Renewable natural gas has spent much of the past decade benefiting from two powerful U.S. environmental commodity markets: the federal Renewable Fuel Standard and California’s Low Carbon Fuel Standard. For projects converting landfill gas, wastewater gas or livestock manure into transportation fuel, the combination of physical gas revenue, Renewable Identification Numbers and state-level low-carbon fuel credits has shaped project economics.

That framework is changing.

EPA finalized new Renewable Fuel Standard volumes for 2026 and 2027 in March 2026. California, meanwhile, is implementing the major LCFS amendments that became effective on July 1, 2025. The two programs still support RNG, but their latest changes point in different directions. Federal demand for qualifying renewable fuel credits is being strengthened, while California is tightening carbon-intensity rules and beginning to reduce the long-term value attached to avoided methane from some livestock biomethane pathways.

For developers and buyers, the question is now which pathway, feedstock, geography and end use will capture environmental value over the life of a project.

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The federal RFS is increasing demand

EPA’s final “Set 2” rule establishes Renewable Fuel Standard requirements for 2026 and 2027. The total applicable renewable fuel volume is 26.81 billion RINs for 2026 and 27.02 billion RINs for 2027 after partial reallocation of volumes associated with small refinery exemptions.

Within that total, EPA set the cellulosic biofuel requirement at 1.36 billion RINs for 2026 and 1.43 billion for 2027.

That category is particularly relevant to RNG. Renewable CNG and LNG produced from eligible biogas feedstocks such as landfills, wastewater treatment digesters and agricultural digesters can qualify for cellulosic D3 RINs when regulatory pathway requirements are met.

EPA’s regulatory impact analysis projects renewable CNG and LNG consumption at approximately 1.235 billion RINs in 2026 and 1.306 billion RINs in 2027. RNG therefore remains a major expected source of supply for the cellulosic category.

The final rule provides a clearer federal demand signal for transportation RNG through 2027. Obligated parties still need RINs to meet Renewable Volume Obligations, and qualifying RNG remains positioned to supply a substantial share of the cellulosic pool.

EPA also partially waived the 2025 cellulosic biofuel requirement because production fell short. That is a reminder that headline mandates do not automatically translate into available supply. A closer relationship between mandated volumes and realistic production can support a more credible compliance market.

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The RFS is becoming more domestic

Another important change begins in 2028.

EPA’s final rule states that imported renewable fuels and renewable fuels produced from foreign feedstocks will receive half the RFS compliance value provided to qualifying domestic products starting in 2028.

For North American RNG markets, this introduces a new commercial variable.

The United States has historically interacted with Canadian and other cross-border renewable fuel supply chains. From 2028, reduced RIN value for foreign fuel and feedstock can affect the relative economics of imported material compared with U.S.-produced RNG. This is particularly relevant to projects whose commercial model depends on supplying U.S. transportation markets from outside the country.

That does not eliminate cross-border trade. It means origin becomes more important in calculating environmental commodity value.

Developers considering new facilities, feedstock contracts or gas supply agreements therefore need to model post-2027 RIN treatment rather than relying only on current credit-generation assumptions.

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California is tightening the LCFS

California’s LCFS is also becoming more demanding.

The amendments approved by the Office of Administrative Law took effect on July 1, 2025. They increase the required reduction in the carbon intensity of California’s transportation fuel pool to 30% by 2030 and 90% by 2045.

A steeper benchmark can increase demand for low-carbon fuels and credits because suppliers of higher-carbon fuels generate larger compliance deficits relative to the declining standard.

CARB has also implemented CA-GREET4.0 and updated pathway calculators, including specific tools for biomethane from dairy and swine manure, organic waste, wastewater sludge and landfills. These affect how individual pathways establish carbon intensity and therefore how many LCFS credits a unit of fuel can generate.

The commercial implication is straightforward: RNG is not one homogeneous product. Two volumes of pipeline-quality biomethane can have different environmental commodity values because their feedstocks, methane assumptions, production processes, transport requirements and certified carbon intensities differ.

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Avoided methane is no longer an unlimited value source

The most significant long-term change for livestock RNG is California’s treatment of avoided methane.

Dairy and swine manure pathways have historically been able to achieve very low, and in some cases negative, carbon-intensity scores because the LCFS recognizes methane emissions avoided when manure is diverted from conventional management systems into anaerobic digestion. CARB’s regulatory materials continue to provide dedicated carbon-intensity calculation methods for dairy and swine manure biomethane.

Those scores can generate significant LCFS credit volumes per unit of transportation fuel. Environmental attributes have therefore represented a major part of project economics for some projects.

