The Impact of Revised RVOs on Projected Biomass-Based Diesel Production and Feedstock Use for 2026-2027

By Todd Hubbs and Scott Irwin

The U.S. Environmental Protection Agency (EPA) released a trilogy of decisions for the U.S. Renewable Fuel Standard (RFS) in recent months that represents some of the most significant regulatory developments for biomass-based diesel in the program’s history.  The combined effect of higher renewable volume obligations (RVOs), more restrictive small refinery exemptions, and mandatory reallocation creates substantially higher biomass-based diesel requirements for 2026/2027 (Farmdoc Daily, Oct. 25, 2025).  Consequently, D4 RIN generation will have to rise substantially in the future (Farmdoc Daily, Nov. 5, 2025).  This in turn raises the all-important question of the implications of the higher requirements for U.S. biomass-based diesel production and feedstock use.  Since the vast majority of biomass-based diesel produced in the U.S. and used to comply with the RFS is made up of FAME biodiesel and renewable diesel (Farmdoc Daily, Feb. 8, 2023), these two biofuels have the most at stake due to the policy changes.  The potential physical market implications are complicated by the EPA’s proposal to award only half RIN credits for domestic biomass-based diesel made from imported feedstock and imported biomass-based diesel fuel.  The purpose of this article is to project biomass-based diesel production and feedstock use for 2026/2027 under different scenarios regarding the impact of the half RIN proposal.  The article builds upon the analysis of the renewable diesel boom found in a series of previous Farmdoc Daily articles.

Analysis

We begin with projections of D4 RIN generation for 2026/2027.  Our first projections were presented in a recent Farmdoc Daily article (Nov. 5, 2025), and the estimated balance sheets for 2023-2027 were based on three important EPA rulemakings: i) proposed renewable volume obligations (RVOs) for 2026 and 2027 released in June 2025; ii) a comprehensive rulemaking on small refinery exemptions (SREs) over 2016–2024 that was released in July 2025; and iii) a reallocation policy framework for small refinery exemptions published in September 2025.  Two scenarios for reallocation of 2023-2025 SREs in 2026/2027 were presented: 100% and 50% reallocation.  Projected SREs for 2026 and 2027 were also assumed to be fully reallocated within each compliance year.

On Nov. 7, the EPA announced a new round of SRE decisions covering 2021–2024 petitions.  Out of the total of 16 petitions considered, two were granted full exemptions, 12 were granted partial 50% exemptions, and two were denied.  The total exempted RVO for the 14 approved petitions across the four compliance years was 740 million (RIN) gallons, a substantial amount.  The six petitions approved for 2021/2022 are not relevant to our projections of D4 balance sheets over 2023–2027 and can be ignored.  However, the 10 petitions approved for 2023/2024 representing 510 million gallons will have a material impact on the balances, and therefore, we include them in our updated estimates.  We follow the procedures discussed in our Nov. 5 article for including the additional SRE volumes.  In addition, the larger total of SREs over 2023–2025 raises the issue of updating volumes for the 100% and 50% reallocation scenarios.  We assume that the EPA will follow the same reallocation procedures for the most recently awarded SREs as those previously granted.

The updated D4 RIN balance sheets shown in Table 1 reveal an even more dramatic shift in D4 RIN market fundamentals between 2023–2025 and 2026/2027 than in our original projections.  In 2023 and 2024, the analysis shows a massive buildup of the D4 RIN bank as RIN generation substantially outpaced obligations.  The D4 bank peaks at 3.0 billion gallons in 2024, over three times the previous peak in 2016 (Gerveni, Hubbs, and Irwin, 2025).  In 2025, the size of the RIN bank begins to decline, reaching 1.61 billion gallons, but still represents an extremely large bank by historical standards.  A bank of this size provides a very large buffer going into 2026-2027.  Note that the size of the ending RIN bank in 2026 and 2027 is assumed to be a fixed value of 73 million gallons, based on the argument that RIN balances are expected to be “tight” during years of sharply rising RVOs.  As a result, 2026 represents a major inflection point with regard to the size of ending RIN stocks.

