What’s Next for Renewable Fuels in North America

As the oil and gas industry has incorporated more sustainability initiatives, renewable diesel has been adopted within the energy sector as a means of lowering carbon emissions. In recent years, renewable fuel sources have become a significant part of North America's transition to low-carbon energy, influenced by advancements in technology.

Thanks to its compatibility with existing diesel engines and its lifecycle greenhouse gas reduction potential, renewable diese l serves as an effective replacement for traditional diesel that offers lower emissions. The next one to two years will be pivotal in shaping how producers respond to tightening margins, evolving feedstock technology, and the effects of the Clean Fuel Production Credit.

The Crossroads of Policy and Production

The proposed volume targets for the next two years are expected to increase by 67% for biomass-based diesel, helping to stimulate production and stabilize investment. However, policy delays and tax credit transitions, such as the shift toward the 45Z clean fuel production credit, have caused some producers to scale back operations.

At the state level, California remains the epicenter of renewable diesel consumption, largely driven by its Low Carbon Fuel Standard (LCFS). The Biodiesel Coalition of Missouri praised the

Canada's Renewable Fuel Outlook

Canada has introduced its own Clean Fuel Standard (CFS), modeled in part after California's LCFS. The federal policy, combined with aggressive provincial mandates in places like British Columbia, has encouraged blending of renewable fuels nationwide. However, the dynamics between Canadian and U.S. credit markets are beginning to show strain. As Canadian producers look to export into the U.S. for stronger LCFS credit returns, they're also facing pressure from an oversupplied market and declining credit values. These cross-border pressures are pushing some facilities to scale back or delay expansion.

EPA Supplemental Rule

On September 16, 2025, the EPA issued a supplemental notice of proposed rulemaking (SNPRM) to revise the Renewable Fuel Standard (RFS) "Set 2" volume obligations for 2026 and 2027. This update responds to small refinery exemption (SRE) decisions from August, which excluded substantial volumes of gasoline and diesel from the 2023-2025 requirements. The EPA is evaluating whether to reallocate 50% or 100% of these exempted volumes in the final rule and is inviting public input on other options. The goal is to balance renewable fuel support, economic impact, and legal compliance, ensuring stability for farmers and biofuel producers.

Once published in the Federal Register, the proposal will open for a public hearing and a 30-day comment period. The EPA aims to issue a single, comprehensive final rule that sets the 2026-2027 obligations and addresses past SRE reallocations, reinforcing the RFS program's alignment with Congressional intent and its role in supporting rural economies and U.S. energy security.

What's Next for the U.S. Energy Landscape?

On June 14, the EPA issued its long-awaited proposed Renewable Fuel Standards for 2026 and 2027. The proposal outlines important updates to the RFS program, with a strong focus on promoting U.S.-produced fuels made from domestic feedstocks. One notable change includes factoring anticipated small refinery exemptions into the RVO formula, which would help preserve demand for renewable fuels by limiting the impact of future exemptions.

Compared to the 2025 requirements, the proposal outlines a meaningful increase in support for biomass-based diesel, both in terms of projected RIN obligations and RVO targets. Regulatory targets provide renewable diesel with a near-term opportunity, but they also underscore its role as a bridge fuel, supporting emissions reductions during the transition to fully zero-emission vehicles.

Previously, the RFS adjusted only fuel volumes. Now, the EPA is proposing a second control that ties RIN value to fuel origin, cutting RIN credit in half for biofuels and feedstocks sourced from outside the U.S. This change aims to strengthen energy security by reducing dependence on imports, which accounted for about 45% of biomass-based diesel in 2024. The EPA's RFS volume requirements for 2026 and 2027 addresses exemptions for small refineries and consulting on how to handle reallocation volumes for past years.