Uncertainty Over U.S. Biofuels Policy Muddying Outlook: CoBank

Lingering uncertainty surrounding U.S. biofuels policy continues to cast a shadow on the outlook for production and demand, rural lender CoBank said in a report last week.

Renewable volume obligations, small refinery exemptions and the 45Z Clean Fuel Production Tax Credit “are the three legs the biofuels industry will be balancing on as the year progresses,” the report stated.

“The combination of uncertainty around implementation of each will greatly impact overall supply and demand,” it added.

Soybean oil “may be the winner” in the proposed 2026-2027 RVO change, CoBank said, as the product “is now more likely to make up a larger share of the feedstock pie than previously.”

EPA proposed a total RVO of 24.02 billion gal for 2026, including 15 billion gal for conventional renewable fuels made from corn ethanol and 9.02 billion gal for advanced biofuels, the report noted, while the biofuels industry asked for a minimum biomass-based diesel level of 5.25 billion gal and received a proposed 5.61 billion gal after the last RVO rule for 2023-2025 set levels well below capacity and feedstock availability.

A major change in the proposed rule gives a 50% value for renewable identification numbers if the fuel or feedstock is imported, it added, and EPA said it would make its determination of small refinery exemptions by release of the final RVO rule at the end of October.

“If RIN generation does not pick up in the back half of this year, the market will be short nearly 2 billion RINs in 2025 without SREs being granted,” the report said. “RINs can also be carried forward to the next compliance year to meet mandates, but carryover balances are unlikely heading into 2026.”

The report is available on CoBank’s website.