Biofuel Policy Brief - March 2026

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Dear reader, March started and ended with war in the world’s major oil and gas export hubs. With energy prices back on the frontpages, there are implications for biofuels as well as the policies driving their uptake. March also brought the most impactful biofuel policy development so far this year, with the finalization of US federal biofuel mandates. Nor have biofuel regulators in the rest of the world wasted much time this month. Key policy developments in March:

• Fuel price inflation can be expected to strengthen policy support for the cheaper types of biofuels and with domestic supply chains. It also involves risks of regulatory backtracking for more expensive or imported biofuels - especially around election time 

• Final version of US federal biofuel mandates confirms major jump in 2026-27 biomass-based diesel obligations. The imported feedstock penalty is scrapped for now, and 70% of small refinery exemptions will be reallocated to large refiners 
  

• Dutch RED III transposition is now final. In Germany a cancelled parliamentary discussion could delay finalization until May. The UK trade authority meanwhile changes its recommendation on duties against US HVO, now deeming these unnecessary
  

• China’s new five-year plan offers no clarity on SAF mandate plans. Singapore delays its SAF mandate several months while Vietnam attempts to bring forward its ethanol mandate, both citing geopolitical escalation as the reason
  

• Mercosur-EU trade agreement is signed into law while Brazilian ministry blocks accelerated biodiesel mandate increase, citing technical constraints

Biofuel policies in times of energy price inflation

War in the Middle East and elevated fuel prices resulting from it have dominated headlines throughout March. From a biofuel policy perspective, the situation comes with risks as well as opportunities. Previous energy shocks showcased how governments use rising energy prices as an argument both in favor and against biofuel blending obligations. Early evidence from this crisis indicates it will be no different this time around. It is worth zooming in on both sides of the argument, in order to foresee what regulatory changes may be ahead for the sector. On the one hand, energy crises like this one can be expected to be a supporting factor for biofuel policies. In fact, the first policies to incentivize biofuels are rooted in the oil crises of the 1970s - offering some striking similarities with today’s crisis in terms of the scale and the countries involved. The reasoning is simple: domestically produced biofuels reduce energy dependence. Contrary to crude oil, the feedstocks for biofuels are largely homegrown, and whatever feedstocks may be imported typically do not come from the large oil exporting countries. Higher biofuel mandates are therefore a way to reduce exposure to energy shocks, whilst creating local jobs at a time when the global economy faces headwinds. Similar reasoning was followed more recently when energy prices skyrocketed in the aftermath of Russia’s 2022 invasion of Ukraine. The EU Commission responded by increasing biomethane targets while US President Biden elevated ethanol blending limits. Trump’s energy philosophy is rarely in line with either of these, yet his administration too cited higher crude oil prices as a justification to announce record-high federal blending mandates a few days ago. It is not just rich countries following this reasoning. Brazil’s trajectory showcases how indeed strong biofuel incentives hedge against oil price increases, and Indonesia is attempting to do exactly that as well. On the other hand, energy price inflation comes with a risk for biofuel policies as well. Biofuels are typically more expensive than fossil fuels, even when fossil prices are high. Some politicians may therefore be tempted to reduce biofuel shares to counter broader fuel price increases. The immediate reflex for a number of Central and Eastern European countries in response to the 2022 Russian energy crisis, was to waive or lower their biofuel blending mandates. Although this was a temporary measure that was reversed a few weeks later, not long afterwards a new Swedish government cited the same reason to significantly lower biofuel blending obligations and they have remained low up until this date. Singapore’s decision this month to delay the introduction of its SAF mandate by 3 months and Romania’s move to slash the country’s ethanol mandate from E8 to E2, are the most recent examples of this reflex. It is hard to predict which of these opposing policy reactions may dominate in each individual jurisdiction. Nevertheless, a few patterns are worth delving into. Firstly, politicians typically want to see quick results when elections are approaching, while favoring more structural solutions outside of campaign season. Reducing biofuel mandates can sometimes bring down fuel prices instantly, though supporting them hedges against price volatility in a more structural way. In that sense, it will be worth monitoring if the Trump administration remains supportive of high blending mandates if oil prices are still elevated when the midterm elections approach in November. There are no country-level elections in any of the major European biofuel markets this year, so that could be an indication these countries will not be inclined to backtrack on biofuel mandates. Secondly, the cheapest biofuels tend to be in the best position for increased policy support when fossil fuel prices are high. This could mean that e.g. ethanol and biodiesel from crops are somewhat better placed than more expensive waste-based SAF in a scenario where fuel prices remain high for a sustained period of time. Thirdly, vested interests always matter. In countries with a large biofuel production industry and with plenty of local feedstock supply (e.g. the US, Brazil or France), backtracking on mandates is less likely. Countries without a strong local biofuel supply chain yet stronger interest groups in e.g. the fossil or airlines industry, may be more easily tempted to reduce biofuel obligations. 

