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Biofuel-related price transmission using Renewable Identification Number prices to signal mandate regime

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  • Whistance, Jarrett
  • Ripplinger, David
  • Thompson, Wyatt

Abstract

This paper improves on existing methods of testing price links between biofuels, petroleum, petroleum products, and agricultural commodity feedstocks by incorporating information contained in the prices of Renewable Identification Numbers (RINs) that are used for biofuel mandate compliance. Theoretical equations are developed to show the role RIN prices can play in the relationships among energy, biofuel, and agricultural commodity prices. RIN price data are used (a) to infer values of fuels where market data are unavailable and (b) to define binding and non-binding mandate regimes. A specific empirical exercise exploits the RIN price data to conduct cointegration tests on high frequency data representing spot and futures prices relating to ethanol and biodiesel from February 2009 through March 2015, finding little evidence of short-term biofuel and petroleum product substitution during this period.

Suggested Citation

  • Whistance, Jarrett & Ripplinger, David & Thompson, Wyatt, 2016. "Biofuel-related price transmission using Renewable Identification Number prices to signal mandate regime," Energy Economics, Elsevier, vol. 55(C), pages 19-29.
    • Handle: RePEc:eee:eneeco:v:55:y:2016:i:c:p:19-29
    DOI: 10.1016/j.eneco.2015.12.026
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    References listed on IDEAS

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    Cited by:

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    2. Gabriel E Lade & C -Y Cynthia Lin Lawell & Aaron Smith, 2018. "Policy Shocks and Market-Based Regulations: Evidence from the Renewable Fuel Standard," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(3), pages 707-731.
    3. Thompson, Wyatt & Johansson, Robert & Meyer, Seth & Whistance, Jarrett, 2018. "The US biofuel mandate as a substitute for carbon cap-and-trade," Energy Policy, Elsevier, vol. 113(C), pages 368-375.
    4. Debnath, Deepayan & Whistance, Jarrett & Thompson, Wyatt & Binfield, Julian, 2017. "Complement or substitute: Ethanol’s uncertain relationship with gasoline under alternative petroleum price and policy scenarios," Applied Energy, Elsevier, vol. 191(C), pages 385-397.
    5. Franken, Jason R.V. & Irwin, Scott H. & Garcia, Philip, 2021. "Biodiesel hedging under binding renewable fuel standard mandates," Energy Economics, Elsevier, vol. 96(C).

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    More about this item

    Keywords

    Food versus fuel; Renewable Fuel Standard; Biofuel mandates; Renewable Identification Numbers; Ethanol; Biodiesel;
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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