The U.S. Environmental Protection Agency (EPA) on June 13, 2025, issued a proposed rule, "Renewable Fuel Standard (RFS) Program: Standards for 2026 and 2027, Partial Waiver of 2025 Cellulosic Biofuel Volume Requirement, and Other Changes." The so-called "Set 2" proposed rule continues the Trump Administration's actions to promote energy independence, the U.S. rural economy and domestic interests, while penalizing imports. EPA has stated its intention to finalize this rule by Oct. 31, 2025, and will accept public comment on the proposal by Aug. 8, 2025.
This Holland & Knight alert offers an overview of the proposed changes, all of which are subject to comment by stakeholders and could change in a final rule.
Two-Year Proposal
EPA states that it is appropriate to propose volume requirements for two years instead of a longer time frame due to the increased uncertainty of trying to project out further in the future, which increases the likelihood of needing to adjust volumes.
Percentage Standards and SREs
Obligated parties use the annual percentage standards to calculate their Renewable Identification Number (RIN) retirement obligation. If small refinery exemptions (SREs) have already been granted, the calculation removes SRE-exempted volumes of gasoline and diesel from the denominator of the formula to set the percentage. EPA says it is still determining its SRE approach, so it is proposing the percentage with the assumption that there will be 18 billion gallons of exempt gasoline and diesel due to SREs (i.e., 34 SRs are exempted) and has calculated the percentage standards accordingly. In parentheses next to the proposed percentage standards below is the alternative if zero gallons of gasoline or diesel are exempt (i.e., zero SREs).
EPA recognizes that while the supply of conventional biofuel (D6 corn-based ethanol) in 2026 and 2027 will likely fall short of the implied 15 billion gallon volume, the proposed total renewable fuel volumes are still achievable through the use of additional volumes of advanced biofuel beyond the volume requirement for that category.
RIN Reduction for Foreign Renewable Fuel or Renewable Fuel from Foreign Feedstocks
EPA is proposing a reduction in the number of RINs generated for imported renewable fuel and renewable fuel produced from foreign feedstocks. Under the proposal, beginning in 2026, a gallon of imported renewable fuel or renewable fuel produced domestically but using foreign feedstocks would generate half (50 percent) the number of RINs that the same gallon of purely domestic renewable fuel generates.
EPA states this change is "in response to the dramatic increase in imported biofuels and feedstocks used to produce biofuels in the U.S. observed in recent years and align with the statutory goals of bolstering national energy independence. Imported renewable fuel and renewable fuel produced from foreign feedstocks do not further energy independence and are projected to result in fewer employment and rural economic development benefits relative to renewable fuels produced in the U.S. from domestic feedstocks." However, EPA is asking for comment on whether these provisions should be limited to "only a subset of countries to reflect the reduced economic, energy security, and environmental benefits of imported renewable fuel and feedstock from those countries." EPA is also asking for comment as to whether the reduction in value should be greater or less than 50 percent and whether there are any legitimate reliance interests that should be considered with respect to this proposal.
Partial Waiver of 2025 Cellulosic
EPA is proposing to lower the cellulosic volumes for 2025 due to a projected 0.19 billion RIN shortfall; EPA is using its cellulosic waiver authority to make the reduction and will make cellulosic waiver credits (CWC) available if this action is finalized. In a separate final rule action, EPA is finalizing a revised 2024 cellulosic volume of 1.01 billion RINs (revised down from 1.09 billion).
Eliminate Renewable Electricity from RFS
The proposal will remove renewable electricity as a qualifying transportation fuel, stating that RFS is about liquid fuels, not electricity. The proposed changes would find that renewable electricity does not meet the definition of renewable fuel under Clean Air Act Section 211(o)(1)(J) and remove references to renewable electricity from the regulations.
Miscellaneous Proposed Changes
EPA is proposing additional regulatory changes in several areas to strengthen its implementation of the RFS program, including:
- specifying new equivalence values for renewable diesel, naphtha and jet fuel
- updating RIN generation and assignment provisions
- clarifying that RINs cannot be generated on pure or neat biodiesel that is used as process heat or for power generation
- changing the percentage standards equations, including specifying the biomass-based diesel (BBD) standard in RINs rather than physical gallons
- updating existing renewable fuel pathways and adding new ones
- adding definitions for terms used throughout the regulations and updating other definitions
- adding a joint and several liability provision applicable to importers of renewable fuel
- revising compliance reporting and registration provisions, including clarifying that small refineries that receive an exemption from their RFS obligations must still submit an annual compliance report
- clarifying certain testing requirements for biodiesel and renewable diesel
Request for Comments on Future Changes to the RFS
EPA says opportunities remain to improve the RFS program, and it requests comment on a variety of potential changes – including, but not limited to:
- a general pathway for the production of renewable jet fuel from corn ethanol, including the consideration of ways to reduce emissions for this pathway such as the use of carbon capture and storage, renewable natural gas for process energy and low-carbon farming practices
- the definition of "produced from renewable biomass"
- additional program amendments to ensure that imported renewable fuels are produced from qualifying feedstocks and enhance ability to track feedstocks to their point of origin; these comments may include input on methods and data to improve evaluation of environmental impacts associated with imported feedstocks such as used cooking oil and tallow
- program enhancements to increase the use of qualifying woody biomass to produce renewable transportation fuel; EPA specifically requests comment on the extent to which the renewable biomass definition in 40 C.F.R. 80.2 aligns with current wildfire risk potential and corresponds to wildfire ignition behavior science, as well as how to best maximize the eligibility of woody biomass residues generated at sawmills and other forest products manufacturing businesses that have not been adulterated by chemicals or other nonwood contaminants
- an option to apply the import RIN reduction provisions to imported renewable fuel and renewable fuel produced domestically from foreign feedstock from only a subset of countries to reflect the reduced economic, energy security and environmental benefits of imported renewable fuel and feedstock from those countries
- any other modifications to the RFS program designed to unleash the production of American energy
Next Steps
EPA will hold a public hearing on July 8, 2025, with a goal of finalizing the rule by Oct. 31, 2025. There will be a 45-day comment period, with comments due to the agency by Aug. 8, 2025.
