HOUSTON – Many businesses are betting that electric and hydrogen-powered cars and trucks will play a critical role in the fight against climate change. But some oil companies are hoping that so will smelly restaurant grease and slaughterhouse waste.

Companies that refine crude oil into fuel are increasingly using such putrid scraps to make a renewable version of diesel that can reduce greenhouse gas emissions from trucks, buses and industrial equipment without requiring families and businesses to invest in expensive new vehicles and factory gear. Phillips 66, Marathon, HollyFrontier and other refiners are spending roughly $2 billion to retool refineries to produce the fuel over the next four years.

Renewable diesel has been around for years, and its production, while tiny compared with its fossil fuel counterpart, has grown steadily because the federal government and California offer incentives for companies to make and sell it. That support has made the fuel even more attractive to oil refiners during the pandemic, when demand for regular diesel, gasoline and jet fuel has plunged as people drive and travel less.

Production of renewable diesel is up roughly 7% this year. If current trends continue, refineries could produce as much as 3.8 billion gallons of renewable diesel by 2025, or more than 5% of the total diesel production last year, according to S&P Global Platts, an energy research firm. "Renewable diesel is a golden nugget," said Corey Lavinsky, director for global biofuels at S&P Global Platts.

Renewable diesel can be used in existing diesel engines without having to be blended with regular diesel — its biggest advantage over biodiesel and ethanol, which are also made from organic material but generally cannot be used without being mixed with petroleum products. Renewable diesel, like biodiesel, is produced from waste agricultural products and animal fats, but it is processed differently to make it chemically identical to conventional petroleum diesel.

Burning renewable diesel produces 50% to 80% less greenhouse gas emissions than conventional diesel. And oil refineries can make renewable diesel with a few upgrades.

But some oil executives worry that renewable diesel could hit a wall in the coming years. CVR Energy Chief Executive David Lamp said federal and state incentives could encourage the industry to produce more fuel than is needed. Or they could pull the plug on incentives. "Take one of those subsidies away and you are at break-even," Lamp said.

But Jeremy Baines, president of Neste U.S., the American unit of a Finnish energy company, is more optimistic. He expects large companies like Amazon, Walmart and UPS to increase their use of the fuel as they look to reduce the carbon emissions of their truck fleets. "Renewable diesel is the only thing deployable and scalable today," he said.