Rule2026-06275
Renewable Fuel Standard (RFS) Program: Standards for 2026 and 2027, Partial Waiver of 2025 Cellulosic Biofuel Volume Requirement, and Other Changes
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 1, 2026
Effective
June 15, 2026
Issuing agencies
Environmental Protection Agency
Abstract
Under the Clean Air Act (CAA), the U.S. Environmental Protection Agency (EPA) is required to determine the applicable volume requirements for the Renewable Fuel Standard (RFS) for years after those specified in the statute. The EPA is establishing the applicable volumes and percentage standards for 2026 and 2027 for cellulosic biofuel, biomass-based diesel (BBD), advanced biofuel, and total renewable fuel. The EPA is also partially waiving the 2025 cellulosic biofuel volume requirement and revising the associated percentage standard due to a shortfall in cellulosic biofuel production. Finally, the EPA is promulgating several regulatory changes to the RFS program, including removing renewable electricity as a qualifying renewable fuel under the RFS program (eRINs) and making minor revisions to the biogas provisions of the RFS program.
Full Text
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[Federal Register Volume 91, Number 62 (Wednesday, April 1, 2026)]
[Rules and Regulations]
[Pages 16388-16500]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-06275]
[[Page 16387]]
Vol. 91
Wednesday,
No. 62
April 1, 2026
Part IV
Environmental Protection Agency
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40 CFR Parts 63, 80, and 1090
Renewable Fuel Standard (RFS) Program: Standards for 2026 and 2027,
Partial Waiver of 2025 Cellulosic Biofuel Volume Requirement, and Other
Changes; Final Rule
Federal Register / Vol. 91 , No. 62 / Wednesday, April 1, 2026 /
Rules and Regulations
[[Page 16388]]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 63, 80, and 1090
[EPA-HQ-OAR-2024-0505; FRL-11947-02-OAR]
RIN 2060-AW23
Renewable Fuel Standard (RFS) Program: Standards for 2026 and
2027, Partial Waiver of 2025 Cellulosic Biofuel Volume Requirement, and
Other Changes
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
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SUMMARY: Under the Clean Air Act (CAA), the U.S. Environmental
Protection Agency (EPA) is required to determine the applicable volume
requirements for the Renewable Fuel Standard (RFS) for years after
those specified in the statute. The EPA is establishing the applicable
volumes and percentage standards for 2026 and 2027 for cellulosic
biofuel, biomass-based diesel (BBD), advanced biofuel, and total
renewable fuel. The EPA is also partially waiving the 2025 cellulosic
biofuel volume requirement and revising the associated percentage
standard due to a shortfall in cellulosic biofuel production. Finally,
the EPA is promulgating several regulatory changes to the RFS program,
including removing renewable electricity as a qualifying renewable fuel
under the RFS program (eRINs) and making minor revisions to the biogas
provisions of the RFS program.
DATES: This rule is effective on June 15, 2026, except for amendatory
instruction 47, which is effective on April 28, 2026, and amendatory
instruction 17, which is effective on January 1, 2027. The
incorporation by reference of certain publications listed in this
regulation is approved by the Director of the Federal Register as of
June 15, 2026.
ADDRESSES: The EPA has established a docket for this action under
Docket ID No. EPA-HQ-OAR-2024-0505. All documents in the docket are
listed on the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website. Although listed in
the index, some information is not publicly available, e.g.,
confidential business information (CBI) or other information whose
disclosure is restricted by statute. Certain other material is not
available on the internet and will be publicly available only in hard
copy form. Publicly available docket materials are available
electronically through <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
FOR FURTHER INFORMATION CONTACT: For information about this final rule,
contact Dallas Burkholder, Assessment and Standards Division, Office of
Transportation and Air Quality, Environmental Protection Agency, 2000
Traverwood Drive, Ann Arbor, MI 48105; telephone number: 734-214-4766;
email address: <a href="/cdn-cgi/l/email-protection#0f5d495c225d7a636a626e646661687c4f6a7f6e21686079"><span class="__cf_email__" data-cfemail="792b3f2a542b0c151c14181210171e0a391c0918571e160f">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Does this action apply to me?
Entities potentially affected by this action are those involved
with the production, distribution, and sale of transportation fuels
(e.g., gasoline and diesel fuel) and renewable fuels (e.g., ethanol,
biodiesel, renewable diesel, and biogas). Potentially affected
categories include:
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NAICS \a\ Examples of potentially
Category codes affected entities
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Industry......................... 111110 Soybean farming.
Industry......................... 111150 Corn farming.
Industry......................... 112111 Cattle farming or
ranching.
Industry......................... 112210 Swine, hog, and pig
farming.
Industry......................... 211130 Natural gas liquids
extraction and
fractionation.
Industry......................... 221210 Natural gas production
and distribution.
Industry......................... 324110 Petroleum refineries
(including importers).
Industry......................... 325120 Biogases, industrial
(i.e., compressed,
liquefied, solid),
manufacturing.
Industry......................... 325193 Ethyl alcohol
manufacturing.
Industry......................... 325199 Other basic organic
chemical manufacturing.
Industry......................... 424690 Chemical and allied
products merchant
wholesalers.
Industry......................... 424710 Petroleum bulk stations
and terminals.
Industry......................... 424720 Petroleum and petroleum
products wholesalers.
Industry......................... 457210 Fuel dealers.
Industry......................... 562212 Landfills.
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\a\ North American Industry Classification System (NAICS).
This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities potentially affected by this
action. This table lists the types of entities that the EPA is now
aware could potentially be affected by this action. Other types of
entities not listed in the table could also be affected. To determine
whether your entity would be affected by this action, you should
carefully examine the applicability criteria in 40 CFR parts 80 and
1090. If you have any questions regarding the applicability of this
action to a particular entity, consult the person listed in the FOR
FURTHER INFORMATION CONTACT section.
Preamble Acronyms and Abbreviations
Throughout this document the use of ``we,'' ``us,'' or ``our'' is
intended to refer to the EPA. We use multiple acronyms and terms in
this preamble. While this list may not be exhaustive, to ease the
reading of this preamble and for reference purposes, the EPA defines
the following terms and acronyms here:
AEO Annual Energy Outlook
AFDC Alternative Fuels Data Center
ATJ alcohol-to-jet
BBD biomass-based diesel
CAA Clean Air Act
CKF corn kernel fiber
CNG compressed natural gas
CO<INF>2</INF>e carbon dioxide equivalent
CWC cellulosic waiver credit
DOE U.S. Department of Energy
EIA U.S. Energy Information Administration
EMTS EPA Moderated Transaction System
EPA U.S. Environmental Protection Agency
EU European Union
FOG fats, oils, and greases
GCAM Global Change Analysis Model
gCO<INF>2</INF>e/MJ grams of carbon dioxide equivalent per megajoule
GHG greenhouse gas
GLOBIOM Global Biosphere Management Model
GREET Greenhouse gases, Regulated Emissions, and Energy use in
Technologies
GTAP-BIO Global Trade Analysis Project-Biofuels
LCFS Low Carbon Fuel Standard
LNG liquefied natural gas
MSW municipal solid waste
[[Page 16389]]
OBBB One Big Beautiful Bill Act of 2025
OPEC Organization of Petroleum Exporting Countries
PTD product transfer document
RFS Renewable Fuel Standard
RIA Regulatory Impact Analysis
RIN Renewable Identification Number
RNG renewable natural gas
RVO Renewable Volume Obligation
STP standard temperature and pressure
UCO used cooking oil
USDA U.S. Department of Agriculture
Outline of This Preamble
I. Executive Summary
A. Summary of the Key Provisions of This Action
B. Impacts of This Rule
C. Policy Considerations
D. Endangered Species Act
II. Statutory Requirements and Conditions
A. Directive To Set Volumes Requirements
B. Statutory Factors
C. Statutory Conditions on Volume Requirements
D. Authority To Establish Volume Requirements and Percentage
Standards for Multiple Years
E. Considerations Related to the Timing of This Action
F. Impact on Other Waiver Authorities
G. Severability
H. Judicial Review
III. Volume Requirements For 2026 and 2027
A. Analyzed Volumes
B. Baselines
C. Volume Changes Analyzed
D. Summary of the Assessed Impacts of the Analyzed Volumes
E. Volume Requirements for 2026 and 2027
F. Treatment of Carryover RINs
G. Consideration of Alternative Volumes
H. Summary of Final Volumes for 2026 and 2027
IV. SRE Reallocation
A. Background and Policy Rationale
B. Legal Justification
C. SRE Reallocation Volumes
V. Total Applicable Volumes and Percentage Standards for 2026 and
2027
A. Total Applicable Volumes for 2026 and 2027
B. Calculation of Percentage Standards
C. Treatment of Small Refinery Volumes
D. Percentage Standards
VI. Partial Waiver of the 2025 Cellulosic Biofuel Volume Requirement
A. Cellulosic Waiver Authority Statutory Background
B. Assessment of Cellulosic RINs Available for Compliance in
2025
C. Implementation of the Cellulosic Waiver Authority
D. Calculation of 2025 Cellulosic Biofuel Percentage Standard
VII. Removal of Renewable Electricity From the RFS Program
A. Historical Treatment of Renewable Electricity in the RFS
Program
B. Statutory Basis for Removal of Renewable Electricity From the
RFS Program
C. Implementation of Removal of Renewable Electricity From the
RFS Program
D. Withdrawal of December 2022 Proposal Regarding Renewable
Electricity
VIII. Other Changes to RFS Regulations
A. Renewable Diesel, Naphtha, and Jet Fuel Equivalence Values
B. RIN-Related Provisions
C. Percentage Standard Equations
D. Renewable Fuel Pathways
E. Updates to Definitions
F. Compliance Reporting, Recordkeeping, and Registration
Provisions
G. New Approved Measurement Protocols
H. Biodiesel and Renewable Diesel Requirements
I. Extension of RFS Compliance Reporting Deadlines
J. Biogas Regulations
K. Technical Amendments
IX. Set 1 Remand
X. Administrative Actions
A. Assessment of the Domestic Aggregate Compliance Approach
B. Assessment of the Canadian Aggregate Compliance Approach
XI. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review
B. Executive Order 14192: Unleashing Prosperity Through
Deregulation
C. Paperwork Reduction Act (PRA)
D. Regulatory Flexibility Act (RFA)
E. Unfunded Mandates Reform Act (UMRA)
F. Executive Order 13132: Federalism
G. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
H. Executive Order 13045: Protection of Children From
Environmental Health Risks and Safety Risks
I. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
J. National Technology Transfer and Advancement Act (NTTAA) and
1 CFR Part 51
K. Congressional Review Act (CRA)
XII. Amendatory Instructions
XIII. Statutory Authority
I. Executive Summary
The EPA initiated the RFS program in 2006 pursuant to the
requirements of the Energy Policy Act of 2005 (EPAct), codified in CAA
section 211(o). Congress subsequently amended the statutory
requirements in the Energy Independence and Security Act of 2007
(EISA). The RFS provisions of the CAA set forth annual, nationally
applicable volume targets for three of the four categories of renewable
fuel (cellulosic biofuel, advanced biofuel, and total renewable fuel)
through 2022 and for BBD through 2012. For subsequent calendar years,
CAA section 211(o)(2)(B)(ii) directs the EPA to determine the
applicable volume targets for each of the four categories of renewable
fuel in coordination with the Secretary of Energy and the Secretary of
Agriculture, based on a review of the implementation of the RFS program
to date and an analysis of specified statutory factors.
In this final rule, we are establishing the volume targets and
applicable percentage standards for cellulosic biofuel, BBD, advanced
biofuel, and total renewable fuel for 2026 and 2027.\1\ We are also
promulgating a number of important regulatory changes, including
removing renewable electricity as a qualifying renewable fuel under the
RFS program (commonly referred to as ``eRINs''). This preamble
describes our rationale for the final volume requirements and
regulatory changes and how public comments informed the rulemaking
process.
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\1\ The 2023-2025 volume requirements and applicable percentage
standards were established on July 12, 2023 (88 FR 44468) (the ``Set
1 Rule'').
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In June 2025, the EPA issued a proposed rule that included volume
requirements for 2026 and 2027,\2\ as well as regulatory changes,
including proposals to reduce the number of Renewable Identification
Numbers (RINs) generated for imported renewable fuel and renewable fuel
produced from foreign feedstocks and to remove renewable electricity as
a qualifying renewable fuel under the RFS program.\3\ In September
2025, the EPA issued a supplemental notice of proposed rulemaking to
address recently granted small refinery exemption (SRE) petitions for
the 2023-2025 compliance years.\4\ Subsequent to each proposal, the EPA
held a public hearing and provided an opportunity for stakeholders to
submit written comments. Stakeholders from various industries and
perspectives provided the EPA with comments, data, and updated analyses
on the Set 2 proposals, and we appreciate stakeholders' input and
interest in strengthening the implementation of the RFS program. We
also engaged directly with stakeholders throughout the rulemaking
process and have documented those discussions.
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\2\ 90 FR 25784 (June 17, 2025) (the ``Set 2 proposal'').
\3\ Throughout this section we refer to imported renewable fuel
and renewable fuel produced from foreign feedstocks collectively as
``import-based renewable fuel'' and RINs generated for these types
of renewable fuel as ``import RINs.''
\4\ 90 FR 45007 (September 18, 2025) (the ``Set 2 supplemental
proposal''). Collectively, the two proposals are referred to as the
``Set 2 proposals.''
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This final rule reflects decisions made after review of public
input, coordination with the U.S. Department of Agriculture (USDA) and
Department of Energy (DOE), and extensive technical analysis. Wherever
possible, we used the most recent data available to inform our analyses
and support the final decisions and approaches described in this
preamble and
[[Page 16390]]
supporting documentation. Where appropriate, in this final rule
preamble, we highlight key stakeholder comments and provide a summary
of our response to those comments. Detailed responses to stakeholder
comments can be found in the Response to Comments (``RTC'') document
for this action.\5\
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\5\ EPA, ``RFS Program Standards for 2026 and 2027, Partial
Waiver of 2025 Cellulosic Biofuel Volume Requirement, and Other
Changes: Response to Comments Document,'' EPA-420-R-26-012, March
2026.
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In the Set 2 proposal, we proposed a significant modification to
how import-based renewable fuel would be treated under the RFS program.
We proposed these changes to better align the RFS program with American
economic interests by strengthening support for domestic growers and
biofuel producers. The Set 2 proposal did this by proposing a new
``import RIN reduction'' (IRR) policy. Stakeholders provided a
significant number of comments and data on the proposed IRR provisions,
and we appreciate the information and analyses that were submitted or
shared directly with the Agency during stakeholder meetings. Following
careful review of this information, we have concluded that more time
would be needed to successfully establish and implement IRR provisions.
Therefore, we are not finalizing the proposed IRR provisions as part of
this final rule in connection with the renewable fuel volume
requirements for 2026 and 2027. We intend, however, to establish IRR
provisions that will take effect beginning in the 2028 compliance year
or shortly thereafter. We discuss IRR considerations and our intent for
future action further in section I.C of this preamble.
The volume requirements finalized in this action will strengthen
the RFS program, boost renewable fuel use, and provide strong support
to the domestic feedstock producers, renewable fuel producers, and
agricultural communities across the country. The final volume
requirements further these objectives, even though the IRR provisions
will follow at a later date. Ensuring a growing supply of domestically
produced renewable fuels is a key component in meeting the statutory
goals of increasing the energy independence and security of the United
States. Increasing domestic production of renewable fuel also
contributes to unleashing American energy production towards the goal
of achieving energy dominance, consistent with the Administration's
``Unleashing American Energy'' Executive Order \6\ and the energy
dominance pillar of the EPA's ``Powering the Great American Comeback''
initiative.\7\ The requirements in this action are responsive to input
from key agricultural and energy stakeholders on ways to bolster the
RFS program.
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\6\ Executive Order 14154, ``Unleashing American Energy,''
January 20, 2025 (90 FR 8353; January 29, 2025).
\7\ EPA, ``EPA Administrator Lee Zeldin Announces EPA's
`Powering the Great American Comeback' Initiative,'' February 4,
2025. <a href="https://www.epa.gov/newsreleases/epa-administrator-lee-zeldin-announces-epas-powering-great-american-comeback">https://www.epa.gov/newsreleases/epa-administrator-lee-zeldin-announces-epas-powering-great-american-comeback</a>.
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A. Summary of the Key Provisions of This Action
1. Volume Requirements for 2026 and 2027
Based on our analysis of the factors required in the statute, and
in coordination with USDA and DOE, we are establishing the volume
requirements for 2026 and 2027, as shown in Table I.A.1-1. The final
volumes represent significant increases of over 15 percent from those
established for 2023-2025. Much of the increase in the volume
requirements in this final rule are attributable to the EPA's decision
not to finalize the proposed IRR provisions in this action. The total
quantity of renewable fuel we project will be supplied to the U.S. to
meet these volume requirements (shown in Table I.A.1-2) are very
similar to the quantities we projected would be supplied to meet the
proposed volume requirements.\8\ We note that the volume requirements
in Table I.A.1-1 do not include the SRE reallocation volumes we are
also finalizing in this action (see section I.A.2 of this preamble).
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\8\ In the Set 2 proposal, we projected that the total volume of
renewable fuel supplied to meet the proposed volume requirements
would be 22.10 billion gallons and 22.37 billion gallons in 2026 and
2027, respectively. As shown in Table I.A.1-2, we project that 21.87
billion gallons and 22.25 billion gallons of renewable fuel will be
supplied in 2026 and 2027, respectively, to meet the volume
requirements we are finalizing in this rule.
[GRAPHIC] [TIFF OMITTED] TR01AP26.026
[[Page 16391]]
We project that the production and use of renewable fuels in the
U.S. will increase significantly in response to these volume
requirements. The quantities of renewable fuel we project will be
supplied to satisfy the volume requirements, after accounting for the
nested nature of the RFS volume requirements, are shown in Table I.A.1-
2. These volumes are similar to those we projected would be supplied in
the Set 2 proposal and reflect updates to EPA's analysis of the
potential supply of renewable fuel in these years and the impacts of
these fuels on the statutory factors.
[GRAPHIC] [TIFF OMITTED] TR01AP26.027
As discussed above, CAA section 211(o) requires the EPA to analyze
a specified set of factors in making our determination of the
appropriate volume requirements. Many of those factors, particularly
those related to economic and environmental impacts, are difficult to
analyze in the abstract. To facilitate a more concrete and meaningful
analysis of the statutory factors, we first identified a set of
renewable fuel volumes to analyze prior to determining the final volume
requirements. To identify those renewable fuel volumes for analysis, we
generally considered factors most likely to limit the domestic
production and/or use of qualifying renewable fuels in 2026 and 2027.
In some cases, the limiting factors we identified were based on our
assessment of the ability of the U.S. market to consume renewable fuels
in the transportation sector, while in other cases they were based on
domestic production capacity. We discuss the derivation of these
volumes for analysis in section III of this preamble. We also discuss
in section III of this preamble the analysis of the statutory factors
with respect to these volumes and our conclusions regarding the
appropriate volume requirements to establish in light of the analyses
we conducted.
The cellulosic biofuel volumes we are finalizing for 2026 and 2027
represent increases over the volumes in the Set 1 Rule. Compressed
natural gas (CNG) and liquefied natural gas (LNG) derived from biogas
comprise most of the qualifying cellulosic biofuel that we project will
be supplied through 2027. Consistent with the analysis presented in the
Set 2 proposal,\9\ and supported by data submitted by commenters and
analysis conducted subsequent to the Set 2 proposal, we project that
the use of renewable CNG/LNG used as transportation fuel will be
limited by the number of vehicles capable of using these fuels in 2026
and 2027. The cellulosic biofuel volume requirements we are finalizing
in this action reflect an updated analysis of the quantity of renewable
CNG/LNG that will be used as transportation fuel in 2026 and 2027. The
final cellulosic biofuel volumes also include projections of cellulosic
ethanol from corn kernel fiber (CKF) produced at existing corn starch
ethanol production facilities.
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\9\ 90 FR 25784 (June 17, 2025).
