European crop-based biodiesel use is likely to rise in 2026 as changes to the EU's recast Renewable Energy Directive (RED III) make waste-based biofuels less attractive for greenhouse gas (GHG) compliance. But looming feedstock caps could limit growth.
RED III will end the practice of counting certain waste feedstocks twice towards compliance targets in major EU economies. Fuel suppliers may turn to cheaper crop-based biodiesel to meet their goals.
Until now, member states could count biofuels from waste feedstocks listed in the directive's Annex IX — Part A (9A) and Part B (9B) — twice towards transport renewable energy targets. These include biodiesel such as used cooking oil methyl ester (Ucome) and Advanced Fame 0, made from feedstocks in 9B and 9A, respectively.
Germany and the Netherlands plan to remove double counting in 2026 as they implement RED III. In Germany, the change applies only to biofuels produced from 9A feedstocks. But ending double counting means suppliers must deliver higher physical volumes of renewable fuel, making cheaper crop-based biodiesel more attractive.
Overall renewable fuel requirements are rising under RED III, with the headline transport mandate more than doubling on an energy basis to 29pc from 14pc by 2030, alongside a 14.5pc GHG reduction target. In countries such as France, Spain and Belgium that still allow double counting, suppliers will continue to favour waste-based biofuels.
Feedstock caps
RED III also brings changes to caps on certain biofuel feedstocks. Germany is expected to slightly increase its cap on 9B fuels but keep an overall limit of 1.7pc. Hydrotreated vegetable oil (HVO), a drop-in biofuel also known as renewable diesel, is expected to meet most of the country's needs under the cap.
As physical blending requirements rise because Germany will stop double counting 9A biofuels, blenders will need more HVO. HVO's chemical properties allow blending beyond the 7pc limit for methyl ester biodiesel in diesel.
Greater use of UCO-based HVO will leave less room for Ucome because of the domestic cap. Market participants will likely look to high-GHG savings crop-based biodiesel and advanced biodiesel — produced from 9A feedstocks still uncapped — to meet targets.
Advanced biodiesel demand could also outpace crop-based buying if further caps on crop-based fuels are introduced. But Argus Consulting forecasts about 1bn litres of additional rapeseed methyl ester (RME) demand next year as a result of these legislative changes.
In the Netherlands, an expansion of the renewable fuels mandate from road fuels to include maritime and inland waterways will bring new feedstock restrictions. Sellers will be watching renewable fuel certificate prices in Germany and the Netherlands, which will be based on GHG savings under RED III.
Many participants have already called for higher biodiesel blending capacity to ease pressure on the HVO market. Italy has drafted legislative changes to allow widespread use of B10 diesel at service stations, requiring distributors to supply B7 at 30pc of sites as a protectionist grade.
