Like many grand government ideas, the Renewable Fuel Standard (RFS)—the government’s ethanol mandates program—includes a number of…perplexing elements. Throughout the year, we’ll be examining a few of these headscratchers through our new video series, The Hall of Legislative Curiosities.
Our first video tackles the government’s mandate compliance system, based on a trading system of ethanol credits called RINs, or Renewable Identification Numbers.
RINs represent a gallon of ethanol produced or imported into the United States and blended into the fuel supply. RINs must be purchased by fuel refiners to demonstrate compliance with ethanol mandates to the EPA. As the mandate for ethanol increases, so too does the amount of RINs required to show compliance. When the law mandates using more ethanol and other biofuel than can safely be blended into the fuel supply, refiners are required to hand in more RINs to meet the mandate than will actually be available. Refiners who do not have enough RINs are subject to a fine.
As these permits become scarce, their cost skyrockets. Just this week, RIN prices rose to record highs, jumping 12 cents to $1.32 per RIN for grain-based ethanol.
The scarcity and high cost of RINs may force U.S. refiners to reduce domestic supply and could lead to higher consumer fuel costs.
If you find this policy as bizarre as we do, sign our petition here to demand change.