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Stakeholders provided the EPA with extensive comments and data
regarding the proposed BBD and advanced biofuel volume requirements
along with their views on appropriate levels for the final volume
requirements. Following issuance of the Set 2 proposal, we carefully
reviewed all new information and engaged directly and extensively with
stakeholders from relevant sectors on this topic. The BBD and advanced
biofuel volumes we are finalizing for 2026 and 2027 reflect the
significant growth observed in the production of these fuels over the
past several years and build off the volumes already achieved in the
marketplace in previous years. The final volume requirements reflect
the projected growth in the domestic production capacity and supply of
feedstocks, primarily soybean oil, with smaller projected increases in
other feedstocks including used cooking oil (UCO) and animal fats. We
have also adjusted the final BBD volume requirements, as expressed in
billion RINs, relative to the proposed volume requirements to account
for the fact that we are not finalizing the proposed IRR provisions at
this time in connection with the volume requirements for 2026 and 2027.
The final volume requirements for total renewable fuel in 2026 and
2027 reflect an implied conventional biofuel volume requirement of 15
billion gallons each year. This is consistent with the implied
conventional renewable fuel volumes in the statutory
[[Page 16392]]
tables for 2015-2022,\10\ as well as the implied conventional biofuel
volumes we established for 2023-2025 in the Set 1 Rule. We recognize
that while the supply of conventional biofuel in 2026 and 2027 will
likely fall short of the 15-billion-gallon implied conventional biofuel
volume requirement, the final total renewable fuel volume requirements
are still achievable through the use of additional volumes of advanced
biofuel beyond the volume requirement for that category.
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\10\ CAA section 211(o)(2)(B)(i).
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Although the Set 1 Rule established volumes for three years (2023-
2025), we believe that it is appropriate at this time to establish
volume requirements for two years instead of a longer timeframe. There
is increased uncertainty in trying to project out further in the
future, which increases the likelihood of needing to adjust volumes in
the future. Retroactive adjustments to volume requirements create
uncertainty in the RFS program and hinder the purpose of projecting
future years, which is meant to provide certainty to the market.
2. Reallocation of Small Refinery Exemptions for 2023-2025
After the release of the Set 2 proposal, the EPA issued decisions
on 175 SRE petitions in August 2025.\11\ These decisions included
numerous grants and partial grants that relieved many small refineries
from their renewable volume obligations (RVOs) for past compliance
years. To mitigate the potential market impacts of these decisions, in
the Set 2 supplemental proposal we proposed reallocating all or a
portion of the exempted RVOs for the 2023-2025 compliance years (the
years for which the exemptions would potentially materially impact the
current RIN and renewable fuel markets) to the 2026 and 2027 compliance
years.\12\ After the release of the Set 2 supplemental proposal, the
EPA issued decisions on an additional 16 SRE petitions in November
2025.\13\ In this final rule, after considering relevant comments,
data, and analyses received from interested stakeholders on the Set 2
proposals, we are finalizing a 70 percent partial reallocation of the
2023-2025 exempted RVOs to the 2026 and 2027 compliance years. This
partial reallocation is intended to prevent the 2023-2025 exemptions
from significantly and negatively impacting biofuel demand in 2026 and
2027, while also recognizing the importance of the availability of
carryover RINs to a liquid and smoothly functioning RIN market. The
renewable fuel volume requirements, SRE reallocation volumes, and total
applicable volumes we are finalizing in this action for 2026 and 2027
are shown in Table I.A.2-1. We further discuss our reallocation of
2023-2025 exempted RVOs in section IV of this preamble.
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\11\ EPA, ``August 2025 Decisions on Petitions for RFS Small
Refinery Exemptions,'' EPA-420-R-25-010, August 2025 (``August 2025
SRE Decisions Action'').
\12\ 90 FR 45007 (September 18, 2025).
\13\ EPA, ``November 2025 Decisions on Petitions for RFS Small
Refinery Exemptions,'' EPA-420-R-25-013, November 2025 (``November
2025 SRE Decisions Action'').
[GRAPHIC] [TIFF OMITTED] TR01AP26.028
The total applicable volumes that we are establishing in this
action are the basis for the calculation of percentage standards
applicable to producers and importers of gasoline and diesel. The
calculation of the final percentage standards is discussed further in
section V of this preamble.
3. Partial Waiver of the 2025 Cellulosic Biofuel Volume Requirement
Consistent with the Set 2 proposal, we are finalizing a partial
waiver of the 2025 cellulosic biofuel volume requirement and revising
the associated percentage standard due to a 0.17 billion RIN shortfall
in the volume of cellulosic biofuel available in 2025. As such, we are
using our CAA section 211(o)(7)(D) ``cellulosic waiver authority'' to
reduce the 2025 cellulosic biofuel volume from 1.38 billion RINs to
1.21 billion RINs. The use of such waiver authority also makes
cellulosic waiver credits (CWCs) available for the 2025 compliance
year. We further discuss our partial waiver of the 2025 cellulosic
biofuel volume requirement in section VI of this preamble.
4. Removal of Renewable Electricity From the RFS Program
In the Set 2 proposal, we proposed to remove renewable electricity
as a qualifying renewable fuel under the RFS program. We discussed the
EPA's difficulties in establishing a workable regulatory framework for
such a program and sought comment on whether such a program is
consistent with the best reading of the statute in the first
instance.\14\ In this final rule, after considering relevant comments
received on this issue, we are finalizing the removal of electricity as
a qualifying renewable fuel under the RFS program. We conclude that
renewable electricity does not meet the definition of renewable fuel
under CAA section 211(o)(1)(J), read in context and considering the
structure of the statute as a whole. We are therefore removing the
regulations related to the production and use of renewable electricity
as a transportation fuel, including the regulations related to facility
registration for renewable electricity producers and the provisions for
generating RINs for use of renewable electricity as a transportation
fuel. We are also removing the definition of ``renewable electricity''
and the renewable electricity pathways in Table 1 to 40 CFR 80.1426 in
connection with this change. In addition, we are withdrawing our
December 2022 proposal associated with the Set 1 Rule pertaining to
renewable electricity,\15\
[[Page 16393]]
which was not finalized as part of the Set 1 Rule.\16\
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\14\ 90 FR 25784, 25841-42 (June 17, 2025).
\15\ 87 FR 80582 (December 30, 2022).
\16\ 88 FR 44468, 44471 (July 12, 2023).
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5. Other Regulatory Changes
In the Set 2 proposal, we proposed a series of regulatory changes
in several areas to strengthen our implementation of the RFS program
that we are now finalizing. The final changes take into account
comments and new information provided by stakeholders during the public
comment period. These regulatory changes are discussed in greater
detail in section VIII of this preamble and include:
<bullet> Specifying new equivalence values for renewable diesel,
naphtha, and jet fuel.
<bullet> Updating RIN generation and assignment provisions.
<bullet> Clarifying that RINs cannot be generated for renewable
fuel that is used for process heat or electricity generation.
<bullet> Changing the percentage standards equations, including
specifying the BBD standard in RINs rather than physical gallons.
<bullet> Updating existing renewable fuel pathways and adding new
ones.
<bullet> Adding definitions for terms used throughout the
regulations and updating other definitions.
<bullet> Adding a joint and several liability provision applicable
to importers of renewable fuel.
<bullet> Revising compliance reporting and registration provisions,
including clarifying that small refineries that receive an exemption
from their RFS obligations must still submit an annual compliance
report.
<bullet> Clarifying certain requirements for biodiesel and
renewable diesel.
<bullet> Other minor changes and technical corrections.
In addition, we are also finalizing several revisions to the RFS
regulations that were originally proposed in the proposed partial
waiver of the 2024 cellulosic biofuel volume requirement, including
provisions that will automatically extend the annual compliance
reporting deadline for a given compliance year if we propose to revise
an existing RFS standard for that year.\17\
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\17\ 89 FR 100442 (December 12, 2024).
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We are also making minor revisions to two main areas of the RFS
program's biogas regulations that were identified after the EPA and
market participants began implementing the regulations promulgated in
the Set 1 Rule. First, we are clarifying and providing flexibility for
how biogas, renewable natural gas (RNG), and renewable CNG/LNG are
measured, sampled, and tested to demonstrate compliance.
Second, we are making the following technical amendments to the
biogas regulations:
<bullet> Clarifying what constitutes a batch of RNG.
<bullet> Clarifying the requirements for the generation,
assignment, and separation of RINs for RNG.
<bullet> Clarifying the registration requirements for biogas
producers, RNG producers, and RNG RIN separators.
<bullet> Clarifying the attest engagement requirements for biogas
producers, RNG producers, and RNG RIN separators.
<bullet> Numerous clarifications, corrections, and consistency
edits to the biogas regulations.
B. Impacts of This Rule
CAA section 211(o)(2)(B)(ii) requires the EPA to assess several
factors when determining volume requirements for calendar years after
2022. These factors are described in section II of this preamble, and
the expected impacts on each factor are discussed briefly in section
III of this preamble and in greater detail in the Regulatory Impact
Analysis (RIA) accompanying this rule.\18\ However, the statute does
not specify how the EPA must assess each factor or the weight each
factor bears on the overall analysis. For two of these statutory
factors--costs and energy security--we provide monetized estimates of
the impacts of the final volume requirements. For the other statutory
factors, we are either unable to quantify impacts at this time or we
provide quantitative estimated impacts that nevertheless cannot be
easily monetized. Thus, we are unable to quantitatively compare all the
evaluated impacts of this rulemaking.
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\18\ EPA, ``RFS Program Standards for 2026 and 2027, Partial
Waiver of 2025 Cellulosic Biofuel Volume Requirement, and Other
Changes: Regulatory Impact Analysis,'' EPA-420-R-26-011, February
2026.
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We considered all statutory factors in developing this final rule,
including factors for which we provide monetized impacts, otherwise
quantify impacts, or provide a qualitative assessment of relevant
impacts, and we find that the final volumes are appropriate under our
statutory authority after balancing all relevant factors. This approach
is consistent with CAA section 211(o)(2)(B)(ii), which requires the
Administrator to ``determin[e]'' volumes based on ``an analysis of''
the statutory factors and does not require that analysis to monetize or
quantify all relevant considerations. A summary of our assessment of
the impacts of this action can be found in section III.H of this
preamble. RIA Table ES-1 provides a list of all the impacts that we
assessed, both quantitative and qualitative. Additional detail for each
of the assessed factors is provided in RIA Chapters 4 through 10.
C. Policy Considerations
The RFS program is a critical policy tool that supports the
domestic production and use of renewable fuels. This final rule seeks
to get the RFS program back on track by aligning the incentives
provided by the RFS program with the statutory goals of, among other
things, increasing energy independence and energy security. The final
volumes for 2026 and 2027 reflect the significant growth potential, in
particular, for domestic renewable fuel production in the U.S., and
will help strengthen rural agricultural communities and industries.
As discussed above, the Set 2 proposal included provisions that
would have reduced the number of RINs generated for import-based
renewable fuel, thereby better aligning the RFS program with American
economic and security interests and strengthening support for American
farmers and domestic renewable fuel producers. The RFS program has
always allowed for import-based renewable fuel, but the surge of
imports of both feedstocks and renewable fuels in recent years has
destabilized domestic biofuel investments and U.S. agricultural
production, all while rewarding foreign feedstock and renewable fuel
producers. We proposed IRR provisions affecting import-based renewable
fuel in the Set 2 proposal. Such import-based renewable fuels do not
further energy independence and are projected to result in fewer
employment and rural economic development benefits relative to
renewable fuels produced in the U.S. from domestic feedstocks. We
proposed that, under the IRR provisions, import-based renewable fuels
would only generate half the number of RINs that they generate under
the current RFS regulations, and sought comment on this overall concept
and how it should be implemented if finalized.
We appreciate the extensive stakeholder input we received on the
proposed IRR provisions. Public comments provided perspectives on all
aspects of the proposed IRR provisions, from overarching concepts and
policy goals to timing and other implementation details. We carefully
reviewed all the comments we received and found that many stakeholders
made compelling arguments regarding when and how IRR provisions could
be most effectively phased in and integrated into
[[Page 16394]]
the RFS program. Commenters indicated that the proposed IRR provisions
could result in significant changes in the supply of renewable fuels
and feedstocks to U.S. markets and that these changes could be
disruptive without sufficient lead time for the market to prepare and
make the necessary adjustments--including leading to increase in
gasoline and diesel prices. Other comments provided constructive
feedback concerning regulatory or definitional gaps in the proposed
design of the IRR provisions and suggested that we could strengthen the
IRR provisions by clarifying various elements of the proposed approach.
We also recognize that there have been important changes in the broader
policy context in which the RFS program operates, including changes to
key Federal biofuel tax credits (we discuss those changes in section
III of this preamble and the RIA).
After reviewing this input, we have determined that it is
appropriate and prudent to take additional time to address some of
these timing and implementation questions regarding the proposed IRR
provisions. In light of that determination, we are not finalizing the
proposed IRR provisions in this final rule in the context of
establishing the volume requirements for 2026 and 2027. We continue to
believe that the IRR concept is appropriate and would better align the
RFS program with the statutory goals for the program. Given the
importance of the policy objectives underlying the proposed IRR
provisions, and the support expressed for it by many stakeholders, we
intend to establish IRR provisions that will take effect at the
beginning of the 2028 compliance year or sometime shortly thereafter.
We are currently considering our next steps and will communicate with
stakeholders as we establish our plans.
In the Set 2 proposal, we also requested comment on other
opportunities to improve the RFS program that could be considered in
future actions. Our request for comments included areas such as a
general pathway for the production of renewable jet fuel from corn
ethanol, the definition of ``produced from renewable biomass,''
additional RFS program amendments to ensure that imported renewable
fuels are produced from qualifying feedstocks and enhance our ability
to track feedstocks to their point of origin, RFS program enhancements
to increase the use of qualifying woody-biomass to produce renewable
transportation fuel, and any other modifications to the RFS program
designed to unleash the production of American energy. We also received
comments on the definitions for different types of woody biomass under
the RFS program. EPA may consider modifications to relevant definitions
such as ``areas at risk of wildfire,'' ``slash,'' ``pre-commercial
thinnings,'' and ``tree residue,'' in a future rulemaking. We
appreciate stakeholders' input on these topics and many others raised
in the comments and will consider potential ways to address these areas
in future actions.
D. Endangered Species Act
Section 7(a)(2) of the Endangered Species Act (ESA), 16 U.S.C.
1536(a)(2), requires that federal agencies such as the EPA, in
consultation with the U.S. Fish and Wildlife Service (USFWS) and/or the
National Marine Fisheries Service (NMFS) (collectively ``the
Services''), ensure that any action authorized, funded, or carried out
by the action agency is not likely to jeopardize the continued
existence of any endangered or threatened species or result in the
destruction or adverse modification of designated critical habitat for
such species. Under relevant implementing regulations, the action
agency is required to consult with the Services for actions that ``may
affect'' listed species or designated critical habitat.\19\
Consultation is not required where the action would have no effect on
such species or habitat.
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\19\ 50 CFR 402.14.
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Consistent with ESA section 7(a)(2) and relevant implementing
regulations at 50 CFR part 402, we engaged in informal consultation
with the Services and completed a Biological Evaluation (BE) for the
Set 2 Rule.\20\ Supported by the analysis in the Set 2 Rule BE, we
determined that formal consultation is not required for the Set 2 Rule
because of the absence of likely adverse effects on listed species and
their habitats. EPA has prepared an ESA section 7(d) determination
memorandum that discusses our decision to finalize this action before
the informal consultation process is complete.\21\
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\20\ EPA, ``Biological Evaluation of the Renewable Fuel Standard
Set 2 Rule,'' 2026 (``Set 2 Rule BE'').
\21\ See ``Endangered Species Act Section 7(d) Determination
with Respect to the Issuance of the Renewable Fuel Standard (RFS)
Program: Standards for 2026 and 2027, Partial Waiver of 2025
Cellulosic Biofuel Volume Requirement, and Other Changes,''
available in the docket for this action.
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II. Statutory Requirements and Conditions
A. Directive To Set Volumes Requirements
Congress enacted the RFS program for the purpose of increasing the
use of renewable fuel in transportation fuel over time. Congress
specified statutory volumes for the initial years of the program,
including for BBD through 2012, and for total renewable fuel, advanced
biofuel, and cellulosic biofuel through 2022, but allowed the EPA to
waive the statutory volumes in certain circumstances. For years after
2022, Congress provided the EPA with the directive and authority to
establish the applicable renewable fuel volume requirements.\22\ This
section of the preamble discusses our statutory authority and
additional factors we have considered due to the timing of this
rulemaking, as well as the severability of the various portions of this
rule. We generally respond to stakeholder comments received on these
topics in the RTC document.
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\22\ We refer to CAA section 211(o)(2)(B)(ii) as the ``set
authority.''
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B. Statutory Factors
CAA section 211(o)(2)(B)(ii) establishes the processes, criteria,
and standards for setting the applicable annual renewable fuel volumes.
That provision provides that the EPA shall, in coordination with USDA
and DOE,\23\ determine the applicable volumes of each renewable fuel
category, based on a review of the implementation of the program during
the calendar years specified in the tables in CAA section
211(o)(2)(B)(i) and an analysis of the following factors:
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\23\ In furtherance of this requirement, we have continued
periodic discussions with USDA and DOE on this action. We have
documented the coordination with the EPA Administrator and
Secretaries in a memorandum available in the docket for this action.
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<bullet> The impact of the production and use of renewable fuels on
the environment, including on air quality, climate change, conversion
of wetlands, ecosystems, wildlife habitat, water quality, and water
supply;
<bullet> The impact of renewable fuels on the energy security of
the United States;
<bullet> The expected annual rate of future commercial production
of renewable fuels, including advanced biofuels in each category
(cellulosic biofuel and BBD);
<bullet> The impact of renewable fuels on the infrastructure of the
United States, including deliverability of materials, goods, and
products other than renewable fuel, and the sufficiency of
infrastructure to deliver and use renewable fuel;
<bullet> The impact of the use of renewable fuels on the cost to
consumers of transportation fuel and on the cost to transport goods;
and
[[Page 16395]]
<bullet> The impact of the use of renewable fuels on other factors,
including job creation, the price and supply of agricultural
commodities, rural economic development, and food prices.
Congress enumerated factors that the EPA must consider without
mandating any particular types of analyses or specifying how the EPA
must weigh the various factors against one another. Thus, as the CAA
``does not state what weight should be accorded to the relevant
factors,'' the statute ``give[s] EPA considerable discretion to weigh
and balance the various factors required by statute.'' \24\ These
factors were analyzed in the context of the Set 1 Rule,\25\ as well as
the 2020-2022 RFS Rule that modified volumes under CAA section
211(o)(7)(F),\26\ which requires the EPA to comply with the processes,
criteria, and standards in CAA section 211(o)(2)(B)(ii). Our assessment
of the factors in the 2020-2022 RFS Rule was upheld by the D.C. Circuit
in Sinclair.\27\ Similarly, our assessment of the factors in the Set 1
Rule was largely upheld in CBD.\28\ Consistent with our past practice
in evaluating the factors,\29\ in this final rule we have again
determined that a holistic balancing of the factors is appropriate.\30\
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\24\ CBD, 141 F.4th at 171; Sinclair Wyo. Refin. Co. LLC v. EPA,
101 F.4th 871, 887 (D.C. Cir. 2024); see also Brown v. Watt, 668
F.2d 1290, 1317 (D.C. Cir. 1981) (``A balancing of factors is not
the same as treating all factors equally. The obligation instead is
to look at all factors and then balance the results. The Act does
not mandate any particular balance, but vests the [agency] with
discretion to weigh the elements . . . .'').
\25\ See 88 FR 44468, 44476 (July 12, 2023).
\26\ See 87 FR 39600, 39607-08 (July 1, 2022).
\27\ Sinclair, 101 F.4th at 888-89.
\28\ CBD, 141 F.4th at 169-76. To the extent the court found
fault in our analysis, we have provided a response in section IX of
this preamble.
\29\ 87 FR 39600, 39607-08 (July 1, 2022).
\30\ EPA, ``RFS Annual Rules: Response to Comments,'' EPA-420-R-
22-009, June 2022 (``2020-2022 RFS Rule RTC''), at 10.