CARB’s amended framework phases out avoided methane crediting associated with biomethane used as a combustion fuel, while retaining a role for biomethane used to produce renewable hydrogen.

This changes the long-term investment case.

Investors should no longer assume that strongly negative carbon-intensity scores will remain available indefinitely for new combustion-fuel pathways. Future economics will depend more heavily on the actual fuel value, remaining LCFS treatment, federal RIN generation and potentially alternative end uses.

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RNG is still valuable, but the source of value is changing

The combination of a stronger federal RFS and a changing California LCFS does not signal the end of transportation RNG. It means that stacking incentives requires more careful analysis.

At the federal level, D3 RIN generation can remain valuable for qualifying renewable CNG and LNG used as transportation fuel. California can add LCFS value when that fuel is supplied into the state and meets LCFS requirements.

Historically, the most attractive projects could combine both markets, particularly when a very low carbon-intensity score generated substantial LCFS credit volumes. The value of that stack now depends increasingly on pathway specifics.

Landfill RNG, wastewater RNG, organic-waste biomethane and livestock RNG can all have different carbon profiles. Feedstock origin is becoming more relevant under the federal program, while end use can determine whether a particular incentive is available.

For traders and buyers, environmental attributes need to be evaluated alongside the physical gas rather than as a generic premium attached to “RNG.”

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LCFS prices also matter

Regulatory ambition does not by itself determine project revenue. Credit prices are set by the market.

CARB’s weekly transfer data for May 25 to May 31, 2026 showed a volume-weighted average LCFS credit price of $66.16 per metric ton across non-zero transfers, with a reported range of $55 to $75.

That is well below the 2026 Credit Clearance Market maximum price of $275.39 per credit. CARB states that the Credit Clearance Market mechanism is designed to provide additional compliance flexibility and limit the risk of extreme credit shortages, rather than to represent the normal market trading price.

The difference illustrates a central project risk. A pathway can generate a large theoretical number of credits and still deliver materially different revenue depending on market pricing.

Project economics should therefore be stress-tested against multiple LCFS price scenarios rather than built around the regulatory maximum or historical highs.

The same principle applies to RINs. Mandated volumes create compliance demand, but realized revenue depends on RIN category, market balance, transaction timing and continued pathway eligibility.

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New projects need a multi-market model

A new RNG project entering development in 2026 should answer several questions before relying on environmental commodity revenue.

What feedstock and EPA pathway determine RIN eligibility? Transportation RNG derived from qualifying biogas needs to meet the applicable RFS pathway requirements before it can generate the intended RIN category.

Where is the feedstock and fuel produced? The RFS treatment of foreign fuels and foreign feedstocks changes from 2028, which can alter the relative value of cross-border supply.

Will the RNG enter California’s transportation market? If so, its certified carbon intensity becomes central to LCFS credit generation.

Is the project relying heavily on avoided methane value? If the answer is yes, the developer needs to understand how California’s phaseout changes the expected economics of using the biomethane as a combustion fuel.

Could the biomethane have greater value in another end use such as renewable hydrogen, industrial decarbonization or a corporate renewable gas program? California’s decision to distinguish between biomethane used for combustion and biomethane used for renewable hydrogen shows why end-use strategy is becoming increasingly important.

These questions should be answered together. Optimizing only for physical gas production while treating credits as secondary can leave significant value, or risk, unaddressed.

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The commercial impact

The policy environment for RNG is becoming more selective rather than simply more or less supportive.

EPA’s 2026 and 2027 Renewable Fuel Standard strengthens mandated renewable fuel demand and continues to rely heavily on renewable CNG and LNG for the cellulosic category. California’s amended LCFS creates a more aggressive overall carbon-intensity target but reduces the long-term reliance on avoided methane crediting for livestock biomethane used as a combustion fuel.

The result is a market in which project quality matters more.

Feedstock, carbon intensity, country of origin, end use, documentation and access to multiple compliance markets can materially affect the value of the same physical unit of RNG.

For developers, this increases the importance of designing the environmental commodity strategy alongside the physical project. For buyers, it makes pathway due diligence more important when comparing supply. For traders, the market is likely to become more differentiated as policy changes alter the value of different RNG attributes.

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AFS Commodities works with producers, buyers and corporate clients across renewable gas and environmental commodity markets. If your organization is developing an RNG project, assessing RIN and LCFS exposure or reviewing the environmental value of biomethane supply, contact AFS Commodities to discuss current market structures, pathway considerations and procurement opportunities.