EPA’s New Rule Set to Advance Biofuels Production

The US Environmental Protection Agency (EPA) has finalized changes to the Renewable Fuel Standard (RFS) “Set 2” rule, establishing renewable fuel blending requirements for 2026 and 2027 at the highest levels in the agency’s history. The rule is intended to strengthen American energy independence, expand domestic biofuel production, and support domestic farmers and rural economies.

The primary objective of the Set 2 rule is to increase the use of domestically produced biofuels, including ethanol, biodiesel, and renewable diesel. By doing so, EPA aims to reduce reliance on foreign oil while creating a more stable and predictable market for American agricultural products. The agency claims that the rule will generate $31 billion in value for corn and soybean oil markets in 2026, increase net farm income by $3–4 billion, and contribute more than $10 billion to rural economies, to support over 100,000 jobs. These estimates would equate to roughly $4,400 to each corn– and soy-producing farm owner in the US. The rule is also framed as a major step toward energy security, with EPA projecting that increased biofuel use will reduce US oil imports by approximately 300,000 barrels per day across 2026 and 2027. Biopropane/renewable propane production was not mentioned directly, but crop-based biopropane producers may be able to benefit under the new rule.

To meet the new goals, biodiesel and renewable diesel production must increase by more than 60% compared to 2025 levels. Meanwhile, the rule maintains the 15-billion-gallon requirement for conventional ethanol, providing continued stability for corn growers and ethanol producers. The EPA has removed renewable electricity infrastructure from eligibility under the RFS, emphasizing that the Clean Air Act focuses on liquid and gaseous fuels rather than electrification. This change reflects a shift away from prior efforts to incorporate electric vehicle infrastructure into the program. EPA also addressed Small Refinery Exemptions by finalizing a 70% reallocation of previously exempted blending obligations (from 2023–2025) into the 2026 and 2027 compliance years; this approach is intended to balance biofuel demand with maintaining a stable credit market.

Looking ahead, the rule introduces a new provision beginning in 2028, under which foreign-produced fuels and feedstocks will receive only half the compliance value of US-produced biofuels. This measure is designed to incentivize domestic production and ensure that American farmers benefit more directly from the program. These measures are likely to significantly expand the share of biofuels production in the total national agricultural output for the remainder of the Trump presidency. Coupled with increasing shares of biofuels in clean-energy infrastructure projects, biofuels may enjoy a protected, favored status through 2028.

Overall, the “Set 2” rule significantly expands the Renewable Fuel Standard, prioritizing domestic agriculture, increasing biofuel production, and reinforcing the Trump Administration’s goals for US energy independence.

To learn more about this rule and how it may impact federally funded projects, reach out to NPGA’s grants and agency engagement manager, Nicholas Edward, at [email protected].