Runaway – What’s Behind the Soaring Price of the D4 Renewable Identification Number (RIN)?
The price of the D4 Renewable Identification Number (RIN) credit has increased 130% so far in 2026. This RIN is a U.S. federal environmental credit that functions as a subsidy for production of diesel fuel made from soybean oil and as a tax on production of conventional diesel fuel made from crude oil. The RIN price rise has been accompanied by a 60% increase in the price of soybean oil and other renewable feedstocks used to make diesel fuel. This blog gives a high-level view of what is behind this year’s bull run in the D4 RIN and related commodities.
In 2026 and 2027, U.S. refiners and importers are obligated to supply nearly 6 billion gallons per year of diesel fuel made from renewable feedstocks like soybean oil to the U.S. market. That’s 10% of the total diesel fuel consumed in the US. This obligation stems from the Renewable Fuel Standard (RFS) that we’ve been writing about for years, going back to the 2012 blog titled A Market of Contradictions—Ethanol Mandates, Motor Gasoline and the Blend Wall. The RFS is administered by the U.S. Environmental Protection Agency (EPA) and includes mandates for minimum annual production volumes of four different categories of renewable fuels: Cellulosic Biofuel, Bio-Based Diesel, Advanced Biofuel and Total Renewable Fuel.
Many refiners produce renewable diesel fuel at petroleum refineries modified to convert soybean oil into diesel fuel. They include Calumet Inc., Chevron, HollyFrontier, Marathon Petroleum, Par Pacific Holdings, PBF Energy, Phillips 66, and Valero.
Through the credit trading system created with the RFS, refiners who don’t have the capability to produce diesel fuel from renewable feedstocks can effectively borrow that capability from others who do have it. You can do that by buying the right number of an environmental credit called a D4 RIN, then reporting that transaction to the government, and “retiring” the RINs. By paying for and retiring those RINs, you have effectively rented the capacity to produce your government-mandated quota of renewable diesel gallons, and some other biofuel producer has fulfilled your obligation to supply it to the U.S. market.
The refiner’s obligation to supply renewable diesel amounts to a tax on the supply of petroleum diesel. That’s because it costs 2-to-3 times more to produce diesel fuel from soybean oil instead of from crude oil, mainly because the soybean oil itself costs that much more than petroleum diesel, even before you’ve refined the soybean oil to make it a suitable substitute for regular diesel fuel. See our upside down blog series for details on renewable diesel production economics and the relative costs of producing diesel fuel from soybean oil instead of crude oil.
The supply of RIN credits comes from those who produce diesel fuel from soybean oil and other qualifying bio-feedstocks. By rule, every gallon of qualifying renewable diesel earns RIN credits that carry market value. Those RINs are sold by those producers to generate revenue that subsidizes their production of renewable diesel.
Each gallon of renewable diesel substitutes for a gallon of petroleum diesel in the fuel supply pool, which shifts diesel fuel market share from petroleum refiners to farmers and renewable fuel producers, thus increasing the supply of bio-based fuels and helping achieve other U.S. government objectives.
In addition to petroleum refineries, many small biorefineries make bio-based diesel from soybean oil and other qualifying bio-feedstocks. This second category of producer uses a different chemical process that produces a different type of diesel fuel that is also is an effective substitute for petroleum diesel and is commonly called “biodiesel” (as compared to “renewable diesel” which is the common name for the product made in petroleum refineries). The term biobased diesel is used to describe the broad category that includes both renewable diesel and biodiesel. See our Baby The RIN Must Fall blog series for details on these two different processes and the two different diesel fuel products they produce.
Who are the small biodiesel producers? In 2022, Chevron bought Renewable Energy Group, who was the largest biodiesel producer, to form what is now called Chevron Renewable Energy Group. Ag Processing Inc. is another name in the biodiesel producer category, along with soybean oil producers Archer Daniels Midland, Cargill, Louis Dreyfuss, and Bungee Global, who have expanded their soybean crushing operations into the production of diesel fuel from soybean oil.
These companies can produce biodiesel profitably only because doing so earns them RINs that act as a subsidy via their market value. The bio-based diesel product, sold as diesel fuel, yields the price of diesel fuel which, after selling the RIN, and cashing in any other available subsidies, produces enough revenue to exceed the higher cost of making biodiesel versus petroleum diesel.
So, we have demand for D4 RINs that comes from petroleum refiners, and we have supply of D4 RINs that comes from biodiesel and renewable diesel producers. The demand for RINs is set by government mandate, and the supply of RINs is determined by decisions made by the biobased diesel producers who compete to capture the subsidies provided by the RIN. The RIN price (Figure 1) is determined by the supply and demand for D4 RINs.
