Biofuel Policy Brief - September 2025

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Dear reader, September is coming to an end and that means policymakers are back at full speed, with summer recess increasingly distant in their rear view mirror. In this edition of the monthly newsletter, we go for a trip around the world to analyze recent biofuel policy developments in each major region. Key policy trends the past month:

• Global trade policies are increasingly protectionist for biodiesel, renewable diesel and SAF. On the other hand, ethanol tariffs into Europe from the Americas are lowered as ethanol is used as a bargaining chip to avoid higher tariffs on other fronts.

• EU countries only partially reached agreement on 2035 climate goals. The national political debates around their 2030 RED III transposition continue, with a notable focus on feedstock acceptance, cross-sectoral compliance and fraud mitigation.

• US federal decisions on the status of small refinery exemptions (SREs) are widely anticipated, with the reallocation of 50% vs 100% two main options considered. Meanwhile E15 acceptance in California and delays to the Canada electric vehicle mandate will also impact markets.

• China’s recent climate pledges are historical, yet implications for biofuel and SAF markets will become clear only later this year. South Korea announced a SAF mandate kicking off in 2027. Indonesia attempts to strengthen exports. India’s supreme court safeguards the E20 mandate.

• Latin American policymakers in major biofuel and feedstock countries tweaked some of their tax incentives, while the Panama Canal Authority announced a unique incentive for low carbon shipping fuels.

International trade The global biofuels trade system is undergoing a fundamental transition. North American and European legislators are introducing measures to shield domestic biomass-based diesel and SAF producers from cheap imports. The US does so most bluntly, towards all countries and including for feedstocks, using a combination of import tariffs and import disqualification towards CFPC and RIN credits. Europe takes more targeted measures, mainly through anti-dumping measures against specific exporters and on final products. At the same time, Europe is increasingly opening its ethanol market for tariff-free imports from the Americas.

The UK Trade Remedies Authority has slapped duties on Chinese HVO and FAME exports. From November, most exporters will face a 54.64% tariff, with the exception of Zhuoye Group, EcoCeres and two other cooperating exporters, who will get a more favorable 15.68% rate. The decision mirrors EU duties against Chinese exporters of 10-35.6%, announced in August 2024. Provisional RTFO data show that China was the main origin of UK biofuels in H1 2025, with 88 million liters of HVO and 8 million liters of FAME imported from the country that period. Until at least 2024, the US was also a major source of UK HVO imports, but the latest data indicate that this flow has largely dried up in 2025, perhaps as a result of ongoing dumping and countervailing investigations on US origin HVO. The protection of biomass-based diesel industries contrasts with dynamics in the ethanol sector, where a recently concluded UK-US trade deal granted tariff-free access for 1.4 billion liters/year US ethanol, widely expected to terminate the UK domestic ethanol industry. For the time being, Chinese SAF has tariff-free access to both the UK and EU market, although trade investigations in both jurisdictions are also ongoing and Chinese SAF exports are strictly capped by the limited number of whitelisted companies permitted to export SAF under Chinese export law.

The EU Commission announced that SAF is henceforth included in existing AD duties and countervailing measures against imports from the US, Indonesia, Argentina and Canada. This is a blow to US SAF producers, who had hoped to export tariff-free to the EU mandated SAF market to balance growing domestic oversupply in the US, where there is no SAF blending obligation. Instead, these producers will now face a similar tariff as renewable diesel exporters, at 211-237 EUR/t (AD) plus 0-198 EUR/t (countervailing). Meanwhile the final text of the EU-Mercosur trade deal as published by the Commission this month, reveals that 450 thousand tonnes/year of non-fuel ethanol would gain tariff free access to the EU market, and another 200 thousand tonnes/year of fuel ethanol can be imported at one-third of the full rate, following a gradual phase-in period of 6 years. There was some confusion initially as to whether ethanol was included in the USD 750 million US energy purchase pledges the EU made to avoid higher tariffs, with US officials claiming ethanol was included while EU counterparts denied this. A joint statement eventually indicated that at least fuel ethanol is excluded and EU vehicle standards are also safeguarded, yet soybean oil will likely gain reduced tariff access up to 400 thousand tonnes/year.

Canada and Australia take a somewhat different approach than the tariff route to protect their domestic biofuel industries. Instead, both countries recently pledged direct production subsidies. In the case of Canada, this will consist of a per-liter incentive spread between 2026-2027 and limited to 300 million liters per facility, for which a total funding of 267 million USD is made available to biodiesel and renewable diesel producers. In Australia, USD 735 million will be made available between 2028-2037 to support biomass-based diesel and SAF projects that are online by 2028. Both countries thereby take a similar approach as the US CFPC, by offering direct monetary incentives for producers - a carrot to supplement the stick of mandates. In Europe, such incentives are lacking for the time being. If ever introduced for biofuels, they will likely need to come from member states’ budgets rather than the EU budget. That said, EU officials this month did express the intention to provide EU subsidies for the sputtering e-SAF industry. Rather than e-SAF production subsidies though, this would be through a scheme that derisks long term e-SAF purchase agreements for intermediaries.

