U.S. proposal for ethanol could have political fallout.

WASHINGTON—The Obama administration's latest plan on ethanol, the corn-based renewable fuel, probably will not have a major effect on pump prices, but could have political reverberations in Iowa and other farm states in the 2016 presidential campaign.

Under the proposed rule announced Friday, the amount of ethanol in the gasoline supply would increase in coming years, just not as much as set out under federal law. That approach drew criticism from ethanol and farm groups that have pushed to keep high volumes of ethanol in gasoline.

Democratic presidential candidate Hillary Rodham Clinton has called for a robust renewable fuels standard while campaigning in Iowa, host of the leadoff presidential caucuses next year.

Iowa produces more ethanol than any other state, and the renewable fuel has long been a powerful economic and political issue.

The 2007 renewable fuels law tried to address global warming, reduce dependence on foreign oil and bolster the rural economy by requiring a steady increase in the overall amount of renewable fuels such as ethanol-blended into gasoline over time.

The new proposal would reduce the amount required in the law by more than 4 billion gallons in 2015 and by more than 3 billion gallons next year.

The EPA said the standards set by the law cannot be achieved, due partly to limitations on the amount of renewable fuels other than ethanol that can be produced.

Next-generation biofuels, made from agricultural waste such as wood chips and corncobs, have not taken off as quickly as Congress required and the administration expected. Also, there has been less gasoline use than predicted, the EPA said.

Still, the targets would represent an overall increase in the use of renewable fuels over time. EPA officials said the new requirements would drive growth at an "ambitious but responsible" rate.