services Segment Leads

Based on the source, the global used cooking oil market is differentiated into food services and households. Among these, the food services segment is anticipated to hold the largest market over the forecast period. The reason behind the growth is, the food services segment is increasingly adopting sustainable practices, such as the use of renewable energy sources and recycling of waste products. Many food service establishments are partnering with collection companies and waste management firms to recycle their used cooking oil, which can then be sold to biodiesel producers and other companies. The food services segment is also expected to benefit from government regulations and incentives that promote the use of biofuels and other sustainable energy sources. For instance, in many countries, food service establishments are required to dispose of their used cooking oil in an environmentally responsible manner. This has led to the development of collection programs and initiatives that encourage restaurants and other food service establishments to recycle their used cooking oil.

By Applications: Industrial Usage Leads

On the basis of applications, the global used cooking oil market is classified into industrial usage, animal feed, and others. Among these, the industrial usage segment is expected to hold the largest market during the forecast period. The growth can be attributed due to, the industrial usage segment includes the use of used cooking oil in various industries such as chemical, cosmetics, and pharmaceuticals. Used cooking oil is a valuable raw material for these industries as it contains fatty acids, glycerol, and other useful compounds that can be used to produce a range of products such as soap, biodiesel, and lubricants. The widespread use of UCO in the production of fuels drives the expansion of the industrial application segment. Advances in the technologies used to process waste cooking oil have encouraged its use in a variety of industrial processes.

Regional Segment Analysis

Europe is expected to hold the largest share of the Global Used Cooking Oil Market during the projected period. Europe is the largest market for used cooking oil, owing to the high level of awareness about the importance of sustainable and eco-friendly energy sources in the region. The European Union has implemented various regulations and initiatives that encourage the recycling and reuse of used cooking oil for the production of biofuels and other products. This has led to the development of a well-established used cooking oil market in the region.

Asia-Pacific is expected to grow at the fastest rate in the global used cooking market during the forecast period, owing to the increasing demand for biofuels and other sustainable energy sources in the region. Countries such as China and India are witnessing rapid urbanization and industrialization, which has led to a surge in the volume of used cooking oil generated in the region. This has created opportunities for the development of collection and recycling programs, and the growth of the used cooking oil market in the region.

North America is another important market for used cooking oil, driven by the increasing demand for biodiesel and other sustainable energy sources in the region. The United States is the largest market in the region, and is witnessing significant growth in the use of used cooking oil for the production of biofuels.

Competitive Analysis

The report offers the appropriate analysis of the key organizations/companies involved within the global used cooking oil market along with a comparative evaluation primarily based on their product offering, business overviews, geographic presence, enterprise strategies, segment market share, and SWOT analysis.

Key Companies

• GreaseCycle
• MBP Solutions Ltd
• Oz Oils Pty. Ltd.
• Brocklesby Limited
• Baker Commodities, Inc.
• Veolia Environment S.A.
• Olleco Ltd. (UK)
• Argent Energy
• Grand Natural, Inc.
• ABP Food Group
• Arrow Oils Ltd.
• Valley Proteins, Inc.
• Proper Oils Co. Ltd.

Recent Developments

• November 2022 — Neste announced the acquisition of Crimson Renewable Energy Holdings, LLC's used cooking oil (UCO) collection and aggregation business and related assets on the US West Coast.
• February 2022 — St1 Nordic Oy, an energy company, has acquired 100% of Brocklesby Ltd. Brocklesby is an expert in the recycling of used cooking oil and fatty food waste.

Market Segment Breakdown

Key Target Audience

• Market Players
• Investors
• End-users
• Government Authorities
• Consulting and Research Firms
• Venture Capitalists
• Value-Added Resellers (VARs)

Used cooking oil, often discarded by restaurants, can be collected and recycled into renewable fuels such as biodiesel and renewable diesel. Instead of being treated as waste, it becomes a valuable resource that helps reduce pollution and supports cleaner energy systems.

One of the biggest environmental benefits is that recycling used cooking oil prevents it from entering sewer systems and waterways. When oil is dumped improperly, it can clog infrastructure and contribute to water pollution, harming ecosystems. By collecting it, companies help protect rivers, oceans, and marine habitats.

Once processed into renewable fuel, used cooking oil can replace fossil diesel in vehicles, trucks, and even airplanes. These renewable fuels typically produce significantly lower greenhouse gas emissions over their lifecycle compared to petroleum-based fuels. This helps reduce air pollution and slows the pace of climate change.

The process also supports a circular economy, where waste materials are reused instead of being discarded. This reduces the need for new raw materials and lowers overall environmental impact.

Overall, turning used cooking oil into renewable fuel helps reduce waste, lower emissions, and protect natural ecosystems, making it a practical solution for improving environmental sustainability.