Clean Fuels Orlando, Strong Signals, Structural Frictions Remain

I spent the week in Orlando at the Clean Fuels Conference. Attendance was estimated at more than 1,500 participants across producers, airlines, jobbers, growers, policymakers, and service providers. Several long-time attendees said they had not seen this level of policy alignment since the early RFS expansion period around 2011.

On the bullish side, three quantified themes dominated the discussion.

First, proposed RFS volumes are moving higher. EPA plans to express the biomass-based diesel obligation in RIN terms rather than gallons. Volumes discussed during the conference imply about 5.6 billion gallons in 2026 and about 5.9 billion gallons in 2027. Using our assumption of a 50 percent split between renewable diesel at 0.75 kg per liter and conventional biodiesel at 0.88 kg per liter, this equates to about 17.3 million metric tons in 2026 and about 18.2 million metric tons in 2027. Recent realized biomass-based diesel consumption has been closer to 4.0 to 4.3 billion gallons, or roughly 12.5 to 13.5 million metric tons, implying potential growth of roughly 30 to 40 percent versus a 2024-type baseline.

Second, small refinery exemptions no longer dominated risk discussions, but the issue is not closed. EPA cleared a large backlog of petitions in August. Since then, about 25 new SRE petitions have been filed, with an additional filing in January. This compares with more than 80 petitions per year during peak SRE disruption. The flow is lower, but it continues. Market impact depends on whether waived gallons are fully reallocated into future RVOs. Even 200 to 300 million gallons, roughly 0.6 to 0.9 million metric tons, would matter at the margin if reallocation is incomplete.

Third, long-term federal support featured prominently through the Clean Fuel Production Credit under Section 45Z. Many speakers referenced visibility through the end of the decade, often citing the current statutory window running through 2029. I don’t know with full certainty that this should be treated as clean support through that date, since guidance and implementation details remain incomplete. What is clear is that the incentive structure has changed in a material way.

A key bearish realization from the conference is that 45Z is a true producer income tax credit. It is not refundable, unlike the blenders tax credit, which offset excise taxes and paid out regardless of profitability. Under 45Z, a producer with no taxable income receives no immediate benefit. Monetization requires transferring the credit to a third party with tax capacity, typically at a discount. Participants referenced indicative discounts in the range of 10 to 25 percent of headline value, depending on tenor and counterparty appetite. This materially reduces effective support for producers operating at thin or negative margins.

This distinction resonated strongly with jobbers. Many openly regretted the loss of the blenders tax credit. The BTC supported rack economics for more than a decade and played a central role in building regional terminal distribution. Under that structure, value accrued at the blending point. Today, value accrues at production. Large refiners increasingly control both production and terminal racks. Jobbers described margin compression of several cents per gallon and reduced ability to justify capital spending on tanks, blending systems, and logistics.

Another dominant theme was stacking incentives. The RFS is no longer viewed as a standalone support. State programs now sit at the center of project economics. California LCFS credits traded around 70 to 75 dollars per metric ton of CO2 in late 2025. Oregon values exceeded 100 dollars per metric ton. Washington values averaged above 200 dollars per metric ton after cap-and-invest adjustments. Speakers showed examples where stacked state and federal incentives exceeded 2.50 dollars per gallon, or roughly 750 to 800 dollars per metric ton, for low-CI fuels, compared with less than 1.00 dollar per gallon under RFS economics alone.

Soybean growers were highly visible at the conference. Many cited cash soybean prices in a range of roughly 9.75 to 10.25 dollars per bushel while fertilizer, seed, and land costs remain elevated. Several referenced Brazilian soybean exports exceeding 100 million metric tons per year, compared with about 70 to 75 million metric tons a decade ago, as a structural drag on global pricing. Growers questioned whether another round of federal support would appear in February and whether it would exceed recent assistance levels that averaged roughly 20 to 30 cents per bushel.

Soybean producers also focused on changes to the GREET model. Multiple speakers referenced improvements of roughly 5 to 10 gCO2e per MJ for certain soy-based biodiesel and renewable diesel pathways, depending on region and farming practice assumptions. At LCFS conversion rates, a 10 gCO2e per MJ improvement equates to roughly 20 to 25 cents per gallon, or about 70 to 80 dollars per metric ton, of additional credit value. Despite this progress, growers and processors highlighted unresolved issues. Indirect land use change treatment, fertilizer intensity assumptions, and regional yield data still drive CI dispersion exceeding 15 gCO2e per MJ across similar pathways. Until those inputs stabilize, GREET improvements are viewed as supportive but not fully bankable.

An important policy tension emerged between federal and California frameworks. The RFS is moving toward deeper use of GREET lifecycle analysis with the stated goal of better reflecting real farming practices and promoting crop-based feedstocks when carbon performance improves. At the same time, California has finalized a cap limiting crop-based feedstocks such as soy, canola, and sunflower to 20 percent of total LCFS credit generation starting in 2028. Multiple participants noted that this mirrors what the EU already applies today by limiting crop-based biofuels under its renewable energy rules. In both cases, the policy objective is to force a shift toward waste and residue feedstocks regardless of lifecycle score improvements. The concern raised in Orlando is consistency. One system refines LCA to reward improved agriculture, while the other applies hard volume limits. If this divergence persists, stacked economics for crop-based projects face increasing uncertainty.

SAF was the most constructive discussion of the week, but it also exposed an unresolved structural question. Today, voluntary SAF blending in the US is supported primarily by corporate scope 3 demand, with premiums paid by airlines and corporate buyers seeking emissions reductions. Volumes remain small, with US SAF production capacity around 440 million gallons per year, or roughly 1.3 million metric tons, representing less than 0.5 percent of total jet fuel demand of about 100 billion gallons. Once mandates and production incentives under 45Z and state programs take effect, it remains unclear how voluntary scope 3 value will interact with compliance-driven demand. Several participants questioned whether airlines and corporate buyers continue paying scope 3 premiums once SAF volumes become mandated or subsidized, and how that value is allocated across producers, blenders, and end users.

Traceability emerged as another clear theme. Multiple panels and side discussions pointed to traceability becoming central to future compliance. Several participants stated an expectation that by around 2028, full feedstock and fuel certification across supply chains will be required for participation in federal and state programs. That implies a need for a centralized registry similar in function to the EPA EMTS system used for RINs. I don’t know of any finalized framework today that explains how the US intends to prevent double counting of the same physical volumes across RFS, 45Z, LCFS, and SAF programs. That gap was widely acknowledged. Without a unified register and clear reconciliation rules, traceability risks turning from a safeguard into a source of cost and compliance friction.

What stood out is how integrated the conversation has become. RFS volumes, state clean fuel programs, SAF, renewable diesel, biodiesel, marine fuels, lifecycle modeling, and traceability were discussed as parts of one system. That integration reduces policy shock risk and supports capital planning measured in hundreds of millions of dollars per facility rather than short-cycle arbitrage.

This conference did not remove uncertainty. EPA timing, SRE handling, 45Z implementation, traceability design, and the divergence between federal and California policy still require close attention. Still, compared with recent years, the numerical signals felt stronger, policy tools more aligned, and industry positioning more coordinated. That explains why many participants left Orlando cautiously constructive rather than defensive.