Renewable Fuel Standard

There’s no shortage of debate around ethanol and gasoline with the summer driving season just around the corner. Farm and biofuels groups are pushing hard for policies favoring expanded ethanol use, while refiners are lobbying for changes to the Renewable Fuel Standard to make it less complex and unpredictable.  The current spike in fuel prices adds another (though likely short-term) component to the debate. Today, we’ll dive into the debate, focusing on ethanol blending policies.

A primary objective of the federal Renewable Fuel Standard (RFS), when it was expanded back in 2007, was to stimulate by 2022 the production of at least 16 billion gallons/year of gasoline and diesel made from cellulosic biomass in conversion plants resembling small refineries. After getting lots of headlines in the early days of renewable fuels, that vision faded into the background and attention shifted to the use of ethanol in gasoline and the production of diesel from soybean oil, but cellulosic biofuels — non-food crops and waste biomass like animal manure, corn cobs, corn stalks, straw and wood chips — are back in the spotlight thanks to a regulatory quirk. In today’s RBN blog, the first in a series, we review the unusual history of the D3 Renewable Identification Number (RIN), the subsidy designed to stimulate cellulosic biofuel production, and the recent impact on heavy-duty trucking. 

The Renewable Identification Number (RIN) has long served as the tool used to force renewable fuels like ethanol and soybean oil into the U.S. gasoline and diesel supply. A creation of the Renewable Fuel Standard (RFS), RINs act as a subsidy that enables the production of renewable fuels that would not otherwise be economically justified. RIN prices are set by the usual workings of supply and demand, but chatter has bubbled up recently in the renewable fuels ecosystem that prices for a particular variety of RIN could be headed for a crash. In today’s RBN blog, we explain what’s behind the talk about RIN prices.

What has been the most controversial topic in the U.S. refining industry over the last 10 years? Well, it’s a matter of opinion but, judging from time spent in earnings conference calls, law offices, courtrooms, congressional committees, the White House, and other forums of business and political debate, Renewable Identification Numbers — or RINs — would have to be a top contender for that prize. In today’s RBN blog and the final episode of this series, we consider two differing viewpoints on the effects of the RIN system and specific disagreements — or are they misunderstandings? — about the financial consequences of RINs that have dominated the debates and legal cases.

Refiners and the U.S. Environmental Protection Agency (EPA) have locked horns in a dispute over Renewable Identification Numbers (RINs). Now in its 10th year, the dispute stems from contradictory premises about how RINs affect the profits of the refiners and blenders who produce the ground transportation fuels sold in the U.S. To form an opinion of what ought to happen next, you need to understand the fundamentals of how RINs work in light of the RIN being a tax and a subsidy that forces renewables into fuels. In today’s RBN blog, we focus on how RINs force renewables into fuels and address the related question: Do RINs increase the price consumers pay for gasoline?

For several years now, no single topic has caused more angst in refiners’ quarterly earnings calls than the seemingly arcane topic of renewable identification numbers, or RINs, which can have a big impact on a refiner’s financial performance. 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 — farmer, refiner, blender, consumer, politician — you may have a very different perspective regarding RINs’ role as a tax and a subsidy. In today’s RBN blog, we dig into the fundamental aspects of RINs at the root of this long-running controversy and examine the role of RINs as a mechanism for forcing renewables into fuels.

Last month, in the U.S. Environmental Protection Agency’s (EPA) latest ruling in a long-running dispute with refiners over the Renewable Fuel Standard (RFS), EPA denied 36 petitions from refiners seeking exemptions to their obligation to blend renewables like ethanol into gasoline for the 2018 compliance year. At the core of this dispute are two contradictory premises about Renewable Identification Numbers, or RINs. One premise says the RINs system adds cost that hurts refiners’ profitability, while the other says refiners’ profitability is not affected. Can two seemingly contradictory premises be true? In today’s RBN blog, we begin an examination of the issues surrounding RINs and the degree to which the cost affects refiners’ and blenders’ bottom lines.

When it comes to hydrogen regulation, there are two buckets. The first includes safety and environmental regulations related to building and operating facilities that produce, transport, store, and consume hydrogen. There’s not much mystery here, just a multitude of rules from various organizations in place to cover the physical side of the hydrogen industry. That said, as hydrogen use is expected to grow over time, this bucket of regulation is likely to expand and maybe morph. The second bucket includes rules that are designed to provide market structure and incentives for hydrogen. This bucket is mostly empty, though, and for hydrogen markets to succeed, it will need to be filled up. Put another way, hydrogen needs rules and incentives that make it clear the powers-that-be want hydrogen to be around and thriving. In today’s blog, we look at existing hydrogen regulations and highlights the gas’s need for further regulatory incentives and clarity.

Ethanol is a biofuel that is found in nearly 98% of the gasoline purchased at retail stations in the U.S., in most cases accounting for 10% of the gasoline/ethanol blend. This high-octane, biofuel has grown in popularity around the world, particularly over the last 20 years, due to regulations that require or incentivize its use. As governments continue to evaluate regulations to control greenhouse gas (GHG) emissions, ethanol has been overshadowed by some other biofuels lately but it is expected to continue to play an important role as a pathway for meeting low-carbon mandates. Today, we discuss the history, the production, and the still-evolving role of ethanol in the global push to decarbonize.

Over the past few weeks, publicly traded independent refining companies reported their latest quarterly results, and nearly all lamented on a common theme: the cost of Renewable Identification Numbers (RINs) is out of control. However, the financial burden is not felt equally across the industry, as companies with integrated marketing operations (refining, blending and retailing) don’t face the same RINs-cost albatross as merchant refiners who don’t have retail operations. Today we review the escalating RIN costs that obligated parties have endured this year and explain how the degree of financial pain depends on the level of refiners’ downstream integration.