The estimates for D4 RIN generation in Table 2 reveal that D4 generation over 2023–2025 averaged 7.84 billion gallons.  This compares to an average of 9.43 billion gallons across the two reallocation scenarios for 2026 and 2027, a 20% increase.  This is a substantial increase in required D4 RIN generation over a relatively short period of time.  It is also important to emphasize that the estimates of D4 RIN generation shown in Table 1 are independent of developments in physical biomass-based diesel markets.  The projections of D4 generation can be thought of as fixed targets that can be met by a wide variety of combinations of domestic and imported physical biomass-based diesel production.  The key is that physical biomass-based diesel volumes must add up to the D4 RIN generation requirements (after appropriate weighting), not the other way around.

We can now turn to the task of estimating physical biomass-based diesel production and feedstock use in 2026/2027.  As mentioned earlier, in its June rulemaking, the EPA proposed lowering the RIN value to 50% for biofuel produced domestically with foreign feedstock or imported biofuel.  The so called “half RIN” dramatically changes the status of imported products under the RFS.  This proposal has major implications for the type of biomass-based diesel produced to meet the expanded RVO’s and the sourcing of feedstocks to meet the mandate.  Additionally, the EPA proposed lowering the D4 RIN equivalence value for non-ester renewable diesel from 1.7 to 1.6 RINs per gallon.  Nearly all renewable diesel is derived from the HEFA process.  This change of policy places FAME biodiesel, which receives 1.5 RIN’s per physical gallon produced, on a more equal basis with renewable diesel.

We consider four scenarios for the impact of the half RIN proposal on physical biomass-based diesel production and feedstock use in 2026/2027.  It is important to emphasize that the scenarios mainly differ by the assumed impact of the half-RIN proposal on domestic production versus imports.  All of the scenarios share the same assumptions about RVOs and required D4 RIN generation.

The base scenario is the same as the EPAs June rulemaking except that RVOs are adjusted by small refinery exemptions (SREs) and reallocation decisions.  In its analysis, the EPA assumed that imported feedstock and imported biodiesel and renewable diesel would stay virtually the same as in 2024.  In essence, the EPA assumed that import quantities would be barely impacted from 2024 levels by the 50% reduction in the RIN credits that could be earned by these volumes.  We simplify the EPA assumption by freezing all import categories at 2024 levels.  In addition, we fix total FAME biodiesel production at 2.116 billion gallons for 2026, the same assumption used by the EPA (Table 3.2-8 in the draft regulatory impact analysis document that accompanied the June rulemaking).   We limit the increase in total biodiesel production for 2027 to the proportional increase in total net RIN generation.

The second scenario addresses the concern that demand for imported feedstocks and imported biomass-based diesel production may be less than perfectly price inelastic.  For example, current D4 RIN prices are in the neighborhood of $1 per (RIN) gallon, which translates into $1.60 per physical gallon of renewable diesel in 2026/2027.  Under the half-RIN proposal, domestic renewable diesel produced from imported feedstock and imported renewable diesel would only receive 80¢ per gallon.  It seems unreasonable to assume that a credit difference of this magnitude would not cause imports to decline substantially.  Hence, for this scenario, we assume that imports of feedstock and biomass-based diesel go to zero in 2026-2027.  In addition, we assume that FAME biodiesel generates one-third of net D4 RIN generation required each year over 2026/2027 and renewable diesel generates 67%.  This fixes the proportions to be the same as in 2024.

The third scenario recognizes that both of the first two scenarios may be too extreme with respect to the price sensitivity of imports.  Consequently, we simply split the difference between the first and second scenarios in terms of imported biomass-based diesel and imported feedstocks, which results in imports being set at the average of the first and second scenarios in 2026 and 2027.

The fourth scenario is the same as the first scenario except the half RIN proposal is assumed to not be in place.  Without the half-RIN, we allow domestic biomass-based diesel production and imports to adjust to the larger D4 RIN requirements for 2026/2027 proportionally to RIN generation in 2024.  In essence, this is a “status quo” scenario for domestic production and imports relative to the pattern in 2024.  We consider 2024 as the base year in order to avoid any distortions introduced in 2025 due to the large D4 RIN bank and uncertainty regarding the implementation of the new 45Z clean fuel production tax credit.

