In the coming weeks, the Environmental Protection Agency (EPA) is expected to propose regulations that would reform the market for Renewable Identification Numbers (RINs), which are the "credits" EPA uses to ensure that refiners satisfy their obligations under the Renewable Fuel Standard (RFS). Although the supposed purpose of these reforms is to "improve transparency" and limit volatility in RIN markets, the reforms under consideration would cause more harm than good. In fact, as NATSO's "RIN Market Volatility" Chart demonstrates, wild RIN price swings over the past several years have been caused by policy announcements, rumors, and news reports, rather than any underlying flaw in RIN markets themselves.
"The RIN market in the United States will always respond to changes in federal policies that are designed to enable biofuels to displace petroleum-based fuels. When there are rumors -- true, false, or otherwise -- that EPA is considering adjusting annual renewable fuel mandates, of course RIN markets will respond," said David Fialkov, Vice President of Government Relations at NATSO.
The changes that EPA is exploring were conceived by the same refining companies that for years have been trying to undercut the RFS in order to avoid investing in renewable fuels. The changes are not designed to 'enhance RIN transparency' but rather 'depress demand for biofuels,' so that a small subset of refiners can spend as little as possible to meet their obligations, according to Fialkov. Most of the volatility was caused by abrupt policy changes -- and suspicious rumors thereof -- that swung RIN prices downward in favor of this small subset of refiners, he said.
"This is why RIN prices today are less than half of what they were in January 2017. And make no mistake about it: Lower RIN prices depresses demand for biofuels. That's bad for the environment, bad for American farmers, and bad for American businesses that made good-faith investments presuming that the RFS would be implemented as Congress intended," Fialkov said.
"Aside from continuing to bail out certain refining companies from their RFS obligations, I see no reason why EPA should be exploring any RIN market reforms," Fialkov said. "Steady, predictable, transparent, growth-oriented implementation of the RFS will mitigate RIN market volatility and encourage America's fuel retailers to continue buying, blending, and selling more renewable fuel."
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