CHICAGO, Dec 21 (Reuters) - U.S. renewable fuel credits remained under pressure on Thursday as expectations mounted that lawmakers may soon renew a $1-per-gallon rebate for biodiesel blenders that could curb worries over tight supplies in the thinly-traded market.

Prices of the biomass-based diesel (D4) Renewable Identification Number (RIN) credits traded at 80 cents apiece on Thursday and as low as 78 cents on Wednesday. That is down from 83.5 cents earlier this week, traders said. Without the $1 rebate, the government-issued credits would likely rise.

Oil refiners use the credits to meet government requirements for use of renewable fuels including ethanol. Fuel companies can either meet the requirements by blending biodiesel with petroleum-based biodiesel, or buy RINs credits.

Reinstating the biodiesel rebate, which expired at the end of 2016, could entice biodiesel makers to ramp up production and would make it more cost-effective for blenders to use it.

A bill including the biodiesel and renewable diesel income tax credit was introduced in the Senate on Wednesday.

Sources expected the rebate would be renewed retroactively for 2017 and extended through 2018.

Many people think “it’s a done deal,” said a trader at a U.S. biodiesel producer.

The tax credit would be a boon for a biofuels market embattled by increased criticism from lawmakers and oil refiners. In November, the Environmental Protection Agency disappointed the biodiesel industry by keeping mandates for use unchanged.

Industry groups such as the American Trucking Association and Petroleum Marketers Association for America pressed U.S. legislators in a letter this week for an extension.

The blenders credit first went into effect as part of the American Jobs Creation Act from 2005-09. It often has been renewed retroactively late in the calendar year and extended to the next year, lapsing for the fifth time since 2009 on Dec. 31, 2016. (Additional reporting by Jarrett Renshaw, Chris Prentice and Richard Valdmanis; Editing by Tom Brown)