The US EPA uses RINs as credits to track and enforce compliance with the renewable fuels mandates set by the Renewable Fuel Standard in the US. The RFS program was created under the Energy Policy Act of 2005, which amended the Clean Air Act (CAA). The EPA implements the RFS program with the assistance of the U.S. Department of Agriculture and the Department of Energy. The RFS program has a national reach and mandates that a certain volume of renewable fuel is to replace or reduce the quantity of petroleum-based transportation fuel, heating oil or jet fuel. The four renewable fuel categories under the RFS are, Biomass-based diesel, Cellulosic biofuel, Advanced biofuel, and Total renewable fuel.
RINs are essentially records of individual batches of renewable fuel being blended into the US gasoline and diesel pools. RINs are created when a batch of renewable fuel is made. The information needed to generate a RIN is the quantity of temperature correct fuel volume, pathway information, originating facility, type of feedstock used, and fuel production date. Each batch receives a unique identification number. RINs become usable as credits (“released”) once the renewable fuel is blended into gasoline or diesel in the US. Once released, RINs can be traded. Every year refiners and fuel importers in the US are required to provide the EPA with RINs based on the volume of gasoline and diesel that they supply into the US market. A large portion of the RINs they receive are from the blenders who release them as blending occurs. An overview of the lifecycle of RINs can be seen in Figure 1 below.
Every year the EPA will set the RIN based on projected US fuel demand will be and a goal for renewables use as a portion of demand. The obligation is published as the number of RINs that are required for each gallon of fuel supplied by refiners and importers. For every gallon of fuel supplied there are four different types of RINs that are required, which are,
The four RIN requirements are “nested” meaning the more advanced RINs count against compliance for less advanced RINs, the figure below illustrates the concept.
EMTS is a database that keeps record of all transactions involving RINs. Parties will enter into a trade agreement outside of EMTS and then as a separate record in EMTS each party will enter a trading record stating which side of the trade they are on. EMTS will match the trade and if quality assurance check is passed then the transfer of RINs will take place.
Companies maintain RIN accounts by D-codes and RIN year (typically called “vintage” year, or the year in which the RIN was generated). RINs are retired for compliance by obligated parties and exporters based on their Renewable Volume Obligation. Retirement of RINs normally coincides with the end of the compliance year or by March 31st when done so by obligated parties. While exporters must retire RINs in order to meet compliance within one month of the export date. If RINs are not retired in the current compliance year they may be used for the next year, however RINs can only satisfy obligations for the current compliance year or the following compliance year. After the next compliance year has passed then the RINs “expire” and can no longer be used for compliance.