Advanced Engines, Renewable Fuels Are Sustainable Solutions for Power, Mobility

Allen Schaeffer
26 minutes ago
3 min read

While federal policy and economic outlooks are murky for now, clean diesel engines and sustainable biofuels remain clear choices available today for carbon and other emissions reductions.

Our new energy frontier is starting to take shape, one based on “achieving American energy dominance” by leveraging all domestic resources—both those extracted from under the ground and those that grow upon it. Like a three-legged stool, three pieces must be in place: a 5.25-billion-gallon U.S. EPA renewable volume obligation (RVO) under the federal Renewable Fuel Standard for 2026*; reasonable IRS tax policy under section 45Z; and strong market drivers, including supportive environmental regulations and firm corporate commitments.

It is notable if not historic that the oil industry and renewable fuels leaders have come together in agreement to seek from EPA a 5.25-billion-gallon RVO in 2026—finally a level based on current reality and realistic growth potential. The clean fuel production tax credit (45Z) hangs in the balance awaiting final guidance from the U.S. Department of the Treasury and IRS. Lackluster initial guidance from the Biden administration sets the stage for a potential course correction under a new Trump administration. Regardless of these outcomes, there is a new set of fundamentals the renewable fuels sector will have to navigate, characterized by uncertainty.

New tariff and trade policies contributed to the first-quarter U.S. gross domestic product (GDP) falling by 0.3 percent. Though likely due to stockpiling of goods before the tariffs were implemented, the contraction of the economy is a sign of brewing weakness. Beyond slowdowns in consumer spending, the longer-term effect of the new tariffs is somewhat predictable: fewer imports arriving by container ship and fewer trucks needed to deliver to retail customers, all of which translates into lower overall demand for fuel. Until the trade and tariff situation becomes clearer, economic uncertainty rules the day. The renewable diesel fuel sector was already reeling at some level with plants being idled due to poor market conditions, and now the oil sector is feeling bearish as the price of crude oil is trending down below $60 a barrel.

A major overhaul of federal environmental rules is underway. While efforts to repeal the endangerment finding that effectively underpins most climate policies may have a lower chance of success, support for eliminating California’s waiver to establish more stringent vehicle-emissions policies under the Clean Air Act is gaining ground from industry and Congress alike. A revocation of the endangerment finding would likely move the federal government out of the decarbonization business for good.

Overturning the California emissions waivers could shift the U.S. back to a single national standard for vehicle and fuel regulations. This would be a welcome change for automakers currently navigating both a federal baseline and a California-led, electric vehicle-focused standard adopted by 15 states and increasingly out of sync with consumer demand. Regardless of the outcome, such a move would almost certainly trigger a prolonged legal battle.

In the commercial-trucking industry, policy is a key driver of fuel and technology choices. Every major rule governing emissions, fuel economy and greenhouse gases is now under scrutiny by the new EPA leadership. These are the rules that drive carbon and other emissions reductions and require introduction of zero-emissions vehicles (ZEVs). Truck and engine manufacturers—including Cummins, Daimler, Paccar, Volvo and International—have affirmed their readiness for “all regulatory eventualities,” including compliance with the new diesel-engine emissions standards that will further reduce nitrogen-oxide emissions by about 90 percent starting with 2027 models. They also acknowledge the new challenges facing the adoption of ZEVs without significant government funding and support. While resigned to a slower adoption timeline, they remain committed to ZEV technology. At the same time, these truck and engine makers also reaffirm their support for advanced diesel and renewable biofuels as practical, near-term solutions for their customers.

Beyond public policy lies public sentiment, and what people are saying. Bloomberg Green analyzed transcripts of S&P 500 company-earnings calls going back to 2020, tracking mentions of more than a dozen terms including “climate change,” “global warming,” “ESG,” “clean energy” and “green energy.” On average, companies are talking about the environment 76 percent less now than they were three years ago.

While there may be less talk about carbon emissions, efforts to address them will persist—though ongoing economic uncertainty is likely to complicate progress. State governments and corporate America will have to take the lead if the federal government unhitches fully from the decarbonization bandwagon. With a 5.25-billion-gallon EPA RVO, reasonable IRS tax policy and adequate market conditions, we are well-positioned to benefit from the continued growth of renewable biobased diesel fuels in the years ahead.

*Editor’s Note: This article was published in the Summer 2025 issue of Biobased Diesel®, which was printed shortly before EPA issued its 2026 and 2027 RVO proposal.