https://orcid.org/0000-0003-1039-3867
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ABSTRACT
A seminal economic paper theorized that when US refiners encountered the 10% blend wall for blending ethanol into gasoline, they would experience a shortage of Renewable Fuel Standard (RFS) compliance credits and consequent higher prices. When Renewable Identification Number (RIN) prices spiked in 2013, many economists and policy makers incorrectly deduced it was due to the predicted shortage stemming from the blend wall. The US Environmental Protection Agency (EPA) in response made changes to the RFS to provide oil refiners relief from the blend wall. Compliance data now published by the EPA demonstrate that US refiners and importers have blended more than 10% ethanol in obligated gasoline volumes since 2010 and did not experience any compliance credit shortages between 2010 and 2015. The 2013 spikes in RIN prices therefore cannot be explained by market shortages of compliance credits. The EPA's changes to the RFS did not reduce demand for ethanol below the blend wall.
Disclosure statement
The author has no direct financial interest in the subject matter.
Notes
1. Thompson, W. et al. (2012) “A Question Worth Billions: Why Isn't the Conventional RIN Price Higher?” Columbia, MO: Food and Agricultural Policy Research Institute. FAPRI-MU Report #12-12.
2. Stock, J.H. (2015) “The Renewable Fuel Standard: A Path Forward.” New York: Columbia University School of International and Public Affairs and Center on Global Energy Policy.
3. Knittel, C.R. et al. (2015) “The Pass-Through of RIN Prices to Wholesale and Retail Fuels under the Renewable Fuel Standard.” Cambridge, MA: Center for Energy and Environmental Policy Research, Massachusetts Institute of Technology.
4. 80 Fed. Reg. (77428-29), Monday 14 December 2015.
5. EPA. (2016a) “Annual Compliance Data for Obligated Parties and Renewable Fuel Exporters under the Renewable Fuel Standard (RFS) Program.” https://www.epa.gov/fuels-registration-reporting-and-compliance-help/annual-compliance-data-obligated-parties-and.
6. 72 Fed. Reg. (23911), Tuesday 1 May 2007
7. 75 Fed. Reg. (14735-14737), Friday 26 March 2010.
8. 80 Fed. Reg. (77510-77511), Monday 14 December 2015.
9. 77 Fed. Reg. (1223, 1340), Monday 9 January 2012. Cf. ‘‘Small Refinery Exemption Study: An Investigation into Disproportionate Economic Hardship’, US Department of Energy, March 2011.
10. See Table 7, in Korotney, D. “Comparison of availability of RINs and standards for previous years.” Memorandum to EPA Air Docket EPA-HQ-OAR-2016-0004-3746, 18 November 2016. (posted 12 December 2016, https://www.regulations.gov/document?D=EPA-HQ-OAR-2016-0004-3746).
11. As made clear in the newly provided data from the EPA, fuel exporters incur a separate RVO if they export RIN-bearing biofuels. The current year and carryover RINs retired by exporters reported by the EPA are excluded from the current analysis, because they are not relevant to the blend wall, which is a structural limit on US fuel supplies. Deficit carryforwards are not permitted for export RVOs under the RFS rules (at CFR §80.1427(c)).
12. The statute adopted by Congress in 2007 included 2009 obligations for the BBD and advanced RVOs; however, the EPA did not finalize the regulations until 2010. The EPA therefore set a BBD RVO in 2010 that included the 2009 obligation. Cellulosic RVOs for 2011 and 2012 were vacated, so the cellulosic RVO for 2011 remains zero, despite the deficit carryforward from 2010.
13. The EPA does not provide data on carryover RINs in 2010, because these RINs were generated under the RFS program established by law in 2005 (RFS1). RFS1 was in effect through June 2010, when the updated regulations and schedule of volumes from the 2007 law came into effect.
14. See also Appendix .
15. Because the reported 2010 BBD RVO also included 2009 volumes, the EPA established additional options for obligated parties to meet it, including use of RFS1 RINs, which are not reported by the EPA.
16. US EPA. (2016b) Renewable Identification Number (RIN) Data for Renewable Fuel Standard Program. https://www.epa.gov/renewable-fuel-standard-program/renewable-identification-number-rin-data-renewable-fuel-standard.
17. There are deviations from this general trend, shown in and used for comparison here. In 2013 and 2014, around 2% of D6 RINs were assigned to BBD or other fuels; in 2015, nearly 3% of D6 RINs were assigned to fuels other than ethanol. And in 2010, nearly 86% of D5 RINs generated were for BBD.
18. 79 Fed. Reg. (34242), Monday 16 June 2014; 79 Fed. Reg. (46353), Friday 8 August 2014
19. 79 Fed. Reg. (73007), Tuesday 9 December 2014.
20. 80 Fed. Reg. (77428-29), Monday 14 December 2015.
21. 80 Fed. Reg. (77487), Monday 14 December 2015.
22. 75 Fed. Reg. (14708), Friday 26 March 2010.