New Study: RIN Price Cap for E15 RVP Waiver “Deal” Would Cut Ethanol Consumption and Trounce Corn Prices

March 08, 2018

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by Emily Druckman (Renewable Fuels Association) Any action to artificially cap Renewable Identification Number (RIN) prices in exchange for an RVP waiver allowing year-round sale of E15 would be a bad deal for rural America and the nation’s consumers, according to a new economic analysis released today. Such a tradeoff would result in reduced ethanol consumption, a drop in corn prices, and an effective cut of 5% to the Renewable Fuel Standard (RFS) conventional renewable fuel requirement, according to the study by the Center for Agricultural and Rural Development (CARD) at Iowa State University.

The CARD analysis comes as President Trump met last week with ethanol and oil industry stakeholders, including members of the Renewable Fuels Association (RFA), to discuss the RFS and RINs. Sen. Ted Cruz (R-Texas) has proposed capping RIN prices at 10 cents, potentially in exchange for an RVP waiver for E15.

Among the CARD study’s conclusions:

“While year-round sales of E15 would encourage retailers to sell the fuel, capping D6 [conventional biofuel] RIN prices would reduce consumption of E15 and E85;”
“A cap on D6 RIN prices between $0.10/gal to $0.20/gal would likely reduce the effective ethanol mandate from 15 billion gallons to about 14.3 billion gallons in 2018;”
“…[C]apping RIN prices at low levels makes it implausible that retailers would invest in E15 even with the assurance that they could sell the fuel throughout the year. Under the proposed compromise, therefore, compliance costs will fall dramatically, but E15 and E85 sales will also decrease. The result would be lower compliance cost and a lower effective blending mandate;”
“Unless increased ethanol exports compensate for the reduced mandate, corn prices would decrease under the proposal’s D6 RIN price cap;” and
“Corn prices under this scenario would drop, in the short-run, by around 25 cents per bushel.”

“The study confirms imposing a price cap on RINs would abrogate the potential benefit of RVP parity for E15. Fundamentally, a RIN price cap and E15 RVP parity work at cross purposes. One is intended to grow demand for biofuels; the other is intended to reduce demand. The net result would be an effective cut to the RFS, lower ethanol production, lower corn prices, and higher consumer gasoline prices,” said RFA President and CEO Bob Dinneen.

“Here’s the bottom line: a RINs price cap would be a lose-lose scenario for America’s farmers and consumers, not the win-win Sen. Cruz has promised. If Sen. Cruz is truly concerned about the supply and price of RINs, and not just demand destruction, he should support RVP parity by itself, since it would expand the supply of RINs available for compliance and lower prices.”

To view the study, click here. READ MORE

In this edition of The Ethanol Report, we hear Bob Dinneen, president and CEO of the Renewable Fuels Association (RFA), discuss the ethanol industry's stand on the issue and why they believe there is a very simple solution to an issue that proves the Renewable Fuel Standard (RFS) is working as intended.

Ethanol Report 3-6-18

Oil and corn tout dueling studies on future of U.S. biofuel program (Reuters/Investing.com)

THE LOOK OF A RIN PRICE CAP (Politico's Morning Energy)

RFS War Rages: Ethanol Plant Managers Plead With Trump to Leave RFS Alone (DTN The Progressive Farmer)

Followup Meeting on E15 RIN Deal This Week at White House (WNAX)

Excerpt from Politico's Morning Energy: Refiner group Fueling American Jobs Coalition is out with a plan today that lays out the policy mechanics of putting a cap on prices for biofuel credits by way of a waiver. The proposal, laid out by Charles River Associates, provides technical heft to Sen. Ted Cruz 's proposal for breaking the Renewable Fuel Standard logjam by arguing for a system of waiver credits that would be sold by EPA at the cost of blending ethanol into gasoline - generally thought to be a few cents per gallon - with the money then going toward stimulating more ethanol consumption, possibly by building out infrastructure for sale of E15 and E85.

Getting personal: The Empowering Iowa Fund will today start airing a pro-ethanol television ad in Washington and the Midwest that targets Cruz for attacking the RFS. The ad, which seems largely aimed at an audience of Trump, tries to remind Trump of Cruz's attacks on both Trump himself and ethanol during the 2016 presidential primary. Empower Iowa Fund is a conservative policy nonprofit, though it appears to have a related super PAC called Empower Iowa. READ MORE