The UK biodiesel sector enters 2026 at a crossroads. Domestic FAME producers face mounting pressure from subsidised imports, tightening sustainability criteria, and a policy landscape that increasingly favours waste-derived and advanced fuels over first-generation crop-based alternatives. At the same time, the government’s net zero commitments mean that a substantial ecosystem of financial support remains firmly in place. The challenge for producers is not a lack of available funding, but the complexity of navigating overlapping schemes, evolving eligibility criteria, and programmes spanning multiple government departments. This article maps the key grants, subsidies, and market-shaping mechanisms available to UK biodiesel producers in 2026, and offers practical guidance on accessing them.

The Renewable Transport Fuel Obligation: The Bedrock of Biodiesel Support

The Renewable Transport Fuel Obligation (RTFO) remains the single most important policy mechanism underpinning biodiesel demand in the UK. Rather than offering a direct cash subsidy, the RTFO creates guaranteed market pull by placing a legal obligation on fossil fuel suppliers to ensure that a set percentage of the fuel they supply comes from renewable and sustainable sources. For the 2026 obligation year, this main obligation target rises to approximately 12.6% of total liquid fuel by volume, continuing the steady annual escalation in effect since the scheme’s inception in 2008.

For biodiesel producers, the RTFO functions as a de facto revenue support mechanism. When a producer supplies qualifying biodiesel into the UK market, they can claim Renewable Transport Fuel Certificates (RTFCs) from the Department for Transport. These certificates are tradeable, meaning they can be sold to obligated fuel suppliers who need them to demonstrate compliance. The buy-out price, currently set at 30 pence per litre of biofuel that would otherwise need to be supplied, effectively places a floor under the value of each certificate and provides producers with a degree of price certainty that underpins investment planning.

Critically, the RTFO is now the subject of a statutory review. In August 2025, the Department for Transport published a call for evidence on the future of the scheme, signalling that significant changes may arrive from the 2027 reporting year. Among the proposals under consideration is a shift from volume-based to greenhouse gas (GHG)-based rewarding, meaning fuels achieving greater emissions reductions would receive proportionally more certificates. For biodiesel producers already investing in high-performance feedstocks and efficient processing, this shift could prove advantageous. For those relying on lower-performing pathways, it represents a clear signal to innovate or risk losing competitiveness.

Renewable Transport Fuel Certificates: Turning Compliance into Revenue

The practical value of RTFCs to a biodiesel producer depends heavily on feedstock choice. Biodiesel derived from waste materials, most notably used cooking oil, qualifies for “double counting” under the RTFO: the producer receives two certificates for every litre of qualifying fuel supplied, rather than one. This mechanism was introduced to incentivise waste-derived feedstocks over virgin crops, and it has had a transformative effect on the UK market. Used cooking oil now dominates UK biodiesel feedstock supply, and the double-counting premium makes waste-derived FAME significantly more commercially attractive than crop-based alternatives, which face a declining crop cap (falling to 3% in 2026 and 2% by 2032).

Producers who are not yet registered under the RTFO should note that even those supplying below the 450,000-litre annual threshold can voluntarily register to claim and trade RTFCs, opening up a revenue stream that might otherwise go uncaptured.

Direct Grant Funding: From Advanced Fuels to Biomass Innovation

Beyond the RTFO’s market-based support, the UK government operates several direct grant funding programmes relevant to biodiesel and related fuel producers. The most prominent is the Advanced Fuels Fund (AFF), administered by the Department for Transport with delivery support from Ricardo Energy and Environment. Across three competitive funding windows, the AFF has now allocated over £140 million to more than 30 projects, primarily targeting first-of-a-kind commercial and demonstration-scale sustainable aviation fuel (SAF) facilities.

While the AFF is nominally SAF-focused, its relevance to biodiesel producers should not be underestimated. Many funded projects employ conversion technologies, including Fischer-Tropsch synthesis, hydrotreatment, and gasification, that are directly applicable to biodiesel production pathways. Producers considering diversification into SAF or renewable diesel (HVO) will find the AFF a natural funding route, particularly as the UK’s SAF Mandate (in force since January 2025) creates growing demand for domestically produced sustainable jet fuel. The third funding window, announced in July 2025, awarded over £65 million to 17 projects, confirming that the pipeline of available capital remains active.

