10 Best Biofuel Stocks: How To Invest in Renewable Fuel in 2022

Replacing fossil fuels with diesel or gas made from feedstock like waste or methane can reduce carbon emissions. Biofuels can be the best medium-term solution for hard-to-decarbonize sectors like aviation. Some biofuel stocks could also be attractive acquisition targets for oil companies that want to transition to cleaner energy. Learn what the top biofuel stocks are.

Anna Ng   Updated March 2nd, 2022

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What are biofuels?

Replacing fossil fuels with biofuels made from renewable materials can reduce carbon emissions. According to the EPA, ethanol can also reduce carbon monoxide emissions.

Biofuels already meet about 2.5% of global energy needs, and gasoline sold in the U.S. contains up to 10% ethanol, a first-generation biofuel. And the International Energy Agency estimates that biofuel demand will have to more than double by 2026 for us to get to net-zero carbon by 2050.

Biofuels are particularly relevant in sectors where no electric alternatives exist, such as aviation and shipping. Electric cars are already an option, but electric planes or ships are not here yet. In fact, airlines have been mixing conventional jet fuel with biofuels for over a decade.

There are several types of biofuels.

First-generation biofuels

First-gen biofuels like ethanol are made from sugarcane, sugar beet, corn, animal fat, or vegetable oils like palm oil. The top two bioethanol producers are the U.S., where ethanol is made from corn, and Brazil, where it’s made from sugarcane.

Next-generation biofuels

The next generation of biofuels is more sustainable. Biofuel manufacturers have learned to turn waste, agricultural residue, and even algae into energy. Next-gen biofuels don’t need any more land and reduce emissions more because the waste would have been there anyway.

What are the disadvantages of biofuels?

Biofuels may be helpful, but they are no longer thought to be a climate game-changer like wind, solar or nuclear fusion.

There are also big differences among biofuels – some are much more sustainable than others. Taking waste and turning it into fuel doesn’t require more land, fertilizer, or water.

Unfortunately, ethanol made from corn, palm oil, or sugarcane requires water and land. Growing more crops can lead to deforestation and make droughts worse. In fact, palm oil has been called out as one of the top causes of deforestation in Malaysia and Indonesia. According to one report, biodiesel made from palm oil is worse for the environment than fossil fuels.

Finally, biofuels are also more expensive than fossil fuels, requiring government subsidies to be competitive.

Having said that, next-gen biofuels could be a medium-term step as the world transitions to green energy.

What are the best biofuel stocks?

There aren’t many large pure-play biofuel companies.

Oil refiners like BP are growing their biofuel businesses. And in March 2022, Chevron announced that it’s acquiring Renewable Energy Group (REGI), the largest biofuel producer in North America. But buying oil company stocks is not a good way of investing in the climate transition or in biofuels.

Here are some alternative biofuel stocks you can invest in:

Biofuel stock list

  • Darling Ingredients (DAR)
  • Neste Oyj (NTOIF)
  • Global Clean Energy Holdings (GCEH)
  • VERBIO Vereinigte BioEnergie AG (VBVBF)
  • Gevo Inc (GEVO)
  • Aemetis (AMTX)
  • Clean Energy Fuels Corp (CLNE)
  • Green Plains Inc (GPRE)
  • Green Plains Partners (GPP)
  • FutureFuel Corp (FF)

Learn more about each company on the list.

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1. Darling Ingredients (DAR)

  • Market capitalization: $12.5 billion
  • 1-year return: 19%

Texas-based Darling Ingredients is the largest publicly-traded company turning food waste into renewable fuel. They operate 250 plants in 17 countries, converting 10% of the meat industry waste into products like renewable diesel and fertilizer. DAR gets used animal cooking fats from 130,000 restaurants, turning waste into “liquid gold.”

DAR’s Diamond Green Diesel Joint Venture with Valero Energy repurposes 15% of America’s recycled animal fats, turning cooking oils into 275 gallons of renewable diesel at their Louisiana facility. They plan to open another plant in Texas next year.

DAR reported $4.7 billion in sales and $214 million in EBITDA for 2021.

2. Neste Oyj (NTOIF)

  • Market capitalization: €28 billion
  • 1-year return: -35%

Finnish company Neste is one of the largest biofuel producers, turning waste and raw materials into renewable fuels. They are the world’s leading producer of renewable diesel and sustainable aviation fuel.

Neste’s aviation fuel can reduce greenhouse gas emissions by up to 80% compared to conventional jet fuel. The market for sustainable aviation fuel remains small, but it has potential because planes are very hard to electrify. And Neste renewable diesel lets customers reduce carbon emissions by up to 90% compared to regular diesel.

However, Neste still has a conventional oil business, even though they aim to reach carbon-neutral production by 2035. So it may not be the best choice for ESG investors who want to divest from fossil fuels.

Neste reported €15.1 billion in 2021 sales.

3. Global Clean Energy Holdings (GCEH)

  • Market capitalization: $169 million
  • 1-year return: -2%

Global Clean Energy Holdings is a small-cap biofuel company that makes renewable diesel. Cleaner-burning than conventional diesel, renewable diesel works with the existing refueling infrastructure.

