Rewriting the RFS Playbook: The Impact of Final RVOs on Projected Biomass-Based Diesel Production and Imports for 2026-2027

June 11, 2026

Print This Article Share it With Friends

by Todd Hubbs and Scott Irwin (Oklahoma State University/University of Illinois/farmdoc daily) The U.S. Environmental Protection Agency (EPA) released the final “Set 2” rule establishing Renewable Volume Obligations (RVOs) under the Renewable Fuel Standard (RFS) for 2026 and 2027 at the end of March. The 2026 and 2027 increases in the biomass-based diesel RVOs are unprecedented in the history of the RFS and will set the trajectory of the U.S. biomass-based diesel industry for years to come (farmdoc daily, April 16, 2026). In our two most recent articles in this series (farmdoc daily, April 27, 2026; May 11, 2026), we used a detailed balance sheet approach to project the level of D4 RIN generation required to meet the final RVOs and then compared that requirement with the recent monthly pace of generation. The headline finding was that required D4 net RIN generation must increase from 7.10 billion RIN gallons in 2025 to 10.99 billion RIN gallons in 2026 and 11.89 billion RIN gallons in 2027—levels that have no precedent in the history of the U.S. biomass-based diesel industry. The purpose of this article is to translate the D4 RIN generation requirement into the physical terms that ultimately determine the levels of domestic FAME biodiesel and renewable diesel production, and the level of imports, needed to generate the required D4 RINs in 2026 and 2027.

Analysis

We begin with a brief recap of the D4/D5 RIN balance sheet analysis presented in our April 27th article. We construct the D4/D5 balance sheet using actual EPA data for 2023–2025 and projections for 2026–2027 based on the final Set 2 RVOs, an assumed minimum operating bank of 200 million gallons in both 2026 and 2027, and crucial cross-market linkages with the D6 conventional balance sheet. The balance sheet is reproduced in Table 1. D4 net RIN generation must rise from 7.10 billion RIN gallons in 2025 to 10.99 billion RIN gallons in 2026 and 11.89 billion RIN gallons in 2027, increases of 55 and 67 percent, respectively, relative to the actual level in 2025. Note that we project net D4 RIN generation, which is gross D4 RIN generation adjusted for the number of invalid RINs generated and other uses. In absolute terms, the 3.89-billion-RIN-gallon increase in D4 net generation between 2025 and 2026 alone is roughly four times the size of the 2025 D4/D5 ending bank of 960 million gallons. 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 534 million 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. The ending D4/D5 bank is projected to fall from 960 million gallons at the close of 2025 to the assumed minimum operating level of 200 million gallons by year-end 2026 and to remain at that level through 2027. In short, 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.

...

The cumulative effect of these five factors is not easily quantified. Under what we believe are reasonable downside scenarios for SREs, obligated volumes, exports, deficits, and ending banks, our best assessment is that the required pace of required D4 RIN generation would fall to no lower than roughly 850 million RIN gallons per month, compared with the average 954 million RIN gallon pace for 2026–2027 under our baseline assumptions. A pace of 850 million RIN gallons would still exceed the average observed in any year over 2023–2025 and would require sustained generation well above the 592 million gallon average of 2025.

Translated into physical terms, even this more conservative scenario would still require domestic production and imports well above their recent pace. The bottom line is that, even under a relatively aggressive combination of downside assumptions, the challenge facing obligated parties and biomass-based diesel producers is only moderately diminished.

Implications

The purpose of this article is to translate the required pace of D4 RIN generation into physical volumes of domestic production and imports needed to meet the final 2026 and 2027 RVOs under the RFS. The results reveal a demanding outlook on both margins of supply. On the domestic side, meeting the final RVOs requires FAME biodiesel to run essentially at its highest sustained pace on record and renewable diesel to run well beyond any pace it has ever achieved, with the combined sector operating at 90 percent of operable capacity in 2026 and 95 percent in 2027. While these are rates that have been demonstrated over multi-month stretches in the past, they sit far above the roughly 60 percent utilization observed as recently as 2025. On the import side, the required volumes are comparable to the standards of 2023 and 2024, but they call for a rebound in a flow that has collapsed under the 45Z credit, for which imported biofuels are not eligible.

These two margins are not independent. The more imports are discouraged by policy, the more of the burden falls on domestic production, and the higher the implied capacity utilization must climb. Our assumption of 600 million gallons of imports in 2026 already presumes a meaningful recovery from the near-zero pace of early 2026; if imports fail to materialize, domestic plants would have to run above the 90 percent rate assumed here—pushing utilization toward, and in some months past, nameplate capacity—or the D4/D5 RIN bank would be drawn down and compliance deficits would accumulate. As shown in our previous article, the D4/D5 bank is essentially exhausted after 2026, which leaves little room for that third margin of adjustment in 2027.

Standing behind every physical gallon of biomass-based diesel is a corresponding requirement for feedstock—soybean oil, distillers corn oil, animal fats, used cooking oil, and imported feedstocks. Production at the levels described here would require feedstock volumes well above recent use, with substantial implications for the soybean oil market and the broader fats and oils complex (Bukowski and Swearingen, 2026). We take up the feedstock implications of the production and import projections in the next article in this series.

The bottom line is that the final Set 2 RVOs ask the domestic biomass-based diesel industry to operate at the upper edge of its demonstrated capability while simultaneously relying on a recovery in imports that current and proposed policy work against. Whether the market can deliver on both fronts at once is a central question for 2026 and 2027.

References

Bukowski, M., and B. Swearingen. “Special Article: Vegetable Oils and Fats Use for Biofuels Production is Forecast to Expand under Current U.S. Biofuels Policies.” Oil Crops Outlook, U.S. Department of Agriculture, Economic Research Service, Situation and Outlook Report, May 2026. https://ers.usda.gov/media/20879/ocs-26e.pdf?v=68086

Gerveni, M., T. Hubbs, and S. Irwin. “Biodiesel and Renewable Diesel: What’s the Difference?” farmdoc daily (13):22, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, February 8, 2023.

Hubbs, T., and S. Irwin. “Rewriting the RFS Playbook: Final 2026–2027 RVOs for Biomass-based Diesel.” farmdoc daily (16):66, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, April 16, 2026.

Hubbs, T., and S. Irwin. “Rewriting the RFS Playbook: The Impact of Final RVOs on Projected D4 Biomass-Based Diesel RIN Generation for 2026-2027.” farmdoc daily (16):73, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, April 27, 2026.

Hubbs, T., and S. Irwin. “Rewriting the RFS Playbook: The Challenge of Meeting D4 Biomass-Based Diesel RIN Generation for 2026-2027.” farmdoc daily (16):82, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, May 11, 2026.

READ MORE