Figures 1 and 2 show projected volumes of U.S. FAME biodiesel and renewable diesel production, respectively, for the four scenarios discussed above.  Please note that detailed results for each of the four scenarios can be found in appendix tables A1 through A4 at the end of the article.  Figure 1 shows that biodiesel production increases substantially in 2026/2027 under all three half-RIN scenarios (June EPA, No Imports, 50% imports).  Compared to average production in 2023–2025 of 1.5 billion gallons, biodiesel production increases between 200 and 400 million gallons in 2026 and between 800 million and 1 billion gallons in 2027.  The increases in FAME biodiesel production across the two years average 39% compared to the three-year average over 2023-2025.  

Under the Status Quo scenario without the half-RIN, the increases were much more modest, due to much larger use of imported feedstock and imported biodiesel.  Figure 2 indicates that renewable diesel production also increases sharply in 2026-2027 under all three half-RIN scenarios.  Compared to average production in 2023–2025 of 2.9 billion gallons, renewable diesel production increases between 600 million gallons and 1.1 billion gallons in 2026 and between 1.5 and 1.9 billion gallons in 2027.  The increases in renewable diesel production across the two years average 44% compared to the three-year average over 2023–2025.  Like biodiesel, increases are much more modest under the Status Quo scenario, for the same reasons.

Figure 3 presents biomass-based diesel capacity utilization rates under each of the four scenarios.  Capacity utilization is measured separately for FAME biodiesel and renewable diesel and then aggregated to the observations shown in Figure 3.  We use data from the Energy Information Agency (EIA) on operable capacity of biodiesel and renewable diesel plants.  In the case of biodiesel over 2026/2027, we measure capacity as the maximum over 2022–2025 to reflect an assumption that capacity that was shuttered during this period would need to be brought back online in order to meet the robust increases in demand represented in Figure 1.  Total biomass-based diesel capacity utilization under the three half-RIN scenarios jumps 6 to 11% in 2026 and 26 to 31% in 2027 compared to the three-year average of 71% in 2023–2025.  The capacity utilization rates under the half-RIN scenarios in 2027 are especially noteworthy as they are just below, or even slightly exceed, full capacity.  This is consistent with the stated goal of the EPA in the June rulemaking: “The volume requirements and regulatory changes proposed in this action would strengthen the RFS program and sharpen the program’s focus on a central goal of the policy: supporting domestic production of renewable fuels.” (p. 25785).

Figures 4, 5, and 6 show projected total feedstock use, domestic feedstock use, and imported feedstock use, respectively, under the four scenarios.  Feedstock use is computed as 7.55 pounds per gallon of FAME biodiesel production and 8.125 pounds per gallon of renewable diesel production.  This results in average feedstock use of 8.0 pounds per gallon of biomass-based diesel production, very close to the average computed using data from the EIA’s Monthly Biofuels Capacity and Feedstocks Update Report. Figure 4 shows that total feedstock use increases substantially in 2026/2027 under all three half-RIN scenarios, as one would expect given the increases in FAME biodiesel and renewable diesel production outlined earlier.  Compared to average use in 2023–2025 of 40 billion pounds, feedstock use increases between 3 and 13 billion pounds in 2026 and between 14 and 25 billion pounds in 2027.  The increases in total feedstock use across the two years average 24% compared to the three-year average over 2023–2025.  Finally, it is interesting to observe that total feedstock usage is highest for the base June EPA scenario out of the three half-RIN scenarios.  The reason is that domestic biomass-based diesel made from imported feedstock and imported biomass-based diesel in this scenario are fixed at 2024 levels, yet these volumes only generate a half-RIN.  This requires additional domestic feedstock to make up for the difference.

