CoBank’s latest quarterly research report, released on July 10, highlights growing uncertainty surrounding three major U.S. biofuel policies—Renewable Volume Obligations (RVOs) under the Renewable Fuel Standard (RFS), Small Refinery Exemptions (SREs), and the 45Z Clean Fuels Production Tax Credit. The report warns that the unclear implementation of these measures could significantly affect biofuel supply and demand through the rest of 2025, reports Biodiesel Magazine.
Describing these policies as “the three legs that will be balancing the biofuels industry as the year progresses,” the report suggests that unresolved questions around their enforcement could disrupt the market.
One area of concern is the EPA’s proposed rule to set RFS RVOs for 2026 and 2027. Among other changes, the rule would reduce the number of Renewable Identification Numbers (RINs) generated for each gallon of fuel made from imported feedstocks by 50%, while also proposing strong targets for biomass-based diesel. According to CoBank, this would likely lead to a sharp increase in the use of domestically sourced soybean oil as a biofuel feedstock.
Biofuel production has lagged during the first half of 2025. If RIN generation doesn’t accelerate in the second half, the report warns that the market could face a shortfall of nearly 2 billion RINs by year-end—a figure that doesn’t yet factor in the impact of pending SREs. The EPA is expected to provide clarity this fall, as it plans to issue final decisions on SREs and publish the final RFS rule by the end of October.
The report also examines the recently updated 45Z tax credit, which was modified and extended under the One Big Beautiful Bill signed by former President Donald Trump on July 4. While the extension pushes the credit’s availability through 2029, it also reduces the maximum value from $1.75 to $1 per gallon for sustainable aviation fuel (SAF), limits eligibility to fuels made from feedstocks produced in the U.S., Mexico, or Canada, and excludes indirect land use change (ILUC) from carbon intensity calculations.
Although some biofuel producers have begun monetizing the 45Z credit using initial guidance issued in January, CoBank notes that the revised credit has not provided enough financial gain to make up for the end of the long-standing $1-per-gallon blender’s tax credit.
Overall, CoBank concludes that how these three policies are implemented will shape the trajectory of the U.S. biofuels sector in the coming months, with potential implications for both domestic production and global market competitiveness.
