-- US biodiesel mandates rise to 5.4 billion gallons for 2026, forcing over 60% output growth as supply trails and credit shortages threaten higher diesel costs, Reuters reported Thursday.
The US biodiesel industry must quickly expand production after a weak year, as record EPA blending targets create significant supply pressure, the report added.
Amid rising fuel costs linked to the US-Israel-Iran conflict, the EPA introduced aggressive biofuel mandates in late March to boost supply, according to the report.
Producers that convert soybeans into biodiesel need to raise output by more than 60% this year to meet targets, though analysts question whether the industry can deliver, the report noted.
The agency increased blending requirements to 5.4 billion gallons for 2026 and 5.7 billion gallons for 2027, up from 3.35 billion gallons in 2025, the report said.
To comply, total available supply must reach 6.07 billion gallons this year, as not all domestic production generates eligible compliance credits, the report noted.
Refiners must either blend biofuels or buy Renewable Identification Numbers credits under the Renewable Fuel Standard, and any shortfall may force them to rely on stored credits.
If refiners draw down their credit reserves, compliance expenses could rise and be passed through to higher diesel prices at the pump, according to the report.
Obligated parties must produce about 915 million credits monthly, while biodiesel credit generation rose to 651 million in March from 481 million in February, the report said.
The US Energy Information Administration forecasts 2026 biodiesel supply at 1.52 billion gallons and renewable diesel at 3.53 billion gallons, both below required volumes, the report added.
The biodiesel industry faces difficulty meeting the new mandates as producers struggle to secure feedstock supplies and manage fuel distribution logistics, Paul Winters, director at the Clean Fuels Alliance of America, said.
The American Fuel and Petrochemical Manufacturers said limited domestic feedstock supply will constrain output and raise compliance costs, the report said.
Agricultural groups and farmers have long pressed Washington to increase biofuel mandates to support crop demand, according to the report.
Farmers remain a crucial voting bloc for Republicans ahead of the November midterm elections, the report added.
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