‘Unprecedented’ Increase Needed in D4 RIN Generation to Meet 2026-27 RVOs: Analysis

The U.S. biomass-based diesel industry must increase net D4 Renewable Identification Number (RIN) generation by 55% and 67% in 2026 and 2027, respectively, from 2025 levels to comply with the Renewable Volume Obligations (RVOs) under the Renewable Fuel Standard (RFS) finalized by the U.S. Environmental Protection Agency (EPA), according to an analysis released Sunday by economists Scott Irwin at the University of Illinois and Todd Hubbs at Oklahoma State University.

In late March, the EPA finalized its RFS “Set 2” rule by setting blending for biomass-based diesel this year at an estimated 8.86 billion RIN credits and 8.95 billion RINs for 2027. The agency moved in the final rule to offer the standards in RINs instead of gallons for the first time in program history.

“The 2026 and 2027 increases in the biomass-based diesel RVOs are unprecedented in the history of the RFS,” Irwin and Hubbs wrote.

D4 net RIN generation must increase from 7.10 billion RIN gal in 2025 to 10.99 billion RIN gal in 2026 and 11.73 billion RIN gal in 2027, the analysis estimated. The forecast is driven by a combination of higher biomass-based diesel blending obligations, ongoing D4 export retirements, and what the economists described as a “D6 pull”, where biomass-based diesel RINs are used to satisfy part of the conventional ethanol mandate when D6 RIN supplies are insufficient.

“In absolute terms, the 3.89-billion-RIN-gallon increase in required D4 net generation between 2025 and 2026 alone is nearly four times the size of the 2025 D4/D5 ending bank of 0.96 billion gallons,” they wrote.

“The demand structure underlying these required generation levels comprises three components: the biomass-based diesel applicable RVO of 9.07 billion gallons in 2026 and 9.20 billion in 2027; D4 export retirements of 0.534 billion gallons in each year; and the D6 ‘pull’ –the volume of biomass-based diesel RINs needed to satisfy the conventional fuel obligation when D6 ethanol RIN supply is insufficient–of 1.42 billion gallons in 2026 and 1.41 billion in 2027,” they said.

They added that the required D4 net RIN generation “is the crucial number that the biomass-based diesel sector must hit in each of the next two compliance years, and the cushion provided by the RIN bank is essentially exhausted after 2026.”

To meet those annual requirements, Irwin and Hubbs estimate the pace of monthly D4 RIN generation would need to rise from 592 million RIN gal in 2025 to 916 million RIN gal in 2026 and 991 million RIN gal in 2027 — levels that exceed the 758 million RIN gal in 2024 and the 652 million RIN gal in 2023.

“[T]he required monthly pace of D4 RIN net generation for 2026 and 2027 is well beyond any sustained level observed in the historical record,” the economists wrote. For historical perspective, only one month between 2023 and 2025 — December 2024 at 906 million RIN gal — approached the pace now required under the new mandates.

The economists noted that the surge in December 2024 was largely attributed to a temporary pull-forward of imports ahead of the expiration of the $1/gal biodiesel blender’s tax credit (BTC).

The report highlighted a slow start to 2026. Monthly D4 RIN generation totaled 436 million gal in January, 478 million gal in February, and 649 million gal in March, all below the pace needed to meet the annual requirement.

According to the economists, the shortfall through the first quarter totaled roughly 1.18 billion RIN gal relative to the pace needed to remain on track for compliance.

“Closing this early-year gap will require monthly D4 RIN generation in the remaining nine months of 2026 to average roughly 1,090 million RIN gallons — a pace that is over 20% higher than the highest single month ever recorded. Even if the December 2024 pull-forward is treated as the upper bound of what is physically possible, the required pace for the balance of 2026 exceeds it by a wide margin,” they said.

The report attributed part of the weaker early-2026 generation pace to lower imports following the transition from the expired BTC to the Section 45Z Clean Fuel Production Tax Credit, which excludes imported biofuels from eligibility. Irwin and Hubbs said several factors could reduce the required pace somewhat, including higher-than-expected small refinery exemptions (SREs), lower petroleum demand tied to higher crude prices, and lower D4 RIN export retirements.

“Our best assessment is that, under reasonable downside scenarios for SREs, obligated volumes, and exports, the required monthly pace would fall to no lower than roughly 850 million RIN gallons per month, compared with the average 950 million RIN gallon pace for 2026-2027 under our baseline assumptions,” they said.

“A monthly pace of 850 million RIN gallons would still exceed the average pace observed in any year over 2023-2025 and would require sustained generation well above the 592 million gallon average observed in 2025. In other words, even under a relatively generous combination of downside assumptions, the challenge facing obligated parties and biomass-based diesel producers in 2026 is only marginally diminished.

“The bottom line is that the biomass-based diesel sector will have to sustain monthly D4 RIN generation at a level reached only a few times in the historical record under the most conservative assumptions,” they said. Irwin and Hubbs said the biomass-based diesel industry will likely need to rely on several mechanisms simultaneously to meet the higher RVO requirements in 2026 and 2027.

“How will obligated parties and biomass-based diesel producers respond to this challenge? At a high level, there are three margins of adjustment. First, biomass-based diesel producers can ramp up capacity utilization, both for FAME biodiesel and for renewable diesel, well above the 60% average utilization rates observed in 2023-2025.

“Second, imports of biomass-based diesel and feedstocks can play a larger role than they did during the slowdown of 2025. Third, in the event that physical production and imports fall short, obligated parties can draw down the existing D4/D5 RIN bank and incur compliance deficits that must be made up in the following year,” they wrote. “The relative contributions of these three margins of adjustment will shape outcomes in the D4 RIN market, in the soybean oil and other feedstock markets, and ultimately in the diesel fuel market itself,” the economists concluded.

Reporting by Bryan Sims, bsims@opisnet.com; Editing by Jordan Godwin, jgodwin@opisnet.com