Chevron Corp is buying biodiesel maker Renewable Energy Group Inc for $3.15 billion, in its biggest bet so far on alternative fuels.

The second-biggest 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 over 40% to the company's Friday close. Renewable Energy shares rose more than 37% in premarket trading.

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

Chevron has set a target to cut operational emissions to net zero by 2050 and in September pledged to invest $10 billion to reduce its carbon emissions through 2028, with about $3 billion earmarked for renewable fuels.

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

The Energy Information Administration estimates renewable diesel production capacity in the United States may increase five-fold 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 deal is expected to accelerate progress toward Chevron's goal to grow renewable fuels production capacity to 100,000 barrels per day by 2030 and brings additional feedstock supplies and pre-treatment facilities, the company said in a statement.

The transaction is estimated to close in the second half of the year and is likely to add to Chevron's earnings in the first year and to its free cash flow after the start-up of Renewable Energy Group's Geismar expansion in Louisiana.

Goldman Sachs & Co was Chevron's financial adviser, while Guggenheim Securities advised Renewable Energy on the deal. (Reporting by Rithika Krishna in Bengaluru; Editing by Aditya Soni)