Renewable Fuel Standard
A full explanation of the EPA RFS can be found at epa.gov [1]
Last updated
A full explanation of the EPA RFS can be found at epa.gov [1]
Last updated
The Renewable Fuel Standard (RFS) program is meant to offset petroleum-based fuel consumption as well as incentivize innovation the renewable fuel industry.
The RFS Program was created under the Energy Policy Act of 2005 (EPAct), which amended the Clean Air Act (CAA). The Energy Independence and Security Act of 2007 (EISA) further amended the CAA by expanding the RFS program. EPA implements the program in consultation with U.S. Department of Agriculture and the Department of Energy.
The RFS program is a national policy that requires a certain volume of renewable fuel to replace or reduce the quantity of petroleum-based transportation fuel, heating oil or jet fuel.
The 2007 enactment of EISA significantly increased the Boosting the long-term goals to 36 billion gallons of renewable fuel
The following chart summarizes the Congressional Renewable Fuel Volume Targets at the time the RFS was enacted in 2007:
Obligated parties under the RFS program are refiners or importers of gasoline or diesel fuel. Compliance is achieved by blending renewable fuels into transportation fuel, or by obtaining credits (called “Renewable Identification Numbers”, or RINs) to meet an EPA-specified Renewable Volume Obligation (RVO).
EPA calculates and establishes RVOs every year through rulemaking, based on the CAA volume requirements and projections of gasoline and diesel production for the coming year. The standards are converted into a percentage and obligated parties must demonstrate compliance annually.
For a fuel to qualify as a renewable fuel under the RFS program, EPA must determine that the fuel qualifies under the statute and regulations. Among other requirements, fuels must achieve a reduction in greenhouse gas (GHG) emissions as compared to a 2005 petroleum baseline.
The four renewable fuel categories under the RFS are:
Biomass-based diesel
Cellulosic biofuel
Advanced biofuel
Total renewable fuel
Each fuel type is assigned a “D-code” – a code that identifies the renewable fuel type – based on the feedstock used, fuel type produced, energy inputs and GHG reduction thresholds, among other requirements. The four categories of renewable fuel have the following assigned D-codes:
Cellulosic biofuel is assigned a D-code of 3 (e.g., cellulosic biofuel) or D-code of 7 (cellulosic diesel)
Biomass-based diesel is assigned a D-code of 4
Advanced biofuel is assigned a D-code of 5
Renewable fuel (non-advanced/conventional biofuel) is assigned a D-code of 6 (grandfathered fuels are also assigned a D-code of 6)
“Renewable identification numbers” or RINs are credits that are generated by producers of qualified renewable fuel under the program and represent a set volume of renewable fuel. It can be thought of as a petroleum offset credit. RINs are the credits obligated parties purchase and use to demonstrate compliance with the standard. Obligated parties must obtain sufficient RINs to satisfy their Renewable Fuel Obligation (RVO) as determined under the program.
The following characteristics of RINs are important to understand prior to discussing the tokenization of the RFS through the RINcoin:
RINs are generated when a producer makes a gallon of renewable fuel
At the end of the compliance year, obligated parties use RINs to demonstrate compliance
RINs can be traded between parties
Obligated parties can buy gallons of renewable fuel with RINs attached. They can also buy RINs on the market
Obligated parties can carry over unused RINs between compliance years. They may carry a compliance deficit into the next year. This deficit must be made up the following year.