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In addition to those factors listed in the statute, the EPA also
has authority to consider ``other'' factors, including both the implied
authority to consider factors that inform our analysis of the statutory
factors and the explicit authority under CAA section
211(o)(2)(B)(ii)(VI) to consider ``the impact of the use of renewable
fuels on other factors.'' Accordingly, for this final rule, we
considered several other relevant factors beyond those enumerated in
CAA section 211(o)(2)(B)(ii), including:
<bullet> The interconnected nature of the volume requirements for
2026 and 2027, including the nested nature of those volume requirements
and the availability of carryover RINs (sections III.E and III.H of
this preamble).\31\
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\31\ This also informs our analysis of the statutory factor
``review of the implementation of the program'' in CAA section
211(o)(2)(B)(ii).
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<bullet> The ability of the market to respond given the timing of
this rulemaking (RIA Chapter 7).\32\
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\32\ This also informs our analysis of the statutory factor
``the expected annual rate of future commercial production of
renewable fuels'' in CAA section 211(o)(2)(B)(ii)(III).
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<bullet> The supply of qualifying renewable fuels to U.S. consumers
(section III of this preamble).\33\
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\33\ This is based on our analysis of the statutory factor the
expected annual rate of future commercial production of renewable
fuel as well as of downstream constraints on biofuel use, including
the statutory factors relating to infrastructure and costs.
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C. Statutory Conditions on Volume Requirements
As indicated above, the CAA does not specify how the EPA is to
consider the enumerated factors or any particular weight each factor
must be given in the overall analysis. However, the CAA contains three
overarching conditions that affect our determination of the applicable
volume requirements:
<bullet> A constraint in setting the applicable volume of total
renewable fuel as compared to advanced biofuel, with implications for
the implied volume requirement for conventional renewable fuel.
<bullet> Direction in setting the cellulosic biofuel applicable
volume regarding potential future waivers.
<bullet> A floor on the applicable volume of BBD.
We discuss these conditions in further detail below.
1. Advanced Biofuel as a Percentage of Total Renewable Fuel
While the statute generally provides broad discretion in setting
the applicable volume requirements for advanced biofuel and total
renewable fuel, it also establishes a constraint on the relationship
between these two volume requirements. CAA section 211(o)(2)(B)(iii)
provides that the applicable advanced biofuel requirement must ``be at
least the same percentage of the applicable volume of renewable fuel as
in calendar year 2022,'' meaning that the EPA must, at a minimum,
maintain the ratio of advanced biofuel to total renewable fuel that was
established for 2022 for all future years in which the EPA itself sets
the applicable volume requirements. In effect, this proportional
requirement limits the proportion of the implied volume of conventional
renewable fuel within the total renewable fuel volume for years after
2022 based on the proportion that existed for calendar year 2022.
The applicable advanced biofuel volume requirement established for
2022 was 5.63 billion gallons.\34\ The total renewable fuel volume
requirement established for 2022 was 20.63 billion gallons, resulting
in an implied conventional volume requirement of 15 billion gallons.
Thus, advanced biofuel represented 27.3 percent of total renewable fuel
for 2022, and we must maintain at least that percentage of the advanced
biofuel volume requirement as compared to the total renewable fuel
volume requirement for all subsequent years. The volume requirements we
are establishing in this action for 2026 and 2027, including the SRE
reallocation volumes further described in section IV of this preamble,
and shown in Table I.A.2-1, exceed this 27.3 percent minimum, and thus
satisfy this statutory requirement for each year.
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\34\ 87 FR 39601 (July 1, 2022).
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2. Cellulosic Biofuel
CAA section 211(o)(2)(B)(iv) requires that the EPA set the
applicable cellulosic biofuel requirement ``based on the assumption
that the Administrator will not need to issue a waiver . . . under [CAA
section 211(o)](7)(D)'' for the years in which the EPA sets the
applicable volume requirement. We have historically interpreted this
requirement to mean that the cellulosic biofuel volume requirement
should be set at a level that is achievable such that we do not
anticipate a need to further lower the requirement through a waiver
under CAA section 211(o)(7)(D).\35\ CAA section 211(o)(7)(D) provides
that if ``the projected volume of cellulosic biofuel production is less
than the minimum applicable volume established under paragraph
(2)(B),'' the EPA ``shall reduce the applicable volume of cellulosic
biofuel required under paragraph (2)(B) to the projected volume
available during that calendar year.'' We maintain this interpretation
of the statute. Therefore, we are establishing the cellulosic biofuel
volume requirements such that a waiver of those requirements is not
anticipated to be necessary for those future years. Operating within
this limitation, and in light of our consideration of the statutory
factors explained in section III of this preamble, we are establishing
cellulosic volumes for 2026 and 2027 at
[[Page 16396]]
the projected volume available in each year, respectively, consistent
with our past actions in determining the cellulosic biofuel volume.\36\
These projections, discussed further in section III.A.1 of this
preamble, represent our best efforts to project the potential for
growth in the volume of cellulosic biofuel that can be achieved in 2026
and 2027.
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\35\ The cellulosic waiver authority applies when the projected
volume of cellulosic biofuel production is less than the minimum
applicable volume, per CAA section 211(o)(7)(D).
\36\ See, e.g., 87 FR 39600 (July 1, 2022) (2020-2022 RFS Rule).
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We recognize that, for 2024 and 2025, the volume of cellulosic
biofuel available was less than the volume required, and we have
partially waived the 2024 cellulosic biofuel volume requirement and are
partially waiving the 2025 cellulosic biofuel volume requirement in
this action as discussed in section VI of this preamble. In projecting
the available volume of cellulosic biofuel in 2026 and 2027, we have
considered our over-projections in previous years and have adjusted our
methodology as discussed in section III.A of this preamble and RIA
Chapter 7.1 to reflect our consideration of the prior shortfalls in the
standards. Retroactive waivers of the volume requirements under the RFS
program decrease certainty for the market and undermines confidence in
the volumes and standards we set, which could negatively impact
investment in renewable fuel production in future years. In this
action, we are changing the methodology used to project cellulosic
biofuel volumes to avoid the need for waivers of the RFS standards in
the future.
3. Biomass-Based Diesel
We have established the BBD volume requirement under CAA section
211(o)(2)(B)(ii) for the years since 2013 because the statute only
specifies BBD volume requirements through 2012. CAA section
211(o)(2)(B)(iv) also requires that the BBD volume requirement be set
at, or greater than, the 1.0-billion-gallon volume requirement
enumerated by statute for 2012, but it does not provide any other
numerical criteria that the EPA must consider. In the years since 2012,
we have steadily increased the BBD volume requirement beyond 1.0
billion gallons to 3.35 billion gallons in 2025. In this action, we are
establishing 2026 and 2027 BBD applicable volumes of 9.07 and 9.20
billion RINs, respectively.\37\ These numbers are not directly
comparable with the BBD volume requirements in previous years, as they
express the required volume of BBD in RINs rather than physical
gallons. Nevertheless, the final BBD volume requirements guarantee that
at least 5.33 and 5.75 billion gallons of BBD will be used in 2026 and
2027, respectively,\38\ far greater than 1.0-billion-gallon minimum
requirement.\39\
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\37\ As noted in section I.A.1 and explained further in section
VII.C of this preamble, we are specifying the BBD volume requirement
in RINs, rather than gallons. This is in contrast to establishing
the 2025 BBD volume requirement at 3.35 billion physical gallons.
\38\ These volumes represent the lowest possible volume of BBD
that could be used to meet the final BBD volume requirements for
2026 and 2027. These numbers are calculated by dividing the final
BBD RIN requirements by 1.7 in 2026 (the equivalence value for
renewable diesel in 2026) and 1.6 in 2027 (the highest equivalence
value we anticipate in 2027, as discussed in in section VIII.A of
this preamble). In practice, we project that significantly greater
volumes of BBD will be supplied to meet the BBD volume requirements,
as biodiesel and some renewable diesel will only generate 1.5 RINs
per gallon in these years.
\39\ Because the EPA interpreted the BBD volume requirement in
physical gallons at the time the 1.0-billion-gallon standard for
2012 was established, we provide our comparison of the 2026 and 2027
BBD volume requirements to this minimum volume requirement in
physical gallons, rather than RINs.
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D. Authority To Establish Volume Requirements and Percentage Standards
for Multiple Years
In this action, we are establishing the applicable volume
requirements and percentage standards for 2026 and 2027. We have a
statutory obligation to promulgate volume requirements under CAA
section 211(o)(2)(B)(ii) and are addressing that requirement in this
final rule. We acknowledge that the statutory deadlines for
promulgating the 2026 and 2027 applicable volume requirements passed on
October 31, 2024, and October 31, 2025, respectively. Nevertheless, we
are establishing the 2026 and 2027 applicable volume requirements ahead
of the 2027 compliance year, and early in the 2026 compliance year.
As to the percentage standards with which obligated parties must
comply, CAA section 211(o)(A)(i) and (iii) requires the EPA to
promulgate regulations that, regardless of the date of promulgation,
contain compliance provisions applicable to refineries, blenders,
distributors, and importers that ensure that the volumes in CAA section
211(o)(2)(B)--which includes volumes set by the EPA after 2022--are
met. As in the Set 1 Rule, we are also establishing corresponding
percentage standards in this action.\40\
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\40\ 88 FR 44468, 44519-21 (July 14, 2023).
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In summary, we are establishing applicable volume requirements and
associated percentage standards for 2026 and 2027, as further described
in sections III and V of this preamble.
E. Considerations Related to the Timing of This Action
In this action, we are establishing applicable volume requirements
for the 2026 and 2027 compliance years after the statutory deadlines to
establish such requirements (October 31, 2024, and October 31, 2025,
respectively).\41\ We have also missed statutory deadlines in the past
for promulgating RFS standards, including the 2023 and 2024 standards
established in the Set 1 Rule, and the BBD volume requirements for
2014-2017, which were established under CAA section 211(o)(2)(B)(ii),
the same provision under which we are establishing the 2026 and 2027
standards in this action.
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\41\ See CAA section 211(o)(2)(B)(ii), requiring the EPA to
promulgate applicable volume requirements no later than 14 months
prior to the first year in which they will apply.
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In its review of the EPA's 2015 action establishing BBD volume
requirements for 2014-2017,\42\ the D.C. Circuit found that the EPA
retains authority beyond the statutory deadlines to promulgate volumes
and annual percentage standards, even those that apply retroactively,
so long as the EPA exercises this authority reasonably.\43\ We had
missed the statutory deadline under CAA section 211(o)(2)(B)(ii) to
establish an applicable volume requirement for BBD no later than 14
months before the first year to which that volume requirement will
apply for all years. The D.C. Circuit held that when the EPA exercises
this authority after the statutory deadline, the EPA must balance the
burden on obligated parties of a delayed rulemaking with the broader
goal of the RFS program to increase renewable fuel use.\44\ In
specifically upholding the portion of that rulemaking that was late but
not retroactive, the court considered whether there was sufficient lead
time and adequate notice for obligated parties.\45\ The court found
that the EPA properly balanced the relevant considerations and provided
sufficient notice to parties in establishing the applicable volume
requirements for 2014-2017.\46\
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\42\ 80 FR 77420, 77427-28, 77430-31 (December 14, 2015).
\43\ Americans for Clean Energy (ACE) v. EPA, 864 F.3d 691 (D.C.
Cir. 2017) (the EPA may issue late applicable volumes under CAA
section 211(o)(2)(B)(ii)); Monroe Energy, LLC v. EPA, 750 F.3d 909
(D.C. Cir. 2014); NPRA v. EPA, 630 F.3d 145, 154-58 (D.C. Cir.
2010); see also CBD, 141 F.4th at 184-85; Sinclair, 101 F.4th at
887.
\44\ NPRA v. EPA, 630 F.3d at 164-65.
\45\ ACE, 864 F.3d at 721-22.
\46\ ACE, 864 F.3d at 721-23.
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Similarly, in its review of the Set 1 Rule, the D.C. Circuit
concluded that the EPA's determination of the 2023 and
[[Page 16397]]
2024 standards after the statutory deadline was permissible.\47\ The
court noted its repeated holdings that the ``EPA may promulgate late,
and even retroactive, volume requirements so long as it `reasonably
considers and mitigates any hardship caused to obligated parties by
reason of the lateness.' '' \48\ In so holding, the court noted that
the EPA's explanation of the achievability of the RFS standards, the
timing of compliance demonstrations in relation to the final rule and
existing flexibilities in the RFS program for obligated parties.\49\
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\47\ CBD, 141 F.4th at 183-84.
\48\ CBD, 141 F.4th at 184.
\49\ Id.
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In this final rule, we are exercising our authority to set the
applicable renewable fuel volume requirements for 2026 and 2027 after
the statutory deadline to promulgate such volume requirements under CAA
section 211(o)(2)(B)(ii). The 2026 standards will also have a partially
retroactive effect, as we are finalizing the standards after the
beginning of the 2026 calendar year. Nevertheless, we believe that the
2026 and 2027 standards being finalized in this action can be met in
the market by obligated parties (see section III of this preamble and
RIA Chapter 7). We are finalizing the 2027 standards prior to the
beginning of the 2027 compliance year (i.e., before January 1, 2027)
and thus these standards do not apply retroactively. Additionally, we
provided obligated parties notice as of June 17, 2025, and September
18, 2025, of the proposed 2026 and 2027 standards, several months ahead
of when the 2026 standards would apply, and over a year in advance of
when the 2027 standards would apply. As described in section I.C of
this preamble, while the volume requirements we are finalizing in this
action appear larger than the proposed volume requirements, this is in
part due to the fact that we are not finalizing the proposed IRR
provisions, which would have reduced the number of RINs generated for
import-based renewable fuel by half. The total volumes of renewable
fuel we expect will be supplied to meet the volume requirements of this
final rule are very similar to those we projected would be supplied to
meet the proposed volume requirements. Obligated parties will have at
least 12 months from the time of promulgation of this final rule before
they are required to submit associated compliance reports for 2026.
There will additionally be at least 24 months between the finalization
of this rule and the compliance deadline for the 2027 standards.
Obligated parties will also continue to have the ability to use
existing compliance flexibilities to comply with the 2026 and 2027 RFS
standards, such as the use of carryover RINs and carrying forward a
deficit from one compliance year into the next.\50\
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\50\ CAA section 211(o)(5); 40 CFR 80.1427(a)(6)(i) and (b).
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We also note that separate components of the 2026 and 2027 advanced
biofuel, BBD, and total renewable fuel applicable volumes--the SRE
reallocation volumes--were proposed with the intent that the standards
be met through the use of carryover RINs as a result of the recent SRE
decisions. In this final rule, we again intend for the SRE reallocation
volumes to be met using carryover RINs that are already available in
the market, and as such do not anticipate additional burden on
obligated parties to obtain newly generated RINs for compliance with
this portion of the applicable volumes.
F. Impact on Other Waiver Authorities
While we are establishing applicable volume requirements in this
action for future years that are achievable and appropriate based on
our consideration of the statutory factors, we retain our legal
authority to waive volumes in the future under the relevant waiver
authorities should circumstances so warrant.\51\ For example, the
general waiver authority under CAA section 211(o)(7)(A) provides that
the EPA may waive the volume requirements in ``paragraph (2),'' which
provides both the statutory applicable volume tables and the EPA's set
authority (the authority to set applicable volumes for years not
specified in the table). Therefore, similar to our exercise of the
waiver authorities to modify the statutory volumes in past annual
standard-setting rulemakings, the EPA has the authority to modify the
applicable volumes for 2023 and beyond in future actions through the
use of our waiver authorities. The Agency's general preference is to
establish requirements in a manner that reduces the need for such
waivers as much as possible. This policy, however, should not be read
as conceding the EPA's authority to implement such waivers if warranted
under the circumstances despite best efforts to project future
conditions in a reasonable and well-informed manner.
---------------------------------------------------------------------------
\51\ See J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Intern.,
Inc., 534 U.S. 124, 143-44 (2001) (holding that when two statutes
are capable of coexistence and there is not clearly expressed
legislative intent to the contrary, each should be regarded as
effective).
---------------------------------------------------------------------------
We note that, as described above, CAA section 211(o)(2)(B)(iv)
requires that the EPA set the cellulosic biofuel volume requirements
for 2023 and beyond based on the assumption that we will not need to
waive those volume requirements under the cellulosic waiver authority.
Consistent with our approach in the Set 1 Rule, because we are
establishing the applicable volume requirements for 2026 and 2027 under
the set authority in this action, we do not believe we could also waive
those requirements using the cellulosic waiver authority in this same
action in a manner that would be consistent with CAA section
211(o)(2)(B)(iv), since that waiver authority is only triggered when
the projected production of cellulosic biofuel is less than the
``applicable volume established under [211(o)(2)(B)].'' In other words,
it does not appear that we could use both the set authority and the
cellulosic waiver authority to establish volumes at the same time in
this action.\52\
---------------------------------------------------------------------------
\52\ We address comments that suggested we interpret this
provision differently in RTC Section 2.1.
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Establishing the volume requirements for 2026 and 2027 using our
set authority apart from the cellulosic waiver authority has important
implications for the availability of CWCs in these years. When we
reduce cellulosic volumes under the cellulosic waiver authority, we are
also required to make CWCs available under CAA section
211(o)(7)(D)(ii). In this rule we are establishing the 2026 and 2027
cellulosic biofuel volume requirements without utilizing the cellulosic
waiver authority. We interpret CAA section 211(o)(7)(D)(ii) such that
CWCs are only made available in years in which we use the cellulosic
waiver authority to reduce the cellulosic biofuel volume. Because of
this, CWCs would not be available as a compliance mechanism for
obligated parties in these years absent a future action to exercise the
cellulosic waiver authority. Despite the absence of CWCs, we expect
that obligated parties will be able to satisfy their cellulosic biofuel
obligations for these years because we are establishing the 2026 and
2027 cellulosic biofuel volume requirements based on the quantity of
cellulosic biofuel we project will be used as transportation fuel in
the U.S. each year.
G. Severability
In the event of judicial review, the EPA intends for the volume
requirements and percentage standards for each single year covered by
this rule (i.e., 2026 and 2027) to be severable from the volume
requirements and
[[Page 16398]]
percentage standards for the other year. Each year's volume
requirements and percentage standards are supported by analyses for
that year.
We also intend for the SRE reallocation volumes for total renewable
fuel, advanced biofuel, and BBD for 2026 and 2027 to be severable from
the 2026 and 2027 volume requirements. Our justification for each
volume is independent, such that invalidation of the SRE reallocation
volumes would not impact our estimates of renewable fuel that are
associated with new renewable fuel production in the market in 2026 and
2027. Our justification for the SRE reallocation volume is independent
of that establishing the 2026 and 2027 volume requirements, despite the
fact that the two terms are additive. We do not believe that it would
be appropriate to further delay implementation of the 2026 and 2027
volume requirements if a court were to find defects in the SRE
reallocation volumes.\53\
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\53\ We have also calculated what the total renewable fuel,
advanced biofuel, and BBD percentage standards for 2026 and 2027
would be without the SRE reallocation volumes. See ``Calculation of
2026 and 2027 RFS Percentage Standards Without the SRE Reallocation
Volumes,'' available in the docket for this action.
---------------------------------------------------------------------------
We intend for the revised 2025 cellulosic biofuel volume
requirement and percentage standard in section VI of this preamble to
be severable from the volume requirements and percentage standards for
the other years. The 2025 cellulosic biofuel volume requirement and
percentage standard is supported by the analysis and legal authority
for that year independent of the analysis and legal authority for the
2026 and 2027 standards.
We also intend for the removal of renewable electricity from the
RFS program discussed in section VII of this preamble and the
regulatory amendments discussed in section VIII of this preamble to be
severable from the volume requirements and percentage standards. These
regulatory amendments are intended to improve the RFS program in
general and are not part of our analysis for the volume requirements
and percentage standards for any specific year. Additionally, because
we have not registered any parties to generate RINs for renewable
electricity, no such RINs are able to be generated and we have not
relied on any such RINs in setting the standards. Further, each
regulatory amendment in sections VII and VIII of this preamble is
severable from the other regulatory amendments because they all
function independently of one another.
If any of the portions of the rule identified in the preceding
paragraph (i.e., volume requirements and percentage standards for a
single year, the individual regulatory amendments) were invalidated by
a reviewing court, we intend the remainder of this action to remain
effective as described in the prior paragraphs. To further illustrate,
if a reviewing court were to invalidate the volume requirements and
percentage standards, we intend the other regulatory amendments to
remain effective. Or, as another example, if a reviewing court
invalidates the removal of renewable electricity as a qualifying
renewable fuel under the RFS program, we intend the volume requirements
and percentage standards as well as other regulatory amendments to
remain effective.
