RFS Uses A Market-Based Approach to Reduce Greenhouse Gas Emissions and Reliance on Imported Oil
RINs are the Compliance Currency of the Renewable Fuel Standard
Congress created the Renewable Fuel Standard (RFS) to reduce greenhouse gas emissions and expand the nation’s renewable fuels sector while reducing reliance on imported oil. This program was authorized under the Energy Policy Act of 2005 and expanded under the Energy Independence and Security Act of 2007.
RFS requires a certain volume of renewable fuel to replace or reduce the quantity of petroleum-based transportation fuel, heating oil or jet fuel. The four renewable fuel categories under the RFS are: Biomass-based diesel (D4), Cellulosic biofuel (D3/D7), Advanced biofuel (D5), and Total renewable fuel (D6)
Renewable identification numbers (RINs) are the credits that obligated parties use to demonstrate compliance with the standard. Obligated parties must obtain sufficient RINs for each category in order to demonstrate compliance with the annual standard, set by U.S. EPA.
RINs are generated and attached to the four renewable fuel categories. They are sold with the renewable fuel. When the renewable fuel is blended with diesel or gasoline, RINs are then separated. Separated RINs are sold on the marketplace and are ultimately purchased by obligated parties to meet their compliance obligation.
The RIN markets operate independently, similar to any market. The value of a RIN fluctuates with the markets. Blenders can sell RINs on the market and add the profits to their bottomline.
More information on RINs:
- RINs are generated when a producer makes a gallon of renewable fuel
- At the end of the compliance year, obligated parties use RINs to demonstrate compliance
- RINs can be traded between parties
- Obligated parties can buy gallons of renewable fuel with RINs attached. They can also buy RINs on the market.
- Obligated parties can carry over unused RINs between compliance years. They may carry a compliance deficit into the next year. This deficit must be made up the following year.
For a visual on how RINs are generated, traded and ultimately retired, download our RIN Flow Chart.