State Momentum Continues to Grow Markets for Clean Fuels

By Jeff Earl, Director of State Governmental Affairs

As we move into the second half of 2026, one thing is becoming increasingly clear: states are taking a leading role in building markets for biodiesel, renewable diesel and sustainable aviation fuel (SAF).

With most state legislatures now adjourned for the year, we have an opportunity to look back at what was accomplished and where the momentum is headed next. From low carbon fuel programs to tax incentives and market development policies, state activity continues to accelerate.

This year alone, Clean Fuels Alliance America was actively engaged in 23 states where legislation or regulatory action for biomass-based diesel was under consideration. The level of activity reflects growing recognition among policymakers that clean fuels can help states meet environmental goals while supporting domestic energy production, strengthening agricultural markets and creating economic opportunities in rural communities.

One notable development occurred in Hawaii, which became the fifth state to adopt low carbon fuel legislation. Governor Josh Green is expected to sign the measure into law, marking another important step in the expansion of technology-neutral policies that reward carbon reductions.

New Mexico also made history this year as the first state outside the West Coast to officially implement a Clean Transportation Fuel Program. The move demonstrates that low carbon fuel policies are gaining broader national interest.

In the Midwest, where biodiesel production and feedstock agriculture play a critical role in local economies, momentum remains strong. Missouri extended its biodiesel tax credits through 2033, providing long-term certainty for producers and fuel marketers. Illinois continues to emerge as a serious contender for a Midwest Low Carbon Fuel Standard, while conversations around biodiesel production, market expansion and infrastructure development continue advancing in Ohio, Indiana, Michigan and Kansas.

Kentucky recently became the fourth state to adopt incentives supporting SAF production, creating additional demand opportunities for agricultural feedstocks while helping position the state as a leader in the emerging aviation fuels market.

Meanwhile, interest in clean fuels continues to grow across the Northeast. States including New York, Pennsylvania and Massachusetts are actively exploring policies that could expand market access and create new opportunities for low-carbon liquid fuels.

Taken together, these developments point to a broader trend: state policy is becoming an important driver of growth for the clean fuels industry.

Clean Fuels will continue working alongside industry partners, agricultural stakeholders and policymakers to ensure these programs deliver meaningful benefits throughout the value chain.

ABOUT CLEAN FUELS ALLIANCE AMERICA

Made from an increasingly diverse mix of resources such as recycled cooking oil, soybean oil, and animal fats, the clean fuels industry is a proven, integral part of America's clean energy future. Clean Fuels Alliance America is the U.S. trade association representing the entire biodiesel, renewable diesel and sustainable aviation fuel supply chain, including producers, feedstock suppliers and fuel distributors. Clean Fuels receives funding from a broad mix of private companies and associations, including the United Soybean Board and state checkoff organizations.

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