Study Finds Negative Impacts of EPA’s Proposed RIN Reform
Posted February 27, 2019
EPA’s proposal to reform a key component of the Renewable Fuel Standard (RFS) would only worsen the already broken RFS, a new study finds. The analysis by Covington & Burling for API affirms that the administration’s proposal to reform the market for Renewable Identification Numbers (RINs) under the RFS misdiagnoses the problem with the RINs market and provides misguided and counterproductive changes.
For those who are not familiar with this issue, RINs are credits generated by biofuel producers and obtained when biofuels are blended into the domestic transportation fuel market. U.S. refiners and importers of gasoline and diesel must submit RINs to EPA to be in compliance with the RFS – a federal program Congress created more than a decade ago to promote domestic biofuel production and reduce U.S. reliance on imported crude oil.
The study finds that RIN price volatility has been the result of 1. the ethanol blend wall that limits how much ethanol can feasible be used in the domestic market, and 2. EPA’s implementation of the program, where EPA regulatory actions, and events that foretell how EPA will set standards, have resulted in RIN price swings. Underpinning these findings is EPA’s own previous report showing that refined products reflect the cost of obtaining RINs and that the RFS does not disproportionately harm certain refiners. In fact, restricting the RIN market will exacerbate the already broken fuels mandate which is costly and unnecessary for U.S. consumers.
The structural changes under consideration are likely to do more harm than good. From API Vice President of Downstream and Industry Operations Frank Macchiarola:
“These suggested changes to the existing program structure could increase fuel production costs and lead to higher prices for U.S. consumers, as energy companies have already made capital investments and business decisions based on the current program.”
Meanwhile, the proposed RIN reform does nothing to address the ethanol blend wall – the fundamental structural problem with the federal program and key factor that influences RIN price and RIN price volatility. And here’s the best part - if EPA addresses the blend wall by setting feasible ethanol volume standards, then the problems these RIN reforms are purporting to address should go away.
The EPA’s attention should be on protecting consumers and finding long-term solutions for a program built on an outdated premise, not picking and choosing parts to fix. Macchiarola:
“Attempts to cherry pick certain aspects of the RFS for reform is more evidence that the entire program is a failure. The outdated RFS mandate was premised on the faulty assumptions of ever-increasing gasoline demand and reliance on foreign sources of oil, and the near-term commercial availability of advanced and cellulosic biofuels. History has proved these assumptions wrong, and today we are faced with an energy policy that pushes for ethanol volumes that exceed the capability of the majority of the vehicle fleet and refueling infrastructure.”
As EPA prepares to release its proposed rulemaking for year-round E15 gasoline sales and biofuels credits reform, it is critical that these anti-consumer policies are reevaluated.
About The Author
Jessica Lutz is a writer for the American Petroleum Institute. Jessica joined API after 10+ years leading the in-house marketing and communications for non-profits and trade associations. A Michigan native, Jessica graduated from The University of Michigan with degrees in Communications and Political Science. She resides in London, and spends most of her free time trying to keep up with her energetic Giant Schnauzer, Jackson.
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