New study shows RIN cap in exchange for year-round E15 is a bad deal

In Iowa, 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 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.”