Europe In the EU, 2035-2040 climate goals dominated headlines whilst in the background member states quietly continued to transpose the 2030 RED III framework. Last week’s UN climate summit was an unofficial deadline for EU countries to find agreement on 2035 climate targets, to serve as an intermediate target between the 2030 emission reduction target (55%) and the 2040 equivalent (90% currently proposed by the Commission) - both as compared to a 1990 baseline. After a long-fought negotiation between EU countries, they only partially succeeded. Rather than agreeing on a single target for 2035, they committed to a range of 66.25% to 72.50% emission reduction. More progress could be made ahead of the November COP30 climate summit, but the debate showcases how momentum for ambitious climate legislation has somewhat weakened in Europe even if political shifts are less pronounced than in the US. A related topic is the 2035 internal combustion engine (ICE) ban. Announced in 2022 at a peak of climate legislation momentum, the present-time political powers are increasingly pushing for a soft ban (potentially with exceptions for e-fuels, biofuels or even plug-in hybrids) rather than a hard ban that would cover all passenger ICEs. This month the Commission announced that a decision on the topic will be pushed forward to 2025, with the review originally being planned for 2026 only. The delay on the EU Deforestation Regulation this month can be seen within this same context of lukewarm member state enthusiasm for stricter climate regulations.

On the European country level, political discussions around RED III implementation are gaining speed after the relevant ministries in several major countries proposed a pathway for doing so this summer. The debate in Germany is particularly worth highlighting, not just because it is the largest fuel market in the EU but also considering the proposed RED III transposition is amongst the most ambitious on the continent. The German Bundestag in September rejected an alternative proposal that the Green party had presented. This counter-proposal would have fully phased out crop-biofuels as well as further tightening the cap for Annex IX-B biofuels and increasing the EV multiplier. One area where the German ministry and the Greens agreed is the perceived need for stricter requirements around on-site audits for imported biofuels, and banning POME towards the general mandate. If the German proposal is adopted in its current form, the country would be the first in Europe to implement a POME ban, although Portuguese lawmakers this month also attempted to somewhat soften incentives for waste-based feedstocks. These are currently tax exempt in Portugal, but the government plans to scrap this status from 2026 onwards. In the Netherlands, the government answered questions from political parties on the transposition, most of which related to the exclusion of Annex IX-B biofuels towards the country’s maritime mandate as well as fraud mitigation and affordability. Despite national elections scheduled in the Netherlands on 29 October, RED III transposition is appears in full speed along the lines of the original proposal, including some of the highest Annex IX-A submandates in Europe. The lack of a buy-out price in the Netherlands combined with an outsized shipping and aviation market, makes the country an important price setter within the EU. North America

The most anticipated regulatory decision of the moment in the US is how SREs (small refinery exemptions) will be accounted for towards the federal biofuel mandates (RVOs). Due to the sheer size of these RVO mandates, even indirect tweaks to them will cause big shifts in the North American and global biofuel markets. The status of E15 in California and an upcoming EV mandate in Canada are also noteworthy.

This summer, the US EPA proposed an ambitious increase in 2026 and 2027 RVOs, expected to be a powerful demand driver of especially biomass-based diesel produced from domestic feedstocks. A major outstanding question within these mandates, is the impact of SREs. If the Trump administration is generous in granting SREs - as was the case during his last presidency - the de facto mandated volumes could be significantly lower than what the official levels would suggest. In September, Trump’s EPA provided insights into its likely approach to these SREs. Unsurprisingly, the EPA did grant most SRE requests fully or partially. The question now is to what extent these exempt volumes will be offset through higher obligations towards the remaining (non exempt) fuel suppliers. The two main options considered would be to reallocate either 50% or 100% of the volumes, though technically other percentages are still possible as well. Following a public hearing by the EPA on the topic on 1 October, a decision is expected by 31 October. Expect legal challenges to whatever decision the EPA takes on the SREs, which will be settled in federal courts rather than regional courts. 

In California, the senate approved the sale of E15 (15% ethanol) year-round, clearing the last hurdle ahead of the governor’s signing. Under the state’s LCFS system, all low carbon pathways can generate credits towards the general obligation. Although most of the obligations are created by the state’s large gasoline pool, renewable diesel has become the largest compliance pathway due to this cross-fuel credit transfer. If indeed the average ethanol share would be increased by a few percentage points, this could have a significant impact on renewable diesel demand and other low carbon compliance pathways. That said, it is not because E15 is formally allowed that fuel retailers will offer it, as they would need to have the infrastructure available to do so.

Canada’s Prime Minister announced that implementation of the country’s EV mandate will be delayed by at least one year. This bill was meant to gradually phase out the internal combustion engine in passenger vehicles through a fleet emission reduction obligation to carmakers, starting at 20% in 2026. A sixty-day review period will now evaluate the timeline and whether the 2035 target for a full ban will be maintained. The backtracking on emission norms for carmakers echoes dynamics in the EU, where a 2025 compliance deadline was softened to 2025-2027 average and a planned 2035 ban is also uncertain. Changes to vehicle fleets tend to impact biofuel demand in two ways, because they alter the base fuel pool the mandates are based upon, but also because EVs increasingly generate credits to the same obligations as biofuels do. In that sense, slower EV roll-out can be a boost to biofuel demand, yet it also comes with a risk of broader backtracking on transport decarbonization legislation, which would negatively impact biofuel markets.

