The U.S. Environmental Protection Agency (EPA) sent out initial Renewable Volume Obligations (RVOs) for 2026 and 2027, following clearance from the White House Office of Management and Budget (OMB) on Thursday morning. This long-anticipated release provides the biofuels industry with much-needed regulatory certainty after months of delay.
Unlike previous years, where D4 RVOs were quoted in gallons, the new RVOs are now expressed in RINs. The proposed RVO for 2026 is set at 7.12 billion RINs, increasing by 380 million to 7.5 billion RINs in 2027.
In addition, the EPA revised how RINs are awarded for imported gallons whether finished fuel or produced using foreign feedstocks. These gallons will now receive only 50% of a RIN, compared to the previous 150% or 160% credit for biodiesel and renewable diesel, respectively. The conversion factor for renewable diesel was also adjusted, reduced from 1.7 to 1.6.
Using a standard conversion rate of 1.55 RINs (in between 1.5 for biodiesel and 1.6 for renewable diesel per gallon) approximately 4.6 billion gallons, assuming all production is domestic and uses domestic feedstocks. See RVO in gallons under this assumption below.
When accounting for imported feedstocks and finished fuel which now only generate 0.5 RINs per gallon the effective conversion rate drops. Using a weighted average of 0.5 (imports), 1.5 (biodiesel), and 1.6 (renewable diesel), the adjusted conversion rate is approximately 1.27.
This adjustment helps explain Bloomberg’s reported figure of 5.61 billion gallons, which assumes that 50% of the volume is derived from imports. See RVO in gallons under this assumption below.
Now matter what way you slice it, the proposed RVOs released today is a stair-step higher and very bullish for the industry. The current guidance is likely to significantly reshape trade flows in the fats and oils market. RIN prices will likely need to rise significantly to offset the increasing cost of feedstocks and allow producers to find positive margins. However, Small Refinery Exemptions (SREs) remain a major uncertainty. Until there is clear guidance on SREs, RIN prices may struggle to gain sustained upward momentum.
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