H. Judicial Review
Under section 307(b)(1) of the CAA, petitions for judicial review
of this action must be filed in the United States Court of Appeals for
the District of Columbia Circuit by June 1, 2026. Filing a petition for
reconsideration by the Administrator of this final action under CAA
section 307(d)(7)(B) does not affect the finality of the action for
purposes of judicial review, nor does it extend the time within which a
petition for judicial review must be filed, and shall not postpone the
effectiveness of the action.
III. Volume Requirements for 2026 and 2027
This section of this preamble presents information related to how
the EPA analyzed renewable fuel volumes, assessed the impacts of the
potential volumes on the statutory factors, and other relevant
information. Section III.A of this preamble describes how we identified
volumes of component categories to facilitate our assessment of the
statutory factors. Sections III.B and C of this preamble discuss the
baselines we used for our analyses and the differences between these
baselines and the analyzed volumes. A summary of our analyses of
certain statutory factors on the analyzed volumes is in section III.D
of this preamble, with more detail on our analyses and the results in
the RIA. Sections III.E through H of this preamble discuss the volumes
we are finalizing for each component category of renewable fuel, our
consideration of carryover RINs, our consideration of alternative
volumes, and finally a summary of the volumes we are finalizing for
2026 and 2027 in this final rule.
A. Analyzed Volumes
As required under CAA section 211(o)(2)(B)(ii), we reviewed the
implementation of the RFS program to date and analyzed a specified set
of factors. Many of the statutory factors, particularly those related
to economic and environmental impacts, are difficult to analyze in the
abstract; it is challenging to assess impacts without understanding the
scale of the volume changes that are the driving force behind those
impacts. In light of this, in the Set 1 Rule we first projected
candidate volumes based on supply-side statutory factors and then
analyzed the impacts on the other statutory factors of those candidate
volumes before setting final volumes,\54\ an approach that was upheld
by the D.C. Circuit in CBD.\55\
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\54\ 88 FR 44480-508 (July 12, 2023).
\55\ CBD, 141 F.4th at 170.
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We similarly framed our analysis of the statutory factors in this
rule: we opted to first identify renewable fuel volumes for each
category of renewable fuel (hereinafter the ``Analyzed Volumes'') so
that a more concrete and meaningful analysis of the impacts of other
statutory factors may be undertaken. This section (III.A) of this
preamble describes how we developed the Analyzed Volumes as well as how
and why they changed from the Set 2 proposal. Our analysis of the
impacts of the Analyzed Volumes on a selection of the statutory factors
is summarized in section III.D of this preamble, and the volume
requirements for 2026 and 2027 that we are establishing in this action
based on our analysis of all the statutory factors and a review of the
implementation of the RFS program to date are described in section
III.E of this preamble and summarized in section III.H of this
preamble. Further details of all analyses performed for this action are
provided in the RIA.
The Analyzed Volumes were determined based primarily on two
statutory criteria: the expected annual rate of future commercial
production of renewable fuels and sufficiency of infrastructure to
deliver and use renewable fuels.\56\ This is similar to the EPA's
approach to identifying ``candidate volumes'' in the Set 1 Rule, which
were also based on supply-side factors.\57\ However, the development of
the Analyzed Volumes is more closely tied to the statutory goals of the
RFS program to, among other things, increase the domestic production
and use of renewable fuel to increase the energy independence and
security of the U.S. To best achieve these goals and consistent with
the statutory requirements, the Analyzed Volumes are designed to
account for the maximum potential production and use
[[Page 16399]]
of renewable fuels in the U.S. while at the same time recognizing
infrastructure constraints that could limit the production and use of
these fuels.
---------------------------------------------------------------------------
\56\ CAA section 211(o)(2)(B)(ii)(III) and (IV).
\57\ 88 FR 44480-81 (July 12, 2023).
---------------------------------------------------------------------------
The Analyzed Volumes in this final rule differ from the volume
scenarios and the proposed volumes in several ways, reflecting
consideration of public comments received and certain adjustments that
were contemplated at proposal. The Analyzed Volumes reflect additional
analyses based on data received since proposal. The Analyzed Volumes
also reflect modifications to our methodologies for projecting the
potential volumes of renewable fuel production and use made in response
to the public comments, including comments asserting that certain
intervening developments discussed below warranted adjustments.\58\
Finally, the Analyzed Volumes have been adjusted to reflect the EPA's
decision not to finalize the proposed IRR provisions in this action.
---------------------------------------------------------------------------
\58\ For example, the analyses that support this final rule have
been revised to reflect tax credit changes in OBBB.
---------------------------------------------------------------------------
For cellulosic biofuel and conventional renewable fuel, the
Analyzed Volumes are equal to the projected volumes of these fuels we
project will be used as RFS-qualifying transportation fuel in 2026 and
2027. Our projections of the use of these fuels assume continued
incentives for the production and use of these fuels provided by the
RFS program and by other State and Federal programs remain in place for
the periods of time currently described in their respective statutes
and regulations.
For non-cellulosic advanced biofuel (including BBD and other
advanced biofuel), the projected supply of these fuels in future years
is highly dependent on the incentives for these fuels provided by the
RFS program, other State and Federal incentives in the U.S., and
actions by foreign countries. Unlike cellulosic biofuel and
conventional renewable fuel, we do not expect that the supply of non-
cellulosic advanced biofuel will be limited by the ability for the
market to use these fuels as RFS-qualifying transportation fuel.
Instead, we project that the available supply of non-cellulosic
advanced biofuel will depend on a number of interrelated factors,
including the supply of feedstocks to produce these fuels, demand for
these feedstocks in non-biofuel markets, and the available incentives
for the production and use of these fuels in the U.S. and other
countries.
The non-cellulosic advanced biofuel volumes we chose to analyze are
based on the projected domestic production capacity of biodiesel and
renewable diesel in 2026 and 2027, as well as the projected supplies of
other advanced biofuels. In determining the Analyzed Volumes for non-
cellulosic advanced biofuel, we also considered the availability of
qualifying feedstocks to produce these fuels but ultimately determined
that feedstock availability was unlikely to limit the production of
these fuels to a level below the domestic production capacity.
Developing volumes of non-cellulosic advanced biofuel for analysis
based on the domestic production capacity for these fuels is consistent
with the statute's goals of increasing energy independence and security
and the Administration's goals of achieving energy dominance.
We recognize that imported renewable fuels are eligible to generate
RINs under the RFS program, provided these fuels meet all relevant
statutory and regulatory requirements. Imported renewable fuels are
expected to continue to contribute to the supply of renewable fuel to
the U.S. in 2026 and 2027. However, the volume of non-cellulosic
advanced biofuels imported into the U.S. decreased significantly in
2025 and we believe based on the balance of available evidence that
this trend will continue into 2026 and 2027 due to new trends in trade
dynamics. Data from the EPA Moderated Transaction System (EMTS)
indicates that biodiesel and renewable diesel imports decreased from
approximately 830 million gallons in 2024 to approximately 140 million
gallons in 2025. This drop in imported renewable fuel was a response to
changing economic conditions, including the transition to the Federal
Internal Revenue Code Section 45Z Clean Fuel Production tax credit
(hereinafter the ``45Z credit''), which does not provide credit for
imported biofuels. The 45Z credit was amended by the One Big Beautiful
Bill Act of 2025 (OBBB).\59\ Among other changes, OBBB required
biofuels to be produced from North American feedstocks to qualify for
the tax credit. Because the 45Z credit is effective for fuel produced
after December 31, 2024, EPA had insufficient data on the impacts of
the new structure of the credit and the market's response to consider
these impacts in the Set 2 proposal. However, the significant drop in
the total volume of imported non-cellulosic advanced biofuels observed
in 2025 further supports our decision to base the non-cellulosic
advanced biofuel Analyzed Volumes on our projection of domestic
production capacity for these fuels.
---------------------------------------------------------------------------
\59\ Public Law 119-21 (2025).
---------------------------------------------------------------------------
Given the nested nature of the statutory renewable fuel categories,
we largely framed our assessment of volumes in terms of the component
categories rather than in terms of the statutory categories (cellulosic
biofuel, BBD, advanced biofuel, and total renewable fuel). The
statutory categories are those addressed in CAA section
211(o)(2)(B)(i)-(ii). The component categories are the categories of
renewable fuels that make up the statutory categories, but which are
not nested within one another. They possess distinct economic,
environmental, technological, and other characteristics relevant to the
factors we must analyze under the statute, making our focus on them
rather than the nested categories in the statute technically sound.
Finally, an analysis of the component categories is equivalent to
analyzing the statutory categories, since doing so would effectively
require us to evaluate the difference between various statutory
categories (e.g., assessing ``the difference between volumes of
advanced biofuel and total renewable fuel'' instead of assessing ``the
volume of conventional renewable fuel''), adding unnecessary complexity
to our analysis. In any event, were we to frame our analysis in terms
of the statutory categories, we believe that our substantive approach
and conclusions would remain materially the same.
In sections III.A.1 through 4 of this preamble, we provide greater
detail on the methodology and data used for identifying the Analyzed
Volumes of cellulosic biofuel, non-cellulosic advanced biofuel, and
conventional renewable fuel.
1. Cellulosic Biofuel
CAA section 211(o)(1)(E) defines cellulosic biofuel as renewable
fuel derived from any cellulose, hemi-cellulose, or lignin that has
lifecycle greenhouse gas (GHG) emissions that are at least 60 percent
less than the baseline lifecycle GHG emissions. Since the inception of
the RFS program, cellulosic biofuel production has steadily increased,
reaching record levels in 2025. This growth has primarily been driven
by renewable CNG/LNG, although small volumes of liquid cellulosic
biofuels, particularly ethanol produced from CKF, have also played a
contributing role.
Figure III.A.1-1: Cellulosic RINs Generated
[[Page 16400]]
[GRAPHIC] [TIFF OMITTED] TR01AP26.029
Sections III.A.1.a-d of this preamble describe our methodology for
determining the appropriate volumes of renewable CNG/LNG and CKF
ethanol and, in turn, the total cellulosic biofuel volume used in our
statutory factor analysis. Additional details on our volume projections
for cellulosic biofuel are provided in RIA Chapter 7.1.
a. Renewable CNG/LNG
To qualify as a RIN-generating fuel under the RFS program biogas
from qualifying sources must first be collected and upgraded for
vehicle use. The upgrading process varies depending on the final
application but typically involves removing undesirable components and
contaminants from the raw biogas. Biogas that has been upgraded and
distributed through a closed distribution system, either as a
biointermediate or for the production of renewable fuel, is defined as
``treated biogas,'' whereas biogas that has been upgraded to be
suitable for injection into the commercial natural gas pipeline system
and could be used to produce renewable fuel is defined as ``renewable
natural gas'' (RNG).\60\ Although they are defined differently in the
regulations, we use the term ``RNG'' to collectively refer to both
treated biogas and RNG in this document. Likewise, we use ``renewable
CNG/LNG'' to refer to both treated biogas and RNG when used as a
transportation fuel in CNG/LNG vehicles, and we apply this term in
contexts where such use is eligible for and results in RIN generation
and separation under the RFS program.
---------------------------------------------------------------------------
\60\ 40 CFR 80.2.
---------------------------------------------------------------------------
To determine appropriate volumes of renewable CNG/LNG, we analyzed
two factors: the amount of RNG that could be produced and the amount of
renewable CNG/LNG that could be consumed as RFS-qualifying
transportation fuel. As discussed further below and in RIA Chapter 7.1,
we updated the analysis from the Set 2 proposal, taking into
consideration data and information provided by commenters, and we
continue to find that consumption, not production, is the primary
constraint on future volumes of renewable CNG/LNG.
For our assessment of consumption of renewable CNG/LNG, we first
estimate total CNG/LNG use in transportation, regardless of whether the
fuel is fossil-based or renewable. Our methodology is the same as in
the Set 2 proposal: we combine estimates of the number of vehicles
capable of using CNG/LNG with data on vehicle miles traveled, fuel
economy, and fuel consumption. Since the Set 2 proposal, we updated
these inputs using more recent data. Commenters generally agreed with
our methodologies for estimating consumption, though some urged more
aggressive assumptions for fuel use and anticipated market growth. We
address these points in detail in RTC Section 3; based on the available
data, however, we believe our estimates strike an appropriate balance
that reflects potential growth in total CNG/LNG consumption while
remaining grounded in observed market trends. Having established this
total-use baseline, we then assess the practical limits on the share of
CNG/LNG that can be supplied by RNG. Fully replacing total CNG/LNG
usage with RNG is unlikely due to facility-specific infrastructure
limitations, costs, and other challenges. Therefore, to account for
this, we adjusted our total CNG/LNG estimate to reflect these
constraints and calculated the share that can realistically be met with
RNG.
To calculate this usage and verify that it reflects real-world
conditions, we examined data from California's Low Carbon Fuel Standard
(LCFS) program. This data shows that approximately 97 percent of
transportation CNG/LNG demand in California has been supplied by RNG
over the past several years, which is the same figure cited in the Set
2 proposal and remains valid based on updated data.\61\ Accordingly, we
applied a 97 percent factor to total CNG/LNG consumption to estimate
potential renewable-based volume. The results of our projected total
CNG/LNG transportation use and the applied 97 percent efficiency factor
are shown in Table III.A.1.a-1 and further discussed in RIA Chapter
7.1.4.1.
---------------------------------------------------------------------------
\61\ CARB, ``LCFS Quarterly Data Summary Spreadsheet,'' August
11, 2025. <a href="https://ww2.arb.ca.gov/resources/documents/low-carbon-fuel-standard-reporting-tool-quarterly-summaries">https://ww2.arb.ca.gov/resources/documents/low-carbon-fuel-standard-reporting-tool-quarterly-summaries</a>.
---------------------------------------------------------------------------
To validate this expected consumption-limitation on renewable CNG/
LNG volumes, we also examined potential production capacity under
unconstrained market conditions (i.e., assuming no consumption limits)
to determine whether production, rather
[[Page 16401]]
than consumption, may be the limiting constraint in 2026 and 2027. To
do this, we used the same industry-wide production projection method
employed in RFS standard-setting since 2018: applying an industry-wide
year-over-year growth rate to the current RNG production rate (see RIA
Chapter 7.1.2).
Specifically, we determined an appropriate year-over-year
production growth rate by analyzing cellulosic RIN generation for RNG
over the two most recent full calendar years. While we have
historically used a rolling 24-month window, including in the Set 2
proposal, for this analysis we aligned to calendar years to reduce
seasonal distortion as RIN generation typically slows early in the year
and surges at year-end. Early 2025 departed from this pattern, likely
due to new biogas regulatory reform regulations, so using full calendar
year data captures both the complete seasonal cycle and any changes to
the seasonal pattern of RIN generation for RNG attributable to the
biogas regulatory reform changes. From this data, we derived a 24
percent year-over-year growth rate. We applied this rate to the 2025
cellulosic RIN generation baseline for RNG to project 2026 RIN
generation and then used the 2026 projection to estimate 2027 RIN
generation. Results from our growth rate-based production estimate are
shown in Table III.A.1.a-1 and discussed further in RIA Chapter
7.1.4.2.
[GRAPHIC] [TIFF OMITTED] TR01AP26.031
Performing this analysis and comparing RNG production with
consumption of renewable CNG/LNG confirms that for 2026 and 2027,
production is expected to exceed consumption as transportation fuel.
This shows that the volume of these fuels will most likely be
constrained by the market's capacity to use RNG as an RFS-qualifying
transportation fuel. Importantly, under the RFS regulations for biogas-
derived renewable fuel as amended in the Set 1 Rule,\62\ while RINs for
renewable CNG/LNG are generally generated when the RNG is injected into
a commercial pipeline,\63\ they are separated and available for
compliance only once the gas is used as transportation fuel.\64\
Consequently, even if production is higher than consumption, the number
of separated RINs from renewable CNG/LNG remains constrained by total
CNG/LNG use in transportation.
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\62\ Prior to these regulatory changes, which went into effect
on January 1, 2025, RINs for CNG/LNG derived from biogas could not
be generated until parties demonstrated that the CNG/LNG had been
produced from qualifying renewable biomass and used as
transportation fuel.
\63\ 40 CFR 80.125(b).
\64\ 40 CFR 80.125(d).
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In previous RFS rulemakings, we recognized that renewable CNG/LNG
consumption could eventually become the limiting factor in determining
volumes but did not know when it would do so. In the Set 1 Rule, we set
the 2023-2025 cellulosic biofuel volume requirements based on projected
production and the historical growth of cellulosic RIN generation,
assuming production capacity, not end-use consumption, would be the
primary constraint.\65\ Evidence now shows a potential shift toward a
consumption-limited baseline for those years. Cellulosic biofuel
deficits from 2023 and 2024 carried into the following year were
significantly larger than the deficits in previous years.\66\ EPA
partially waived the 2024 cellulosic biofuel volume requirement due to
a shortfall in the projected volume of cellulosic biofuel available
relative to the 2024 cellulosic biofuel standard.\67\ Similarly, as
described in section VI of this preamble, we are partially waiving the
2025 cellulosic biofuel volume requirement due to a shortfall in 2025
cellulosic RINs necessary to meet the original 2025 requirement
established in the Set 1 Rule.
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\65\ Set 1 RIA Chapter 6.1.3.
\66\ Cellulosic biofuel deficits for 2023 and 2024 were
approximately 55-60 million RINs each year. Prior the 2023, the
largest cellulosic biofuel deficit in a single year was
approximately 20 million RINs in 2017. See ``RFS Compliance Data as
of February 20, 2026,'' available in the docket for this action.
\67\ 90 FR 29751 (July 7, 2025).
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In addition, we are also now seeing a rapid increase in cellulosic
RINs retired for non-transportation purposes, which provides further
evidence that consumption, rather than production capacity, is
increasingly the binding constraint. Specifically, retirements of
cellulosic RINs for non-transportation use increased from 0.4 million
RINs in 2024 to 74.5 million RINs in 2025,\68\ further reducing the
number of cellulosic RINs available for compliance.\69\ Thus, while we
still project continued growth in cellulosic biofuel production in 2026
and 2027, growth in cellulosic RIN availability is likely to remain
significantly constrained for the foreseeable future by the ability of
fuel consumers to use renewable CNG/LNG.
---------------------------------------------------------------------------
\68\ See ``RIN retirement data from January 2026'' RIN data file
available at: <a href="https://www.epa.gov/fuels-registration-reporting-and-compliance-help/spreadsheet-rin-retirement-data-renewable-fuel">https://www.epa.gov/fuels-registration-reporting-and-compliance-help/spreadsheet-rin-retirement-data-renewable-fuel</a>.
\69\ For a detailed discussion, see RIA Chapter 7.1.3.
---------------------------------------------------------------------------
Based on our analysis of renewable CNG/LNG consumption and RNG
production, we reach the same conclusion as in the Set 2 proposal: in
2026 and 2027, cellulosic volumes from renewable CNG/LNG are
constrained by total CNG/LNG transportation usage. Commenters were
divided on this point; some agreed that consumption could limit volumes
in the near term, while others argued that we should base our Analyzed
Volumes solely on projected production without consideration of the end
use of the CNG/LNG. Because cellulosic RINs can only be separated and
made available to demonstrate compliance if the CNG/LNG is used as
transportation fuel, EPA decided it was appropriate to consider
constraints related to the use of CNG/LNG as transportation fuel in
determining the Analyzed Volumes. Accordingly, we treat the volumes in
Table III.A.1.a-2 as the renewable CNG/LNG contribution to the total
cellulosic biofuel volume used in our statutory factor analysis.
[[Page 16402]]
[GRAPHIC] [TIFF OMITTED] TR01AP26.032
b. Ethanol From Corn Kernel Fiber
Several technologies are currently being developed to produce
liquid fuels from cellulosic biomass. However, most of these
technologies are unlikely to yield significant volumes of cellulosic
biofuel by 2027. One notable exception is the production of ethanol
from CKF, for which several companies have developed production
processes. Many of these processes involve co-processing of both the
starch and cellulosic components of the corn kernel. However, to be
eligible for cellulosic RIN generation, facilities must accurately
determine the amount of ethanol produced specifically from the
cellulosic portion of the corn kernel using approved methodologies.
