As the United States Environmental Protection Agency (EPA) has been working to finalize renewable fuel volumes for 2020 and 2021, and rulemaking begins to take shape for the future of the Renewable Fuel Standard (RFS) program, now is a good time to clarify some of the confusing—yet fundamental—aspects of the U.S. renewable fuels program. With that in mind, here is an introduction to the RFS.
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What is the RFS?
The RFS is a federal program administered by the EPA that requires refiners and importers of gasoline or diesel to meet specified renewable fuel quotas. The refiners and importers are known as obligated parties. The RFS is designed to reduce greenhouse gas emissions (GHGs) by lowering the total quantity of petroleum-based fuel introduced into the marketplace.
What is a renewable volume obligation (RVO)?
An RVO is the amount of renewable fuel the EPA requires refiners and importers to blend into petroleum fuels. The EPA is supposed to finalize blending requirements for each compliance year by November 30th of the preceding year. The volume the EPA requires from each obligated party is based on a percentage of the company’s petroleum product sales. Obligated parties actually have two ways to meet their RVO requirement: they may blend their fuel with the amount of biofuel set by the EPA, or they may buy blending credits known as Renewable Identification Numbers (RINs).
How do RINs work?
Refiners and importers turn RINs in to the EPA to demonstrate they have met their RVO. Every gallon of renewable fuel that is produced in or imported into the U.S. is assigned an alphanumeric code known as a RIN. The RIN remains associated to the gallon of renewable fuel until it is blended into the petroleum fuel. When blending is completed, the RIN becomes a tradeable commodity. Obligated parties who blend more than their required volume of renewable fuel will have extra RINs they may sell to other parties, including companies that didn’t meet their RVO.
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