The U.S. will need to import feedstocks like used cooking oil and soybean oil to meet its biomass-based diesel renewable volume obligation (RVO) for 2026 and 2027, according to CoBank. Despite record domestic production, a gap remains, prompting increased imports. The Environmental Protection Agency's (EPA) final rule for RVOs aims to boost biofuel use, but challenges persist in feedstock supply.
The reliance on imports for key biofuel feedstocks highlights potential supply chain vulnerabilities and impacts the cost structure for U.S. biofuel producers. Meeting ambitious RVO targets is crucial for the renewable fuel industry's growth and its ability to claim tax credits, influencing investment decisions and the overall energy landscape.
The U.S. will continue to rely on imported feedstocks, including used cooking oil and soybean oil, to meet its renewable volume obligations (RVOs) for biomass-based diesel, according to CoBank. Despite record domestic production, a gap persists between supply and the mandated levels set by the Environmental Protection Agency (EPA).
The EPA's final rule for 2026 and 2027 established RVOs of 5.4 billion gallons and 5.7 billion gallons, respectively, representing significant increases. However, the projected domestic supply, primarily from soybean oil, is not sufficient to meet these targets. To bridge this gap, imports of soybean oil are expected to exceed projections, with estimates suggesting around 230,000 metric tons for the 2025/26 marketing year, surpassing the USDA's August forecast. Used cooking oil imports have also risen to compensate for shortfalls.
Concerns regarding the impact of small refinery exemptions (SREs) on demand have been somewhat alleviated. The EPA announced plans to reallocate 100% of the gap between projected and actual 2025 exempted volumes into the 2026 and 2027 RVOs. This move, along with a delayed implementation of a reduction in RIN values for foreign feedstocks until 2028, aims to provide greater certainty and incentivize domestic production.
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