The United States biodiesel industry, still on the mend after one of its most difficult operating years, faces a steep challenge in scaling up output fast enough this year to comply with the most ambitious biofuel blending targets the country’s Environmental Protection Agency (EPA) has ever set, Reuters reported.
The EPA announced the record mandates in late March, against a backdrop of surging fuel prices. To fulfil the new requirements, producers that convert soybeans into biodiesel will need to raise output by more than 60 per cent this year alone. Several industry bodies and biofuel experts have expressed doubt that the sector can achieve this in time, and a shortfall could put further upward pressure on diesel prices at the pump.
The EPA has set biodiesel and renewable diesel volume requirements at 5.4 billion gallons for 2026 and 5.7 billion gallons for 2027, sharply higher than the 3.35 billion gallons mandated last year. The agency estimates that an actual supply of around 6.07 billion gallons will be needed to satisfy the 2026 obligation, a figure that exceeds the headline mandate because a portion of domestically produced biofuel is exported or does not generate compliance credits.
Under the Renewable Fuel Standard (RFS), refiners are required to blend prescribed volumes of biofuel into the national fuel supply each year, or purchase compliance credits known as Renewable Identification Numbers (RINs) from producers who do. Should blending targets go unmet, obligated parties would need to draw on previously accumulated RIN reserves, which could push up credit prices and ultimately raise fuel costs for consumers.
Scott Irwin, an agricultural economist at the University of Illinois and a recognised authority on biofuels, estimated that obligated parties would need to generate 915 million credits per month to satisfy the EPA’s mandate. According to EPA data, credits generated from biodiesel blending under the D4 category reached 651 million in March, up from 481 million the month before — well short of what the mandates require. Irwin warned that the industry was headed for significant deficits that would carry through into 2027.
The U.S. Energy Information Administration (EIA), in its latest Short-Term Energy Outlook, forecast domestic biodiesel supply of approximately 1.52 billion gallons and renewable diesel supply of 3.53 billion gallons for 2026, a combined total that falls below the EPA’s blending requirement.
Paul Winters, director of public affairs and federal communications at the Clean Fuels Alliance of America, which represents renewable fuel producers, said the industry was working to get supply chains functioning in a coordinated manner. He noted that US producers had delivered 5 billion gallons to the market in 2024, which demonstrated that meeting the new targets was not impossible, but stressed that aligning feedstock supply with production and distribution remained a considerable task. The American Fuel and Petrochemical Manufacturers (AFPM), which represents refiners, has previously stated that the EPA’s targets go beyond what domestic feedstock supplies can sustainably support and would add to compliance costs.
Weak demand for biodiesel and renewable diesel in prior years had already driven many producers to shut down plants or operate well below installed capacity. Bringing those facilities back online at or near full capacity is now the central operational challenge. In Iowa, which accounts for more than 23 per cent of US biodiesel production, plants that had been idle earlier this year began ramping up following the EPA’s announcement. Monte Shaw, executive director of the Iowa Renewable Fuels Association, said the state’s combined annual target of 400 million barrels would be difficult to reach without clearer guidance from the Trump administration on how producers could access clean fuel credits under a new programme known as 45Z. With a quarter of the year already elapsed, Shaw noted, the pressure on producers had intensified.
In Minnesota, the Minnesota Soybean Processors, which operates an integrated soy crushing and biodiesel production facility, restarted its idled Brewster plant within a week of the EPA’s announcement. The facility is now working towards output of 35 million gallons this year, compared with 25 million gallons in 2025. Jeramie Weller, general manager of Minnesota Soybean Processors, said the company was ready to respond to what he described as a strong demand signal.
Processors cautioned, however, that expanding output beyond existing installed capacity remains difficult. Steel and aluminium tariffs have driven up construction costs significantly, and logistical and labour constraints continue to weigh on the sector. EIA data showed that as of January 1, 2026, the US had operable biodiesel capacity of 1.96 billion gallons and renewable diesel and other biofuel capacity of 4.89 billion gallons — a combined total that should in theory be sufficient to meet the 2026 quotas. However, actual combined production in 2025 came in at just 2.9 billion gallons, underscoring the gap between installed capacity and real-world output.
While soybean feedstock supplies are presently adequate, traders and analysts expect inventories to tighten by the fourth quarter as biodiesel production activity picks up. Winters said meeting the renewable volume obligations would require both biodiesel and renewable diesel plants to operate at 85 to 90 per cent of capacity, with additional capacity likely needed to satisfy 2027 mandates. He added, however, that the EPA mandates also represented a significant growth opportunity for the industry.
