Biobased diesel producers are grappling with policy uncertainty in 2025, as CoBank warns that inconsistent regulation is undermining investment, planning, and market stability across the clean fuels sector.

CoBank released its latest quarterly research report on April 10. The report highlights current challenges facing the biobased diesel industry and cites policy uncertainty and trade disruptions due to tariff disputes as factors impacting biofuel producers. 

Within the report, CoBank stresses that upcoming Renewable Fuel Standard renewable volume obligations (RVOs) and implementation of the 45Z clean fuels production credit will determine the trajectory of biofuels demand and production. The EPA could propose 2026 RVOs as soon as this spring, allowing the agency to finalize a rulemaking before the end of this year. CoBank said the upcoming 2026 RVO could bring some certainty to the biofuels industry if RVO levels more closely align with production capacity. 

According to CoBank, biodiesel and renewable diesel production fell by 41% in January and February compared to 2024. The report attributes the decline to the absence of the $1 per gallon blenders’ tax credit and uncertainty over the 45Z credit. “Margin pressure exceeded projections,” CoBank wrote in the report. “Biodiesel producers were operating at 39% nameplate capacity in February, while renewable diesel producers were running at 56% (vs. 72% last year) and seeing thin margins. The pullback in production is greater than anticipated, revealing even larger plants are making the economic decision not to run or pull forward maintenance.”

Assuming biomass-based diesel RVOs for 2026 are not set at or below the 2025 level of 3.35 billion gallons, CoBank said biobased diesel production will need to pick up this quarter to generate enough renewable identification numbers (RINs) to meet the 2025 RVOs. 

Download a copy of the Bio-based Diesel Report, available on the CoBank website » GO.

Clean Diesel Needs Policy Clarity — Let Technology Lead While Lawmakers Catch Up

Policy instability is delaying growth in the biobased diesel space, but that doesn’t mean clean fuel innovation should wait. Forward-thinking companies are future-proofing now by investing in flexible, circular fuel systems.

Klean Industries Delivers Fuel Independence & Resilience:

✅ Tire pyrolysis oils and biogenic fuels are compatible with LCFS programs
✅ Carbon tracking and monetization via KleanLoop™ blockchain
✅ Modular clean diesel & SAF production platforms
✅ Guidance on regulatory alignment and long-term fuel strategies

Talk to Klean Industries to navigate clean fuel markets confidently and future-proof your biobased diesel production amid shifting policy landscapes » GO.