(Reuters) – Chevron Corp. buys biodiesel maker Renewable Energy Group Inc. for $3.15 billion, in its biggest alternative fuels bet yet.

The second-largest U.S. oil and gas producer said on Monday it would pay $61.5 in cash for each share of Renewable Energy, a premium of more than 40% from Friday’s close. Renewable energy stocks rose more than 37% in premarket trading.

Big oil companies are facing increasing pressure from governments and investors to reduce their carbon footprint and join the fight against climate change, given their large contributions to global emissions.

Chevron has set a goal of reducing operational emissions to net zero by 2050 and in September pledged to invest $10 billion to reduce carbon emissions through 2028, including about $3 billion earmarked to renewable fuels.

Based in Ames, Iowa, Renewable Energy Group is a producer and supplier of cleaner fuels like biodiesel and renewable diesel.

The Energy Information Administration estimates that renewable diesel production capacity in the United States could increase fivefold by 2024, from 1 billion gallons currently to more than 5 billion gallons per year.

Biofuels are made from agricultural waste and traditional food crops grown specifically as fuel feedstock.

The agreement is expected to accelerate progress toward Chevron’s goal of increasing renewable fuels production capacity to 100,000 barrels per day by 2030 and bring additional feedstock supplies and pre-processing facilities, the company said. company in a press release.

The transaction is expected to close in the second half and is expected to boost Chevron’s first-year earnings and free cash flow after the start of Renewable Energy Group’s Geismar expansion in Louisiana.

Goldman Sachs & Co acted as financial advisor to Chevron, while Guggenheim Securities advised Renewable Energy on the deal.