Transesterification of a vegetable oil was conducted as early as 1853 by scientists E. Duffy and J. Patrick, many years before the first diesel engine became functional. Rudolf Diesel's prime model, a single 10 ft (3 m) iron cylinder with a flywheel at its base, ran on its own power for the first time in Augsburg, Germany on August 10, 1893. In remembrance of this event, August 10 has been declared "International Biodiesel Day". Diesel later demonstrated his engine and received the Grand Prix (highest prize) at the World Fair in Paris, France in 1900.
This engine stood as an example of Diesel's vision because it was powered by peanut oil - a biofuel, though not biodiesel, since it was not transesterified. He believed that the utilization of biomass fuel was the real future of his engine. In a 1912 speech Diesel said, "the use of vegetable oils for engine fuels may seem insignificant today but such oils may become, in the course of time, as important as petroleum and the coal-tar products of the present time."
During the 1920s, diesel engine manufacturers altered their engines to utilize the lower viscosity of petrodiesel (a fossil fuel), rather than vegetable oil (a biomass fuel). The petroleum industries were able to make inroads in fuel markets because their fuel was much cheaper to produce than the biomass alternatives. The result, for many years, was a near elimination of the biomass fuel production infrastructure. Only recently have environmental impact concerns and a decreasing cost differential made biomass fuels such as biodiesel a growing alternative.
In 1977, Brazilian scientist Expedito Parente produced biodiesel through the use of transesterification and ethanol. This process, the first patented in the world, is classified as Biodiesel by international norms, conferring a "standardized identity and quality. No other proposed biofuel has been validated by the motor industry". Currently, Parente's company Tecbio is working with Boeing and NASA to certify bioquerosene, another product produced and patented by the Brazilian scientist.
Research into the use of transesterified sunflower oil, and refining it to diesel fuel standards, was initiated in South Africa in 1979. By 1983 the process for producing fuel-quality, engine-tested biodiesel was completed and published internationally. An Austrian company, Gaskoks, obtained the technology from the South African Agricultural Engineers; the company erected the first biodiesel pilot plant in November 1987, and the first industrial-scale plant in April 1989 (with a capacity of 30,000 tons of rapeseed per annum).
Throughout the 1990s, plants were opened in many European countries, including the Czech Republic, Germany and Sweden. France launched local production of biodiesel fuel (referred to as diester) from rapeseed oil, which is mixed into regular diesel fuel at a level of 5%, and into the diesel fuel used by some captive fleets (e.g. public transportation) at a level of 30%. Renault, Peugeot and other manufacturers have certified truck engines for use with up to that level of partial biodiesel; experiments with 50% biodiesel are underway. During the same period, nations in other parts of the world also saw local production of biodiesel starting up: by 1998 the Austrian Biofuels Institute had identified 21 countries with commercial biodiesel projects. 100% Biodiesel is now available at many normal service stations across Europe.
In September of 2005 Minnesota became the first U.S. state to mandate that all diesel fuel sold in the state contain part biodiesel, requiring a content of at least 2% biodiesel.