Ex Post Costs and Renewable Identification Number (RIN) Prices Under the Renewable Fuel Standard

Resources for the Future Discussion Paper 15-22

46 Pages Posted: 26 Jun 2015

See all articles by Gabriel Lade

Gabriel Lade

Macalester College - Department of Economics

C.-Y. Cynthia Lin Lawell

Cornell University

Aaron Smith

University of California, Davis - Department of Agricultural and Resource Economics

Date Written: June 19, 2015

Abstract

We critically review the Environmental Protection Agency’s (EPA) assessment of the costs and benefits of the Renewable Fuel Standard (RFS2) as summarized in its regulatory impact analysis (RIA). We focus particularly on EPA’s methods used to calculate the costs of the policy on the US fuel market. We compare EPA’s ex ante cost and benefit estimates to measures of ex post costs implied by the price of compliance credits under the policy. Overall, we find that the agency’s assessment was inadequate. In spite of, or perhaps because of, the detailed and complex analysis underlying the RIA, EPA overlooked several fundamental factors. We conclude by recommending a simplification of the analysis used in RIAs, as well as the use of “stress tests” in RIAs to ensure that programs like the RFS2 are designed in ways that can manage high compliance cost scenarios.

Keywords: Renewable Fuel Standard, biofuels, compliance credits, renewable identification number, RIN prices, GHG emissions, regulatory impact analysis

Suggested Citation

Lade, Gabriel and Lin Lawell, C.-Y. Cynthia and Smith, Aaron D., Ex Post Costs and Renewable Identification Number (RIN) Prices Under the Renewable Fuel Standard (June 19, 2015). Resources for the Future Discussion Paper 15-22, Available at SSRN: https://ssrn.com/abstract=2622701 or http://dx.doi.org/10.2139/ssrn.2622701

Gabriel Lade (Contact Author)

Macalester College - Department of Economics ( email )

1600 Grand Ave.
Saint Paul, MN 55105
United States

HOME PAGE: http://gabe-lade.com

C.-Y. Cynthia Lin Lawell

Cornell University ( email )

Ithaca, NY 14853
United States

HOME PAGE: http://clinlawell.dyson.cornell.edu/

Aaron D. Smith

University of California, Davis - Department of Agricultural and Resource Economics ( email )

One Shields Avenue
Davis, CA 95616
United States
530-752-2138 (Phone)
530-752-5614 (Fax)

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