Problem With Current RIN Markets

Centrally Planned Markets Are Inefficient

The RFS is currently run by a host of government employees under the direction of an administrator. As with any market run by a central planner, there are many inefficiencies . From the EPA Renewable Fuel Standard [1], it's read:

The statute also contains a general waiver authority that allows the Administrator to waive the RFS volumes, in whole or in part, based on a determination that implementation of the program is causing severe economic or environmental harm, or based on inadequate domestic supply.

A central administrator can change RFS volumes at any time which leads to unstable valuations of RINs. That makes it difficult for firms that produce renewable fuels to have good financial forecasts on future projects which stifles innovation.

The Current Market is Limited to Registered Market Participants Only

Registration process is it's own barrier to entry. Only entities registered with the EPA can participate and the registration process is not simple or quick. This limits the market participants to firms with large budgets that can pay consultants who are experts in navigating the bureaucratic system. To be clear, it should be normal practice to have RIN market participants register, but it should be as quick and simple as creating a modern brokerage account or crypto wallet.

The Current Exchange System is Terrible

EPA moderated transaction system (EMTS) is the official exchange and database of record for all transactions involving RINs. It's terrible. It's no wonder why the deals are put together in meetings outside of the EMTS and only once all parties agree on price, they go into EMTS and record the transaction. In this modern world, there's no reason something as intangible as RINs can't be bought and sold on a digital exchange with real time spot pricing available, source transparency available in a few clicks, and price history trendlines. Even physical fuels such as crude oil and natural gas can be traded in this way so why not renewable fuels and RINs?