Biodiesel: Indiana Incentives
Biodiesel Blend Tax Exemption
Biodiesel blends of at least 20% (B20) that are used for personal, noncommercial use by the individual that produced the biodiesel portion of the fuel are exempt from the special fuel license tax. The maximum number of gallons of fuel for which the exemption may be claimed is based on the percentage volume of biodiesel in each gallon used. For more information, see the Indiana Department of Revenue Fuel Tax Forms website. (Reference Indiana Code 6-6-2.5-1.5, 6-6-2.5-28, and 6-6-2.5-30.5)
Biodiesel Price Preference
A governmental body, state educational institution, or instrumentality of the state that performs essential governmental functions on a statewide or local basis is entitled to a 10% price preference for the purchase of fuels containing at least 20% biodiesel (B20) by volume or fuels that are primarily ester-derived (other than alcohol) made from biological materials, such as oilseeds and animal fats, for use in operating compression and ignition engines. (Reference Indiana Code 5-2215-19)
Diesel Vehicle Retrofit and Improvement Grants
The Indiana Department of Environmental Management (IDEM) administers the DieselWise Indiana grant programs to support projects that reduce diesel emissions. The Clean Diesel Across Indiana program provides grants ranging from $10,000 to $75,000 for projects throughout the state. Eligible applicants include private and public entities that operate equipment serving the public, including private bus fleets and sanitation fleets. Eligible projects include replacing or converting a diesel vehicle or vehicle component with one that operates on alternative fuel, as well as installing exhaust retrofit technologies, idle reduction technologies, aerodynamic technologies, and low rolling resistance tires. For more information see the IDEM DieselWise website.
Vehicle Research and Development Grants
The Indiana 21st Century Research and Technology Fund provides grants and loans to support economic development in high-technology industry clusters. Incentives are available for qualified alternative fuel technologies and fuel-efficient vehicle development and production. For more information, see the Indiana Venture Development website. (Reference Indiana Code 5-28-16-2)
Special Fuel Tax Exemption
The sale of biodiesel, blended biodiesel, and natural gas used to power an internal combustion engine or motor is exempt from state gross retail tax. (Reference Indiana Code 6-2.5-5-51 and 6-6-2.5-22)
Special Fuel License Tax
The tax does not apply to nominal biodiesel blends of at least 20% (B20); special fuel used only for personal, noncommercial use and not for resale; and biodiesel used by a biodiesel producer holding an exemption certificate. Other exemptions apply. For the current tax rate and more information, see the Indiana Miscellaneous Tax Rates website. (Reference Indiana Code 6-62.5 and 6-6-1.6)
Updated March 6, 2025. Source: https://greaterindiana.com/fuels/biodiesel/
Renewable Fuel Standard
The RFS is a federal program that requires transportation fuel sold in the United States to contain a minimum volume of renewable fuels. The RFS provides additional incentives for blending renewable fuels by attaching Renewable Identification Numbers (RINs) to each gallon of renewable fuel. RINs are separated when B100 is blended with petroleum diesel. Once RINs have been separated, they can be sold or assigned to a broker to sell. This value can reduce the cost of biodiesel blends. The value fluctuates depending on supply and demand.
State Low-Carbon Fuel Standards
California has implemented a low-carbon fuel standard (LCFS) that penalizes fossil fuels while incentivizing low-carbon fuels like biodiesel. The California LCFS credits can be worth up to $1.50 per gallon, which causes biodiesel producers all over the country to sell their product to the west coast to take advantage of the additional revenue. Washington state and Oregon have also recently started low-carbon fuel standard programs that increase demand for biodiesel.
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