RIN Credits and RIN TradingRenewable Identification Numbers play a key role in the U.S. biofuels market
What are RIN Credits?
A RIN – short for Renewable Identification Number – is a credit that is generated each time a gallon of renewable fuel (ethanol, biodiesel, etc) is produced. The two are not inextricably linked, however, as the RIN can be split from the gallon when it is bought on the open market. The credit alone can then be sold to businesses interested in purchasing of RIN credits.
RIN credits comprise a fungible, tradable regulatory currency that represents a qualifying renewable fuel. RINs and RIN trading have played an important role in the development of today’s North American biofuels market.
How do RIN Credits Work?
RINs are used to track the production, use, and trading of biodiesel and other renewable fuels, as required by the EPA’s Renewable Fuel Standard, implemented in the wake of the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007.
The ability to track bio-based fuels is critical as it enables regulatory bodies to enforce annual quotas dictating what percentage of the total amount of motor fuels consumed in the United States must be represented by biofuel blended into fossil fuels. RINs periodically submitted to the EPA by ‘obligated parties’ (petroleum-derived fuel producers) provide an accurate representation of the amount of biofuel-blended petroleum fuel used in the United States.
Who Buys RIN Credits?
Regulations outline the following types of RIN market participant categories:
- Obligated parties (refiners and importers of gasoline or diesel fuel)
- Renewable fuel exporters
- Renewable fuel producers
- Registered RIN market participants
Participants include both domestic and foreign companies. A company may fall under one or more categories and can change from year to year based on their trading or business activities.