Commonsense Reforms to Revive the Renewable Fuel Industry

An agricultural and biofuel producer crisis unfolding today can be thwarted with a few simple but effective solutions.

It is too late for some and may be too late for many biodiesel plants. The renewable fuel industry has been on a rollercoaster ride for a long time with bad policies, mismanaged regulations, loopholes and unfair trade, just to name a few issues affecting the market. Fixing it really is just a matter of common sense. Most people want clean air, clean water and a clean environment. And most people who have invested billions of dollars in U.S. agricultural processing and renewable fuels want these industries to succeed. Yet over half of the biodiesel plants are idled, with many permanently shuttered. Many renewable diesel plants are also idled or operating at reduced capacity. The ethanol industry is also distressed. Why? Uncertainty and bad policy. The whole system is broken, not just parts of it. Poor policies have strangled the industry with lapsing credits and caps that limit growth.

Market Reforms Needed

Perhaps it is time for an overhaul. Not everyone will agree, but it is certainly worth considering. Commonsense reforms for both biodiesel and ethanol could ensure that we have a robust renewable fuel industry that is also good for agriculture and the environment:

• Delay 45Z implementation for biobased diesel and reinstate the blenders tax credit (BTC).

• Raise the renewable volume obligations (RVOs) under the Renewable Fuel Standard*.

• Make year-round E15 permanent.

• Reform or eliminate the Quality Assurance Plan program.

• Stop penalizing agriculture with uncertainty.

Section 45Z is half-baked and should be delayed or scrapped altogether for biodiesel. There is too much investment and too many jobs on the line. Continuing to wait on 45Z clarification will destabilize the industry further. Billions of U.S. dollars have been invested in soybean-processing and renewable fuel facilities. These are existing domestic industries that farmers rely on for value-added markets. While not nearly as sexy as artificial intelligence (AI) data centers, this is the foundation of our economy. Biodiesel and ethanol are not “Green New Deal” industries—they have been producing liquid renewable fuels for decades while creating thousands of jobs across the country and fostering an interdependent value chain. The BTC, which has lapsed multiple times over the years only to be retroactively reinstated, should be immediately extended for 2025 and 2026 to allow more time for a 45Z tax credit to be thoughtfully planned. This will provide immediate stability for biofuel producers. If this happens before this article is published, then that would be great.

The biobased diesel RVO should be raised to 5.25 billion gallons (at minimum) for 2026 to reflect the realities of the actual combined production capacity of renewable diesel and biodiesel, which the U.S. Energy Information Administration states is over 7 billion gallons. This will reflect the real, existing, combined capacities of these industries. The 2027 RVO should be at least 6.5 billion gallons to reflect industry capacity and the additional soybean-processing plants currently being constructed. Higher RVOs will incentivize production without distorting the market.

Year-round E15 should be made permanent. Special waivers are given by EPA administrators to “bring down the cost of gasoline,” but there is no certainty to these waivers. A permanent E15 would put a continuous downward pressure on gasoline prices and help the ethanol industry by providing clarity through expanding the domestic market. No other industry faces such arbitrary production caps, which limit ethanol growth and consumer choices.

Eliminate the QAP program or make it mandatory. It serves no purpose except to punish small producers. The major buyers have independent vetting processes and the QAP program is just a redundant quagmire. It is a multitiered system in which small producers must pay for verification yet still get discounted on their RINs—if they can sell them at all. Q-RINs do not really mean anything anymore and they represent a very small percentage of RIN generation. If unqualified oil is imported on a large scale and used to produce fuel by a non-QAP entity, who is watching? There should not be multiple standards for detecting and preventing RIN fraud.

Clarity Needed

The industry desperately needs clarity. Soybean and corn farmers created these markets in part to help add value and remain competitive. We are already losing farmland to urban sprawl and solar farms at an alarming rate. Is it wise to further punish corn and soybean farmers? Ethanol, biodiesel and renewable diesel are all on their heels, in large part due to the 45Z debacle and unprecedented uncertainty.

The current renewable fuel regulatory structure is broken. Farmers pioneered biofuels markets to add value to their crops, yet ironically the very crops that they grow are somehow bad. Domestic-crop acreage is diminishing, not increasing. Now is the time to simplify the regulatory structure with commonsense reforms and let the industry continue to grow and become more efficient, just like it has over the past two decades. This will revive the industry, open closed plants, bring jobs back and improve rural economies. It seems like common sense to me.

*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.

Author: Pete Moss

President

Frazier, Barnes & Associates

901-725-7258

fbapete@frazierbarnes.com