Biofuel Policy Brief - April 2026

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Key biofuel policy developments in April:

• IMO meeting failed to reach a breakthrough on global low carbon shipping mandate, leaving the toil to working groups ahead of decisive vote later this year
  

• EU Commission opens the door for doubling the allowed ethanol content in gasoline to 20% (E20). EU Parliament votes in favor of ETS2 reform with the aim to prioritize stability and household protection
  

• German Bundestag proposes higher 2027 THG obligation as well as elevated e-fuel mandate and more lenient feedstock criteria in the medium to long term, compared to original cabinet RED III transposition draft
  

• US Farm Bill omits language around E15 pump availability, although a decision will likely be taken in May. Meanwhile US heating oil can have higher biodiesel content according to the updated fuel specifications
  

• Southeast Asian countries accelerate biofuel mandate increases, with notably Indonesia rolling out B50 nationwide from July this year and Vietnam aiming to raise its ethanol mandate to 15-20 vol% after the 10% mandate has already been brought forward

• Brazil may raise its ethanol mandate from 30% currently to 32% for an initial period of 6 months, whilst an increase in the biodiesel mandate from 15% to 16% is not deemed feasible this year

International

The IMO’s Marine Environment Protection Committee (MEPC) met in London last week for its 84th meeting. A main topic was the Net Zero Framework, which sets mandatory carbon intensity reductions for maritime fleets and associated carbon levies - effectively serving as a global low carbon shipping fuel obligation. Adoption of the framework was scheduled for last year, but opposing countries managed to delay the decision to 2026 - casting doubt on whether the measures still enjoy enough support to come into force at all. Last week's meeting can therefore be described as somewhat of a rescue mission; an attempt to find a compromise between those countries wishing to keep the original setup with minimal changes (e.g. EU, UK, Canada, Pacific Island States) and those who would like to see the compliance mechanisms weakened by scrapping economic penalties (e.g. US, Saudi Arabia, Russia). No real breakthroughs were reached, however. This means work will need to continue at two intersessional working groups in September and November, ahead of the decisive vote slated for the MEPC’s next meeting between 30 November and 3 December this year.

Europe

EU Commission President Ursula von der Leyen sent a letter to the European Parliament stating that the EU will consider allowing higher ethanol blending to reduce reliance on foreign oil imports. More specifically, she mentioned E20 (20% ethanol in gasoline) as an option that is being considered. Currently, E10 is the maximum allowed content the EU allows as a standard gasoline grade - and it has overtaken E5 to become the most common grade in key countries like France. This is lower than e.g. the US (where E15 is common), Brazil (with an active E30 mandate), or India (which reached an average ethanol share of E20 last year). Allowing for a higher ethanol share, could have a dampening effect on rapid EU biomass-based diesel demand growth, seeing as both typically contribute to the same road biofuel blending mandates. That said, it would not necessarily lead to a sudden jump in ethanol blending shares overnight. Once the EU allows it, member countries still decide nationally whether to actually roll out the grade, a process that can take years, and not all countries are guaranteed to do so. Moreover, E10 would likely still have to be offered as a protected grade. This means that any gas station offering E20 would still need to offer lower ethanol grades as well so that consumers can choose.

The EU Parliament voted with a large majority in support of ETS2 reform. Under the ETS2 scheme, road fuels and households are scheduled to pay a carbon price from 2028 with the goal of reducing emissions by 42% in these sectors by 2030 (vs 2005). Although the Parliament still formally supports this emission reduction target, the political momentum has shifted since the scheme’s inception, with energy price inflation coming back to the centre stage of the discussion. The reform is therefore an attempt to save the measures politically by prioritizing stability and household protection. Some of the changes that the EU Parliament is proposing, is for the 45-euro price cap to be indexed to 2026 rather than 2020 price levels, to extend this cap beyond its original 2029 expiration, to shorten the response time to release MSR supply if prices exceed the threshold from 2 months to 1 month, to cancel the immediate deletion of unused carbon credits, and to temporarily allow for some residential building to be exempt.

