"Obligated parties have the option to either acquire RINs by purchasing and blending physical quantities of biofuels, or by purchasing already separated RINs and submitting them to the EPA for compliance," EIA explains. That means that in addition to being used for RFS compliance, RINs have a standalone value that represents an economic incentive to use biofuels.
From 2006 through much of 2012, the RIN value was close to zero, because it was economical to blend up to or above the level mandated by the RFS. But when RIN prices increase, blenders are encouraged to blend more biofuel because they can sell the RIN and the physical fuel.
RIN prices impacting consumers, corn producers, some say
Recently, RIN prices have increased considerably, causing petroleum groups to point a finger at the RFS for making ethanol production higher than what is needed in the marketplace. In turn, they say, the so-called "blend wall" – a cap on the amount of ethanol that can be blended into traditional fuels and still be sold – is boosting RIN demand and driving prices higher because of compliance concerns.
Petroleum groups have also expressed concern that the rising RIN price is driving up consumers' fuel costs. Sens. David Vitter, R-La., and Lisa Murkowski, R-Alaska sent a letter to EPA Director Nominee Gina McCarthy in March requesting a plan to "protect American citizens from rising gas prices due to the rising cost of ethanol Renewable Identification Numbers."
At the height of the 2012 drought, livestock producers were also concerned about the future of RFS requirements. They said that rising corn prices due to short supplies left them to compete with blenders for a smaller amount of corn.
Another issue in the mix is ongoing concern about RIN integrity, which earlier this year led the Environmental Protection Agency to develop a program to verify RIN validity.
For more, view the University of Illinois Farmdoc post, High Gasoline and Ethanol RINs Prices: Is There a Connection?