The company emphasizes low-carbon inputs like camelina, a plant of the mustard family. They buy camelina directly from farmers, process it at a biorefinery in Bakersfield, California, and sell biodiesel under long-term agreements through a strategic relationship with ExxonMobil.

GCEH is a small company with less than $200 million in market cap, but it could be an interesting acquisition target for an oil company looking to reduce its reliance on oil and gas.

4. VERBIO Vereinigte BioEnergie AG (VBVBF)

  • Market capitalization: €4.4 billion
  • 1-year return: 122%

Based in Germany, VERBIO is a leading European supplier of biodiesel, bioethanol, and biogas. They were founded in 2006 and have about 900 employees today.

VERBIO relies on raw materials that aren’t used for food production and plan to use more agricultural waste in the future. According to the company, VERBIO biofuels reduce carbon emissions by up to 90% compared to regular petrol and diesel. VERBIO also makes biofertilizer, animal feed, and raw materials for the pharma, cosmetic and food industries.

The company reported €1 billion in 2021 sales and €166 million in EBITDA.

5. Gevo Inc (GEVO)

  • Market capitalization: $732 million
  • 1-year return: -56%

Englewood, Colorado-based Gevo makes renewable fuels, renewable gasoline, and natural gas. They are focused on meeting the demand for sustainable aviation fuel and have agreements in place to supply jet fuel to airlines like Delta and SAS.

Gevo is currently engineering its Net-Zero Plant. The plant, expected to be operating in 2025, should materially increase profits. However, Gevo is a startup with less than $1 million in 2021 sales.

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Save and invest spare change

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Fees

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Minimum

$100,000

6. Aemetis (AMTX)

  • Market capitalization: $444 million
  • 1-year return: -23%

Aemetis is a U.S. renewable fuels company that makes sustainable aviation fuel, renewable diesel, ethanol, and renewable natural gas. The company captures methane from cows at dairy farms using digesters and pipes the gas to its plant, where it becomes renewable natural gas. Their Californian ethanol plant produces roughly 65 million gallons per year of ethanol, animal feed, and corn oil.

Aemetis is also involved in carbon capture and sequestration, capturing carbon at its own plants and for third parties. Besides the two operating biofuel plants, Aemetis is building a renewable jet fuel refinery. The facility will produce sustainable aviation fuel for companies like Delta.

For 2020, Aemetis reported $165 million in sales, though they target $1.5 billion in sales and $461 million in EBITDA by 2026.

7. Clean Energy Fuels Corp (CLNE)

  • Market capitalization: $1.68 billion
  • 1-year return: -38%

Clean Energy Fuels Corp is a leading provider of renewable natural gas (RNG) in the U.S. The company makes RNG from organic waste, such as garbage or cow manure. They capture methane, a potent greenhouse gas, from manure at dairy farms and turn it into biogas. The market for RNG from cow manure has been boosted by regulation in California, so the opportunity is attractive.

RNG can fuel passenger cars, buses, and heavy-duty trucks. Clean Energy already fuels over 25,000 vehicles daily, and its customers include Amazon, New York City Metro, and Los Angeles County Metro. The company also has a large network of fueling stations in North America.

In 2021, CLNE reported $256 million in sales and $57 million in EBITDA, so it’s already profitable.

8. Green Plains Inc (GPRE)

  • Market capitalization: $1.83 billion
  • 1-year return: 37%

Omaha, Nebraska-headquartered Green Plains is an ethanol producer with a capacity of over 1 billion gallons per year. They have 11 biorefineries throughout the U.S.

Besides ethanol, Green Plains makes corn oil, animal feed ingredients, sugar, and distillers grains. However, Green Plains relies on corn as its feedstock, and corn isn’t as sustainable as other biofuel inputs.

Green Plains is a relatively big company, reporting $2.8 billion in 2021 sales.

9. Green Plains Partners (GPP)

  • Market capitalization: $322 million
  • 1-year return: 28%

Formed by its parent, Green Plains Inc, Green Plains Partners provides ethanol storage, terminal, and transportation services.

To be more specific, they have 32 ethanol storage facilities (located near the parent’s ethanol plants), eight fuel terminals, and a railcar fleet of over 2,840 railcars.

GPP is a separate company listed on the NASDAQ. For 2021, they reported $78 million in sales and $52 million in EBITDA.

10. FutureFuel Corp (FF)

  • Market capitalization: $319 million
  • 1-year return: -49%

St. Louis, Missouri-based FutureFuel makes biodiesel and diversified chemical products. They manage their business through two segments, chemicals and biofuels, which is the larger segment. FF’s biofuels plant in Arkansas has an annual capacity of 59 million gallons per year, offering both biodiesel and petrodiesel blends to customers. The company can produce biodiesel from a broad range of feedstock, such as animal fat, used cooking oil, and vegetable oil.

In 2021, FutureFuel generated $205 million in sales and $29 million in EBITDA.


NOT INVESTMENT ADVICE. The content is for informational purposes only; you should not construe any such information as investment advice.

🔔 Looking for other biofuel investment ideas? Check out the top ethanol investments.

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