Top Photo: Copyright 2025, G. Edward Johnson. CC-By Attribution.

The U.S. Environmental Protection Agency has finalized its “Set 2” renewable fuel volume obligations for 2026 and 2027, setting targets higher than those proposed last year and signaling continued federal support for domestic biofuel production. The decision provides greater market certainty for fuel producers, refiners, and project developers navigating a period of policy uncertainty and evolving energy markets.

The final rule establishes total renewable fuel volumes at 25.82 billion renewable identification numbers (RINs) in 2026 and 25.98 billion in 2027, up from 24.02 billion and 24.46 billion, respectively, in the June 2025 proposal. The increase reflects a shift toward higher expectations for renewable fuel blending, particularly for advanced and cellulosic fuels tied to waste-based feedstocks.

Higher Targets Across Key Categories

The final volumes reflect incremental growth across major fuel categories. Cellulosic biofuel requirements are set at 1.36 billion RINs in 2026 and 1.43 billion in 2027. Biomass-based diesel volumes rise to 8.86 billion and 8.95 billion RINs, while advanced biofuel requirements reach 10.82 billion and 10.98 billion RINs. Conventional ethanol remains steady at 15 billion gallons.

While the structure of the Renewable Fuel Standard (RFS) remains largely intact, the increases reinforce the program’s role in driving demand for fuels derived from organic waste streams, including renewable natural gas (RNG) produced through anaerobic digestion (AD) and landfill gas recovery.

Policy Decisions Drive Volume Increases

The higher targets are tied to two key policy decisions aimed at maintaining market stability.

First, the agency delayed implementation of a proposed policy that would have reduced the value of renewable fuels produced from imported feedstocks. That provision, which would have cut associated RIN values in half, was intended to incentivize domestic production. EPA ultimately postponed the policy, citing concerns that immediate implementation could disrupt supply chains and increase fuel prices.

Second, the agency moved forward with a partial reallocation of volumes waived through small refinery exemptions. By redistributing 70% of previously waived volumes back into the program, EPA sought to preserve demand for renewable fuels while maintaining a functioning credit market.

Together, these decisions helped push the final targets above earlier projections while avoiding abrupt shifts in market conditions.

Removal of Renewable Electricity

Beyond the volume increases, the final rule formalizes a significant program change by eliminating renewable electricity from the RFS. After several years of discussion and limited implementation, electricity pathways (e-RINs) were removed from qualification under the program. This affects anaerobic digesters generating electricity.

The decision reinforces the RFS’s focus on liquid and gaseous fuels, including RNG. At the same time, EPA introduced updated definitions and reporting requirements for biogas producers, including clarification around RNG batch tracking and RIN generation.

Industry Response Reflects Cautious Optimism

Reaction from the RNG sector has been broadly positive, particularly in response to higher cellulosic biofuel volumes.

“The final rule is certainly an improvement over the agency’s Set 2 proposal,” said Johannes Escudero, founder and CEO of the RNG Coalition. “The RNG Coalition will continue to urge EPA to administer a growth-oriented program as envisioned by Congress.”

Escudero emphasized the importance of the RFS in supporting investment across the sector. “The RNG industry in the U.S. has grown substantially over the last decade due in part to a strong RFS,” he said. “The program is critical to supporting significant investment across American communities and growing volumes of clean fuel.”

He added that the industry is positioned for continued expansion. “With hundreds of facilities under construction, we stand ready to continue supplying increasing volumes of American alternative fuels through the horizon of Set 2.0 and beyond.”

The response underscores the extent to which the RFS continues to serve as a central policy driver for waste-based fuel development, particularly for projects converting landfill gas, agricultural residues, and food waste into RNG.

Debate Over Program Direction Continues

Despite support for higher volumes, the final rule highlights ongoing tensions over the long-term direction of the RFS. EPA’s decision to delay the import feedstock policy reflects the challenge of balancing domestic production incentives with market stability. While some stakeholders favor stronger measures to prioritize U.S.-based fuels, others have warned that abrupt changes could disrupt supply chains and increase costs. EPA has indicated that it may revisit the import feedstock policy in future rulemakings, potentially introducing new incentives for domestic production beginning in 2028.

Questions also remain about how the agency sets targets for cellulosic fuels, particularly those derived from biogas. Some industry participants argue that current methodologies may underestimate production potential and constrain growth in sectors such as AD.

The reallocation of small refinery exemption volumes addresses another long-standing issue within the program, but it does not fully resolve concerns about how exemptions affect real-world fuel demand.

Implications for Biogas and Organics Recycling

For the biogas sector, the final rule offers a generally favorable outlook. Higher cellulosic targets support continued investment in RNG infrastructure, including AD and landfill gas systems. The regulatory clarifications included in the rule may also provide greater certainty for developers navigating compliance requirements.

At the same time, the exclusion of renewable electricity narrows the scope of eligible pathways, reinforcing the importance of RNG as the primary mechanism for biogas participation in the RFS.

For now, the higher volume obligations offer a signal of continuity. Whether they are sufficient to capture the full growth potential of the biogas and renewable fuel sectors will depend on how future rules balance ambition with market realities.