North America

Probably the most impactful biofuel policy announcement the world has seen so far this year, came from the US EPA last Friday. This agency has now set final rules for the 2026-2027 Renewable Fuel Standards (RFS) - also known as the federal level biofuel mandates in the US. Not all superlatives ever used by the Trump administration can be taken at face value, yet in this case the new mandates truly are record-high and unprecedented. For total biofuels (D6 RINs), the 2026 mandates increase by a significant 20% compared to 2025. Even more remarkably, biomass-based diesel (D4) mandates increase by 69% in 2026. Similar targets were already included in the draft proposal released last year, and so these nominal levels are not the most talked about facet of last week’s legislation. Instead, the biofuel industry has been focused on how much of the small refinery exemptions (SREs) will be reallocated and what the status of imported feedstocks will be. SREs will be reallocated for 70% to larger refiners, thereby canceling out most of the biofuel demand destruction that has often been associated with exemptions to smaller refineries. This level is on the higher end of what analysts had been expecting until recently, even though sources close to the decisionmakers indicated a few weeks ago that reallocation would be at least 50%. In the original EPA proposal, imported feedstocks were penalized by only granting them half the RIN credits as domestic feedstocks. In last week’s final legislation however, the imported feedstock penalty is scrapped for 2026 and 2027 - meaning biofuels from domestic and imported feedstocks will be treated equally under this year’s and next year’s RFS mandates. The goal is still to introduce this imported feedstock disadvantage from 2028, yet it remains to be seen whether this will be kept in practice. There are simply not enough domestic feedstocks to reach the major volumes needed to comply with high biomass-based diesel mandates, and penalizing imported feedstocks in this way would de facto increase the mandate further since twice as many biofuels from imported feedstocks would be needed to generate the same amount of credits.  

The US ethanol industry is watching an ongoing policy discussion in Congress around E15 at least as closely as it has been monitoring the RFS mandate finalization. Smog rules generally limit the maximum blend of ethanol to 10% (E10) during summer, but the EPA last week introduced a temporary measure allowing for this limit to be exceptionally lifted to 15% the coming summer. For this to become permanent however, Congress needs to give its approval. The institution has been divided over the topic, but a decision is likely to be reached in the coming weeks.

Europe

The UK Trade Remedy Authority announced this month that it no longer recommends implementing anti-subsidy duties against US HVO. This is somewhat of a U-turn compared to its previous view, whereby it proposed to implement such duties starting at 258 GBP/tonne for selected US producers and up to 304 GBP/tonne for others - levels that were broadly aligned with similar measures the EU has in place to shield from US HVO overcapacity. The lack of such tariffs in the UK, has caused major flows of US HVO going to the country, even cannibalizing some (normally cheaper) UCOME. The reasoning behind changing its recommendation is that the original US tax credit on which the complaints were based no longer exists. Although technically correct, the current production tax credit constitutes at least as much of a subsidy as the old incentives. In normal times this would constitute a real risk, yet the UK biomass-based diesel industry may be lucky with the new RFS mandates discussed above, which are so high that HVO overcapacity in the US could be largely resolved. In parallel, UK Whitehall has launched consultations on how to treat SAF under the country’s emission trading system. The three main options considered, are to 1.) threat SAF as zero-emission, 2.) report the actual SAF emissions or 3.) consider SAF emission to be equal to fossil fuels. If the first option is chosen, the cost of SAF for airlines would decrease the most. That said, even then it is not expected to lead to much additional SAF demand, given that this is regulated by the mandates and ETS prices are not high enough to fully bridge the large price premium of SAF over fossil jet fuel. 

The Dutch Senate yesterday approved the country’s RED III transposition bill. Despite two political parties that were previously in favor withdrawing their support, it was still approved with a comfortable majority. This means the Netherlands has officially moved to emission-based renewable fuel mandates with retroactive application from 1 January 2026. The Dutch mandates go beyond what RED III would prescribe in terms of the overall targets, whilst the country is also amongst the most ambitious in Europe in terms of its Annex IX-A submandates and crop caps. The Dutch disqualification of Annex IX-B feedstocks in shipping is also stricter than the EU guidance. Road mandates in the Netherlands jump significantly faster in 2028 than in the other years, which could lead to a sudden HVO demand boom that year in the country. The diversity in sector specific submandates, subquota for specific fuels and caps on feedstocks makes it so that there will now be no less than 16 different categories of tickets (EREs), versus 4 categories under the old energy% tickets (HBEs).