This requires the ability to reliably and precisely calculate the
ethanol derived from the cellulosic component, distinct from the starch
portion of the corn kernel. In September 2022, we issued updated
guidance on analytical methods that could be used to quantify the
amount of ethanol produced when co-processing CKF and corn starch.\70\
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\70\ EPA, ``Guidance on Qualifying an Analytical Method for
Determining the Cellulosic Converted Fraction of Corn Kernel Fiber
Co-Processed with Starch,'' EPA-420-B-22-041, September 2022.
---------------------------------------------------------------------------
We also had substantive discussions with technology providers
intending to use analytical methods consistent with this guidance, as
well as with owners of facilities registered as cellulosic biofuel
producers using these methods. Based on information from these
technology providers, we believe that cellulosic ethanol production
from CKF could be feasible at all existing corn ethanol facilities,
with minimal additional processing units or modifications. To generate
cellulosic RINs for ethanol produced from CKF, a facility would need to
demonstrate the converted fraction consistent with appropriate test
methods. For the purposes of this analysis, we assume that 90 percent
of facilities will produce cellulosic ethanol over this period due to
potential facility-specific challenges that may prevent 100 percent
adoption.
Based on data submitted to the EPA by renewable fuel producers
generating cellulosic RINs for CKF ethanol, the current industry-wide
average conversion among registered facilities is approximately 1
percent. Accordingly, for this analysis we use a 1 percent conversion
rate. We recognize that some parties have claimed they can demonstrate
up to 1.5 percent conversion using analytical methods consistent with
EPA guidance, but we do not yet have sufficient data to support
adopting that higher rate.
Commenters generally supported our inclusion of robust volumes of
CKF ethanol. Some, however, as discussed earlier, urged more aggressive
assumptions for facility participation and conversion efficiency. We
address these comments in detail in RTC Section 3. Based on the
available data, we do not find sufficient support to increase these
rates at this time.
The projected production of cellulosic ethanol from CKF, as shown
in Table III.A.1.b-1, is based on projections of total corn ethanol
production, with a 90 percent facility participation rate and a 1
percent conversion efficiency applied.\71\
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\71\ A detailed discussion of the methodology used to project
cellulosic ethanol production from CKF can be found in RIA Chapter
7.1.5.
[GRAPHIC] [TIFF OMITTED] TR01AP26.033
c. Other Cellulosic Biofuels
We expect U.S. commercial-scale production of cellulosic biofuels,
other than renewable CNG/LNG and CKF ethanol, to be very limited in
2026 and 2027. Several technologies in development may be capable of
producing small volumes by 2027. These technologies primarily target
cellulosic hydrocarbons from feedstocks such as separated municipal
solid waste (MSW), precommercial thinnings, and tree residues, which
can be blended into gasoline, diesel, and jet fuel. However, because no
producer has achieved sustained U.S. production to date, projected
volumes for 2026 and 2027 remain highly uncertain and are likely to be
small. Accordingly, we do not project production of cellulosic biofuels
beyond renewable CNG/LNG and CKF ethanol during 2026 and 2027.
d. Summary of Cellulosic Biofuel Volumes
In determining the Analyzed Volumes of cellulosic biofuel for 2026
and 2027, we started by considering the statutory volume targets for
2010-2022. The statutory volumes for cellulosic biofuel increased
rapidly, from 100 million gallons in 2010 to 16 billion gallons in 2022
with the largest increases in the later years. These increases are even
more notable in comparison to the implied statutory volumes for the
other renewable fuel volumes. Statutory BBD volumes did not increase
after 2012, implied conventional renewable fuel volumes did not
increase after 2015, and non-cellulosic advanced biofuel volumes
reached a maximum of 5 billion in 2022. Thus, by 2022, the statute was
clearly oriented toward expanding cellulosic biofuel volumes.
Given the statute's emphasis on growing cellulosic biofuel volumes,
our statutory analysis evaluates the highest feasible volume of
cellulosic biofuel. However, as discussed in section II.C of this
preamble, CAA section 211(o)(2)(B)(iv) requires the EPA to set the
cellulosic biofuel volume requirement such that we do not anticipate a
need to waive the volumes under CAA section 211(o)(7)(D). Accordingly,
the Analyzed Volumes of cellulosic biofuel used in our statutory
analysis for 2026 and 2027 are equal to the projected amount of
cellulosic biofuel used as RFS-qualifying transportation fuel in those
years,
[[Page 16403]]
balancing the statute's goal of increasing cellulosic biofuel while
avoiding the need to waive future volumes.
Table III.A.1.d-1 presents the Analyzed Volumes of cellulosic
biofuels for 2026 and 2027. Because production characteristics and
market conditions differ across cellulosic fuels, we present CKF
ethanol and renewable CNG/LNG separately.
[GRAPHIC] [TIFF OMITTED] TR01AP26.034
2. Non-Cellulosic Advanced Biofuel
CAA section 211(o)(1)(D) defines BBD as renewable fuel that is
biodiesel as defined by 42 U.S.C. 12330(f) and that has GHG emissions
reductions of at least 50 percent from the baseline. It also excludes
biodiesel that is co-processed with petroleum feedstocks. The BBD
standard is nested within the advanced biofuel standard. Historically,
the BBD supply under the RFS program has exceeded the BBD standard,
with the additional supply used by obligated parties to meet their
advanced biofuel volume requirements. Thus, the advanced biofuel
standard has incentivized the use of BBD beyond just the BBD standard.
a. Biodiesel and Renewable Diesel
Since 2010, when the BBD volume requirement was added to the RFS
program, production of BBD has generally increased annually. The volume
of BBD supplied in any given year is influenced by a number of factors,
including: production capacity; feedstock availability and cost;
available incentives including the RFS program; the availability of
imported BBD; the demand for BBD (and feedstocks used to produce BBD)
in foreign markets; and several other economic factors.
Most renewable fuel that qualifies as BBD is either biodiesel or
renewable diesel. Both these fuels are replacements for petroleum
diesel and are produced from the same lipid-based feedstocks, a diverse
category that includes animal fats, UCO, and vegetable oil feedstocks.
Biodiesel and renewable diesel differ in their production processes and
chemical composition. Biodiesel is an oxygenated fuel that is generally
produced using a transesterification process. Renewable diesel, on the
other hand, is a hydrocarbon fuel that closely resembles petroleum
diesel and that is generally produced by hydrotreating renewable
feedstocks.
i. Historic Production of Biodiesel and Renewable Diesel
From 2012 through 2022 the largest volume of advanced biofuel
supplied in the RFS program was biodiesel. Domestic biodiesel
production increased from approximately 1.3 billion gallons in 2014 to
approximately 1.8 billion gallons in 2018. From 2018 to 2024, domestic
biodiesel production decreased slightly to approximately 1.7 billion
gallons. In 2025, domestic biodiesel production decreased to an
estimated 1.1 billion gallons.\72\
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\72\ Further details on these volume projections can be found in
RIA Chapter 7.2.
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In the early years of the RFS program renewable diesel was produced
and imported in smaller quantities than biodiesel, as shown in Figure
III.A.2.a.i-1. In recent years, however, domestic production of
renewable diesel has increased significantly. Renewable diesel
production facilities generally have higher capital costs relative to
biodiesel, which likely accounts for the historically higher volumes of
biodiesel production relative to renewable diesel production prior to
2023. The higher capital cost of renewable diesel production can
largely be offset through the benefits of economies of scale, since
renewable diesel production facilities tend to be much larger than
biodiesel production facilities.\73\ For example, according to data
from the U.S. Energy Information Administration (EIA), in 2025, there
were 19 active renewable diesel facilities that produced an average of
248 million gallons of renewable diesel per facility,\74\ compared to
48 active biodiesel facilities that produced an average of 41 million
gallons of biodiesel per facility.\75\
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\73\ See RIA Chapter 10 for more detail on our assessment of the
cost to produce biodiesel and renewable diesel.
\74\ EIA, ``U.S. Renewable Diesel Fuel and Other Biofuels Plant
Production Capacity,'' September 26, 2025. <a href="https://www.eia.gov/biofuels/renewable/capacity">https://www.eia.gov/biofuels/renewable/capacity</a>.
\75\ EIA, ``U.S. Biodiesel Plant Production Capacity,''
September 26, 2025. <a href="https://www.eia.gov/biofuels/biodiesel/capacity">https://www.eia.gov/biofuels/biodiesel/capacity</a>.
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Because renewable diesel more closely resembles petroleum diesel
than biodiesel, renewable diesel can be blended at much higher
concentrations with diesel than biodiesel. This allows renewable diesel
to more easily be blended into diesel at higher rates and enables
renewable diesel producers to sell greater volumes of renewable diesel
in California, benefiting from the LCFS credits in California in
addition to RFS incentives and the 45Z credit.\76\ The greater ability
for renewable diesel to generate credits under California's LCFS
program provides a significant advantage over biodiesel. Biodiesel
blends in California containing 6-20 percent biodiesel require the use
of an additive to comply with California's Alternative Diesel Fuels
Regulations, making the use of higher-level biodiesel blends more
challenging in California.\77\ The Washington, Oregon, and New Mexico
programs modeled from the California LCFS have generally mirrored this
incentive structure. If additional States were to adopt clean fuels
programs using a similar structure, these programs could provide an
additional advantage to renewable diesel production relative to
biodiesel production in the U.S.
---------------------------------------------------------------------------
\76\ For example, when LCFS credits are worth $100/metric ton,
blending renewable diesel into California generates LCFS credits
worth approximately $0.25 to $0.90 per gallon (assuming carbon
intensities of 70 and 20 gCO<INF>2</INF>e/MJ respectively).
Renewable fuel producers that sell qualifying renewable fuel in
California can generate both RINs under the RFS program and LCFS
credits.
\77\ CARB, ``Frequently Asked Questions on the Alternative
Diesel Fuels Regulation,'' November 2017. In 2021, nearly all
renewable diesel consumed in the U.S. was consumed in California.
Together renewable diesel and biodiesel represented approximately
65-70 percent of all diesel fuel consumed in California in the
second half of 2024.
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Figure III.A.2.a.i-1: Domestic Production of Biodiesel and Renewable
Diesel
[[Page 16404]]
[GRAPHIC] [TIFF OMITTED] TR01AP26.035
Imports and exports of biodiesel and renewable diesel also impact
the domestic supply of these fuels. The U.S. has been a net importer of
biodiesel since 2013. Biodiesel imports reached a peak in 2016, with
the majority of the imported biodiesel coming from Argentina.\78\ In
August 2017, the U.S. announced tariffs on biodiesel imported from
Argentina and Indonesia.\79\ These tariffs were subsequently confirmed
in April 2018 and remain in place after being reaffirmed in 2023.\80\
Biodiesel imports started dropping in 2017 but increased precipitously
in 2023, reaching approximately 500 million gallons.\81\ Biodiesel
imports saw large declines in 2024 and 2025 to 398 million gallons and
34 million gallons, respectively.\82\
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\78\ In 2016 and 2017, 67 percent of all biodiesel imports were
from Argentina. EIA, ``U.S. Imports by Country of Origin--
Biodiesel,'' Petroleum & Other Liquids, April 30, 2025. <a href="https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_EPOORDB_im0_mbbl_a.htm">https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_EPOORDB_im0_mbbl_a.htm</a>.
\79\ 82 FR 40748 (August 28, 2017).
\80\ 83 FR 18278 (April 26, 2018).
\81\ EIA, ``U.S. Imports of Biodiesel,'' Petroleum & Other
Liquids, April 30, 2025. <a href="https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=m_epoordb_im0_nus-z00_mbbl&f=a">https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=m_epoordb_im0_nus-z00_mbbl&f=a</a>.
\82\ See RIA Chapter 7.2 for further discussion of EPA estimates
of imports and exports of BBD.
---------------------------------------------------------------------------
Imports and exports of renewable diesel have also varied over time.
Nearly all the renewable diesel imported into the U.S. through 2025 was
imported from Singapore.\83\ In more recent years, the U.S. has also
exported increasing volumes of renewable diesel. In 2022-2025,
renewable diesel exports exceeded renewable diesel imports based on
data collected through EMTS (see Table III.A.2.b-1).
---------------------------------------------------------------------------
\83\ EIA, ``U.S. Imports by Country of Origin--Renewable Diesel
Fuel,'' Petroleum & Other Liquids, April 30, 2025. <a href="https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_EPOORDO_im0_mbbl_a.htm">https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_EPOORDO_im0_mbbl_a.htm</a>.
---------------------------------------------------------------------------
The simultaneous import and export of significant volumes of
biodiesel and renewable diesel is likely the result of a number of
factors, including the design of the previous biodiesel tax credits
(which were available with respect to biodiesel and renewable diesel
that was either produced or used in the U.S. and thus eligible for
exported volumes as well), the varying structures of the available
incentives (with the level of incentives varying by country and often
depending on the feedstocks used), and logistical considerations
(biodiesel and renewable diesel may be imported and exported from
different parts of the country). Starting in 2026, the 45Z credit,
which consolidated and replaced the previous $1 per gallon credits for
biodiesel and renewable diesel, is only available for fuel produced in
the U.S. from feedstocks sourced from North America. As the 45Z credit,
unlike the tax credits it replaced, does not provide tax incentives to
imported biofuels, imports of biodiesel and renewable diesel dropped
significantly in 2025 relative to previous years. The magnitude of the
effect of the structure of the 45Z credit was not apparent in the
available data at the time of the Set 2 proposal. We expect that
biodiesel and renewable diesel imports will continue to be available in
future years, but that the structure of the 45Z credit will continue to
provide strong support for biodiesel and renewable diesel produced in
the U.S. relative to imported fuels.
[[Page 16405]]
[GRAPHIC] [TIFF OMITTED] TR01AP26.036
ii. Biodiesel and Renewable Diesel Feedstock Assessment
---------------------------------------------------------------------------
\84\ USDA, ``Fats and Oils: Oilseed Crushings, Production,
Consumption, and Stocks,'' February 2, 2026. <a href="https://esmis.nal.usda.gov/sites/default/release-files/795753/cafo0226.pdf">https://esmis.nal.usda.gov/sites/default/release-files/795753/cafo0226.pdf</a>.
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When considering the potential production and import of biodiesel
and renewable diesel in future years and the likely impacts of
biodiesel and renewable diesel production, feedstock availability is a
key consideration. Currently, biodiesel and renewable diesel in the
U.S. are produced from a number of different feedstocks, including
fats, oils, and greases (FOG), distillers corn oil, and virgin
vegetable oils such as soybean oil and canola oil. The available supply
of distillers corn oil is primarily a function of corn ethanol
production, as most corn ethanol facilities currently extract and sell
distillers corn oil. The available supply of soybean oil and canola oil
is primarily a function of the quantity of these oils produced by
oilseed crushing facilities, both of which have increased in recent
years.\84\
Figure III.A.2.a.ii-1: Feedstocks Used To Produce Biodiesel and
Renewable Diesel in the U.S.
[GRAPHIC] [TIFF OMITTED] TR01AP26.037
[[Page 16406]]
Use of soybean oil to produce biodiesel grew from approximately 10
percent of all domestic soybean oil production in the 2009/2010
agricultural marketing year to 48 percent in the 2023/2024 agricultural
marketing year, the latest data available at the time of writing.\85\
In the intervening years, the total increase in domestic soybean oil
production and the increase in the quantity of soybean oil used to
produce biodiesel and renewable diesel were similar while the use of
soybean oil in non-biofuel markets has been fairly stable. This
indicates that the increase in oil production was likely driven by the
increasing demand for biofuel. Notably, the percentage of the soybean
value that came from the soybean oil (rather than the meal and hulls)
had been relatively stable and averaged approximately 33 percent from
2016-2020. The percentage of the soybean value that came from the
soybean oil increased significantly starting in 2021, reaching a high
of 53 percent in October 2021, before declining slightly to 39 percent
in August 2024 (the most recent date for which data are available).\86\
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\85\ USDA, ``Oil Crops Yearbook,'' March 2025. <a href="https://www.ers.usda.gov/data-products/oil-crops-yearbook">https://www.ers.usda.gov/data-products/oil-crops-yearbook</a>.
\86\ Id.
---------------------------------------------------------------------------
Available volumes of FOG (including UCO and animal fats) and
distillers corn oil from domestic sources are expected to continue to
increase in future years, but these increases are expected to be
limited, especially as new trade dynamics take hold. FOG feedstocks,
like UCO, are the byproducts of other activities (e.g., food production
and rendering operations), and production of FOG is not responsive to
increasing demand for biofuel production. Similarly, distillers corn
oil is a byproduct of ethanol production. Since we do not anticipate
significant growth in ethanol production in future years (see section
III.A.3.a of this preamble), we do not project significant increases in
the production of distillers corn oil for biofuel production, as most
ethanol production facilities currently produce distillers corn oil.
Therefore, if biodiesel and renewable diesel production increase in
future years, it will likely require increased use of vegetable oils
such as soybean oil and canola oil, either from new production or
diverted from other markets, or increased use of imported feedstocks,
as occurred in 2022 and 2023 to some extent.
Greater volumes of soybean oil are projected to be produced from
new or expanded soybean crushing facilities through 2027. In recent
years, several parties announced plans to expand existing soybean
crushing capacity or build new soybean crushing facilities, including a
swing plant in Louisiana and a dedicated soy crush plant in
Illinois.\87\ Public announcements of near-certain expansions and new
builds suggest that domestic soybean crush capacity could reach 615,000
bushels per day in 2026, with growth largely coming from announced or
planned crush plants.\88\ This projection, which only accounts for
plants recently completed or under construction as of Q1 2026 would
result in 360 million additional gallons of BBD in 2026 alone.\89\ At
the time of writing, USDA projects 2026 increases in soy crush that
could result in domestic soybean oil production sufficient to produce
approximately 200 million gallons over current levels annually.\90\
Including announced future capacity, some projections of the domestic
crush capacity could result in an increase in domestic soybean oil
production sufficient to produce approximately 750 million additional
gallons of BBD per year and suggests a 250 million gallon per year
annual increase in soybean oil production through 2026.\91\ Similarly,
a 2024 assessment of potential BBD feedstocks in future years estimated
that increases in domestic soybean oil production could support the
production of an additional 1 billion gallons of BBD from 2023 to
2027.\92\ Recent data suggests that the domestic soybean crushing
industry is capable of continuing to add significant capacity in future
years, but any investment in domestic soybean crushing is highly
dependent on demand for soybean oil (and soybean meal) from biofuel
producers and other markets.\93\
---------------------------------------------------------------------------
\87\ American Soybean Association, ``Soybean Crush Expansion,
2025 Update,'' April 10, 2025. <a href="https://soygrowers.com/news-releases/soybean-crush-expansion-2025-update">https://soygrowers.com/news-releases/soybean-crush-expansion-2025-update</a>.
\88\ American Soybean Association, ``Soybean Crush Expansion,
2025 Update,'' April 10, 2025. <a href="https://soygrowers.com/news-releases/soybean-crush-expansion-2025-update">https://soygrowers.com/news-releases/soybean-crush-expansion-2025-update</a>.
\89\ To note, announced facilities that have not begun
construction as of Q1 2026 are considered too uncertain.
\90\ USDA, ``World Agricultural Supply and Demand Estimates
Report,'' January 12, 2026. <a href="https://www.usda.gov/oce/commodity/wasde/wasde0126.pdf">https://www.usda.gov/oce/commodity/wasde/wasde0126.pdf</a>.
\91\ See RIA Section 7.2. This estimate assumes a soybean oil
yield of 12 lbs per bushel of soybeans and 1 gallon of BBD per 7.75
lbs of soybean oil.
\92\ S&P Global, ``Availability of Feedstocks for Biofuel Use--
Key Highlights,'' July 2024.
\93\ See RIA Chapter 7.2 for further discussion of this topic.
