Any action to artificially cap Renewable Identification Number (RIN) prices in exchange for an RVP waiver allowing year-round sale of E15 would be bad deal for rural America and the nation’s consumers, according to a new economic analysis released Tuesday. 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.