Wednesday, July 18, 2012

Available RIN stocks for 2012?

It seems that the EPA in setting the 20% cap applies it to the RVO  not the mandate levels themselves, and since the RVO is on the gap between the total renewable and advanced mandate THIS WOULD CAP CORN RINS INCOMING FOR 2012 at 2,640 million gallons (not 2779 as below).

From a policy standpoint this decision by the EPA to implement the rules in this way creates less flexibility than if the 20% were applied to the nested mandates and not the gap. In this year and in a future drought year it could make a big difference.

I've seen questions and calculations of the availability of RIN stocks and how the industry may use this supply of 2011 conventional RINs to comply with 2012. Those are two very distinct questions as we don't have much of a history to go by in determining RIN stock holding behavior.

As I've said I've seen several RIN stock holding calculations including this one from the University of Illinois that contains at least 2 errors when it comes to application of the mandate policy..... Fortunately for them some of the errors are offsetting! I started from their table and fixed the errors I noticed. This isn't a big difference (200 million gallons of ethanol or so), however, the errors in the their calculation will become MUCH more problematic in future years!  

(Click on the table to enlarge)

 Calculating the RINs is the easy part of the calculation, determining RIN stock holding behavior is the bigger question.

I'd recommend THIS article out of Missouri if you want to understand RINs. You should be able to find the errors in the U of I calculation after reading it and also figure out why they might be a bit deal in the future. The RIN carry COULD be a big source of corn price stability depending on the elasticity of demand for RIN stock holding.

No comments:

Post a Comment