Under U.S. law, refiners and importers must blend specific volumes of biofuels into transportation fuels. This requirement, the Renewable Fuel Standard (RFS), was enacted in 2005 and strengthened in 2007, and is administered by the Environmental Protection Agency. Following a period of statutory blending requirements that ended in 2022, the EPA’s authority to set blending percentages has become discretionary. Provisional blending percentages for 2026 and 2027 are currently under debate and review, along with provisions for reallocating previously granted exemptions as additional blending requirements.
Compliance is managed through Renewable Fuel Identification Numbers (RINs), a credit system used to verify that blending requirements are met. RIN prices reflect whether the mandates are aggressive or lax, and these costs are passed on to consumers of gasoline and diesel.
Using a model adapted from S&P Platts, Figure 1 presents EPRINC’s ongoing estimates of the additional cost the RFS imposes per gallon of fuel. At a current estimate of 20 cents per gallon and 196 billion gallons of annual fuel consumption—137 billion gallons of gasoline and 59 billion gallons of diesel—the projected total annual cost approaches $40 billion for U.S. consumers.
Should the EPA’s final determination of blending mandates and reallocations for 2026 and 2027 prove particularly aggressive, these costs are set to rise further.
From the EPRINC Chart of the Week archive.