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Harvard Professor: RVP Parity for E15 is Quickest Route to Lower RIN Prices

February 6, 2018


WASHINGTON - Oil refiners and their champions in Congress continue to propose misguided "reforms" to the Renewable Fuel Standard (RFS) intended to reduce the price of RINs (Renewable Identification Number credits). But a recent paper from Harvard University Professor James H. Stock argues that perhaps the most direct way of lowering RIN prices is for EPA or Congress to provide parity in the regulation of gasoline volatility (RVP) for E10 and E15. Providing RVP parity for E15 would facilitate increased ethanol blending, which in turn would drive increased generation and availability of RIN credits. Ultimately, greater availability of RIN credits means lower RIN prices. "Extending the RVP waiver to E15 (and higher blends) would facilitate additional corn kernel ethanol being blended into the fuel supply, as some E10 sales are converted to E15 sales," Stock wrote, noting that current EPA regulations effectively prevent E15 from being sold year-round in most of the country. "This additionally blended ethanol would make it easier to comply with the RFS obligation for blending conventional fuels, because more D6 RINS [from conventional ethanol] would become available for compliance. ...[T]hese additional RINs would exert downward pressure on RIN prices. Additional sales of E15, along with the continued expansion of total gasoline demand, would tend to stabilize RIN prices at a lower value, all else equal." Alongside other RFS and RIN experts, Stock will be speaking at the Renewable Fuels Association's (RFA) National Ethanol Conference next week in San Antonio on a panel entitled "For Your RINformation: An Update on RIN Markets." The impact of RVP parity for E15 on RIN prices will be among the topics discussed, along with other concepts that have recently been suggested. "Assuming that extending the RVP waiver leads to more E15 sales, more ethanol will be consumed," Stock says. "This reduces the RIN price needed to induce the marginal E15 or E85 consumer to buy a higher blend. Said differently, because of E15 sales, more RINs are available, driving down the price of RINs." If RVP parity for E15 induced even 200 million gallons of additional ethanol consumption, it "...could exert substantial downward pressure on RIN prices," according to Stock. "If refiners truly want lower RIN prices, the answer is really quite simple: blend more ethanol," said RFA President and CEO Bob Dinneen. "The very purpose of the RFS is to drive expanded consumption of renewable fuels and the RIN provides a powerful incentive to do just that. Once the D6 RIN has done its job to expand conventional renewable consumption to 15 billion gallons and beyond, its value will naturally recede. Some of the other foolhardy approaches being discussed—such as Sen. Cruz's proposal to cap RIN prices or allowing RINs from exported volumes to count toward compliance—might indeed lower RIN prices, but they would eviscerate the RFS and undermine its statutory purpose in the process. The message from Prof. Stock's paper is clear enough for a bumper-sticker: RVP Relief=RIN Relief."