---------------------------------------------------------------------------
If domestic crushing of soybeans increases at the expense of
soybean exports, domestic vegetable oil production could increase
without the need for increasing domestic soybean acreage. Increased
demand for BBD feedstock could also be met through diversion of
increasing volumes of qualifying feedstocks (e.g., soybean oil and
canola oil) from existing markets to produce biodiesel and renewable
diesel. Were this diversion to occur, non-qualifying feedstocks (e.g.,
palm oil, imported soybean oil from Latin American, or other virgin
vegetable oils) could be used in larger quantities in place of soybean
and canola oil in food and oleochemical markets. Diverting feedstocks
from existing uses would be projected to result in higher prices for
these feedstocks, as biofuel producers would have to outbid the current
users of these feedstocks.
In addition to processing domestic feedstocks such as distillers
corn oil and soybean oil, a number of domestic biodiesel and renewable
diesel producers produce fuel from imported feedstocks. In recent
years, the market has seen a significant increase in the quantity of
imported feedstocks. Imports of feedstocks that are often considered
wastes or by-products of other industries, such as UCO and tallow, have
seen the greatest increase in recent years. Figure III.A.2.b.ii-1 shows
total imports of common biodiesel and renewable diesel feedstocks
through 2024. Figure III.A.2.b.ii-2 shows the total volumes of domestic
biodiesel and renewable diesel produced from domestic feedstocks,
domestic biodiesel and renewable diesel produced from imported
feedstocks, and imported biodiesel and renewable diesel. Greater
discussion of both domestic and imported feedstocks can be found in RIA
Chapter 7.2.
Figure III.A.2.b.ii-1: Imports of BBD Feedstocks
[[Page 16407]]
[GRAPHIC] [TIFF OMITTED] TR01AP26.038
Figure III.A.2.b.ii-2: Domestic BBD From Domestic and Imported
Feedstocks and Imported BBD
[GRAPHIC] [TIFF OMITTED] TR01AP26.039
There are several factors that have likely contributed to the
recent increases in imports of certain BBD feedstocks to the U.S. Three
key factors contributing to the increase in imported feedstocks are
increasing domestic demand for these feedstocks, increasing available
supply of these feedstocks in other countries, and the structure of
[[Page 16408]]
incentive programs for biofuels in the U.S. relative to other
countries' policies. As noted in section III.A.2.b.iii of this
preamble, the production capacity for renewable diesel and renewable
jet fuel has increased rapidly and is expected to continue to be
maintained or grow in future years. As the total production capacity
for these fuels has grown, the demand for feedstocks for renewable fuel
production has grown along with the production capacity. This has led
to increases in not only domestic feedstock demand, but imported
feedstock demand as well. For example, we project that production of
canola oil will increase in future years due to expanding canola
crushing capacity in Canada and that much of this expanded production
will be exported to the U.S. for biofuel production.\94\ Similar to the
investments in soybean crushing in the U.S., a number of companies have
announced investment in additional canola crushing capacity in Canada,
and some of these projects are already under construction. Increasing
canola oil production in Canada could provide an opportunity for
domestic renewable diesel producers to import canola oil for biofuel
production. We note that these parties will face competition for this
feedstock from Canadian biofuel producers as well as food and other
non-biofuel markets. For example, in 2023, Canada began implementing
their Clean Fuels Requirements, requiring that the carbon intensity of
transportation fuel decrease by 1.5 gCO<INF>2</INF>e/MJ per year each
year from 2023 to 2030.\95\
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\94\ Some of the projected expansion in soybean crushing
capacity discussed in section III.B.2.c of this preamble is from
facilities also capable of crushing canola and other oilseeds.
Domestic production of canola is limited, however, and the majority
of canola oil supplied to biofuel producers through 2027 is expected
to be imported from Canada.
\95\ Government of Canada, ``What are the Clean Fuel
Regulations?'' July 7, 2022. <a href="https://www.canada.ca/en/environment-climate-change/services/managing-pollution/energy-production/fuel-regulations/clean-fuel-regulations/about.html">https://www.canada.ca/en/environment-climate-change/services/managing-pollution/energy-production/fuel-regulations/clean-fuel-regulations/about.html</a>.
---------------------------------------------------------------------------
Canadian canola oil is the most prominent non-domestic beneficiary
after the 45Z credit changes in OBBB, but other non-domestic North
American feedstocks will also likely begin to expand their role in the
U.S. biofuels markets. This includes virgin seed oils, animal fats, and
larger UCO markets. In particular, Mexican UCO collection is poised to
expand, due to a precipitous dip in the observed trend of imported
Asian UCO in 2025 and lower collection costs than Canada.\96\ Domestic
incentives, coupled with rapidly shifting international financial
backing for biofuels, are poised to shift the biofuels feedstocks
market.
---------------------------------------------------------------------------
\96\ See RIA chapter 7.2 for further discussion of North
American feedstock growth potential.
---------------------------------------------------------------------------
The incentives available in foreign countries to encourage
production and use of BBD are changing rapidly, on an almost annual
basis. For example, in response to the Russian invasion of Ukraine in
February 2022, many European countries reduced biofuel mandates and
penalties for not fulfilling the mandates.\97\ The reduction in demand
from these countries resulted in an increase in the available feedstock
supply to the U.S. Around the same time, the European Union (EU) took
actions to discourage the importation of UCO and biodiesel produced
from China. On December 20, 2023, the EU announced an anti-dumping
investigation on biodiesel imported from China,\98\ finalized in July
2024.\99\ These actions, in part, led to increased UCO importation into
the U.S. from China. By that same token, however, export of Chinese UCO
was greatly affected by the removal of an export rebate by the Chinese
government in order to incentivize use in their burgeoning sustainable
aviation industry, contributing to declining growth of UCO importation
in the U.S. in 2024 and 2025.\100\
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\97\ USDA, ``Biofuel Mandates in the EU by Member State--2024,''
June 27, 2024.
\98\ European Commission, ``European Commission to Examine
Allegations of Unfairly Traded Biodiesel from China,'' December 20,
2023. <a href="https://policy.trade.ec.europa.eu/news/european-commission-examine-allegations-unfairly-traded-biodiesel-china-2023-12-20_en">https://policy.trade.ec.europa.eu/news/european-commission-examine-allegations-unfairly-traded-biodiesel-china-2023-12-20_en</a>.
\99\ Reuters, ``EU to Set Tariffs on Chinese Biodiesel in Anti-
Dumping Probe,'' July 19, 2024. <a href="https://www.reuters.com/business/energy/eu-set-tariffs-chinese-biodiesel-imports-anti-dumping-probe-2024-07-19">https://www.reuters.com/business/energy/eu-set-tariffs-chinese-biodiesel-imports-anti-dumping-probe-2024-07-19</a>.
\100\ USDA FAS, ``UCO Export Tax Rebate Terminated'', <a href="https://www.fas.usda.gov/data/china-uco-trade-update">https://www.fas.usda.gov/data/china-uco-trade-update</a>.
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Recent changes in the trade flows of UCO from China illustrate the
changing nature of incentive programs and the impact these changes can
have on the supply of biofuel feedstocks. From 2018-2023, exports of
UCO from China increased significantly, from approximately 0.6 million
metric tons in 2018 to about 2.1 million metric tons in 2023. From
2018-2022, the primary destination of these exports was Europe,
accounting for approximately 60 percent of all exports of UCO from
China, while less than 1 percent of all exports of UCO from China were
exported to the U.S.\101\ In 2023, however, the market dynamics changed
significantly. Exports of UCO from China to Europe fell to just 23
percent of total exports, while exports to the U.S. increased to 41
percent.\102\ The decline in European UCO imports was due to a
combination of factors, including reduced demand for biodiesel and
renewable diesel in some EU member states and concerns that imported
UCO from China may include palm oil. These concerns resulted in
decreased demand for UCO sourced from China in the EU and simultaneous
increased demand for this feedstock in the U.S. In 2025, this dynamic
again shifted, with a precipitous drop in U.S. imports of Chinese UCO.
This coincided with a high tariff environment, the removal of a UCO
export rebate by the Chinese government in December 2024,\103\ and a
upsurge of Chinese sustainable aviation fuel refining.\104\ The
unpredictable nature of changes to biofuel incentives in both the U.S.
and other countries in future years, combined with the potentially
significant impact of these changes, makes it very difficult to predict
the supply of these feedstocks to U.S. biofuel producers with a high
degree of certainty.
---------------------------------------------------------------------------
\101\ UN Comtrade Database, Trade Data, HS Code 1518.
\102\ Id.
\103\ USDA Foreign Agricultural Service, ``UCO Export Tax Rebate
Terminated,'' CH2024-0149, November 25, 2024. <a href="https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=UCO%20Export%20Tax%20Rebate%20Terminated_Beijing_China%20-%20People%27s%20Republic%20of_CH2024-0149.pdf">https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=UCO%20Export%20Tax%20Rebate%20Terminated_Beijing_China%20-%20People%27s%20Republic%20of_CH2024-0149.pdf</a>.
\104\ International Civil Aviation Organization, ``Progress of
Sustainable Aviation Fuels Pilot In China,'' September 13, 2025.
<a href="https://www.icao.int/sites/default/files/Meetings/a42/Documents/WP/wp_573_en.pdf">https://www.icao.int/sites/default/files/Meetings/a42/Documents/WP/wp_573_en.pdf</a>.
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Incentive programs for biofuels in the U.S. have also contributed
to the recent observed increases in biofuel feedstock imports. State
low carbon fuel standards or clean fuels programs, such as California's
LCFS, provide greater incentives for fuels with lower carbon
intensities. In general, fuels produced from byproducts such as UCO or
tallow have lower carbon intensity values under these programs and thus
generate greater credits relative to virgin vegetable oils such as
soybean oil and canola oil. In recent years, additional States such as
Oregon, Washington, and New Mexico have adopted programs that similarly
provide higher incentives for fuels with lower carbon intensity.
While these State programs do not explicitly favor imported fuels
and/or feedstocks over domestic fuels and feedstocks, most of the
available waste and by-product feedstocks such as UCO and tallow
available in the U.S. are already being used for biofuel production.
The nature of these programs has played a role in biofuel producers
seeking to import UCO and
[[Page 16409]]
tallow from foreign countries rather than increasing their use of
domestic soybean oil to maximize their generation of credits under
these programs.
For the reasons discussed above, in recent years, animal fats and
UCO have become a popular source of feedstock. Most of the economically
recoverable UCO and animal fats in the U.S. are currently collected and
productively used, primarily for biofuel production.\105\ It is a well-
established market and while the supply of these feedstocks are
projected to grow, the rate of growth will be modest and driven by
domestic meat production and the use of vegetable oil for food
production.
---------------------------------------------------------------------------
\105\ Global Data, ``UCO Supply Outlook,'' August 2023.
---------------------------------------------------------------------------
In contrast, there is both significant growth potential and a high
degree of uncertainty surrounding the supply of animal fats and UCO
that could be imported into the U.S. and used for biofuel production.
There is large supply capable of being bid away from other markets, but
rapidly shifting trading dynamics and strong domestic feedstock
availability may dampen growth in future years. The global supply of
animal fats is expected to increase with global meat consumption.
Global meat production increased 53 percent from 2000 to 2021 and is
expected to continue to increase in future years.\106\ Like other
biodiesel and renewable diesel feedstocks, animal fats have
historically been used in other markets such as for oleochemical
production and livestock feed. We project that strong incentives for
biofuels produced from animal fats in the U.S. (from both State and
Federal incentive programs) will result in increasing quantities of
these feedstocks being used for biofuel production. Thus, we project
that the available supply of animal fats to biofuel producers will
increase in future years due to both increasing animal fat production
as a byproduct of increasing meat production. It may also supplant some
UCO imports as an alternative biofuel feedstock. In 2025, for example,
tallow imports surged as UCO imports declined.\107\ The environmental
benefits associated with biofuels produced from diverting animal fats
(or any feedstock) diverted from existing markets are likely less than
the environmental benefits associated with biofuels produced from
feedstocks that would not otherwise be productively used.\108\
---------------------------------------------------------------------------
\106\ Food and Agriculture Organization of the United Nations,
``World Food and Agriculture--Statistical Yearbook 2023,'' 2023.
<a href="https://doi.org/10.4060/cc8166en">https://doi.org/10.4060/cc8166en</a>.
\107\ Argus Media, ``Viewpoint: US Policy Shift Elevates
Domestic Feedstocks,'' February 1, 2026. <a href="https://www.argusmedia.com/en/news-and-insights/latest-market-news/2771306-viewpoint-us-policy-shift-elevates-domestic-feedstocks">https://www.argusmedia.com/en/news-and-insights/latest-market-news/2771306-viewpoint-us-policy-shift-elevates-domestic-feedstocks</a>.
\108\ When feedstocks are diverted from existing uses, the
markets that previously used these feedstocks generally seek
alternative feedstocks. Potential alternatives could include
petroleum-based feedstocks or palm oil. Increased use of these
feedstocks in non-biofuel markets could reduce or negate the
intended environmental benefits from increased biofuel production.
---------------------------------------------------------------------------
The global supply of UCO is primarily a function of UCO collection
rates, which are themselves a function of the total quantity of
vegetable oils used in food production and the infrastructure in place
to collect and productively use UCO. UCO collection rates vary
significantly by country, from virtually nothing in many countries to
approximately 2.5 pounds per capita per year in the U.S.\109\ Demand
for UCO as a feedstock for biofuel production in recent years has
resulted in a rapid increase in the global collection of UCO, from
approximately 2.3 billion gallons in 2018 to approximately 3.7 billion
gallons in 2022.\110\ A recent study projected that the increase in
global UCO collection from 2022 to 2027 could range from 1.4 billion
gallons (based on projected increases in population and GDP) to 6.1
billion gallons (based on increasing collection rates in countries that
currently have some UCO collection infrastructure in place).\111\
---------------------------------------------------------------------------
\109\ Global Data, ``UCO Supply Outlook,'' August 2023.
\110\ Id.
\111\ Id.
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Despite competing incentives and a growing worldwide biofuels
market, feedstocks abound, with the U.S. remaining the preeminent
destination for renewable fuel production. As renewable diesel and
biodiesel capacity has expanded, so too has the flexibility of the
market to utilize different feedstocks. More facilities than ever
before accept mixed streams of feedstocks, and those feedstocks are all
growing rapidly. With an unyielding supply of distillers corn oil,
ever-expanding UCO collection coverage, and robust growth in canola and
soy crush, domestic renewable fuel producers are likely to be able to
source the quantities of feedstocks they need in order to maximize
production. We do not believe feedstocks will be a limiting factor in
2026 and 2027, and we believe that the industry is capable of utilizing
more capacity than it has over the previous several years.
iii. Biodiesel and Renewable Diesel Production Capacity
Available data suggests that there is significant unused biodiesel
production capacity in the U.S., and thus domestic biodiesel production
could grow without the need to invest in additional production
capacity. Data reported by EIA shows that domestic biodiesel production
capacity in November 2025 was approximately 1.96 billion gallons per
year, roughly 800 million gallons more than was utilized through
2025.\112\ According to this data, annual average biodiesel production
capacity grew relatively slowly from about 2.1 billion gallons in 2012
to a peak of approximately 2.6 billion gallons in 2019. Reduction in
EIA's reported operable capacity from 2015 to present likely reflects
facility inactivity or closure. While EIA reports operable capacity,
EPA data suggests that there are potential mothballed, inactive, or
temporarily halted facilities beyond EIA's reported operable
capacity.\113\ This is a result of unfavorable economics in many cases.
Renewable diesel has supplanted much of the available biodiesel
capacity over the past decade.
---------------------------------------------------------------------------
\112\ EIA, ``U.S. Biodiesel Production Capacity,'' Petroleum &
Other Liquids, February 6, 2026. <a href="https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M_EPOORDB_8BDPC_NUS_MMGL&f=M">https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M_EPOORDB_8BDPC_NUS_MMGL&f=M</a>.
\113\ See ``BBD Facility Capacity,'' available in the docket for
this action.
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Total domestic renewable diesel production capacity has increased
significantly in recent years from approximately 280 million gallons in
2017 \114\ to approximately 5 billion gallons at the end of 2025.\115\
Additionally, a number of parties have announced plans to build new
renewable diesel production capacity with the potential to begin
production in future years. While production slowed down in 2025,
capacity expansions are buoyed by continued demand for renewable jet
fuel and the strength of State market incentives. This new capacity
includes new renewable diesel production facilities, expansions of
existing renewable diesel production facilities, and the conversion of
units at petroleum refineries to produce renewable diesel.
---------------------------------------------------------------------------
\114\ Renewable diesel capacity based on facilities registered
in EMTS.
\115\ EIA, ``U.S. Total Biofuels Operable Production Capacity,''
Petroleum & Other Liquids, October 30, 2025. <a href="https://www.eia.gov/dnav/pet/pet_pnp_capbio_dcu_nus_m.htm">https://www.eia.gov/dnav/pet/pet_pnp_capbio_dcu_nus_m.htm</a>.
---------------------------------------------------------------------------
EIA previously projected that renewable diesel production capacity
would continue to expand and could reach nearly 6 billion gallons by
the end of 2025, but acknowledged that they expected some of these
projects would
[[Page 16410]]
be delayed or cancelled.\116\ This projection was not met, but EIA
continues to project robust annual production growth of 25 percent over
the next two years.\117\ A 2024 report found that by 2028 the domestic
production capacity for renewable diesel and renewable jet fuel through
the hydrotreating process alone could increase to 9.6 billion gallons
per year.\118\ In previous years, domestic renewable diesel production
has increased in concert with increases in domestic production
capacity, with renewable diesel facilities generally operating at high
utilization rates.\119\
---------------------------------------------------------------------------
\116\ EIA, ``Domestic renewable diesel capacity could more than
double through 2025,'' Today in Energy, February 2, 2023. <a href="https://www.eia.gov/todayinenergy/detail.php?id=55399">https://www.eia.gov/todayinenergy/detail.php?id=55399</a>.
\117\ EIA, ``Short-Term Energy Outlook,'' January 2026, Table
4d--U.S. Biofuel Supply, Consumption, and Inventories. <a href="https://www.eia.gov/outlooks/steo/tables/pdf/4dtab.pdf">https://www.eia.gov/outlooks/steo/tables/pdf/4dtab.pdf</a>.
\118\ Calderon, Oscar Rosales, Ling Tao, Zia Abdullah, Michael
Talmadge, Anelia Milbrandt, Sharon Smolinski, Kristi Moriarty, et
al. ``Sustainable Aviation Fuel State-of-Industry Report:
Hydroprocessed Esters and Fatty Acids Pathway,'' National Renewable
Energy Laboratory NREL/TP-5100-87803, July 30, 2024. <a href="https://doi.org/10.2172/2426563">https://doi.org/10.2172/2426563</a>.
\119\ For further discussion and visualization of capacity and
utilization rates, see RIA Chapter 7.2.
---------------------------------------------------------------------------
iv. Biodiesel and Renewable Diesel Analyzed Volumes
In developing the Analyzed Volumes of biodiesel and renewable
diesel, we have identified the maximum quantity of BBD that could
reasonably be produced utilizing all the currently operating domestic
production capacity, mirroring utilization seen in similar industries
(90 percent utilization rate).\120\ Our assessment of available
feedstocks indicates that domestic production capacity, rather than the
availability of feedstock, is the factor most likely to constrain
domestic biodiesel and renewable diesel production in 2026 and 2027,
based on new data and analysis subsequent to the Set 2 proposal.
---------------------------------------------------------------------------
\120\ EIA, U.S. Percent Utilization of Refinery Operable
Capacity, <a href="https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mopueus2&f=a">https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mopueus2&f=a</a>.
\121\ More detail on the development of this projection can be
found in RIA Chapters 3 and 6.
\122\ Renewable jet fuel volumes are based on data from EMTS.
\123\ The equivalence values for renewable diesel and jet fuel
are similar. As discussed in section VIII.A of this preamble, we are
revising the renewable diesel equivalence value to be 1.5 RINs per
gallon, while also establishing the renewable jet fuel equivalence
value to be 1.5 RINs per gallon. However, we expect most renewable
diesel will generate 1.6 RINs/gallon in 2027 through the equivalence
value application process.