Germany’s lower parliamentary house did not vote on the country’s RED III proposal as originally planned on 19 March, meaning approval will likely be delayed until May. Retroactive application from January is still expected for the GHG reduction obligations, subquotas and feedstock limits, yet key questions remain around whether the POME ban and stricter auditing criteria will apply from 2026 or from 2027. The country’s legislator did add Brazil to the list of approved countries towards these auditing criteria in March, yet China is expected to remain excluded.

Romania will be lowering its ethanol blending mandate in the gasoline pool from 8% to 2%. To do so, the relevant ministry declared a crisis situation due to fuel prices having surged following the Middle East escalation. The mandate decrease should apply until 30 June and will then be reevaluated. 

On the EU trade front, the EU Commission decided to extend existing anti-dumping duties on Indonesian biodiesel. These duties of 8-18% (depending on the producer) have been in place since 2019. Prior to that year, Indonesia was a major source of biodiesel in the EU, but the duties have been quite effective in reducing imports. Even if duties would have been lifted however, today Indonesia would presumably not be as effective in increasing exports as was the case back in the late 2010s. Since then, the EU Commission has also rolled out a de facto palm oil biofuel phase-out through its indirect-land-use-change delegated act. The vast majority of Indonesian biodiesel is palm-oil based.

Asia

The Chinese government released its much anticipated 15th five year plan this month - a high-level blueprint setting strategic targets and economic goals for the medium term. This includes a 17% carbon intensity reduction target, albeit that even if this target is met emissions would still not peak before 2030 due to China’s rapidly growing total energy demand. Replacing oil and gas in the transportation and industrial sectors are mentioned in the plan, although without directly linking it to biofuels or SAF. In recent history, Chinese policymakers have preferred battery-electrification over biofuels wherever possible, and it cannot be excluded that green hydrogen will be somewhat favored where molecules are still needed. The targets are not so detailed that they include renewable goals for specific subsectors like aviation, and thus for the time being still offer little clarity around any potential Chinese plans to introduce a dedicated SAF mandate. It is however possible that follow-up legislation in the coming months could include such a SAF mandate or other SAF incentives.

Singapore’s Civil Aviation Authority decided to postpone the introduction of the country’s new SAF mandate and associated levy by 3 months. Instead of applying to flights departing from 1 October 2026, this will now only be 1 January 2027. The cited reason is higher jet fuel prices as a result of the Strait Hormuz blockage. Asian jet fuel prices more than doubled since the start of the Iran escalation, and although the SAF premium over fossil jet fuel has actually decreased it is still more expensive. Ironically, Vietnamese policymakers saw in that same energy crisis a reason to investigate whether the country’s new E10 (10% ethanol) mandate could be brought forward from June to April. Contrary to SAF, ethanol is often seen by policymakers as bringing fuel prices down -  even though this only tends to be true on a per-litre basis and not on a mileage basis due to ethanol’s significantly lower energy content than gasoline. The relevant Ministry concluded however, that this timeline is too ambitious due to logistical challenges.   Latin America

The Brazilian Ministry of Mines and Energy said it needs to conduct more technically feasibility studies in the coming months before a higher biodiesel mandate than the current 15% can be rolled out. Normally the biodiesel mandate should have increased to 16% this year, to then gradually grow further by 1 percentage point every year towards 20% by 2030. Several voices in the Brazilian energy sector have called for a more rapid increase in the biodiesel blending mandates following the recent diesel price escalation as the production capacity and feedstocks exist in Brazil to meet such higher mandates. However, it thus seems that this will be obstructed by the technical requirements. Indonesia has proven that much higher blends are in fact possible, having raised the blending mandate already to 40% and with plans for further increases. That said, there are some differences between Brazilian and Indonesian biodiesel fuel specifications, given that the former is primarily soybean based and the latter almost fully palm based. Other differences in e.g. the climates and vehicle fleets in the country make it so that compatibility in one country cannot automatically be extrapolated to the other.

The trade agreement between the Mercosur countries (Brazil, Argentina, Paraguay and Uruguay) and the EU is now approved and ratified by all countries. Legal challenges do remain, with e.g. the European Parliament having requested a legal opinion from the EU Court of Justice. Nevertheless, the lower tariffs and other measures under the agreement should provisionally apply from May.