February Question of the Month

Welcome to the February installment of the Clean Cities Technical Response Service (TRS) Question of the Month.

Question of the Month: What are Renewable Identification Numbers (RINs), and how are they generated, transferred, and traded?

Answer: The U.S. Environmental Protection Agency (EPA) uses the RIN as a unit for tracking compliance under the Renewable Fuels Standard (RFS2) program. RFS2 requires obligated parties (refiners, blenders, and importers) to ensure that the conventional fuel (gasoline or diesel) sold or introduced into commerce contains a certain percentage of renewable fuels. As such, each obligated party has a renewable volume obligation (RVO) based on the amount of conventional fuels it handles on an annual basis.

Generating RINs
RINs are 38-character numeric codes generated for all renewable fuel produced in or imported to the United States by the producer or importer, according to a formula set by EPA. The RIN code provides information about the year that the fuel was produced or imported, the producing or importing entity, and the type of renewable fuel.

RINs can be generated as gallon-RINs or batch-RINs (multiple gallon-RINs combined under one numeric code). The number of gallon-RINs generated may not be equal to the number of gallons of fuel. Instead, gallon-RINs are assigned based on equivalence values determined according to the volumetric energy content of the fuel in comparison with corn ethanol and adjusted for the renewable content. One gallon of corn ethanol is equal to 1 gallon-RIN while one gallon of biodiesel, for example, is actually equal to 1.5 gallon-RINs.

Transferring RINs
RINs “travel” with the renewable fuel as it is transferred from one entity to another. When renewable fuel changes hands, it is accompanied by the associated paper RIN credit and the transfer is recorded using product transfer documents (PTDs), which serve as the basis for the recordkeeping and reporting requirements under the RFS2 program.

If a batch of renewable fuel is split into smaller volumes and transferred, the RIN number will change accordingly. Tracking these 38-digit codes and the associated fuel producers, importers, blenders, marketers, refiners, and exporters is a complex process. Therefore, EPA developed and introduced a new EPA Moderated Transaction System (EMTS) in 2010. All regulated parties were required to start using the EMTS to track their RIN generation and transferring starting on July 1, 2010.

There are several actions that separate the RIN from the fuel, including when the renewable fuel enters the retail market. Once a RIN is separated, it can be traded.

Trading RINs
At the end of each year, each obligated party must demonstrate that it has sufficient RINs to cover its RVO for that year. RINs can be used within the calendar year in which they were generated or the following calendar year (plus two months), with some restrictions. If an obligated party has access to RINs, it can sell those RINs on the open market. Conversely, if an obligated party cannot or does not wish to blend renewable fuels into conventional fuel and, therefore, does not have enough RINs to meet its RVO, it can purchase RINs from other entities. The price of RINs is set by the market and is largely based on supply, demand, commodity prices, and speculation.

The summary above provides an overview of RINs, but there are many more details and complexities associated RFS2 compliance and RIN generation, transfer, and trading. For more information about RFS2 and RINs, please visit the EPA’s RFS (http://www.epa.gov/otaq/fuels/renewablefuels/index.htm) and RFS1 & RFS2 Compliance Help (http://www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/index.htm) websites. Specific questions can also be sent to the EPA Fuels Programs Support Line at EPAFuelsPrograms@epa.gov or 202-343-9755.