EIA says RIN credits headed for historic highs

In Washington, the Energy Information Administration says prices of renewable identification number (RIN) credits have been steadily rising in recent months and are approaching their highest nominal levels in the history of the program. 

The corn ethanol (D6) RIN price reached more than $1.00 per gallon (gal) in late January and early February 2021, the highest price since 2013, when the D6 RIN price reached an all-time high. Similarly, the biomass-based diesel (D4) RIN price, applied to volumes of both biodiesel and renewable diesel fuels, approached $1.20/gal during the same period. 

Although the RFS renewable volume obligations for 2021 have yet to be released, RIN prices have been increasing because of limited fuel production as a result of lower fuel demand related to responses to COVID-19, fewer approved new small refinery exemptions (SRE) since 2018, and uncertainty around future RFS levels.

In the past, RIN credit prices increased, generally, because of two situations: when the cost of a biofuel was higher than the petroleum fuel it was blended into or when RFS targets increased more than market-driven biofuel consumption. In the second situation, the higher-value RINs encourage additional, more costly blending beyond normal market levels. 

The recent price increase is likely attributable to the first situation. In spring 2020, as transportation demand was quickly falling, wholesale gasoline prices fell by more than wholesale ethanol prices, causing ethanol D6 RIN prices to increase enough to encourage increased ethanol blending. Similarly, diesel fuel prices fell significantly lower than biomass-based diesel (both biodiesel and renewable diesel), driving biomass-based diesel D4 RIN prices higher to encourage blending costlier biofuels.