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Land of Confusion - Counterintuitive Premises at Heart of Debate Over RINs Policy

The Renewable Identification Number, or RIN, market is so misunderstood that even its main participants don’t agree on its financial impact, effectiveness, or even basic fairness. RINs are a feature of the federal Renewable Fuel Standard (RFS), which requires renewable fuels like ethanol and bio-based diesel to be blended into fuels sold in the U.S. And depending on your point of view — trader, farmer, refiner, blender, consumer, politician — you may have a very different perspective about how the system works. In today’s RBN blog, we discuss highlights from our new Drill Down Report that attempts to make sense of the complexities of the RINs market.

Let’s start with the basics. RINs were designed to ensure compliance with the federal RFS, which was created by the Energy Policy Act of 2005 and expanded and extended by the Energy Independence and Security Act of 2007. To explain how the system works, we’ll refer to Figure 1 below and consider a simplified example of E10, a 90-10 mix of “unfinished gasoline” (oil-based blendstock for oxygenated blending, or BOB) and ethanol. Beginning on the left-hand side, refiners and/or importers (dashed black circle) are subject to the RFS and incur Renewable Volume Obligations (RVO) that they need to fulfill for any BOB that they produce or import. When renewable fuel (ethanol) is produced for blending into BOB, a RIN — a 38-digit number — is assigned and “attached” to each gallon (dashed green circle).

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