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RIN Risks: Using Supply and Demand Behavior to Assess Risk in the Markets for Renewable Identification Numbers used for Renewable Fuel Standard Compliance

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  • Donahue, Dustin J.
  • Meyer, Seth

Abstract

Congress has mandated that more biofuels be used over the next decade. To ensure compliance with the mandate, RINs are used to track biofuels that fuel blenders mix into motor fuels for domestic consumption. RINs may be traded, and the prices of RINs are affected by the ability of blenders and biofuel producers to comply with the mandate. There are four components to the mandate, one of which relates specifically to cellulosic biofuels, and the EPA has the authority to waive any or all components of the mandate. The purpose of this paper is to gain insight into the interactions between cellulosic biofuel technology and the mandate. To achieve this, the prices of RINs are simulated through the use of an economic model under scenarios varying both levels of technology and the enforcement or waiver of the cellulosic component. If the non-cellulosic components of the mandate are not waived, RIN markets are found to contain the effects that might otherwise be transmitted to crops markets. Higher levels of cellulosic biofuel technology are found to increase compliance costs in the presence of a mandate waiver but lower compliance costs if the mandate is not waived.

Suggested Citation

  • Donahue, Dustin J. & Meyer, Seth, 2010. "RIN Risks: Using Supply and Demand Behavior to Assess Risk in the Markets for Renewable Identification Numbers used for Renewable Fuel Standard Compliance," 2010 Conference, April 19-20, 2010, St. Louis, Missouri 285310, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nccc10:285310
    DOI: 10.22004/ag.econ.285310
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    References listed on IDEAS

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