In Germany, the Bundestag voted in favor of significantly raising the country’s THG emission reduction obligation to transport fuel suppliers as part of the country’s RED III transposition. One key change compared to the cabinet’s earlier proposal, is that a higher 17.5% emission reduction obligation is proposed for 2027 (vs 16% earlier). This to offset a large amount of banked tickets that requalify from that year. Significantly higher levels for e-fuels (RFNBOs) are also tabled, while over the long term the crop cap is somewhat relaxed from 4.4% in the old proposal to 5.8%. What is more, the Bundestag is proposing to allow co-processed HVO from animal fats, albeit still excluding UCO based HVO co-processing. This vote now clears the way for final approval in the Bundesrat, which is expected in the coming weeks. Industry stakeholders are still largely expecting for most of the elements to apply retroactively from 1 January 2026 - despite final clarity on the levels still lacking now one-third into the year. In parallel, Germany’s BLE continued to add countries to the Nabisy list of qualifying biofuel origins. Remaining absent from the list however, are China and India - indicating that these may not make the cut as they do not meet the onsite audit criteria.

The Romanian Ministry of Energy has launched a public consultation on a 500-million euro state aid programme for biofuel production. Out of this, 400 million euros is earmarked for SAF and HVO facilities with a minimum capacity of 20 kt/a for SAF or 90 kt/a HVO, while the remaining 100 million euros is allocated for bioethanol plants with a minimum capacity 50 kt. The funds would cover up to 70% of eligible project costs, with a maximum amount of 133 million euros per HVO/SAF plants and 50 million euros per ethanol plants. Romania in the past already managed to attract some advanced biofuel plants (e.g. cellulosic ethanol), though these often struggled to be profitable. The proposed subsidies have the potential to radically improve the economics and attract new investments.

North America

The US House of Representative passed the 2026 Farm Bill, reaffirming SAF as an advanced biofuel. Notably however, the bill did not include language around year-round E15 sales due to jurisdictional disputes. Instead, a standalone vote on E15 is now scheduled for 13 May, which has the potential to permanently end the cycle of emergency waivers. For the fifth consecutive year now, the EPA has issued a nationwide emergency fuel waiver to allow E15 sales during the summer months. Allowing E15 in the US can lead to a faster jump in ethanol demand versus e.g. the above E20 discussion in the EU, given that no national implementation is needed. That said, there could still be some bottlenecks on the infrastructure side. Many gas station owners cannot document that their storage tanks and pumps are certified to handle 15% ethanol. This could lead to insurance issues, potentially making some pump owners reluctant to offer the grade. Still in the US, the ASTM this month updated a heating oil specification that raises the allowed biodiesel content to 21-50%. Previously, the limit was at 20%.

Asia

Several Southeast Asian countries are accelerating biofuel mandate increases in an attempt to soften the impact of fossil fuel price increases. In Indonesia, the Directorate General of Oil & Gas has issued a circular mandating B50 (50% biodiesel) from 1 July 2026. This is a significant increase from the previous interim target of B40 for 2026. Moreover, there are no regional carve-outs or major exemptions to certain diesel types. In other words, the ambition is for average biodiesel content in the diesel pool to actually increase by about 10 percentage points in H2 this year. This would translate to several million tonnes additional biodiesel demand. In any other country, such a large jump would have major ramifications for feedstock prices and availability. In Indonesia however, this is somewhat less the case due to the vast majority of biodiesel in the country being palm oil based. The palm oil industry’s major scale (with annual volumes larger than any other biomass-based diesel feedstock), means it has some capacity to absorb additional biofuel demand. Moreover, Indonesia is by far the world’s largest palm oil producer, and so can attempt to increase palm oil supply somewhat as well in the medium term.

Vietnam is planning to further increase the country’s ethanol blending mandate. Earlier it was already announced that the 10 vol% ethanol mandate would be implemented ahead of schedule, from 1 June. Now the government has communicated that a mandate of 15-20 vol% is being considered. Currently Vietnam does not have the ethanol production capacity to meet such rapid increase in volumes only with domestic ethanol however. However, the country did reduce its ethanol import tariff from 10% to 5%. This means imports can be expected to increase, notably from the US which has significant ethanol overcapacity.

Latin America

Brazil’s Minister of Mines and Energy stated a temporary increase in the country’s road ethanol mandate to 32 vol% will be considered at the country’s next National Energy Policy Council in early May. Currently, the blending mandate is at 30%. The increase would apply for a period of 180 days and be extendable if the authorized body deems the geopolitical situation still calls for a higher mandate. Brazil’s ethanol mandate was originally designed in the aftermath of the 1970s oil shocks, and has proven rather effective in reducing fuel price volatility in the country. From a technical vehicle compatibility standpoint, the Ministry is hopeful that a higher ethanol mandate will not constitute any issues. At the same time, an increase in the biodiesel mandate will likely not be possible this year. The Ministry considered raising this mandate from 15% currently to 16%. However, more tests and validations are needed before this can be implemented.