Renewable fuel credits

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Renewable fuel credits, often referred to as Renewable Identification Numbers (RINs), are integral components of the Renewable Fuel Standard (RFS) program administered by the United States Environmental Protection Agency (EPA). These credits are used to ensure compliance with mandated levels of renewable fuel usage in the transportation sector, aiming to reduce greenhouse gas emissions and promote the use of biofuels.

Overview[edit]

Renewable fuel credits are essentially serial numbers assigned to batches of biofuel. They serve as proof that biofuels have been produced and are being used in the transportation fuel supply, helping to track the production, use, and trading of renewable fuels as required by federal law.

History and Legislation[edit]

The concept of renewable fuel credits was established under the Energy Policy Act of 2005 and expanded by the Energy Independence and Security Act of 2007. These acts set forth the Renewable Fuel Standard (RFS) program, which mandates that transportation fuel sold in the United States contains a minimum volume of renewable fuels. The RFS program is designed to increase the amount of renewable fuel used in the U.S. each year, culminating in 36 billion gallons by 2022.[1][2][3][4][5]

Function and Trading[edit]

Generation and Assignment[edit]

When a batch of biofuel is produced, a corresponding RIN is generated. Initially, these RINs are assigned to the batch of fuel and travel with it through the distribution chain. Once the biofuel is purchased and used, the RIN can be separated from the batch. This separation allows RINs to be traded independently of the fuel.[6]

Trading and Compliance[edit]

RINs can be traded in markets, providing flexibility for fuel producers and importers to meet regulatory requirements. Obligated parties, such as refiners and importers of gasoline and diesel, are required to demonstrate compliance with the RFS by submitting a sufficient number of RINs to the EPA. These parties can either produce the required renewable fuel themselves or purchase RINs in the market from those who have exceeded their production quotas.

Market Dynamics[edit]

The trading of RINs is facilitated by the EPA's Moderated Transaction System (EMTS), which records all RIN transactions. The system ensures that trades are matched and that compliance is accurately tracked. RIN prices can fluctuate based on supply and demand dynamics, influenced by factors such as production levels of renewable fuels and changes in regulatory requirements.

Criticisms and Challenges[edit]

The RIN market has faced criticism and challenges, including concerns about fraud and market manipulation. Instances of "RIN fraud," where RINs were sold without the production of corresponding biofuels, have been reported. This has led to calls for stronger oversight and regulation of the RIN market to ensure its integrity and effectiveness in promoting renewable fuel use.

Environmental Impact[edit]

The RFS and the associated RIN system are designed to reduce greenhouse gas emissions by replacing a portion of fossil fuels with biofuels, which generally have a lower carbon footprint. The program supports the development of advanced biofuels, which have an even greater potential to reduce emissions compared to conventional biofuels.[7]

References[edit]

  1. Energy Policy Act of 2005. BallotPedia.org.
  2. Summary of the Energy Policy Act. U.S. Environmental Protection Agency.
  3. ENERGY POLICY ACT OF 2005. Govinfo.gov.
  4. ENERGY POLICY ACT OF 2005. Federal Energy Regulatory Commission.
  5. H.R.6 - Energy Policy Act of 2005. Congress.gov.
  6. Renewable Identification Numbers (RINs) under the Renewable Fuel Standard Program. U.S. Environmental Protection Agency.
  7. Renewable Fuel Standard. Alternative Fuels Data Center.