The EPA has released its proposed Renewable Volume Obligations (RVOs) for 2026 and 2027 under the Renewable Fuel Standard, delivering a notable surprise to the clean fuels market.
Clean fuels and agricultural groups had advocated for a 2026 biomass-based diesel (BBD) volume of 5.25 billion gallons. In the months leading up to the announcement, market participants expected volumes to fall short of that target, with bearish trade sentiment and wide price swings fueled by rumors of leaked drafts. However, the EPA exceeded expectations, setting the 2026 BBD requirement at 7.12 billion RINs and 7.50 billion for 2027. In response, D4 and D6 RINs rose 10-15 cents in today’s trading.
In contrast, the agency revised the 2025 cellulosic-derived biofuel volume requirement down to 1.19 billion RINs from a previously finalized 1.38 billion. In a separate proposal, the EPA also issued a partial waiver for the 2024 cellulosic requirement, enabling the use of waiver credits to assist obligated parties with compliance. These revisions underscore the ongoing infrastructure challenges in the RNG sector, particularly the limited availability of CNG fueling stations – a persistent bottleneck constraining D3 RIN generation.
Karbone’s 20-year D3 RIN pricing model anticipated a downward revision to 2025 volumes in its Base Case scenario. Looking ahead, prices could remain elevated if CNG trucking demand accelerates and supply remains tight – driven by expanded fueling infrastructure and adoption of larger CNG-compatible engines.
However, unanswered questions remain about small refinery exemptions (SREs), which are granted to refiners with an average annual crude oil throughput of 75,000 barrels or less, demonstrating “economic hardship” as a result of RVO compliance. The EPA’s proposal leaves uncertainty around the volume of gasoline and diesel that will be exempt in 2026 and 2027, with estimates ranging from zero to 18 billion gallons, and does not definitively address the backlog of 169 SRE petitions, underscoring the long-term uncertainty for projects relying on RIN revenues.
A particularly impactful component of the EPA’s proposal is its emphasis on domestic energy production. Under the new proposed rulemaking, renewable fuels produced from imported or foreign-derived feedstocks will generate only half as many RINs per gallon. This offers a clear regulatory advantage to U.S.-based feedstock suppliers; Karbone expects this shift to drive additional RIN demand and support continued price strength across the market.
Together, these regulatory shifts reinforce a growing federal commitment to domestic clean fuel production – creating tailwinds for U.S.-based biofuels investment. The proposed mandates are subject to change based on a public comment period and intake of biofuel production data over the coming months. Karbone Research continues to track these regulatory developments and their market impacts, providing forward-looking insights and long-term pricing forecasts to help clients navigate an increasingly dynamic RINs landscape.
