RINs And Ethanol Blends -- Platts

Platts is reporting.

For the archives to help me understand RINs.

The beginning of the article in case the link breaks:

In December 2012, economists at the University of Missouri published a paper entitled “A Question Worth Billions: Why Isn’t the Conventional RIN Price Higher”? In the paper, they puzzled over why the price of Renewable Identification Numbers (RINs), used to prove compliance with the Renewable Fuel Standard (RFS), was only 5 cents, even though it was eviden tthat the so-called “blend wall” (the point at which the mandated volumes of ethanol exceed the roughly 10 percent of total gasoline consumption that our fuel infrastructure can accommodate) would need to drive RIN prices higher to incentivize the build-out of infrastructure capable of accommodating higher ethanol blends. They speculated perhaps it was because the market expected EPA to waive the broad mandates if RIN prices were to rise sharply.

Hold that paper up to a mirror and reverse it, and that’s where the market stands today. The question right now is why RIN prices are not lower. And based on various analyst reports this week, a key part of the reason seems to be broad-based skepticism in the market that EPA will use its waiver authority to avoid the blend wall—even though EPA just went to unusual lengths to signal precisely that it will.

On Tuesday, EPA announced that it would keep the 2013 biofuel targets roughly in place.Significantly, however, EPA stated unambiguously that it understands the RFS will become unworkable next year and that it expects to lower the 2014 volume requirements, including advanced biofuel and total renewable categories.