Changes which the US Environmental Protection Agency proposed to improve the Renewable Identification Numbers biofuel credits program under the federal Renewable Fuel Standard would have the opposite effect, a study commissioned by the American Petroleum Institute concluded.
“Proposals to rework certain features of the RFS program’s RIN market to address complaints of one group of stakeholders would be a serious policy misstep,” the study by Covington & Burling said. “Improving the position of some obligated parties at the expense of other obligated parties is not a valid goal of public policy.”
“API’s new study makes clear that the EPA’s RINs reform proposal both misdiagnosed the problem and provides misguided and counterproductive solutions,” said Frank Macchiarola, API vice-president of downstream and industry operations.
“Our analysis confirms the previous findings of the EPA, as well as findings by independent analysts, that refined product prices already reflect the cost of obtaining RINs and that no significant reform of the current RIN system is needed,” he told reporters during a teleconference. “In fact, reforming the RINs market will exacerbate the already broken fuels mandate—the RFS—which is costly and unnecessary for US consumers.”
The report found that RIN prices tend to react to demand for the biofuel credits, which is directly related to the approach EPA takes in setting annual renewable fuel quotas under the RFS. As compliance credits, RINs don’t behave like energy or other commodity markets, API said.
“These suggested changes to the existing program structure could increase fuel production costs that could be then passed onto US consumers, as energy companies have already made capital investments and business decisions based on the current program,” Macchiarola said.
“While EPA is framing these changes as a way to increase transparency, it has already enacted improvements to the program that improve transparency for market participants—thus making these proposed changes potentially redundant and unnecessary,” he maintained.