The Environmental Protection Agency's renewable volume obligation targets for 2026 and 2027 have been welcomed by the agricultural sector, but the biofuels industry now faces the challenge of producing enough renewable fuel to meet the sharply higher mandates.
The new renewable volume obligations increase biomass-based diesel blending requirements by 67% in 2026 and 70% in 2027 compared with the 2025 total of 5.42 billion gallons. The increases are the largest since the Renewable Fuel Standard was established, far exceeding the previous record year-over-year increase of 28% in 2013.
Several factors have complicated the industry's ability to respond, including uncertainty surrounding last year's rulemaking, the elimination of the biodiesel blenders tax credit in 2025, the transition to the 45Z Clean Fuel Production credit that excludes non-North American fuels and the delayed release of the final rule.
Under the Renewable Fuel Standard, refiners may carry forward up to 20% in excess renewable identification numbers, or RINs, from the previous year to help meet compliance obligations.
EPA has set Sept. 1, 2026, as the deadline for obligated parties to submit their 2025 RIN retirements. Final compliance data released after that deadline is expected to provide a clearer picture of whether renewable fuel production is keeping pace with the higher mandates.
The agency could propose renewable fuel blending requirements for 2028 and beyond as early as this fall, although it may wait until 2027 to evaluate production trends before setting future targets.
The Energy Information Administration projects renewable diesel production will increase 24% in 2026, while biodiesel production is expected to rise 41%. Combined capacity utilization for renewable diesel and fatty acid methyl ester biodiesel producers exceeded 70% in April 2026, compared with an average of 56% during 2025.
Even with those gains, meeting the new renewable volume obligations will require near-record biodiesel production and unprecedented renewable diesel output. Industry capacity utilization would need to reach about 90% in 2026 and 95% in 2027, compared with roughly 60% in 2025.
Analysts also note that refiners are unlikely to expand production capacity or make significant new investments without greater certainty regarding long-term federal biofuel policy.
Imports and lower export volumes could help narrow the gap between production and mandated blending levels, but they are not expected to fully offset the shortfall. Fuel exported earlier cannot be counted toward Renewable Fuel Standard compliance, while some production continues to be directed toward sustainable aviation fuel markets because of existing contracts and export incentives.
The RIN market has become a key mechanism for balancing compliance. The RIN bank declined from approximately 2.9 billion credits at the start of the year to about 680 million within five months. Bloomberg Intelligence projects monthly shortages of between 150 million and 165 million RINs.
Expanded E15 sales could provide additional voluntary blending, particularly in regions with established infrastructure and competitive retail pricing. However, ethanol generates fewer RINs per gallon than biomass-based diesel fuels.
Agricultural producers continue expanding feedstock supplies to support renewable fuel production. Soybean crush facilities are increasing output as demand for soybean oil grows, and the U.S. soybean industry expects 57% of the domestic soybean crop to be crushed this year and next, compared with 52% in 2024.
According to the Energy Information Administration, biomass-based diesel production in March used a record 1.28 billion pounds of domestic soybean oil and 432 million pounds of distillers corn oil.
RIN values are expected to play an increasingly important role by encouraging additional renewable fuel production where market conditions allow. Some producers with flexible facilities can shift production between renewable diesel and sustainable aviation fuel, depending on market economics, providing additional options as the industry works to satisfy the higher Renewable Fuel Standard mandates.
Source: CoBank, "Crunch time is now for meeting RVO"