Renewable Identification Numbers (RIN) and Renewable Volume Obligations (RVO) are the mechanisms the EPA uses to implement the RFS program. RINs are used for both recordkeeping and flexibility in meeting the separate RFS targets. Each RIN is a 38-character alphanumeric code assigned to each gallon of renewable fuel that is produced in or imported into the United States. RINs are valid for the year in which they are generated. However, up to 20% of a year's mandate can be met with RINs generated in the previous year.
When renewable fuels are blended into gasoline and diesel fuel or sold to consumers in neat form (typically 100% biofuel), the RIN representing the renewable attribute of the fuel becomes separated from the physical biofuel and can be used for either compliance purposes or traded. Separated RINs have a market value attached to them and provide flexibility for obligated parties in meeting their RVOs. Obligated parties have the option to either acquire RINs by purchasing and blending physical quantities of biofuels, or by purchasing already separated RINs and submitting them to the EPA for compliance.
In addition to being used for recording RFS compliance, RINs are part of the value of each gallon of biofuel to which they are attached. The value of RINs, which derives from the RFS program, provides an economic incentive to use renewable fuels. If RIN prices increase, blenders are encouraged to blend greater volumes of biofuels, based on their abilities to sell both the blended fuel and the separated RIN. If a biofuel is already economical to blend up to or above the level required by the RFS program, such as ethanol was from 2006 through much of 2012, one would expect the RIN price to be close to zero. When the biofuel is more costly than nonrenewable fuels but is needed to meet RFS standards or must be blended in greater volumes to be economic, the RIN value should increase to a point at which firms will increase biofuel blending.