Jakob Christopherson, Research Fellow
Brigit Rollins, Staff Attorney
On April 1, 2026, the Environmental Protection Agency (“EPA”) published its “Set 2” final rule to establish the 2026 and 2027 renewable volume obligations (“RVO”) for the Renewable Fuel Standard (“RFS”). The RFS is a Clean Air Act (“CAA”) program that requires fuel refiners and importers of gasoline to blend a certain amount of biofuel into their fuel supply each year. Although the annual amount used to be dictated directly by statute, since 2023, EPA has been responsible for setting the required amount of biofuel to be blended under the RFS. Along with establishing that number for 2026 and 2027, the Set 2 final rule also makes regulatory changes to the RFS including reallocating waivers from small refineries from previous years and closing a pathway that would have allowed some electricity used to power electric vehicles to be eligible for the RFS program. The rule will go into effect on June 15.
Overview of Renewable Volume Obligations and Renewable Identification Numbers:
The RFS requires all transportation fuel sold in the United States to contain a minimum volume of biofuel. The program was initially established as part of the Clean Air Act (“CAA”) in the Energy Policy Act of 2005 and later expanded by the Energy Independence and Security Act of 2007. EPA administers the RFS program in consultation with both USDA and the Department of Energy. Part of that administration includes setting the volume of renewable fuel that refiners and importers of gasoline will be required to blend with their fuel the following year. The RFS refers to these blending requirements as Renewable Volume Obligations or RVOs. RVOs are set for each of the four categories of renewable fuel – cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel.
To ensure compliance with RVOs, the RFS uses a tradable credit system called renewable identification numbers (“RINs”). Under this system, a RIN is generated whenever a producer makes a gallon of renewable fuel. The RIN then attaches to the gallon of fuel and is used to track renewable fuels in the marketplace. Producers and importers of petroleum-based fuels that are subject to RFS may buy and sell RIN credits to comply with RVOs. At the end of each RFS compliance year, fuel refiners and importers must retire the RINs for each gallon of renewable fuel that is blended into gasoline and diesel fuel. Compliance with the RFS is demonstrated by the number of RINs retired
From 2006 to 2022, RVOs were defined in statutory language. However, post-2022, EPA is responsible for setting annual RVOs. EPA refers to RVO rules as “Set” rules. In 2023, EPA finalized Set 1 which established RVOs for 2024 and 2025. Set 2 establishes RVOs for 2026 and 2027.
Set 2 Final Rule Breakdown:
EPA published its initial proposal for Set 2 in June 2025. The final version was released in March 2026 and will take effect on June 15, 2026. Notably, the RVOs established under the final rule are higher than what EPA initially proposed and have set the record for the highest ever RVOs. Under the initial proposal, EPA would have required 24.02 billion RINs to be generated in 2026 and 24.46 billion in 2027. Under the final version of Set 2, EPA has increased total renewable fuel requirements to 25.82 RINs in 2026 and 25.98 billion in 2027.
Beyond setting 2026 and 2027 RVOs, the final Set 2 rule also makes several regulatory changes to the RFS, including reallocating Small Refinery Exemption (“SRE”) waivers and ending the eRIN program.
Under the RFS, small refineries that process no more than 75,000 gallons a day can petition EPA for an exemption from RFS fuel blending requirements. 40 C.F.R. § 80. The waiver will be granted if the refinery can show that compliance with the RFS would cause it to experience “disproportionate economic hardship.”42 U.S.C. § 7545 (o)(9)(B)(i). Waivers are granted on an annual basis although as a practical matter waivers are often granted years after a petition was submitted. For example, in August 2025, EPA granted a backlog of 175 SRE petitions covering compliance years 2016 – 2024. When waivers are granted, the waived RINs are effectively deducted from the overall RVO requirements for that year. Because the RINs are waived, they are not blended into gasoline or diesel fuel and therefore are not retired. This practice has proven controversial with some agriculture and biofuel advocates claiming that SREs reduce the overall demand for renewable fuels. To address this, the final Set 2 rule establishes a 70% reallocation of exempted RINs from 2023-2025 into the 2026-2027 compliance years. This means that 70% of the gallons of renewable fuels waived under SRE petitions for the 2023-2025 compliance years have been reallocated to the overall RVOs for 2026-2027. In total, EPA states that this translates to almost 1 billion RINs reallocated into 2026 and 1.04 billion reallocated into 2027.
Along with the SRE reallocation, the final Set 2 rule has also ended the eRIN program that EPA established in 2022. Under that program credits, known as eRINs, could be generated by using electricity created by renewable biomass to power electric vehicles. At the time the program was created, EPA claimed that it fell under the agency’s CAA authority because the statute provides that the RFS applies to renewable “fuel that is produced from renewable biomass and that is used to replace or reduce the quantity of fossil fuel present in a transportation fuel.” 42 U.S.C. § (o)(1)(J). EPA explained that eRINs would satisfy this requirement if they were applied to electricity that was produced from renewable biomass and used as transportation fuel for electric vehicles. However, in the final Set 2 rule, EPA stated that it no longer believes the CAA grants EPA the authority to extend the RFS program to renewable electricity. According to EPA, the best reading of the CAA is that, for purposes of the RFS, “a renewable fuel must physically displace a volume of fossil fuel that is present in a motor vehicle or motor vehicle engine.” Because renewable electricity does not replace the replace the volume of fossil fuel in motor vehicle or motor vehicle engine, EPA no longer believes that the eRIN program is allowable under the CAA and has formally retired the program.
Conclusion
Ultimately, the new Set 2 final rule sets the record for highest ROVs. According to EPA, Set 2 will result in a 60% increase over 2025 for both biodiesel and renewable diesel RVOs. Along with record-high RVOs, the Set 2 final rule has resulted in substantive changes to the RFS program itself including a reallocation of SRE waivers from 2023-2025 and the termination of the eRIN program. The final rule is set to go into effect on June 15, 2026.
To read the Set 2 final rule, click here.
For more resources from EPA on the Set 2 rule, click here.
For more CAA resources from the National Agricultural Law Center, click here.