US at risk of missing Trump's biofuel targets

Machines powered by B100 biodiesel
Marcelo Souza / g1
President Donald Trump's effort to expand biodiesel production and fulfill promises made to farmers and rural communities is coming up against market reality: American plants are failing to keep up with the targets set by the government.
The difference between targets and actual production brings political and economic risks.
A prolonged shortage could sharply increase the prices of renewable fuel credits and force the Trump administration to resort to a rarely used device, which allows it to reduce previously defined targets to adapt them to market conditions.
A possible revision of the targets would represent an unusual setback and could displease farmers and biofuel producers, who have pushed for higher quotas and form an important political base for the president on the eve of the mid-term legislative elections.
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Part of production is also already committed to export contracts, where prices have been more attractive due to to supply interruptions caused by the war in Iran. These volumes, however, do not generate credits to meet the goals set by the US Environmental Protection Agency (EPA).
Refineries generated 736 million renewable credits (RINs) in May, according to EPA data, well below the approximately 915 million needed per month to maintain the pace required by the goals, said Scott Irwin, an agricultural economist at the University of Illinois.
According to Irwin's estimates, production in the first four months 2026 was 1.41 billion RINs below what was needed. To make up for this shortfall, production would have to exceed the highest monthly volume ever recorded by the industry by more than 20% for the remainder of the year.
"The targets, in practice, require that biodiesel plants operate at their highest sustained rate in history and that renewable diesel plants produce production well above any level they have already achieved," said Irwin. Washington company that advises refineries, fuel distributors and investment funds. "The deficit has generated great concern throughout the sector, mainly about what the government's reaction will be."
According to him, market agents do not expect the EPA to intervene, despite the agency having the authority to grant flexible targets. Instead, the government could take steps such as reducing obligations scheduled for 2028 by changing the way imported volumes are counted towards meeting the requirements.
Regulatory uncertainty has slowed production
Production was held back for months as biodiesel and renewable diesel manufacturers waited for the Trump administration to finalize rules for the 45Z federal tax credit, intended for the production of clean fuels.
The guidelines, released in recent weeks, eliminated some restrictions related to use of land and expanded incentives for renewable diesel produced with soybeans - changes demanded by the sector about a year ago.
According to Jeramie Weller, general manager of Minnesota Soybean Processors, a biodiesel producer, the new rules bring more security to expand production and sign raw material supply contracts with farmers. Still, he states that it is not clear whether the measures arrived in time to compensate for previously accumulated production losses.
The spike in oil prices, caused by the conflict with Iran, also reduced the pace of growth in biodiesel production. Supply disruptions have raised the profitability of fossil fuels, encouraging refiners to maximize production of petroleum products rather than expanding the supply of renewable fuels.
Stock of credits shrinks
Below-than-expected production is also reducing a reserve that historically helped the market absorb temporary deficits.
The so-called "bank of RINs" - a stockpile of unused credits that refineries can use to meet targets - has been reduced throughout this year as production falls below target. necessary while demand remains high. If this trend continues, analysts warn that this reserve could be depleted by the end of 2026, further putting pressure on credit prices.
RIN prices have already reached record levels, raising compliance costs for smaller refiners that rely on purchasing these credits rather than blending renewable fuels themselves.
The prospect of a tighter market has intensified lobbying pressure in Washington. The American Fuel and Petrochemical Manufacturers (AFPM), the main association of American refiners, has been meeting with parliamentarians in Congress to pressure the government to review the biofuels targets for 2026. The entity also filed a lawsuit against the EPA.
"Americans will pay billions of dollars more than they should if the renewable fuels program is not resized", stated the AFPM in materials distributed to parliamentarians, arguing that the high cost of credits ends up raising fuel prices for the consumers.
In an email response, the EPA stated that it assesses compliance with targets considering the entire year and takes into account normal fluctuations between months, including the use of existing credits to cover temporary deficits.
For Brett Gibbs, an analyst at Bloomberg Intelligence, the EPA may have underestimated both the volume of biodiesel and renewable diesel exports and the difficulties of importing raw materials in the short term due to the conflict with Iran.
"The EPA may well have a problem on its hands before the elections midterm. And certainly going into 2027," Gibbs said.

Source: G1