US biodiesel and renewable diesel producers are falling short of production levels needed to meet record federal blending targets for 2026, raising concerns over higher compliance costs and the possibility of regulatory intervention by the President Donald Trump administration, reported EnergyNow, citing Reuters.
The US Environmental Protection Agency (EPA) has set a 2026 target requiring refiners to generate or purchase 8.86 billion Renewable Identification Numbers (RINs), equivalent to blending around 5.4 billion gallons of biodiesel and renewable diesel. This is more than 60% above the 2025 requirement.
However, production has not kept pace. Operating rates at US biodiesel plants stood at just under 77% in May, while renewable diesel facilities operated at 78%, below the roughly 90% capacity utilisation assumed under the mandate, according to Argus Media.
Refiners generated 736 million RINs in May, against the approximately 915 million required each month to remain on track. University of Illinois agricultural economist Scott Irwin estimates that production during the first four months of 2026 fell 1.41 billion RINs short of the required level. Closing the gap would require output to exceed the industry’s previous monthly production record by more than 20% for the rest of the year.
Industry analysts say the targets would require biodiesel plants to operate at record sustained levels and renewable diesel facilities to exceed their historical production rates. Some available volumes are also committed to export markets, where stronger prices have encouraged overseas sales rather than domestic blending.
Production growth was further constrained by uncertainty over guidance for the federal 45Z clean fuel production tax credit. The Trump administration finalised the guidance only recently, introducing changes that improve incentives for soy-based renewable diesel and provide greater certainty to producers. However, industry participants remain uncertain whether the policy clarity will be sufficient to offset earlier delays.
The depletion of the RIN credit bank is adding to market concerns. The reserve of unused credits, which refiners can use to meet blending obligations, has been shrinking as production lags demand. Analysts warn that continued drawdowns could exhaust the buffer by the end of 2026, putting further upward pressure on RIN prices.
Higher credit prices are increasing compliance costs, particularly for smaller refiners that depend on purchasing credits. The American Fuel and Petrochemical Manufacturers has urged the administration to reconsider the mandates, arguing that rising compliance expenses could ultimately increase costs for consumers.
The EPA said it assesses compliance over the full year and takes normal monthly production fluctuations into account, including the use of existing credits to bridge temporary shortfalls.
Analysts have also pointed to export demand and constraints on feedstock imports amid disruptions linked to the Iran conflict as factors that may have affected the EPA’s production assumptions. The growing gap between mandated demand and available supply could become a major policy challenge for the administration as the 2026 midterm elections approach.
