Published on Thursday, June 26 2025
Authors : Cinda Lohmann, Executive Vice-President, Fuels Regulatory Practice

The Environmental Protection Agency (EPA) has proposed its Renewable Volume Obligations (RVOs) for 2026 and 2027, reinforcing its emphasis on domestic renewable fuel production while curbing reliance on foreign supply. The proposal includes increased volume mandates across all categories and introduces structural changes that would impact how Renewable Identification Numbers (RINs) are generated – particularly for imports. But whether this approach will effectively support new U.S. production – or simply raise the cost of compliance – is far from certain. This blog explores the tension between policy intent and market reality, and what it could mean for the future of renewable fuel obligations.

Key Changes Proposed

Cellulosic Biofuel

EPA proposes slightly reduced cellulosic biofuel volumes of 1.30 billion RINs for 2026 and 1.36 billion RINs for 2027 compared to 1.38 billion RINs for 2025, driven largely by limitations on the consumption of renewable natural gas used as compressed or liquefied natural gas (CNG/LNG) in vehicles. While CNG/LNG from biogas continues to be the dominant cellulosic biofuel pathway, modest volumes of cellulosic ethanol from corn kernel fiber are also expected to contribute.

Advanced Biofuel and Biomass-Based Diesel (BBD

EPA proposes notable increases in advanced biofuel and BBD volumes:

*		Advanced Biofuel: 9.02 billion RINs in 2026 and 9.46 billion in 2027 from 7.33 billion RINs for 2025
*		Biomass-Based Diesel: 7.12 billion RINs in 2026 and 7.50 billion in 2027 from an EPA estimated 5.36 billion RINs for 2025

These higher targets reflect projected increases in domestic feedstock availability, particularly soybean oil, as well as incremental growth in used cooking oil and animal fats. But most importantly, EPA’s targets also reflect the potential availability of foreign feedstocks for BBD production, which were not specifically included when determining the 2025 volumes. In this rulemaking, BBD targets are also presented in RINs rather than gallons for consistency across all biofuel categories.

A significant policy shift also accompanies this growth: EPA proposes to cut in half the number of RINs generated per gallon for imported renewable fuel and for renewable fuel produced from foreign feedstocks. This change is intended to prioritize domestic production and align with national energy security goals.

Compliance Credit Dynamics and Program Cost Implications

While the policy is aimed at supporting U.S. production for energy security, the practical impact could be a constrained RIN supply relative to the rising volume obligations. The proposed reduction in RIN generation for imports and the reduced equivalency value for Renewable Diesel (1.7 to 1.6 RIN/gal), coupled with a reduced year – to – date production of domestic BBD in 2025, may create compliance challenges in the near term.

This dynamic could lead to an increase in the overall cost of RFS program compliance. With fewer RINs generated per gallon of qualifying fuel – especially from imports – obligated parties may face higher costs to secure sufficient RINs. There are two primary cost pressures under the proposed 2026 and 2027 RVOs. First, the market may need to pull deeper along the supply curve, where production is more expensive – particularly as access to lower-cost foreign RINs is curtailed. Second, the number of RINs required for compliance is increasing substantially due to the higher volume mandates. Whether or not RIN prices respond directly will depend on a variety of factors, including the pace of domestic production, the balance of domestic and foreign feedstocks, and market expectations. However, from a program cost standpoint, the increased volume mandates alone signal increased economic pressure for obligated parties.

From a policy perspective, this approach reflects a dramatic shift in emphasis: volume growth targets are now being paired with qualitative controls on credit generation, favoring domestic sourcing even if it potentially results in higher compliance costs.

Conventional Renewable Fuel

EPA retains the implied 15-billion-gallon target for conventional biofuel in 2026 and 2027. However, as has been the case in recent years, actual ethanol blending is expected to fall short of this mark. Any shortfall in conventional volumes would need to be offset by additional advanced biofuel volumes, effectively increasing total RIN demand. This shift places upward pressure on D6 RIN prices, which may rise significantly – potentially approaching D4 RIN price levels. Such a convergence introduces another unintended program cost, putting further upward pressure on total RIN demand and overall program cost.

Conclusion

EPA’s 2026–2027 RFS proposal signals a deliberate policy shift: increased volume obligations paired with reduced credit generation from imported fuels and fuels produced from imported feedstocks. While the goal may be to strengthen U.S. energy security and promote domestic production, the implications will depend on market response. On one hand, existing domestic capacity may be capable of meeting the proposed targets – if supported by strong, sustained market (RIN price) signals. On the other hand, obligated parties may face higher compliance costs as lower-cost import options are constrained. As the comment period moves forward, the discussion will likely focus less on the direction of policy – and more on whether the program’s structure will support its delivery without unintended economic strain.