For producers focused on feedstock innovation rather than fuel conversion, the Biomass Feedstocks Innovation Programme offers a complementary route. Part of the government’s £1 billion Net Zero Innovation Portfolio, this programme has made £26 million available to projects developing novel approaches to increasing domestic biomass supply, from algae cultivation to sustainable forestry residue harvesting. Biodiesel producers seeking to secure or diversify their feedstock base may find alignment here.

Research-stage innovation is supported through UKRI, specifically the Biotechnology and Biological Sciences Research Council (BBSRC), which offers standard research grants of up to £2 million for projects targeting advanced biofuel production. These grants are open on a rolling basis and can fund projects lasting up to five years, making them suitable for longer-horizon process development.

Innovate UK and the Green Industries Growth Accelerator

The broader Innovate UK funding landscape also presents opportunities, albeit ones that require biodiesel producers to think creatively about how their operations intersect with adjacent policy priorities. The Green Industries Growth Accelerator (GIGA), backed by £960 million in initial funding and topped up with an additional £120 million in 2025, supports manufacturing and supply chain development in priority green sectors. Its initial focus areas are CCUS, hydrogen, nuclear, and offshore wind. However, biodiesel producers integrating carbon capture into their operations, or those exploring hydrogen-based processing routes such as hydrotreatment for HVO, may find themselves eligible for GIGA supply chain funding as the programme evolves.

At the earlier venture stage, the Clean Growth Fund, seeded with £20 million of government investment matched by private capital, targets UK-based clean technology start-ups across the power, transport, and waste sectors, explicitly including biofuels companies within its remit.

Trade Protections and Market-Shaping Policies

Not all government support takes the form of grants or certificate schemes. UK biodiesel producers also benefit from trade remedy measures that function as an indirect subsidy by shielding the domestic market from unfairly priced imports. Anti-dumping and countervailing duties on FAME biodiesel originating from the United States (and in some cases consigned via Canada) have been maintained by the Trade Remedies Authority (TRA) through January 2026. These measures were introduced after the TRA found evidence that government-subsidised US producers would likely dump FAME biodiesel in the UK market, causing material harm to domestic industry.

Producers should monitor the TRA’s ongoing activities closely. The Authority has published a Statement of Essential Facts regarding biodiesel imports from Indonesia, signalling that further trade defence actions may be forthcoming as global competitive dynamics shift. While trade protections are inherently time-limited and subject to review, they remain a meaningful element of the support landscape for UK FAME producers.

The SAF Mandate and Revenue Certainty Mechanism: A Gateway for Diversification

The SAF Mandate, which took effect in January 2025, requires an increasing share of sustainable aviation fuel in the UK’s jet fuel supply, rising to 10% by 2030. For biodiesel producers, this creates a strategic diversification opportunity. The Mandate operates its own tradeable certificate scheme, rewarding suppliers based on the greenhouse gas savings their fuels achieve, and the forthcoming Revenue Certainty Mechanism (expected in the second half of 2026) is designed to provide the long-term price stability that project financiers require before committing capital to new facilities.

The Green Finance Institute, working alongside industry partners, has launched a dedicated SAF accelerator programme aimed at enabling leading UK projects to reach final investment decisions in 2026. Biodiesel producers with the technical capability to co-process or pivot toward SAF routes should view this as a timely entry point into a rapidly growing market.

Practical Steps for Biodiesel Producers Seeking Funding in 2026

Navigating this landscape requires a strategic, portfolio-based approach rather than a narrow focus on any single scheme. Producers should begin by ensuring they are registered under the RTFO, even if operating below the mandatory threshold, to capture RTFC revenue. They should monitor the Department for Transport’s forthcoming consultation on updated RTFO targets and the potential shift to GHG-based rewarding, which could materially alter the economics of different feedstock and process choices from 2027.

On the grant funding side, producers should review Innovate UK’s open calls for feedstock and process innovation, assess whether their operations qualify for adjacent GIGA or CCUS-linked funding, and consider whether SAF diversification aligns with their long-term strategy. Engaging an experienced energy consultant to map eligibility across multiple overlapping programmes can be invaluable, as the interaction effects between schemes are often more significant than the value of any single one in isolation.

The UK’s support landscape for biodiesel in 2026 is not defined by a single headline grant or subsidy. It is an ecosystem of obligations, certificates, direct grants, trade protections, and emerging market mechanisms that, taken together, create a meaningful foundation for producers willing to invest the effort to understand and access them. With the RTFO review and the SAF Revenue Certainty Mechanism both set to deliver key milestones this year, 2026 will be a pivotal period for shaping the sector’s trajectory into the next decade.