A larger reserve of renewable-fuel compliance credits is easing the projected 2026 burden for biomass-based diesel, but much of that cushion could disappear before 2027. An updated analysis by agricultural economists Todd Hubbs and Scott Irwin puts required net D4 credit generation at 8.82 billion RIN gallons in 2026 and 11.55 billion in 2027.
Those estimates are down 2.17 billion and 0.34 billion RIN gallons, respectively, from the researchers’ May projections. Even after the revisions, they project generation needs 24 percent above the 2025 level in 2026 and 63 percent above it in 2027. The relief is concentrated in the first year, not spread evenly across both.
Hubbs, of Oklahoma State University, and Irwin, of the University of Illinois, track credits against obligations, exports, compliance deficits and banked balances. Their figures describe projected credit-generation needs, rather than physical gallons of fuel. The distinction matters because their accounting includes both current generation and credits carried forward from earlier years.
EPA’s final rule establishes 2026 and 2027 volume requirements and percentage standards for biomass-based diesel, cellulosic biofuel, advanced biofuel and total renewable fuel. The researchers’ updated balance sheet applies assumptions about fuel use, exemptions and credit availability to that regulatory framework. It is a projection of how compliance could work, not a new EPA standard.
Banked credits provide most of the cushion
The biggest change in available reserves is the combined D4 and D5 credit bank. The researchers raised its estimated year-end 2025 balance from 0.96 billion to 1.89 billion RIN gallons after refinery-exemption decisions and data revisions. That larger opening balance alone reduces their estimate of required 2026 generation by 0.93 billion RIN gallons.
Their scenario assumes obligated parties spend that reserve down to about 0.18 billion RIN gallons by the end of 2026, then hold it at that level in 2027. Across D4, D5 and ethanol-related D6 credits, the combined bank falls from 3.2 billion at the end of 2025 to 0.8 billion in 2026 and 0.5 billion in 2027.
Stronger ethanol credit generation supplies another major source of relief. When D6 credits cannot cover the conventional renewable-fuel obligation, obligated parties use D4 credits to close the gap, the authors explain. They now project D6 generation of 14.85 billion in each year, up from the 14.66 billion assumed in May.
Together with revised export, bank and deficit assumptions, that change reduces the projected call on D4 credits for conventional compliance to 0.47 billion RIN gallons in 2026, from 1.42 billion previously. The corresponding 2027 estimate falls less sharply, to 1.18 billion from 1.41 billion. This helps explain why the two years look different.
Fuel use and exports pull in opposite directions
Lower projected petroleum gasoline and diesel use also trims the obligation. Using the Energy Information Administration’s October outlook, the authors project consumption below EPA’s assumptions in both years. They estimate that this lowers the biomass-based diesel obligation by about 0.24 billion RIN gallons in 2026 and 0.10 billion in 2027.
Not every revision reduces generation needs. Credits must be retired when biomass-based diesel is exported, the authors note. Export-related retirements have declined more slowly than they expected. Their revised estimates add 0.30 billion RIN gallons to required 2026 D4 generation and 0.07 billion to 2027 needs compared with their May calculations.
Exemption assumptions still matter
Refinery exemptions also affect the balance. EPA announced August 3 decisions on six petitions from four refineries covering the 2023 and 2024 compliance years. The agency granted one full exemption and two half exemptions, while finding three petitions ineligible. In the researchers’ accounting, exemptions can leave credits banked that otherwise would have been retired.
The projections also incorporate a later reallocation proposal described by Hubbs and Irwin. Their scenario splits additional exempted 2025 obligations equally between 2026 and 2027. They further assume additional exemptions for those two years will be reassigned within each year, rather than reducing total obligations. Those are modeling assumptions, not finalized outcomes.
That treatment remains consequential for 2027. The authors estimate that failing to reallocate the additional exemptions would lower the biomass-based diesel obligation by roughly 0.3 billion RIN gallons in each year. Reassigning them later would instead move the burden. With banked credits largely depleted in their scenario, those policy choices carry more weight for 2027 generation needs.
