The Renewable Identification Number (RIN) has long served as the tool used to force renewable fuels like ethanol and soybean oil into the US gasoline and diesel supply. A creation of the Renewable Fuel Standard (RFS), RINs act as a subsidy that allows the production of renewable fuels that would otherwise not be economically justified. RIN prices are determined by the usual workings of supply and demand, but recently there has been talk in the renewable fuel ecosystem that the prices of a particular variety of RINs could be headed for a crash. In today’s RBN blog, we explain what’s behind the RIN pricing talk.
RINs are a feature of the RFS, requiring certain minimum volumes of biofuels to be blended into fuel sold in the US. The minimum required is determined by the Environmental Protection Agency (EPA). RINs come in different categories with different names. This blog series focuses on the D4 RIN, which applies to biodiesel fuels made from soybeans and other bio-based feedstocks. The D4 RIN (see Figure 1) is a virtual coupon that is attached to each gallon of biodiesel or sustainable aviation fuel (SAF). It is dislodged with a blender when this gallon is mixed with conventional diesel for use as fuel. The blender then redeems the coupon by selling it to petroleum fuel suppliers who are required to meet a biofuel supply quota each year. (See our misunderstanding series and ours land of confusion Detailed report for full explanations of how the system works.)
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