While the increase in total feedstock use is large under all three of the half-RIN scenarios, the biggest impacts of the half-RIN proposal are found in Figures 5 and 6, which show total domestic and import feedstock use, respectively.  Compared to average domestic use in 2023–2025 of 23 billion pounds, Figure 5 shows that domestic feedstock increases between 14 and 20 billion pounds in 2026 and between 21 and 31 billion pounds in 2027.  The increases in domestic feedstock use across the two years average an eye-popping 88% compared to the three-year average over 2023–2025.  It makes sense that domestic feedstock usage is the highest for the no-import scenario and lowest for the June EPA scenario.  As noted earlier, the latter scenario assumes import volumes are fixed at relatively high levels during 2026/2027.  Just the opposite of domestic use, Figure 6 shows that imported feedstock use basically stays flat or declines all the way to zero depending on the half RIN scenario.  These dramatic changes in domestic versus imported feedstock use are fully consistent with EPA’s justification for the half-RIN proposal in its June rulemaking: “Imported renewable fuel and renewable fuel produced from foreign feedstocks do not further energy independence and are projected to result in fewer employment and rural economic development benefits relative to renewable fuels produced in the U.S. from domestic feedstocks.” (p. 25788)

It is important to provide context for the magnitude of increases in total and domestic feedstock use. Fortunately, a February 2025 special article in the USDA Oil Crops Outlook by Bukowoski, Swearingen, and Hubbs provides invaluable data in this regard. These authors estimate that that the total supply of foreign biomass-based diesel feedstock for the 2023-24 marketing year was 129 billion pounds. The average annual increase in total feedstock usage over 2026/2027 for the three half-RIN scenarios is 14 billion pounds when compared to the previous three-year average.  This represents an 11% increase in the total global demand for biomass-based diesel feedstock compared to the 2023/2024 benchmark.  

As one would expect, a similar comparison for the U.S. domestic market is even more striking.  The average annual increase in domestic feedstock usage over 2026/2027 for the three half-RIN scenarios is 20 billion pounds when compared to the previous three-year average.  Bukowoski, Swearingen, and Hubbs estimated the total supply of U.S. vegetable oils, animal fats, used cooking oil (UCO), and grease to be 80 billion pounds for the 2023/2024 marketing year.  The average increase in domestic feedstock usage over 2026-2027 of 20 billion pounds represents a quarter of this benchmark measure of total U.S. biomass-based feedstock availability.  It should be kept in mind that these comparisons are only rough indicators of the potential market impact of the increases in feedstock use under the EPA half-RIN proposal. First, there is a range of feedstock usage increases depending on the scenario considered. Second, there is the possibility of feedstock supplies increasing in response to any price increases caused by the increased feedstock demand.

Implications

EPA decisions in recent months regarding the implementation of the U.S. Renewable Fuel Standard (RFS) will likely have far-reaching impacts on biomass-based diesel market dynamics. Of central importance to the potential impacts on physical production and feedstock use is the EPA proposal to lower the RIN value by 50% for biofuel produced domestically with foreign feedstock or imported biofuel.  In this article, we project biomass-based diesel production and feedstock use for 2026/2027 under different scenarios regarding the impact of the half RIN proposal.  Our projections indicate that FAME biodiesel production will need to increase by an average of 39% over 2026/2027 compared to the 2023–2025 average, while renewable diesel production must rise by 44% over the same period.  Capacity utilization jumps from an average of 71% over 2023-2025 to rates approaching or even exceeding 100% by 2027 under the half-RIN scenarios.  This would mark a dramatic reversal from the recent period of relative oversupply and substantial D4 RIN bank accumulation.  Our analysis also projects that domestic feedstock use will need to increase by an average of 20 billion pounds annually over 2026/2027 compared to the 2023–2025 average—an eye-popping 88% jump that represents one-quarter of the entire U.S. vegetable oil, animal fat, and grease supply available in the 2023/2024 marketing year.  Market participants should anticipate a period of elevated price volatility for D4 RINs, biomass-based diesel, and feedstock as the market adjusts to these tighter fundamentals.  It should also be noted that the EPA policies analyzed in this article have not been finalized.  In particular, much depends on whether the half-RIN proposal is included in the final rulemaking for 2026/2027.

Rewriting the RFS Playbook: The Impact of Revised RVOs on Projected Biomass-Based Diesel Production and Feedstock Use for 2026-2027 was originally published by Farmdoc.