The German manufacturer trialled using biofuel for its transporters at last year's Belgian, Dutch and Italian Grands Prix triple-header to see if it was feasible to use more sustainable fuel.
That experiment proved a success, reducing emissions by 89% compared to using normal fossil fuel.
However, the issue of the cost cap proved to be a hurdle in Mercedes committing to using the more environmentally friendly fuel for a full European season.
Biofuel costs are higher and, under the original cost cap rules, fuel costs for taking transporters to races had to come out of the team's annual budget.
That, in theory, meant that a switch to biofuel would have had knock-on consequences in terms of resources left for car development.
However, following discussions at the Formula 1 Commission earlier this year, a raft of sustainability initiatives were introduced to encourage teams to take more environmentally friendly options without facing a disadvantage.
It was agreed that, from now on, the costs of biofuel purchased for use in F1's company cars, race transporters and generators will be outside the cost cap.
This means that teams wishing to use more sustainable fuel can commit to the more expensive products without having to worry that it will have to come out of the budget they would rather be spending on car development.
Source: Autosport