The Environmental Protection Agency is proposing to cut the volume of renewable fuels next year.

The agency is required to set annual standards for cellulosic, biomass-based diesel, advanced biofuel and total renewables. It gave two reasons why it needs to reduce the percentage of these fuels next year.

First, although production of renewables has been increasing, overall gasoline fuel consumption is less than Congress expected when it established the program. Second, there are limits to how much ethanol can readily be blended into gasoline.

In its proposal, the agency proposes cutting renewable fuel from the original level of 18.15 billion gallons to 15.21 billion gallons. Cellulosic biofuel would go from 1.75 billion to 17 million gallons. Advanced biofuel, of which biodiesel is a subset, would go from 3.75 billion to 2.2 billion gallons.

“These adjustments are intended to put the program on a manageable trajectory while supporting growth in renewable fuels over time,” EPA said in its proposal.

But biodiesel interests sounded an alarm about the proposal.

The National Biodiesel Board, which represents biodiesel manufacturers and users, warned that the cutback will cost jobs and lead to plant closures.

“This proposal, if it becomes final, would create a shrinking market, eliminate thousands of jobs and likely cause biodiesel plants to close across the country,” said Anne Steckel, vice president of federal affairs for the Board.

The proposed cut means the effective market in 2014 will be closer to 1 billion gallons than to 1.28 billion, because of a carryover from 2013 inventory, the Board said.

“Our industry has been running recently at 170 million gallons a month, an annualized rate of 2 billion gallons,” Steckel said. “This proposal could nearly cut that in half.”

EPA will be accepting comments on its proposal for the next two months, and says it is open to alternatives.