Based on the current level of process economics associated with the trans­esterification of vegetable oil in the United States, biodiesel requires a sub­sidy from the government in order to compete with petrodiesel and other fossil fuels. The scheduled expiration and delayed but retroactive reinstate­ment of the biodiesel subsidy ($1 for each gallon of biodiesel blended in the United States as of 2010) in the United States has lately been intensely con­tested and debated by Congress. Biodiesel plant owners have to sell their crude glycerin by-product for a decent value to stay profitable. Or, they need to convert the glycerin by-product and coproduct into other value-added chemicals or products. Successful development of profitable markets for by­products and coproducts may be a key determinant of the overall success for biodiesel industries. However, as fossil fuels become more expensive, biodie­sel becomes a more feasible fuel alternative. As of 2010, the United States pro­duces around 315 million gallons of biodiesel per year. However, the current level of U. S. production is substantially below the industry capacity; that is, biodiesel manufacturing facilities are being underutilized.

The future of the biodiesel industry depends strongly on the cost of feedstock. The raw material cost is a substantial portion of the biodiesel manufacturing cost. The current biodiesel industry’s gross margin is very poor without taking into account the governmental subsidy. Food costs increased substantially in recent years, which also escalated the raw material cost of vegetable oils for the conventional biodiesel industry, even though some blame the biofuels industry for the food price hike. In this regard, the algae biofuel option is very promising, inasmuch as it does not compete for food or require arable land for algae growth.

Biodiesel offers many benefits to the environment that are worthy of note. It is considered a mostly carbon neutral fuel because all the carbon dioxide emitted from burning biodiesel originally came from plants and animals that removed it from the air. However, it is not completely carbon neutral because to process biodiesel all the way from plant oil and animal fat some nonrenewable energy is inevitably required. It is, however, a huge improve­ment. It reduces carbon dioxide emissions by 78% compared to petrodiesel. Biodiesel even offers a reduction in carbon monoxide and sulfur emissions. It does, however, have slightly higher nitrous oxide (N2O) emissions. Biodiesel is also biodegradable and nontoxic. Biodiesel is available today as a pure (or neat) fuel and also as a blended fuel with petrodiesel. Blends such as B20 (20% biodiesel and 80% petrodiesel) burn cleaner than petrodiesel alone, thus reducing emissions of harmful air pollutants such as carbon monox­ide, volatile organic compounds (VOCs), soot, and particulate matter (PM). Over time, biodiesel has good potential to play a large role in the future fuel economy as well as in the transportation fuel sector.