The process of setting 2026 Renewable Fuel Standard (RFS) quotas by the Environmental Protection Agency (EPA) is delayed, prolonging strategic uncertainty in the Renewable Identification Numbers (RINs) market. The US administration has initiated a complex arbitration process combining E15 ethanol, feedstock imports, and Small Refinery Exemptions (SREs) into a single compromise expected in 2026.
A regulatory compromise in the making
The current proposal, known as “Set 2”, covers 2026 and 2027 and introduces increased volumes, a reduction in RINs generated from imports, and the removal of eRINs linked to renewable electricity. This framework reshapes value dynamics between biofuel segments and raises the likelihood of regulatory litigation. It also reopens the debate on SREs, a long-standing point of contention between the oil industry and the EPA.
Immediate impact on markets
Uncertainty around volumes and credit generation mechanisms increases RIN price volatility and raises hedging costs for refiners. Investment decisions for renewable diesel or advanced biofuel capacity remain on hold pending the final rule, as project bankability depends on the intersection of RFS volumes, RIN pricing, and 45Z production tax credits.
Pressure on supply chains and tax alignment
Changes in RIN credit generation rules for imports, combined with a 2025 tightening of tax credits for foreign feedstocks, are already reshaping import flows of biodiesel and renewable diesel. Market participants are reassessing the viability of logistics chains, particularly for used cooking oil (UCO), animal fats and soybean oil.
A political lever to reduce sectoral tensions
The delay appears to be a deliberate strategy by the White House to reach a broad agreement between refining and agricultural interests. Several stakeholder meetings have been confirmed, aiming to avoid cross-litigation and regulatory instability that could impact fuel prices and investment momentum.
Indirect geopolitical impact and shifting alliances
Although the current measures are not tied to any sanctions regime, the discounting of foreign feedstocks acts as a quasi-protectionist barrier. This domestic bias may alter transatlantic flows and trigger trade tensions with key exporters of biofuel feedstocks.
Pending decisions on five key fronts
Regulatory signals to monitor include the legislative trajectory of E15, the compensation method for SRE-exempt gallons, the final calibration of the 45Z production credit, legal justifications for import-related rules, and the EPA’s official timeline for the final rule. Each adjustment on these elements could strongly influence investment decisions and contractual balances across the sector.