Figure 1D4 RIN Price, Source: Banyan Commodities
What’s behind this year’s 130% run-up in the D4 RIN price? Undoubtedly, the biggest factor is the increased biobased diesel volume mandate level set by EPA for 2026 and 2027. That mandate level was increased to 6 billion gallons per year, up 70% from 2025. EPA proposed the increase in June of 2025, and the final rules came out March 27, 2026. In between, there was a 9-month process of stakeholder feedback, lobbying and negotiations among a host of participants from the oil and agriculture industries who have strong interests in the mandate level because it sets the demand level for their products.
Three issues became the major bargaining chips during the 9-month negotiation. The first involves Small Refiner Exemptions (SRE). These exemptions, available to small refiners have fueled a 13-year legal dispute (see our Misunderstanding blog series for the details on that dispute). This latest episode in the SRE battle led to a compromise that grants some of the disputed exemptions while denying others. The granting of some exemptions effectively reduces the demand for RINs, which is partly offset by assigning some of the exempted obligations to others, to be fulfilled in 2026 and later years. This compromise is the latest, but not necessarily the last episode in this legal saga.
The second big issue was a proposal to reduce the number of RINs earned by imported biofuel gallons to one-half those earned by domestically produced gallons (the RFS mandates and RIN rules also apply to imported and exported gallons). This “half-RIN” proposal would directly tilt the playing field in favor of domestic versus international suppliers and would especially benefit the U.S. agriculture industry. The half-RIN proposal was not adopted for 2026 and 2027, but, in the final rule, EPA stated they intend to pursue it in the next round of mandate-setting, for implementation in 2028 and beyond.
The third big issue is a producer tax credit called the 45-Z tax credit, a Biden-era tax credit that provides a higher federal subsidy for production of biofuels made from feedstocks with lower carbon intensity, meaning feedstocks that produce less carbon dioxide when burned as fuel. This issue is still not completely resolved. Meanwhile, the industry is proceeding with business while coping with the uncertainties that still surround this tax credit.
After nine months of deliberations, the final rules were released on March 27, 2026. When the dust settled, the biggest uncertainties had been clarified, but the final mandate level was not much different from informed projections made from the proposal issued nine months earlier, which said a huge increase in the mandated demand for bio-based diesel fuel was on the way.
With the mandates now set for 2026 and 2027, the big questions are whether, when, and how the industry will respond with the higher biobased-diesel supply rates needed to reach the mandate. This year’s 130% increase in the D4 RIN price is a big incentive for more supply. The 70% increase in soybean oil and other bio-feedstock prices is a strong leading indicator that more domestic production is on the way. Renewable diesel producers have reported their production rates are increasing to near nameplate capacity and, in some cases, going well beyond the nameplate. Some shuttered biodiesel plants have resumed production.
But domestic production is not the only factor in the RIN supply demand balance. Other factors include imports, exports, and the relative costs of different biobased diesel feedstocks which include canola oil, distiller’s corn oil (from ethanol plants), animal fats like beef tallow and poultry fats, and waste oils like used cooking oil. Higher RIN prices encourage increased supply from all these feedstock sources, each of which has its own supply chain.
Perhaps the biggest unknown is how the current large incentives will trigger unexpected innovations, which can occur anywhere along the diverse supply chain and have occurred often in the history of renewable fuels.
Market sentiment indicates an even higher RIN price will be needed to meet the 6 billion gallon target. Among market watchers who meticulously track supply and demand of renewable fuels, feedstocks and RINs, there is now talk of a possible D4 RIN price runaway that might force EPA to find a way to back-pedal on the high mandate level. Critical industry-level supply data are published monthly by the U.S. Energy Information Administration and EPA. But with so many moving parts, it is a big challenge to even keep a reasonably up-to-date industry supply/demand balance let alone foresee what will happen by the day of reckoning.
This blog has focused on the physical markets that determine the supply and demand of D4 RINs. The D4 RIN itself is a financial asset which, like other environmental credits, is traded in a financial trading market. But, unlike other traded environmental credits, the D4 RIN is just one of a family of four RIN credits (there is one for each of the four categories of RFS renewable fuels) that is nested in an odd way that causes the family members to interact with one another in peculiar ways that surprise the market. Furthermore, each of them comes in different vintages with different expiration dates and any of them can be banked and borrowed. These nuances make the RIN the most complex environmental credit ever invented. In the next blog in this series, we will show how these complexities have already affected this year’s RIN price rise and how they might further influence where it heads from here.
Purchase Hoekstra RIN Price Outlook. It is issued quarterly. Here’s the offer letter.
George Hoekstra george.hoekstra@hoekstratrading.com +1 (630) 330 8159
