Graduate Thesis Or Dissertation
 

RINs and biofuel mandates : comparing ethanol and biodiesel markets

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https://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/mg74qq188

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  • The United States Congress set out to increase the blending of biofuels by updating and implementing the Renewable Fuel Standard (RFS2) in 2007. The new mandate required that a combination of 36 billion gallons of ethanol, biodiesel, and cellulosic biofuel be blended annually, by 2022. To offset the cost of compliance with the mandate, Congress authorized the U.S. EPA to implement a renewable energy credit scheme for each type of biofuel produced. The credit, called a Renewable Identification Number (RIN), is generated for each gallon of biofuel produced and can be traded with other blenders who find it more expensive to blend biofuel. Few studies have focused directly on the RIN market. Subsequently, there is a dearth of understanding about how the RIN program actually effects the production of blended fuels under the RFS2. This research aims to extend the available research by quantifying the effect that RINs have on the ethanol and biodiesel markets, using blending margins as a predictor for RIN prices. The biofuel supply chain is also considered for this analysis insofar as geography plays an important role in the costs associated with procuring biofuel to comply with the RFS2 mandate. To measure the effect that RINs have on the production of blended fuel, this analysis assumes that blenders face a trade-off between physically moving biofuel to combine with conventional fuel, and purchasing a RIN. The analysis presented in this study provides a useful view of how blenders perceive the trade-off between blending biofuel and purchasing RINs in the immediate run. By understanding how blending margins effect RIN prices and in turn, how blenders respond to those prices, the hope is that this study can extend the understanding of the effectiveness of the current RIN program, relative to the goals set forth under the RFS2. This, in turn, should set the foundation for more sophisticated models in later research.
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