2027 Biomass-Based Diesel Mandate: When Applause Turns to Arithmetic
Record D4 RIN prices are the market’s way of asking whether EPA’s biomass-based diesel volumes can actually be met — and the waiver question is no longer hypothetical
The commentary above is not hyperbole, and the numbers back it up. When EPA finalized the “Set 2” rule on March 27 — announced by President Trump himself at the White House Great American Agriculture Celebration — farm groups and biofuel producers celebrated the largest biomass-based diesel (BBD) volumes in program history. Three months later, the celebration is colliding with production reality, and the question of whether the 2027 mandate is achievable has moved from the margins to the center of RFS policy debate.
The supply math is unforgiving. The BBD volume increases for 2026 and 2027 are unprecedented — up 67% and 70%, respectively, from the 2025 total of 5.42 billion RIN gallons. The previous record year-over-year jump was 28% in 2013. University of Illinois economists Todd Hubbs and Scott Irwin, whose balance-sheet work has become the definitive tracking of this question, calculate that required D4 net RIN generation must climb from 7.10 billion gallons in 2025 to 10.99 billion in 2026 and 11.89 billion in 2027 — increases of 55% and 67% over two years, demands on the physical production system with no precedent in RFS history.
The monthly pace tells the story even more starkly. Required monthly D4 RIN generation must rise from 592 million gallons in 2025 to 916 million in 2026 and 991 million in 2027 — levels exceeding any sustained pace in the historical record. Only one month in the past three years, December 2024 at 906 million gallons, came close, and that reflected a pull-forward of imports ahead of the expiring blenders credit, not sustained supply. Worse, the industry is already behind: generation in the first three months of 2026 averaged just 521 million gallons, leaving a cumulative shortfall of roughly 1.18 billion gallons and requiring nearly 1.1 billion gallons per month for the rest of the year to stay on track.
The import wildcard cuts against compliance. University of Illinois economists Todd Hubbs and Scott Irwin have quantified just how much the mandate leans on foreign gallons. Their balance-sheet framework pegs domestic plants running at 90% of capacity in 2026 and 95% in 2027 — utilization rates the industry has rarely sustained — and even then, the math leaves a hole that only imports can fill: roughly 600 million gallons in 2026, swelling to 1.3 billion in 2027. The problem is that the import pipeline has largely dried up. The 45Z Clean Fuel Production Credit, which replaced the old blenders credit on Jan. 1, 2025, rewards only U.S.-produced fuel — and OBBBA layered on a North American feedstock requirement. Foreign renewable diesel and biodiesel lost roughly a dollar per gallon of economics overnight, and the trade flows responded accordingly. The telltale sign came in December 2024, when importers rushed gallons into the country ahead of the blenders credit’s expiration — producing the single strongest month of D4 generation in three years — and then the flow essentially stopped. Whether D4 RINs north of $2.40 are rich enough to pull unsubsidized foreign gallons back into the U.S. market is, as the Illinois economists concede, an open question. And the valve tightens further in 2028, when EPA’s half-RIN penalty on foreign fuels and feedstocks takes effect. In short: the mandate assumes an import recovery that current policy actively discourages.
Of note: The slow D4 RIN production in early 2026 may have been in part due to no finalized RFS level until the end of March. Recall all the reports of EPA limiting the BBD expansion, etc. that could have factored into the slower production as no one had the assurance that BBD mandate was going to rise or at least it would rise by x amount.
The RIN market has already rendered its verdict. D4 RINs traded at $2.41 in early June, close to the all-time highs set in 2021, with biodiesel and renewable diesel now generating more than $3.50 per gallon in credit value. That is precisely what economic theory predicts when a mandate is binding hard against supply constraints — but it is also the political tinder for waiver petitions, because obligated parties pass those costs through.
The waiver question is legitimate, and EPA left the door open. Notably, the agency wrote its own escape hatch into the final rule, stating that while it considers the volumes achievable and appropriate, it retains legal authority to waive volumes in the future under the relevant waiver authorities should circumstances warrant — specifically citing the general waiver authority under CAA section 211(o)(7)(A). Agencies do not include such language casually. Sources note that anti-RFS groups are shopping for gubernatorial waiver requests fits the historical playbook: general waiver petitions came from Texas in 2008, from drought-state governors in 2012, and from refinery-state governors in 2020. All were denied, and that history matters — EPA has never granted a general waiver based on economic harm, and the bar it set in 2008 (severe harm, caused by the RFS itself) is demanding.
The inadequate-domestic-supply route is the more plausible vehicle, but it carries its own legal baggage. In Americans for Clean Energy v. EPA (2017), the D.C. Circuit ruled that EPA may not consider demand-side constraints or the volume of fuel available to ultimate consumers when assessing whether domestic supply is “inadequate” — supply means supply. Ironically, that ruling, which the biofuel industry won, could now work in a waiver’s favor: if physical D4 generation genuinely cannot reach the mandated level, a supply-based waiver is on firmer legal footing than the demand-based rationale the court rejected. There is also recent precedent for the mechanics — EPA just partially waived the 2025 cellulosic mandate due to a 170 million-RIN shortfall, demonstrating the agency’s willingness to true-up volumes when the math fails.
The 2028 shadow. In what may be the most consequential for agriculture, the Set 3 rulemaking will establish 2028 volumes against the backdrop of whatever happens this year and next — and with an added complication: starting in 2028, foreign fuels and feedstocks will receive half the RFS compliance value of American-made products, further tightening the supply picture. If the industry visibly strains, misses, or requires a waiver to meet 2027, EPA will have every institutional and legal incentive to flatten the 2028 BBD trajectory rather than extend it. A waiver — or even a credible near-miss — becomes the ceiling on future growth. For soybean growers and crushers who made investment decisions on the promise of a sustained demand escalator, that is the real stake in this fight.
Bottom line: The 2026-2027 BBD mandates were a political triumph for agriculture and a genuine gamble on production capacity. Record D4 RIN prices are doing exactly what they are designed to do — pulling idled capacity back online and bidding for feedstock — but the first-quarter shortfall means the industry must now run at a pace it has never sustained, for 21 consecutive months, with the import valve partially welded shut. A waiver is not the base case, but it is no longer a fringe scenario, and the smart money in Washington is watching monthly EMTS data the way grain traders watch crop conditions. Whether 2027 is met the hard way or trimmed the easy way will define the 2028 debate before Set 3 is even proposed.
