U.S. biofuel imports are not rising quickly enough to help the industry comply with the Environmental Protection Agency's renewable fuel blending mandates, as imports no longer benefit from key U.S. tax incentives, a Valero Energy executive said.
Many foreign producers are not registered to generate compliance credits, which is also stifling imports, executives at the U.S. refining company said.
The EPA finalized record bio-based diesel requirements this year under the Renewable Fuel Standard, mandating refiners and fuel importers to blend more biofuel into the nation's fuel supply or purchase Renewable Identification Number credits to meet their obligations.
History of biofuel imports
Historically, imports helped fill supply gaps because fuel blenders could claim a $1-per-gallon blender's tax credit on imported bio-based diesel. That incentive was replaced in 2025 by the 45Z Clean Fuel Production tax credit, which generally benefits domestic bio-based diesel rather than imported volumes.
As a result, imports of bio-based diesel have increased more slowly than some market participants had expected, Eric Honeyman, Valero's senior vice president of renewable operations and low carbon fuels, said on the refiner's earnings call.
"What's different now with (EPA's new mandates) is you have to be registered to generate RINs, and a lot of these foreign importers are not registered to generate RINs," Honeyman said.
"You also have the elimination of all tax credit benefits to foreign imports ... and with the recent announcements of additional tariffs it just makes that hurdle more difficult."
Key points from Valero biofuel imports:
- Biofuel import growth is slowing: Valero executives noted that U.S. biofuel imports are not rising fast enough to help refiners meet the Environmental Protection Agency's record bio-based diesel blending mandates under the Renewable Fuel Standard.
- Tax code changes and regulatory hurdles impact supply: The replacement of the $1-per-gallon blender's tax credit with the 45Z Clean Fuel Production tax credit in 2025 shifted benefits primarily to domestic producers, while foreign imports face additional hurdles like tariff announcements and compliance registration requirements for generating Renewable Identification Number credits.
- Industry debate over capacity and registration: While Valero points to registration issues and tax changes as main barriers, agricultural economists argue that enough registered capacity and domestic production exist to meet blending requirements despite significant drops in year-over-year biodiesel imports.
Scott Irwin, an agricultural economist at the University of Illinois, said while it was true the 45Z producer tax credit made imported biodiesel ineligible, he disagreed with Honeyman's assertion that registrations were an issue.
"What is patently false is the statement that not enough importers are registered to help meet the 2026", he said in an email, adding that imports for total bio-based diesel amounted to nearly 1 billion physical gallons in 2024.
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"There is plenty of registered capacity and enough domestic production capacity to fulfill the 2026," Irwin said.
Through June, the United States has imported this year only 25% of the 40.6 million gallons of biodiesel it imported during the same period in 2024, according to Argus Media principal consultant Zander Capozzola.
