President-elect Donald Trump’s recent election victory is likely bad news for the biofuel sector in the United States on a couple of fronts, says an industry analyst.
Why it matters: Canadian oilseed growers have been excited about market opportunities for U.S. biofuel, although benefits have been muted so far, thanks in part to U.S. imports of used cooking oil from China.
Chris Hairel, vice-president of consulting with Argus Media, said there are three key biofuel policy issues that could be affected by Trump’s government.
Read Also
Drones jumpstart cover crop planting
Drones are a tool that can help farmers with cover crop planting in still-growing corn and soybeans.
The first is uncertainty about what will happen with the U.S. Environmental Protection Agency’s renewable volume obligation (RVO) for 2026 and 2027. The RVO establishes how much ethanol, biodiesel and renewable diesel the U.S. is required to produce and consume nationally.
The biofuel sector was already bitterly disappointed with the 2023, 2024 and 2025 targets established under outgoing President Joe Biden’s administration. The mandates were far lower than anticipated and caused Renewable Identification Number (RIN) values to plummet. RINs are credits that are used to fulfil RVOs.
Hairel anticipates the biofuel sector is in for further disappointment under a Trump administration if the EPA establishes less aggressive RVOs than it would have under a Democrat administration.
“They may rise a bit compared to where they are at the moment, but we don’t see them being significantly higher,” he said during a recent Argus webinar about Trump’s expected impact on the energy sector.
The 2026 and 2027 targets will be easily achieved and Hairel said the price outlook for RINs will be “less bullish.” RIN values during Trump’s previous presidency were typically under 10 U.S. cents per gallon due in a large part to the small refinery exemptions.
Under Biden’s presidency, they typically traded at about twice that value, although by the end of his term they were back to the 10-cent range because of disappointing 2023-25 RVO targets.
The second key policy issue will be the small refinery exemptions that became popular under the previous Trump administration, which exempted some refineries from having to comply with the RVO.
Those exemptions wiped out about 20 per cent of the national RVO requirement, significantly reducing demand for biofuels and driving down RIN values. Biden’s administration stopped granting the exemptions.
“If Trump were to bring back the small refinery exemption, we would expect that to depress RIN prices going forward,” said Hairel.
The final key policy issue is whether Trump’s EPA allows blending to E15 in the gasoline pool. Cars built after 2001 are capable of driving on E15, or higher blends. That represents a large portion of the light duty vehicle fleet.
A Trump administration might embrace that policy because it directly benefits agriculture in Republican-dominant states.
In general, Hairel anticipates that a Trump government will shift biofuel policy away from a focus on low carbon intensity and more toward supporting agriculture. The outcome could be the same — to encourage higher adoption of biofuels — but the policy levers will be different.
Hairel said the other important thing to watch is the transition from the dollar per gallon blender’s tax credit, which expires at the end of the year, to the 45Z producer’s tax credit.
He noted final guidance on the new credit has not been released and that is unlikely to happen until after Trump’s inauguration in January.
The 45Z credit is supposed to encourage more renewable diesel and sustainable aviation fuel production facilities. But the credit is only authorized for 2025 and 2026, so it would expire before a new plant could take advantage of it. That is why Hairel wonders if it will be extended.
He also wonders if the existing blender’s credit will be extended since the new 45Z credit will not likely be implemented on Jan. 1, 2025.
It is even possible that the two credits could be stacked for a while, which would help projects planned for Republican-won states.
Finally, Hairel believes there is increased likelihood that individual states will adopt biofuel incentive programs if they don’t see enough happening at the national level.
