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Optimal biofuel supply chain design under consumption mandates with renewable identification numbers

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  • Wang, Xiaolei
  • Ouyang, Yanfeng
  • Yang, Hai
  • Bai, Yun

Abstract

The Renewable Identification Number (RIN) system is a tracking mechanism that enforces the U.S. Renewable Fuel Standard by monitoring obligated parties’ compliance with the biofuel consumption mandates. This paper incorporates the RIN system into the design of a biofuel supply chain that addresses independent decisions of non-cooperative farmers, biofuel manufacturers, and blenders. Game-theoretic models are developed to examine the impacts of the RIN system on individual stakeholders’ decisions (e.g., on farmland use, bio-refinery investment, biofuel production) and the competition between food and biofuel industries, in both a perfectly competitive scenario and a monopoly scenario. For the perfectly competitive scenario, Nash equilibrium can be obtained by solving a convex optimization problem. For the monopoly scenario, a bi-level Stackelberg leader–follower model is developed, from which we found that a rigid mandate on blenders may suppress the total biofuel production. To avoid such unintended consequences, a relaxed unit-RIN based penalty scheme is proposed and shown to improve the overall biofuel supply chain performance. Managerial insights are drawn from a numerical case study for the state of Illinois.

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  • Wang, Xiaolei & Ouyang, Yanfeng & Yang, Hai & Bai, Yun, 2013. "Optimal biofuel supply chain design under consumption mandates with renewable identification numbers," Transportation Research Part B: Methodological, Elsevier, vol. 57(C), pages 158-171.
    • Handle: RePEc:eee:transb:v:57:y:2013:i:c:p:158-171
    DOI: 10.1016/j.trb.2013.07.008
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    3. Mason, Charles F. & Wilmot, Neil A., 2016. "Price discontinuities in the market for RINs," Journal of Economic Behavior & Organization, Elsevier, vol. 132(PB), pages 79-97.
    4. Olli-Jussi Korpinen & Mika Aalto & Raghu KC & Timo Tokola & Tapio Ranta, 2023. "Utilisation of Spatial Data in Energy Biomass Supply Chain Research—A Review," Energies, MDPI, vol. 16(2), pages 1-23, January.
    5. Jia, Zehui & Wang, David Z.W. & Cai, Xingju, 2016. "Traffic managements for household travels in congested morning commute," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 91(C), pages 173-189.
    6. Li, Yuanzhe, 2019. "Modeling Bioenergy Supply Chains: Feedstocks Pretreatment, Integrated System Design Under Uncertainty," Institute of Transportation Studies, Working Paper Series qt1539g5sj, Institute of Transportation Studies, UC Davis.
    7. Hossein Savoji & Seyed Meysam Mousavi & Jurgita Antucheviciene & Miroslavas Pavlovskis, 2022. "A Robust Possibilistic Bi-Objective Mixed Integer Model for Green Biofuel Supply Chain Design under Uncertain Conditions," Sustainability, MDPI, vol. 14(20), pages 1-16, October.
    8. Wang, Xin & Lim, Michael K. & Ouyang, Yanfeng, 2015. "Infrastructure deployment under uncertainties and competition: The biofuel industry case," Transportation Research Part B: Methodological, Elsevier, vol. 78(C), pages 1-15.
    9. Bai, Yun & Ouyang, Yanfeng & Pang, Jong-Shi, 2016. "Enhanced models and improved solution for competitive biofuel supply chain design under land use constraints," European Journal of Operational Research, Elsevier, vol. 249(1), pages 281-297.
    10. Li, Yanan & Lin, Jun & Qian, Yanjun & Li, Dehong, 2023. "Feed-in tariff policy for biomass power generation: Incorporating the feedstock acquisition process," European Journal of Operational Research, Elsevier, vol. 304(3), pages 1113-1132.
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    12. Moncada, J.A. & Lukszo, Z. & Junginger, M. & Faaij, A. & Weijnen, M., 2017. "A conceptual framework for the analysis of the effect of institutions on biofuel supply chains," Applied Energy, Elsevier, vol. 185(P1), pages 895-915.
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