---------------------------------------------------------------------------
In addition to projecting the overall Analyzed Volumes of biodiesel
and renewable diesel we have also projected the mix of feedstocks used
to produce these fuels in 2026 and 2027. The mix of the feedstocks used
to produce BBD will indirectly impact other statutory factors, as the
environmental and economic impacts of biodiesel and renewable diesel
may differ depending on the feedstocks used to produce these fuels. For
example, the impacts of increasing biodiesel and renewable diesel
production vary depending on whether the fuel was produced from UCO
that would not otherwise have been collected, soybean oil from
additional production and processing of soybeans, or the diversion of
feedstocks or biofuels that would otherwise have been used in other
markets. Our projections of the feedstocks used to produce biodiesel
and renewable diesel in 2026 and 2027 reflect input received from
commenters, the most recent data available at the time the projections
were completed, and our assessment of the impact of the 45Z credit. As
biodiesel and renewable diesel producer feedstock procurement is driven
largely by input feedstock cost, the composition of feedstocks
contributing to the actual volumes of biodiesel and renewable diesel in
2026 and 2027 may differ.\121\
[GRAPHIC] [TIFF OMITTED] TR01AP26.040
b. Renewable Jet Fuel
There is also a small volume of renewable jet fuel that qualifies
as BBD. Renewable jet fuel has qualified as a RIN-generating BBD and
advanced biofuel under the RFS program since 2010 and must achieve at
least a 50 percent GHG reduction in comparison to petroleum-based
fuels. While relatively little renewable jet fuel was produced or
imported through 2023 (20 million gallons or less per year) production
volumes have been increasing in recent years, reaching approximately
110 million gallons in 2024 and approximately 290 million gallons in
2025.\122\
Tax credits for renewable jet fuel available during 2023 and 2024,
often referred to as the ``sustainable aviation fuel credit'' or ``40B
credit'' (also available as the 6426(k) excise tax credit), may have
resulted in increasing volumes of renewable jet fuel produced from
existing renewable diesel production facilities. The 45Z credit is
available from 2025 through 2029 and, starting in 2026, provides up to
$1.00 per gallon of renewable jet fuel, provided the relevant wage and
apprenticeship requirements are met by the producer. The 45Z credit may
provide continued support for renewable jet fuel production. Renewable
jet fuel production from existing renewable diesel facilities, however,
would likely result in a decrease in renewable diesel production, with
little or no net change in their overall production of RIN-generating
fuels.\123\
The vast majority of renewable jet fuel produced through 2025 was
produced using the same feedstocks and very similar production
technologies as renewable diesel, and in most cases are produced at the
same production facilities. For example, Montana Renewables produced
both renewable diesel and renewable jet fuel at their Great Falls,
Montana facility in 2024,\124\ as did Phillips 66 in their Rodeo,
California facility.\125\ Historically,
[[Page 16411]]
greater incentives have been available for renewable diesel production
than for renewable jet fuel production. This has resulted in most
production facilities choosing to maximize renewable diesel production,
although based on the production data at the time of this writing this
dynamic may be starting to change.
In the near term, we expect that because the vast majority of
renewable jet fuel will be produced using the same feedstocks and at
the same facilities as renewable diesel any increase in renewable jet
fuel production will result in a corresponding decrease in renewable
diesel production. We recognize that new technologies are being
developed to produce renewable jet fuel from a wider variety of
feedstocks, some of which are not suitable for use in the hydrotreating
process that dominates renewable diesel production. For example,
several companies are developing new technologies intended to produce
renewable jet fuel from ethanol or other alcohols, through a technology
often referred to as the ``alcohol-to-jet'' (``ATJ'') process. To date,
we have not approved a generally applicable pathway for these fuels,
but we have approved a facility-specific pathway for the production of
renewable jet fuel from ethanol to generate D4 RINs.\126\ While ATJ has
the potential to produce significant volumes of renewable jet fuel in
future years, there is a high degree of uncertainty related to the
production of these fuels through 2027 as commercial scale production
of these fuels has been limited and no RINs have yet been generated for
these fuels at the time of this writing. Production of renewable jet
fuel using these emerging technologies may not negatively impact
renewable diesel production to the extent that they do not compete for
feedstocks.
---------------------------------------------------------------------------
\124\ Montana Renewables, ``Products,'' <a href="https://montanarenewables.com/products">https://montanarenewables.com/products</a>.
\125\ Phillips 66, ``Rodeo Renewable Energy Complex,'' <a href="https://www.phillips66.com/rodeo-renewable-energy-complex">https://www.phillips66.com/rodeo-renewable-energy-complex</a>.
\126\ See, e.g., EPA, ``Letter from EPA to LanzaJet, Inc.,''
January 12, 2023.
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In this action, we have not separately projected growth in
renewable jet fuel production. Instead, we are considering any
production of renewable jet fuel from hydrotreating lipid feedstocks in
our projection of renewable diesel production. We recognize that other
renewable jet fuel production technologies and production facilities
are being developed and, in some cases, may produce small fuel volumes
in the near term. These could enable the future production of renewable
jet fuel from new facilities and feedstocks that are not expected to
impact renewable diesel production.
c. Other Advanced Biofuels
In addition to biodiesel, renewable diesel, and renewable jet fuel,
other renewable fuels that qualify as advanced biofuel have been
produced and used in the U.S. in the past and are expected to
contribute to compliance with applicable RFS volume requirements in the
future. These other advanced biofuels include imported sugarcane
ethanol, domestically produced advanced ethanol, RNG used in CNG/LNG
vehicles not produced from cellulosic biomass, and heating oil,
naphtha, and co-processed renewable diesel that does not qualify as
BBD.\127\
---------------------------------------------------------------------------
\127\ Renewable diesel produced through coprocessing vegetable
oils or animal fats with petroleum cannot be categorized as BBD but
remains advanced biofuel.
---------------------------------------------------------------------------
These biofuels have been used in much smaller quantities than
biodiesel and renewable diesel in the past, and the production volumes
of many of these fuels have been highly variable. Some of these ``other
advanced biofuels'' such as naphtha and heating oil are byproducts of
the production of other types of renewable fuel. Others, such as co-
processed renewable diesel and sugarcane ethanol, are consistently
produced or imported at volumes far below their theoretical production
capacity. This variability in the technologies used to produce these
fuels and their production volumes over time makes projecting the
potential production or import volumes in future years challenging.
To determine the Analyzed Volumes of these other advanced biofuels
in 2026 and 2027, we used the same general methodology as in the Set 2
proposal and the Set 1 Rule. We projected the supply of these other
advanced biofuels using historic data on the supply of these fuels from
2015-2025. Our methodology addresses the historical variability in
these categories of advanced biofuel while recognizing that consumption
in more recent years is likely to provide a better basis for making
future projections than consumption in earlier years. Specifically, we
applied a weighting scheme to historical volumes wherein the weighting
was higher for more recent years and lower for earlier years. The
result of this approach is shown in Table III.A.2.c-1. Details of the
derivation of these estimates can be found in RIA Chapter 5.4. As the
available data varies significantly from year to year, it does not
allow us to identify an upward or downward trend in the historical
consumption of these other advanced biofuels. Therefore, we have used
the volumes in Table III.A.2.c-1 both 2026 and 2027.
[[Page 16412]]
[GRAPHIC] [TIFF OMITTED] TR01AP26.041
d. Analyzed Volumes of Non-Cellulosic Advanced Biofuels
Non-cellulosic advanced biofuel has been the fastest growing
category of renewable fuel in the RFS program since 2021, with the
majority of the growth coming from renewable diesel. While the supply
of non-cellulosic advanced biofuels decreased from 2024 to 2025, our
analyses indicate that sufficient domestic production capacity and
feedstocks are available to enable the production of these fuels to
increase significantly in 2026 and 2027. Sections III.A.2.a through c
of this preamble describe our derivation of the Analyzed Volumes of
different types of non-cellulosic advanced biofuels for 2026 and 2027.
These Analyzed Volumes are summarized in Table III.A.2.d-1.
[GRAPHIC] [TIFF OMITTED] TR01AP26.042
3. Conventional Renewable Fuel
Conventional renewable fuel includes any renewable fuel that is
made from renewable biomass as defined in 40 CFR 80.1401, does not
qualify as advanced biofuel (including cellulosic biofuel and BBD), and
meets one of the following criteria:
<bullet> Is demonstrated to achieve a minimum 20 percent reduction
in lifecycle GHG emissions in comparison to the gasoline or diesel
which it displaces; or
<bullet> Is exempt (``grandfathered'') from the 20 percent minimum
GHG reduction requirement due to having been produced in a facility or
facility expansion that commenced construction on or before December
19, 2007, as described in 40 CFR 80.1403 and pursuant to CAA section
211(o)(2)(A)(i).
Under the statute, there is no volume requirement for conventional
renewable fuel. Instead, conventional renewable fuel may fill that
portion of the total renewable fuel volume requirement that is not
required to be advanced biofuel. In some cases, this portion of the
total renewable fuel requirement that can be met with conventional
renewable fuel is referred to as an ``implied'' volume requirement.
However, obligated parties are not required to comply with it per se,
since any portion of it can be met with advanced biofuel volumes
exceeding what is needed to meet the advanced biofuel volume
requirement.
To develop the Analyzed Volumes of conventional renewable fuel for
2026 and 2027, we focused primarily on projecting volumes of ethanol
consumed via motor gasoline use across all gasoline blends with varying
concentrations of ethanol (i.e., E10, E15, and E85). We also
investigated potential volumes of non-advanced biodiesel and renewable
diesel.
a. Corn Ethanol
Ethanol made from corn starch has historically been the renewable
fuel supplied in the greatest quantities basis in the past and is
expected to continue to do so in 2026 and 2027.\128\ Corn starch
ethanol is prohibited by CAA section 211(i)(1)(B)(i) from being an
advanced biofuel regardless of its lifecycle GHG emissions performance
in comparison to gasoline.
---------------------------------------------------------------------------
\128\ Conventional ethanol from feedstocks other than corn
starch have been produced in the past, but at significantly lower
volumes. Production of ethanol from grain sorghum reached 125
million gallons in 2019, representing just less than 1 percent of
all conventional ethanol in that year; grain sorghum ethanol in 2024
was only 46 million gallons. Waste industrial ethanol and ethanol
made from non-cellulosic portions of separated food waste have been
produced more sporadically and at even lower volumes. These other
sources do not materially affect our assessment of volumes of
conventional ethanol that can be produced.
---------------------------------------------------------------------------
Total domestic corn ethanol production capacity increased
dramatically between 2005 and 2010 and increased at a slower rate
thereafter. As of late 2025, domestic corn ethanol production capacity
exceeded 18 billion gallons.\129\ Actual production of corn ethanol in
the U.S. was approximately
[[Page 16413]]
16.2 billion gallons in 2024 and is estimated to have reached 16.4
billion gallons in 2025.\130\
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\129\ EIA, ``Monthly Biofuels Capacity and Feedstocks Update,''
November 28, 2025. <a href="https://www.eia.gov/biofuels/update">https://www.eia.gov/biofuels/update</a>.
\130\ EIA, ``Monthly Energy Review,'' Total Energy, March 2025.
<a href="https://www.eia.gov/totalenergy/data/monthly/pdf/mer.pdf">https://www.eia.gov/totalenergy/data/monthly/pdf/mer.pdf</a>.
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The expected annual rate of future commercial production of corn
ethanol will continue to be driven primarily by gasoline demand in 2026
and 2027, as most gasoline is expected to continue to contain 10
percent ethanol during this period. Commercial production of corn
ethanol is also a function of exports of ethanol and the demand for E0,
E15, and E85. There is evidence that some fuel retailers sell higher
volumes of E15 than E10, leveraging lower prices at the pump and
marketing higher-level ethanol blends to their customers as a cheaper
fuel option with only negligible effects on fuel economy (a 1-2 percent
reduction compared to E10). In addition to government incentives,
industry-led efforts such as Prime-the-Pump have enjoyed great success
in growing markets for higher ethanol gasoline blends by providing
technical and financial assistance to fuel retailers.\131\
Acknowledging the potential for growth in these fuel markets, we have
incorporated projected growth in opportunities for sales of E15 and E85
blends into our assessment.
---------------------------------------------------------------------------
\131\ Transportation Energy Institute, ``The Case of E15,''
February 2018.
---------------------------------------------------------------------------
Despite this steady growth, there remains excess production
capacity of ethanol and corn feedstock in comparison to the ethanol
volumes that we estimate will be consumed domestically during 2026 and
2027, given constraints on U.S. ethanol consumption. Thus, as was the
case with the Set 1 Rule, we do not expect production capacity to be a
limiting factor in determining the Analyzed Volumes.
The total volume of ethanol that can be used--including ethanol
produced from corn, grain sorghum, cellulosic biomass, the non-
cellulosic portions of separated food waste, and sugarcane--is a
function of demand for E10, E15, and E85 ethanol blends most commonly
used in the U.S. and for E0. Ethanol concentration across the entire
gasoline pool can exceed 10 percent only insofar as the incremental
ethanol in E15 and E85 volumes more than offsets the lack of ethanol in
E0 volume. As shown in Figure III.A.3.a-1, poolwide ethanol
concentration increased dramatically from 2003 through 2010 and has
continued to grow more slowly since 2010. As the average ethanol
concentration approached and then exceeded 10 percent, the gasoline
pool became saturated with E10, with a small, likely stable volume of
E0 and small but gradually increasing volumes of E15 and E85. We expect
this trend to continue during 2026 and 2027.
Figure III.A.3.a-1: Historical Poolwide Volumetric Ethanol
Concentration
[GRAPHIC] [TIFF OMITTED] TR01AP26.043
[[Page 16414]]
For this action, volume data from USDA's Higher Blends
Infrastructure Incentive Program (HBIIP) \132\ and additional volume
data acquired directly from six States with high volumes of higher-
level ethanol blends (California, Kansas, Iowa, Minnesota, New York,
and North Dakota) has enabled a data-driven, bottom-up approach to
projecting ethanol volumes into the future that differs from the way
these projections were calculated in previous years. More information
on this method of projection ethanol concentration can be found in RIA
Chapter 7.5.1. We introduced this new methodology in the Set 2 proposal
and continue to refine it here. In the Set 1 Rule, we projected ethanol
concentration in the national gasoline pool using a least-squares
regression model using then-current E15 and E85 fueling station
population data.\133\ This was due to lack of data and a subsequent
inability to aggregate sales volumes by ethanol volume at the retail
fuel station level. Now, greater availability of sales volume data from
the aforementioned six States, HBIIP, and industry partners has enabled
an updated and simplified methodology for producing the ethanol volume
projections in this action.
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\132\ USDA, ``Higher Blends Infrastructure Incentive Program,''
May 2023. <a href="https://www.rd.usda.gov/hbiip">https://www.rd.usda.gov/hbiip</a>.
\133\ See ``Renewable Fuel Standard (RFS)Program: Standards for
2023-2025 and Other Changes Regulatory Impact Analysis,'' EPA-420-R-
23-015, June 2023 (``RFS Set 1 RIA''), Chapter 7.5.1.
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Using the average sales of each gasoline-ethanol blend per retail
fueling station, as well as updated station populations from DOE's
Alternative Fuels Data Center (AFDC) \134\ and the California Air
Resources Board (CARB) \135\ for 2021-2024, we produced projections of
expected growth in station counts and throughputs out to 2027 for each
gasoline-ethanol blend other than E10. In addition to a projection for
each blend, E85 projections were expanded in this action relative to
the Set 1 Rule. After reviewing the State-specific data, the difference
between the E85 market in California compared to five other States
(i.e., Kansas, Iowa, Minnesota, New York, and North Dakota) became
apparent. Thus, we chose to analyze the California E85 market
separately from the other States in order to more accurately project
E85 in California versus the rest of the U.S. We then used these
projections to estimate the total fuel volume for these gasoline-
ethanol blends (E0, E15, and E85) for 2026 and 2027 using the following
relation: for gasoline-ethanol blends at each concentration, the total
fuel volume consumed in any given year is equal to the product of the
number of retail fueling stations offering that blend for sale and the
volume of that fuel blend sold at a fueling station (i.e., throughput)
on average during that year. Finally, we projected E10 as the remainder
of the gasoline pool, after accounting for the Analyzed Volumes of E0,
E15, and E85, using the most recent version of EIA's Annual Energy
Outlook to project total gasoline demand for 2026 and 2027.\136\
---------------------------------------------------------------------------
\134\ AFDC, ``Historical Alternative Fueling Station Counts.''
<a href="https://afdc.energy.gov/stations/states">https://afdc.energy.gov/stations/states</a>.
\135\ CARB, ``Annual E85 Volumes,'' April 11, 2025.
\136\ EIA, ``Annual Energy Outlook 2025,'' April 15, 2025
(``AEO2025''). <a href="https://www.eia.gov/outlooks/aeo">https://www.eia.gov/outlooks/aeo</a>.
---------------------------------------------------------------------------
Total ethanol consumption is the sum of gasoline (E0) blended with
ethanol to create E10, E15, and E85.\137\ The ethanol portion of the
projected total consumption for each fuel blend (i.e., total ethanol
consumption) is shown in Table III.A.3.a-1. While we project that the
ethanol concentration in the gasoline pool will increase in future
years, total ethanol consumption is projected to decrease due to
decreases in total gasoline consumption in future years.
---------------------------------------------------------------------------
\137\ See RIA Chapter 7.5.1 for a more comprehensive discussion
of the methodology employed to produce the total ethanol consumption
projection.
\138\ Less than 15 million gallons total of conventional
biodiesel and renewable diesel has been produced domestically from
2014-2025.
[GRAPHIC] [TIFF OMITTED] TR01AP26.044
b. Conventional Biodiesel and Renewable Diesel
Other than conventional ethanol, the only other conventional
renewable fuels that have been used at significant levels in the U.S.
in recent years have been conventional biodiesel and renewable diesel.
Conventional biodiesel and renewable diesel are produced at facilities
grandfathered under 40 CFR 80.1403 because there are no currently valid
RIN-generating pathways for their production. Almost all conventional
biodiesel and renewable diesel historically used in the U.S. has been
imported.\138\ According to EMTS data, the use of conventional
biodiesel and renewable diesel did grow marginally in 2024 after a
period of very low volume (less than 1 million gallons per year from
2018-2022), though the overall supply remained negligible (less than
0.1 percent of total biofuel supply to the U.S.) and the total supply
of conventional biodiesel and renewable diesel in 2025 was once again
less than one million gallons. While some sparse generation of D6 RINs
for these fuels have been observed in recent years, nearly all these
RINs were retired for being designated for use in any application other
than transportation fuel and therefore do not represent qualifying fuel
under the RFS program. As discussed in RIA Chapter 7.7, there exists
much greater potential for domestic production and use of conventional
biodiesel and renewable diesel than has actually been supplied in prior
years, suggesting the use of these fuels in the U.S. is largely a
function of domestic demand for these fuels and the incentives
available for conventional biodiesel and renewable diesel in the U.S.
relative to other countries. While there exists some potential for
growth in 2026 and 2027, we are not including volumes of conventional
biodiesel and renewable diesel in our analyses for this final rule.
c. Conventional Renewable Fuel Summary
The Analyzed Volumes of conventional renewable fuel represent the
volume of these fuels we project would be supplied to the market when
considering the incentives that could be available through the RFS
program and other State and Federal incentives. Since the supply of
ethanol is projected to be limited by the ability for the market to
consume ethanol in gasoline blends, the supply of conventional ethanol
in 2026 and 2027 can be estimated from the total ethanol
[[Page 16415]]
consumption projections from Table III.A.3.a-1 and our projections for
other forms of ethanol as discussed earlier in this section. Our
projected volumes of ethanol consumption are presented in Table
III.A.3.c-1. We do not currently project that non-ethanol conventional
renewable fuels will be supplied to the U.S. under the RFS program in
2026 and 2027.
[GRAPHIC] [TIFF OMITTED] TR01AP26.045
4. Summary of Analyzed Volumes
For the reasons explained in the introduction of section III.A of
this preamble, we have developed Analyzed Volumes for 2026 and 2027 to
aid our analyses under CAA section 211(o)(2)(B)(ii). The methodology
used to develop the Analyzed Volumes of each component category of fuel
are summarized in sections III.A.1 through 3 of this preamble. The
Analyzed Volumes used to support this final rule are presented in
Tables III.A.4-1 and 2.
