Biofuels Industry Explained: The U.S. View
U.S. biofuels exist because the law requires them. Under the Renewable Fuel Standard (RFS), the Environmental Protection Agency sets how much renewable fuel refiners must blend each year, and refiners prove compliance with credits called RINs. Corn-based ethanol is blended into gasoline; biodiesel and renewable diesel are made from soybean oil, canola oil, used cooking oil and animal fats. In April 2026 the EPA finalized record mandates of 25.82 billion RINs for 2026 and 25.98 billion for 2027. It reallocated 70% of volumes previously waived for small refineries in 2023–2025, adding back about 2 billion gallons of demand, and estimated that biomass-based diesel output must rise more than 60% from 2025. It also delayed until 2028 a plan to give imported fuels and feedstocks only half as many credits. The mandate reaches farms: USDA's October 2026 report projects 17.8 billion pounds of soybean oil going to biofuels in 2026/27, up from 14.8 billion, and 5.65 billion bushels of corn going to ethanol.
- Mandate
- EPA set record RFS volumes: 25.82 billion RINs for 2026, 25.98 billion for 2027
- Soybean oil
- USDA: 17.8 billion lb of soybean oil for biofuel in 2026/27, up from 14.8
- Imports
- EPA delayed half-credits for imported fuels and feedstocks until 2028
How the chain works
Ethanol and biomass-based diesel
| Corn ethanol | Biodiesel and renewable diesel | |
|---|---|---|
| Feedstock | Corn: 5.65 billion bushels projected for 2026/27 (USDA) | Soybean oil 17.8 billion lb projected for 2026/27, plus canola, used cooking oil, fats |
| Blended into | Gasoline | Diesel |
| Policy driver | Conventional renewable fuel requirement | Biomass-based diesel and advanced requirements |
| 2026 change | Steady | EPA estimates output must rise more than 60% from 2025 |
| What to watch | Gasoline demand, blend limits | Feedstock costs, import rules, tax credits |
How the mandate works
Each gallon of qualifying renewable fuel generates a RIN, a tracking credit. Refiners and importers of gasoline and diesel must hold enough RINs each year to match the EPA's volume obligations, either by blending biofuel themselves or buying RINs from others. Because the requirement is fixed by regulation, biofuel demand does not depend much on whether oil is cheap or expensive.
Small refineries can apply for exemptions. When the EPA grants them without adding the volumes elsewhere, total demand falls. In the April 2026 final rule, the EPA reallocated 70% of previously waived volumes from 2023–2025 into the 2026–2027 obligations, restoring roughly 2 billion gallons of renewable fuel demand.
Record volumes for 2026 and 2027
The EPA published its final rule on April 1, 2026, setting total requirements of 25.82 billion RINs for 2026 and 25.98 billion for 2027, which law firm Beveridge & Diamond describes as record highs. The agency estimated that biodiesel and renewable diesel production would need to rise by more than 60% from 2025 levels to meet the biomass-based diesel requirement.
The EPA had proposed giving imported fuels and fuels made from imported feedstocks only half the credit of U.S. ones. The final rule delayed that import reduction until the 2028 compliance year. Shifting federal tax incentives under the Section 45Z clean fuel production credit could also raise compliance costs or add to diesel price volatility.
From mandate to farm prices
Higher mandates pull vegetable oil off the food market. USDA's October 2026 report projects 17.8 billion pounds of soybean oil used for biofuel in 2026/27, up from 14.8 billion, which helps lift projected soybean crushing to 2,780 million bushels and the projected farm price to $12.00 a bushel.
Corn ethanol is the mature part of the program. USDA projects 5,650 million bushels of corn for ethanol in 2026/27, up slightly from 5,547 million, about 35% of the projected U.S. corn crop.
How the U.S. view differs from the China view
The Chinese version of this page sees biofuels mostly as an export business: China collects used cooking oil and produces biodiesel and sustainable aviation fuel feedstocks largely for European and U.S. buyers, so foreign rules decide its demand.
From the U.S. side, biofuel policy is farm policy. Mandates support corn and soybean prices, and rules that cut credits for imported feedstocks, such as used cooking oil from China, would shift demand toward U.S. soybean and canola oil.
2026: record mandates
In April 2026 the EPA finalized the largest RFS volumes in the program's history and reallocated most of the volumes it had waived for small refineries.
The effect showed up quickly in USDA's projections: soybean oil for biofuel up 3 billion pounds and a higher soybean price.
At the same time, the EPA delayed its half-credit rule for imports to 2028, so imported feedstocks can keep competing with U.S. soybean oil for now.
- U.S. biofuel demand is set by regulation, not by oil prices.
- Biofuel mandates now move soybean oil and soybean prices.
- Rules on imports and exemptions decide who benefits.
Common misreadings
MythBiofuels only make sense when oil is expensive.
RealityRefiners must meet EPA volume obligations regardless of oil prices.
MythSmall refinery exemptions don't matter.
RealityEPA's 70% reallocation restored roughly 2 billion gallons of demand.
MythBiofuel demand is mainly about corn.
RealitySoybean oil for biofuel is projected to rise 3 billion lb in 2026/27.
MythImported feedstocks were cut off in 2026.
RealityEPA delayed the half-credit rule for imports until 2028.
Policy, feedstocks and fuel demand: scenarios
| Scenario | Main effect | How it passes through |
|---|---|---|
| More small refinery exemptions | RIN demand | Lower biofuel demand, weaker soybean oil |
| Import half-credit starts in 2028 | Feedstock mix | More U.S. soybean and canola oil used |
| Tax credit rules change | Producer margins | Plants speed up or idle |
| Diesel demand falls | Blending room | RIN prices rise to force compliance |
| Soybean oil gets expensive | Producer costs | Shift to waste oils and fats |
| Higher ethanol blends allowed | Corn demand | More ethanol in gasoline |
Supply and demand by segment
| Segment | Supply rigidity | Concentration | New demand | Policy role | What to watch |
|---|---|---|---|---|---|
| Corn ethanol | Low (mature capacity) | Medium | Low | Very high (RFS) | Gasoline demand |
| Biodiesel and renewable diesel | Medium (plants exist) | Medium | Yes | Very high (RFS, tax credits) | Mandates, margins |
| Vegetable oil feedstocks | Medium (crush capacity) | Medium | Yes | High (import rules) | Soybean oil prices |
| Waste oils and fats | High (limited supply) | Low | Yes | High (credit rules) | Imports |
Supply rigidity: how long new capacity takes and whether money can speed it up. Concentration: whether output sits in a few countries or companies. The more rigid and concentrated, the more prone to shortages.
How to track it
| Indicator | What it tells you | Where to find it |
|---|---|---|
| RFS volume rules and exemption decisions | Size of the mandate | EPA Renewable Fuel Standard program, free |
| RIN generation data | Biofuel production | EPA EMTS data, monthly, free |
| Soybean oil for biofuel, corn for ethanol | Farm demand | USDA WASDE, monthly, free |
| Weekly ethanol production | Ethanol output | EIA Weekly Petroleum Status Report, free |
| Soybeans | Main oil feedstock | U.S. view: soybeans |
Sources
- Beveridge & Diamond: EPA finalizes record-high 2026–2027 RFS volume obligations (2026-04-06)
- USDA: World Agricultural Supply and Demand Estimates, October 2026
Last updated 2026-10-18.