The spread between biomass-based diesel D4 and ethanol D6 RINs fell below 1¢/USG for the first time in 2025 on 27 October, given changing expectations on credit fundamentals and biofuel feedstock trade flows.
Under the Renewable Fuel Standard, the US Environmental Protection Agency requires oil refiners and importers to annually blend biofuels or buy different categories of Renewable Identification Number (RIN) credits from those that do. Credits from lower-carbon categories can be used to fulfill the D6 obligation, which is mostly met by ethanol, but this typically does not occur.
Biodiesel and renewable diesel that generate D4 biomass-based diesel RINs often have a higher cost intensive production process and supply chain as opposed to ethanol. For the first three quarters of 2025, D4 RIN generation pulled back with lower volumes of fuel produced domestically and imported. This raised the value of the D4, hitting its highest valuation in two years earlier this summer, and the spread between D4 and D6 RINs widened.
More recently however, RIN traders anticipate a cheaper cost of production and thus a more plentiful supply of D4s in the coming months. Oilseed processors have set consecutive monthly crush records this year at the same time as trade wars are hurting export market demand for soybeans and soybean oil. Prices of soybean oil — and competing feedstocks like tallow — are sharply down over the last few months, lifting margins for biomass-based diesel producers and signaling more D4 supply is likely.
A similar phenomenon occurred in 2024 with D4 oversupply weighing down prices, given biofuel mandates that undershot renewable diesel production and road fuel demand.
There are also more limits on how much more ethanol can be blended into gasoline, limiting D6 supply growth. Legislation to authorize 15pc ethanol gasoline year-round has stalled this year amid the government shutdown and increasingly vocal opposition from oil groups. In tandem, D6 RIN generation has dipped slightly on a year-over-year basis, which may account for relative strength when comparing the two as D4 obligation substitutes. On any given year, up to 20pc of a given party's obligation may be deferred to the next calendar year, relieving pressure to buy credits in unfavorable market conditions.
The tightening spread between D4 and D6 credits comes despite proposed biofuel mandates the next two years that would be record highs for the biomass-based diesel category, potentially meaning fewer D4 credits are available for other program categories. But the market is still waiting for final answers on those mandates, on potential reallocation of exempted volumes, and extended delays in finalizing guidance around a biofuel tax credit.
RINs are credits produced and traded by refiners and importers to show compliance with the RFS program. Obligated parties can produce credits when renewable fuels are blended into conventional transportation fuels or can purchase credits from other RIN producers.