[GRAPHIC] [TIFF OMITTED] TR01AP26.046
[GRAPHIC] [TIFF OMITTED] TR01AP26.047
To determine the final volume requirements for 2026 and 2027, we
developed and evaluated these Analyzed Volumes to facilitate our
analysis of the statutory factors listed in CAA section
211(o)(2)(B)(ii)(I)-(VI). A summary of several of these analyses is
described in section III.D of this preamble and discussed in greater
detail in the RIA. Details of the individual biofuel types and
feedstocks that make up the Analyzed Volumes are provided in RIA
Chapter 3. In section III.E of this preamble we discuss the volume
requirements based on a consideration of all the factors that we
analyzed.
B. Baselines
To estimate the impacts of the Analyzed Volumes, we must identify
the appropriate baseline(s). The primary baseline developed for this
final rule reflects the use of renewable fuels absent this final rule
or the RFS program (i.e., the alternative collection of biofuel volumes
by feedstock, production process (where appropriate), and biofuel type
that would be anticipated to occur in 2026 and 2027 in the absence of
RFS program), and acts as the point of reference for assessing the
impacts of this final rule. To this end, we have developed a ``No RFS''
scenario that we used as the baseline for analytical purposes
(hereinafter the ``No RFS Baseline''). Many of the same supply-related
factors that we used to develop the Analyzed Volumes were also relevant
in developing the No RFS Baseline.
We also developed a 2025 baseline that in some cases is more
informative in understanding the impacts of the Analyzed Volumes
relative to the status quo.
1. No RFS Baseline
Broadly speaking, the RFS program is designed to increase the use
of renewable fuels in the transportation sector beyond what would occur
in the absence of the program. It is appropriate, therefore, to use a
scenario representing what would occur if the RFS program did not
continue to exist as the baseline for estimating the costs and impacts
of the Analyzed Volumes. Our No RFS Baseline is consistent with the
Office of Management and Budget's Circular A-4, which says that the
appropriate baseline would normally ``be a `no action' baseline: what
the world will be like if the proposed rule is not adopted.'' \139\
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\139\ Office Management and Budget, ``Circular A-4,'' 68 FR
58366 (October 9, 2003).
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Importantly, this No RFS Baseline is not equivalent to a market
scenario
[[Page 16416]]
wherein no renewable fuels are used at all. Prior to the RFS program,
both biodiesel and ethanol were used in the transportation sector,
whether due to State or local incentives, tax credits, or a price
advantage over conventional petroleum-based gasoline and diesel. This
same situation would exist in 2026 and 2027 in the absence of the RFS
program. Federal, State, and local tax credits, incentives, and support
payments would continue to be in place for these fuels, as well as
State programs such as blending mandates and LCFS programs.
Furthermore, now that capital investments in renewable fuels have been
made and markets have been oriented towards their use, there are strong
incentives in place for continuing their use even if the RFS program
were to disappear. As a result, it would be improper and inaccurate to
attribute all use of renewable fuel in 2026 and 2027 to the applicable
standards under the RFS program.
To inform our assessment of the volume of renewable fuels that
would be used in the absence of the RFS program for the years 2026 and
2027, we began by analyzing the trends in the economics for renewable
fuels blending in prior years. Assessing these trends is important
because the economics for blending renewable fuels changes from year to
year based on renewable fuel feedstock and petroleum product prices and
other factors that affect the relative economics for blending renewable
fuels into petroleum-based transportation fuels. A renewable fuel
facility investor and the financiers who fund their projects will
review the historical (e.g., did they lose money in a previous year),
current, and perceived future economics of the renewable fuel market
when deciding whether to continue to operate their renewable fuel
facilities, and our analysis attempted to account for these factors.
The No RFS Baseline economic analysis for 2026 and 2027 compares
the projected renewable fuel cost with the projected cost for the
fossil fuel it displaces. The comparison is performed at the point that
the renewable fuel is blended with the fossil fuel (generally a fuel
terminal) to assess whether the renewable fuel provides an economic
advantage to blenders. If the renewable fuel is lower cost than the
fossil fuel it displaces, it is assumed that the renewable fuel would
be used absent the RFS program (within the constraints described
below). The No RFS Baseline economic analysis that we conducted mirrors
the fuel cost analysis described in section III.D.4 of this preamble,
but there are several differences. The primary difference is that the
No RFS Baseline economic analysis was conducted from the fuels
industry's perspective, asking whether they would find it economically
advantageous to blend renewable fuel into petroleum fuel in the absence
of the RFS program. Conversely, the social cost analysis in section
III.D.4 of this preamble reflects the overall fuel cost impacts on
society at large.\140\ A primary example of a social cost not
considered for the No RFS Baseline economic analysis is the fuel
economy effect due to the lower energy density of the renewable fuel,
as this cost is generally borne by consumers, not the fuels industry.
Other ways that the No RFS Baseline economic analysis is different from
the social cost analysis include:
---------------------------------------------------------------------------
\140\ See section III.D.4 of this preamble and RIA Chapter 10
for descriptions of the social cost analysis.
---------------------------------------------------------------------------
<bullet> In the context of assessing production costs, we amortized
the capital costs at a higher rate of return more typical for industry
investment instead of the rate of return used for social costs.
<bullet> We assessed renewable fuel distribution costs to the point
where it is blended into petroleum fuel, not all the way to the point
of use, which is necessary for estimating the fuel economy cost.\141\
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\141\ For several renewable fuels (e.g., ethanol blended as E10,
biodiesel, and renewable diesel), the fuel economy cost is paid by
the consumer. Because it is the fuels industry (i.e., refiners,
terminals, and retailers) that decides whether to blend renewable
fuels into petroleum fuels, they are only concerned about the
relative cost at the point in which the renewable fuel is blended
into the petroleum fuel, not the costs downstream of that blending
point.
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<bullet> While we generally do not account for the fuel economy
disadvantage of most renewable fuels for the No RFS Baseline economic
analysis, the exception is E85 where the lower fuel economy of using
E85 is noticeable to vehicle owners such that they demand a lower price
to make up for this loss of fuel economy. As a result, retailers must
price E85 lower than the primary alternative E10 to account for the
lower energy content of E85 and they must consider this in their
decisions to blend and sell E85.\142\
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\142\ See RIA Chapter 2 for further discussion of this topic.
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To estimate the relative cost of a renewable fuel compared to the
fossil fuel being displaced, we considered several different cost
components (i.e., production cost, distribution cost, any blending
cost, retail modification costs) together to reflect the relative cost
of each renewable fuel to its respective fossil fuel. We also
considered any applicable Federal or State programs, incentives, or
subsidies that could reduce the apparent blending cost of the renewable
fuel at the terminal, including the 45Z credit. The exact amount of
credit under 45Z is more variable and depends on a range of factors.
However, generally speaking, the amount of credit that fuel producers
are able to claim under 45Z is less than the previous $1 per gallon tax
credits that biodiesel and renewable diesel producers were able to
claim under 40A and 6426.\143\ In the case of higher-level ethanol
blends, the retail cost associated with the equipment or use of
compatible materials needed to enable the sale of these newer fuels is
assumed to be reduced by 75 percent due to the HBIIP program.
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\143\ See RIA Chapter 1 for a further discussion of the 45Z
credit.
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In addition, there are a number of State programs that create
subsidies for biodiesel and renewable diesel, the largest being offered
by California and Oregon through their LCFS programs.\144\ We accounted
for State and local biodiesel mandates by including their mandated
volume regardless of the economics. Several States offer tax credits
for blending ethanol at 10 percent. Other States offer tax credits for
E85, of which the largest is New York. We are not aware of any State
tax credits or subsidies for E15.\145\ To account for the various State
assumptions, it was necessary to model the cost of using these biofuels
on a State-by-State basis.
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\144\ At the time the analysis for the No RFS Baseline was
completed, there was insufficient data to project the impacts of
LCFS programs in New Mexico on biofuel consumption in these States
in the absence of the RFS program.
\145\ In light of the fluid situation with respect to a 1-psi
RVP waiver for E15 or actions to remove the 1-psi waiver for E10 in
seven Midwestern States, our analysis did not specifically assume
either of these potential changes. These assumptions can affect the
relative cost of E15; however, adopting these assumptions would not
have impacted the overall conclusions with respect to blending E15
in the absence of the RFS program.
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For most renewable fuels, the economic analysis provided consistent
results, indicating that they are either economical in all years or are
not economical in any year. However, this was not true for biodiesel
and renewable diesel, where the results varied from year to year. Such
swings in the economic attractiveness of biodiesel and renewable diesel
confound efforts on the part of investors to project future returns on
their investments to determine whether to continue to operate their
facilities or shut down. Thus, to smooth out the swings in the
economics for using biodiesel and renewable diesel and look at it the
way facility operators and their investors would do in the absence of
the RFS
[[Page 16417]]
program, we made two key assumptions. First, the economics for
biodiesel and renewable diesel were modeled starting in 2009 and the
trend in their use was made dependent on the relative economics in
comparison to petroleum diesel over distinct four-year periods. As a
result, the first four-year period modeled the costs over 2009-2012 to
estimate the volume of biodiesel and renewable diesel that would be
used in 2012 in the absence of the RFS program. Second, the estimated
biodiesel and renewable diesel volumes were limited in the analysis to
no greater volume than what occurred under the RFS program in any year,
since the existence of the RFS program would be expected to create a
much greater incentive for using these fuels than if the RFS program
was not in place.
We also conducted an analysis for cellulosic biofuels, focusing
primarily on renewable CNG/LNG and CKF ethanol. We found that renewable
CNG/LNG is more expensive than fossil natural gas and, without targeted
incentives and given competing demand in other sectors, would see
little transportation use. However, because California, Oregon, and
Washington do have State-level biofuels programs that incentivize CNG/
LNG in transportation, we assumed these programs would support some use
even without the RFS program. To estimate that future level of use, we
analyzed each State's program data and extrapolated trends through
2027. Additionally, CKF ethanol is eligible for additional incentives
through programs such as California's LCFS program, so we expect CKF
ethanol will continue to be produced at the volumes determined in this
rule even in the absence of the RFS program. The No RFS Baseline for
2026 and 2027 is summarized in Table III.B.1-1.\146\ More details on
the No RFS Baseline can be found in RIA Chapter 2.
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\146\ See RIA Chapter 2 for a more complete description of the
No RFS Baseline and its derivation.>
\147\ Since E85 is borderline economical in California in the No
RFS Baseline when we do not assume any increase in California's LCFS
credit, a likely increase in the LCFS credit under the No RFS
Baseline increases the certainty that E85 would be economic.
Additionally, we did not consider the possibility that cellulosic
ethanol, which receives a larger LCFS credit, could be used to
produce E85 and may be more economical than corn ethanol.
[GRAPHIC] [TIFF OMITTED] TR01AP26.048
Our analysis shows that conventional ethanol is economical to use
in 10 percent blends (E10) without the presence of the RFS program.
Conversely, higher-level ethanol blends are only partially economical
without the RFS program. E85 is economical in 2026 and 2027 in
California; thus, we assumed that E85 would be consumed in California
without the RFS program.\147\ Conversely, E15 is not economical without
the RFS program due to the relatively low sales volumes per station and
high cost associated with the equipment needed to be installed at
retail stations, even if these costs are partially subsidized by
government funding, and the lack of octane blending value. Some volume
of biodiesel is estimated to be blended based on State mandates in the
absence of the RFS program, and some additional volume of both
biodiesel and renewable diesel is estimated to be economical to use
without the RFS program, particularly in California and Oregon due to
the LCFS incentives. The volumes of renewable CNG/LNG and imported
sugarcane ethanol are projected to be consumed in States with an LCFS
program due to the economic support provided by their programs.
2. 2025 Baseline
The applicable volume requirements established for one year under
the RFS program do not roll over automatically to the next, nor do the
volume requirements that apply in one year become the default volume
requirements for the following year in the event that no volume
requirements are set for that following year. Nevertheless, the volume
requirements established for the previous year represent the most
recent set of volume requirements that the market was required to meet
and are indicative of current market conditions.
Since the previous year's volume requirements represent the
starting point for any adjustments that the market may need to make to
meet the next year's volume requirements, they represent another
informational baseline for comparison. For this reason, in previous RFS
annual standard-setting rulemakings we used previous year's standards
as a baseline against which to compare the projected impacts of the
volume requirements and are also doing so here in addition to the No
RFS Baseline for some of the factors (e.g., the cost of this action).
In the Set 2 proposal, we estimated a 2025 baseline using the
analysis performed in the Set 1 Rule. We considered using 2025 partial-
year data for the 2025 Baseline in the Set 2 proposal, but we instead
continued to rely on the Set 1 Rule analysis. In this final rule, we
now have data from EMTS on the actual production and use of renewable
fuel in the U.S. in 2025. In this final rule we have revised and
updated the 2025 Baseline using this data, such that the 2025 Baseline
reflects the actual production and use of biofuels in 2025 rather than
the projected volumes from the Set 1 Rule. In some cases (such as the
feedstocks used to produce biodiesel and renewable diesel) we have
supplemented the data collected by EMTS with other data sources.
Our estimates of the actual use of qualifying biofuels in 2025 are
shown in Table III.B.2-1. More details on the 2025 Baseline can be
found in RIA Chapter 2.
[[Page 16418]]
[GRAPHIC] [TIFF OMITTED] TR01AP26.049
C. Volume Changes Analyzed
In general, our analyses of the impacts of this rule were based on
the differences between the No RFS Baseline and the Analyzed Volumes
(i.e., our assessment of how the market would respond to the Analyzed
Volumes were they to become the final volume requirements). Those
differences are shown in Table III.C-1.\148\ Because this approach is
squarely focused on the differences in volumes between the No RFS
Baseline and the Analyzed Volumes, our analyses do not assess impacts
from total renewable fuel use in the U.S. As noted above, we also
consider the impacts of the Analyzed Volumes relative to the 2025
Baseline for some of our analyses. The changes in renewable fuel
consumption relative to the 2025 Baseline are shown in Table III.C-2.
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\148\ See RIA Chapter 2 for more details of this assessment,
including a more precise breakout of those differences.
\149\ A full description of the analysis for all factors is
provided in the RIA.
[GRAPHIC] [TIFF OMITTED] TR01AP26.050
[GRAPHIC] [TIFF OMITTED] TR01AP26.051
D. Summary of the Assessed Impacts of the Analyzed Volumes
As described in section II.B of this preamble, the statute
specifies a number of factors that the EPA must analyze in making a
determination of the appropriate volume requirements to establish for
years after 2022 (and for BBD, years after 2012).\149\ In this section,
we provide a summary of the analysis of a selection of factors,
including employment, rural economic development, energy security,
climate change, costs, environmental impacts, and various other
economic impacts, for the Analyzed Volumes, along with some
implications of those analyses. We provide a summary of our
consideration of all factors in determining the final volume
requirements in section III.E of this preamble.
We received numerous comments on the analyses of statutory factors
presented in the proposal. In some cases, we have updated our analyses
to incorporate feedback provided by commenters (e.g., climate change,
prices of agricultural commodities). Changes in methodology relative to
the Set 2 proposal are described in the sections below and in the
corresponding RIA Chapters. Other comments not addressed in those
sections are addressed in the Response to Comment document in the
docket for this rule.
It was not always possible to precisely identify the implications
of the analysis of a specific factor for a specific component category
of renewable fuel. For instance, while we analyzed the impact of
biodiesel and renewable diesel on the cost to consumers of
transportation fuel (section III.D.4 of this preamble), biodiesel and
renewable diesel can be used to satisfy multiple biofuel requirements
(e.g., BBD, advanced biofuel, and total renewable fuel) and this
analysis therefore does not apply to a single standard in that regard.
Additionally, air quality impacts are driven primarily by biofuel type
(e.g., ethanol, biodiesel) rather than by biofuel category (e.g.,
advanced biofuel,
[[Page 16419]]
cellulosic biofuel), and energy security impacts are driven by the
amount of fossil fuel energy displaced. In these cases, we have
analyzed one or more of the standards collectively rather than
individually.
Moreover, except for CAA section 211(o)(2)(ii)(III), the statute
does not require that the requisite analyses be specific to each
category of renewable fuel. Rather, the statute directs the EPA to
analyze certain factors, without specifying how that analysis must be
conducted. In addition, the statute directs the EPA to analyze the
``program'' and the impacts of ``renewable fuels'' generally, further
indicating that Congress intended to provide flexibility regarding how
and at what level of specificity to analyze the statutory factors.\150\
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\150\ See CBD, 141 F.4th at 171 (``The text of the CAA does not
require EPA to monetize or otherwise quantify all of the factors it
must consider[.]'').
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1. Job Creation and Rural Economic Development
In this section, we summarize our estimates of the impacts
(relative to the No RFS Baseline) of the Analyzed Volumes on economy-
wide employment and rural economic development. These estimates include
direct, indirect, and induced impacts for both job creation and rural
economic development and are presented in Table III.D.1-1. More details
on these analyses can be found in RIA Chapter 9.
We apply two analytical approaches common in the literature--the
``rule-of-thumb'' approach and, where feasible, input-output (IO)
modeling. The rule-of-thumb approach uses employment and economic
development impact estimates from previous studies, expressed in jobs
and GDP per unit of biofuel production, and multiplies these estimated
impacts by the Analyzed Volumes to arrive at employment and GDP
estimates. This approach is taken to produce estimates for the impacts
of the quantities of ethanol, BBD, and RNG in the Analyzed Volumes
relative to the No RFS Baseline.
The IO modeling approach relies on the use of a methodology
developed specifically for analysis of dry mill corn ethanol. Using the
results from this IO analysis we have developed ranges of potential
impacts from the projected corn ethanol volumes based on uncertainty
regarding how the volumes will be provided. For example, volumes of
corn ethanol associated with new production capacity would also be
associated with some number of temporary construction jobs, while
expanded capacity utilization at existing dry mill corn ethanol
facilities would not. These ranges of potential impacts are summarized
in tables in RIA Chapter 9 along with detailed explanations of the
associated methodology. Similar IO modeling methods were not readily
available to estimate impacts from other types of ethanol, BBD or RNG,
so we have not attempted to do so.
We estimate that all three categories of renewable fuel we
analyzed--ethanol, BBD, and RNG--are associated with increases in jobs
to varying degrees. BBD is projected to have the highest job creation
impact overall, primarily due to substantially higher projected fuel
volume increases relative to the No RFS Baseline. In terms of rural
employment specifically, ethanol has the highest direct and total
effects per million gallons of ethanol equivalent. Relative to the No
RFS Baseline and accounting for direct, indirect, and induced effects,
BBD is projected to have the highest impact on agricultural employment,
again primarily due to substantially higher projected fuel volume
increases due to the 2026 and 2027 standards relative to the No RFS
Baseline.
We also estimate that ethanol, BBD, and RNG are all associated with
increased rural economic development, again to varying degrees. Since
renewable fuels rely on agricultural feedstocks, we use the GDP impacts
associated with agricultural feedstocks to infer the effects on rural
economic development. We estimate that BBD and ethanol have higher
impacts per million gallons of ethanol equivalent on rural economic
development than does RNG. Relative to the No RFS Baseline and
accounting for direct, indirect, and induced effects, BBD is projected
to have the highest impact on rural economic development, again
primarily due to substantially higher projected fuel volume increases
due to the 2026 and 2027 standards relative to the No RFS Baseline.
Table III.D.1-1 summarizes the estimated economy-wide employment
impacts, expressed in terms of full-time equivalent jobs, and rural
economic development impacts, expressed in terms of rural GDP in 2024$
associated with the Analyzed Volumes of ethanol, BBD, and RNG.\151\
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\151\ More detail on our estimates of job creation and rural
economic development, including a discussion of the limitations of
these estimates, can be found in RIA Chapter 9.1.
[GRAPHIC] [TIFF OMITTED] TR01AP26.052
2. Energy Security
Our analysis shows that the Analyzed Volumes will have a positive
impact on energy security by reducing U.S. reliance on foreign sources
of energy. Monetized energy security impacts of the Analyzed Volumes
are summarized in Table III.D.2-1. Energy security and methods of
quantifying energy security impacts are discussed further below and in
RIA Chapter 6.
[[Page 16420]]
[GRAPHIC] [TIFF OMITTED] TR01AP26.053
Changes in the required volumes of renewable fuels under the RFS
program can significantly impact: (1) the U.S.'s trade in crude oil and
petroleum products, affecting
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