Demystifying RINs: A Partial Equilibrium Model of U.S. Biofuels Markets

Christina Korting and David Just

No 250034, Working Papers from Cornell University, Department of Applied Economics and Management

Abstract: We explore four fundamental channels of mandate compliance available under current U.S. bio- fuels policy: increased ethanol blending through E10 or E85, increased biodiesel blending, and a reduction in the overall compliance base. Simulation results highlight the interplay and varying importance of these channels at increasing blend mandate levels. In addition, we establish how RIN prices are formed: The value of a RIN in equilibrium is shown to re ect the marginal cost of compensating the blender for employing one additional ethanol-equivalent unit of biofuel. This contrasts with existing research equating the price of RINs to the gap between free-market ethanol supply and demand at the mandate level. We demonstrate the importance of this distinction in case of binding demand side infrastructure constraints such as the ethanol blend wall: as percent- age blend mandates increase, the market for low-ethanol blends may contract in order to reduce the overall compliance base. This has important implications for implied ethanol demand in the economy.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 23
Date: 2016-09
New Economics Papers: this item is included in nep-agr and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/250034/files/Cornell-Dyson-wp1614.pdf (application/pdf)

Related works:
Journal Article: Demystifying RINs: A partial equilibrium model of U.S. biofuel markets (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:cudawp:250034

DOI: 10.22004/ag.econ.250034

Access Statistics for this paper

More papers in Working Papers from Cornell University, Department of Applied Economics and Management Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().