Do Renewable Identification Numbers Function as a Tax or Subsidy, or Both?
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. Depending on your point of view — farmer, refiner, blender, consumer, politician — you may have a very different perspective about how the system works. Our new Drill Down Report is intended to provide a basic understanding of the complexities and contradictions of the RINs market.
The debate over RINs goes far beyond what’s covered in this report, with issues like the “ethanol blend wall,” the role of higher ethanol blends like E15 and E85, the “nesting” of RIN categories, and RIN pricing all generating a lot of conversation, but the framework described here is fundamental to understanding and analyzing those topics.
Key takeaways from the report include:
- Disagreements between refiners and producers highlight debate over renewable fuels policy
- Viewed as a cross-subsidy, consumers are hit by the RINs tax but also benefit from subsidized ethanol
- Both sides in debate over RINs scheme focus on how market prices of key products are affected
- Blending ethanol into unfinished gasoline not enough to meet entire renewable fuels obligation
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