Asia

Policymakers in South Korea and Vietnam announced plans for SAF mandates this month. China made headlines with its emission reduction goals and carbon market, yet without much details on the biofuel-specific implications. Indonesian lawmakers remain preoccupied with trade policies, while India’s ethanol sector continues to enjoy strong policy support.

China made several climate commitments this month, partly in the context of UN climate talks where countries are meant to renew commitments every 5 years as part of the Paris Agreement. President Xi-Jinping said China would reduce its GHG emissions across the economy by 7-10% by 2035, which marks the country’s first commitment to an absolute emission reduction target. In parallel, the country’s cabinet announced it will tighten China’s carbon trading market by introducing absolute emission caps in certain industries from 2027, to be implemented through a combination of free and paid carbon allowances. No specific industries were mentioned, but it could include domestic aviation as well as chemicals, a broadening from the current inclusion of the power, cement, steel and aluminum. It is too early to speculate on any potential SAF implications, as much would also depend on the amount of free allowances granted. Analysts are eagerly anticipating China’s 15th five-year plan, on which a Plenum by the Communist Party will be held from 20-23 Oct. More concretely, an open question is whether strong SAF incentives will be announced under such a plan, and if so whether they would be more demand focus (e.g. through a mandate) or supply oriented (e.g. production subsidies).

South Korea this month announced a nationwide SAF mandate, starting at 1% in 2027, increasing to 3-5% by 2030 (decision in 2026) and 7-10% by 2035 (decision in 2029). Only fuel supplied to international flights will create an obligation. This exemption of domestic aviation is a growing trend in Asian SAF mandates, also seen e.g. in the Thai mandate plans. Other details released about the Korean SAF mandate are that the obligation applies both to fuel suppliers and airlines, that the penalty of non-compliance is 1.5 times the market price multiplied by the shortfall volume, and that SAF used needs to reduce carbon intensity by at least 10%. It looks likely that after 2030, a GHG based mandate will replace the percentage based mandate in 2030, as will also be the case in Japan then. The Korean Ministry of Trade, Industry and Energy will likely make subsidies available to the amount of 25% of SAF facility CAPEX and another 40% for R&D spending. Recently, Vietnamese policymakers also issued a directive that could lead to a potential SAF mandate. However, this is in a much earlier stage than in Korea.

Indonesia’s trade ministry urged the EU to revoke countervailing duties on biodiesel imports after the WTO ruled these duties are in breach of international trade rules. Since 2019, the EU imposes 8-18% import duties on FAME of Indonesian origin, arguing that palm oil producers in the country receive unfair government incentives that allow them to sell the feedstock to biodiesel producers below market prices. The WTO rejected this claim however, as Indonesia’s government support cannot be considered a financial contribution. Yesterday, the EU Commission announced it will appeal the WTO’s decision. Cheap imports of Indonesian FAME were a major shaper of biodiesel dynamics in the EU market prior to 2019. Should the EU be forced to scrap the duties however, the impact may still be manageable, given that in the meantime the EU’s ILUC act largely banned palm oil as a biofuel feedstock. Seeing as the vast majority of Indonesian biodiesel is palm oil based, even at zero tariffs trade flows would likely not rival the volumes anymore seen prior to 2019. India’s Supreme Court dismissed a petition by consumer groups that attempted to challenge the country’s E20 mandate. The court ruled that roll-out of the ethanol mandate was legal, whereas the consumer groups had voiced concerns around compatibility for older vehicles as well as fuel efficiency. The decision safeguards E20 as the prime fuel grade available at Indian pumps now, following a rapid scale up in the grade to meet the government’s fuel ethanol target for 2025. In parallel, the federal government this month removed caps on fuel ethanol produced from sugarcane juice and molasses. Such a cap had been in place to put a lid on sugar price increases. However, dynamics in the global corn and sugar markets have rapidly increased the share of corn based ethanol in India recently. Therefore, the cap had not been reached anyway and so removal of it is unlikely to materially impact feedstock use in the near term.

Latin America

No major shifts in Latin America biofuel policies this month, though large producers Brazil and Argentina announced tweaks to their biofuel tax policies, while the Panama Canal Authority takes a proactive stance in trying to incentivize low carbon marine fuel uptake.

Brazil’s tax council announced increases to the biofuel tax rates that will apply from 2026. The rates for fuel ethanol and biodiesel will increase by a similar level as fossil tax rates, keeping their relative status relatively unchanged and thus not expected to lead to a major change in the market. Argentinian lawmakers reinstated a biodiesel export tax of 24.5% after scrapping it just a couple days prior, seeing as the predefined export value was reached in that brief period. Lastly, the Panama Canal Authority announced it will reserve dedicated transit slots for ships that run on low carbon fuels. Every week, one such priority slot will be reserved exclusively for such vessels from November onwards. It showcases how the transition to low carbon marine fuels is not driven by one single set of mandates or subsidies, but rather by multiple layers of local and international incentives.