The Pass-Through of RIN Prices to Wholesale and Retail Fuels under the Renewable Fuel Standard
The US Renewable Fuel Standard (RFS) requires blending increasing quantities of biofuels into the surface vehicle fuel supply. The RFS requirements are met through a system of tradable permits called Renewable (fuel) Identification Numbers, or RINs. We exploit the large fluctuations in RIN prices du...
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| Format: | Article |
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University of Chicago Press
2019
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| Online Access: | http://hdl.handle.net/1721.1/120581 https://orcid.org/0000-0002-7654-8641 |
| _version_ | 1826216223423070208 |
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| author | Meiselman, Ben S. Stock, James H. Knittel, Christopher Roland |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Meiselman, Ben S. Stock, James H. Knittel, Christopher Roland |
| author_sort | Meiselman, Ben S. |
| collection | MIT |
| description | The US Renewable Fuel Standard (RFS) requires blending increasing quantities of biofuels into the surface vehicle fuel supply. The RFS requirements are met through a system of tradable permits called Renewable (fuel) Identification Numbers, or RINs. We exploit the large fluctuations in RIN prices during 2013–15 to estimate the pass-through of RIN prices to US wholesale and retail fuel prices. We control for common factors by examining spreads of physically similar fuels with different RIN obligations. Pooling six different wholesale petroleum fuel spreads, we estimate a pooled long-run or equilibrium pass-through coefficient of 1.00 with a standard error of 0.11. This pass-through occurs within two business days. The only fuel for which we find economically and statistically significant failure of pass-through is retail E85, which contains up to 83% ethanol; the pass-through of RIN prices to the retail E85–E10 spread is precisely estimated to be close to zero. Keywords: E85; Energy prices; Fuels markers; RBOB; Retail fuel spreads; Wholesale fuel spreads |
| first_indexed | 2024-09-23T16:44:16Z |
| format | Article |
| id | mit-1721.1/120581 |
| institution | Massachusetts Institute of Technology |
| last_indexed | 2024-09-23T16:44:16Z |
| publishDate | 2019 |
| publisher | University of Chicago Press |
| record_format | dspace |
| spelling | mit-1721.1/1205812022-09-29T21:09:59Z The Pass-Through of RIN Prices to Wholesale and Retail Fuels under the Renewable Fuel Standard Meiselman, Ben S. Stock, James H. Knittel, Christopher Roland Sloan School of Management Knittel, Christopher Roland The US Renewable Fuel Standard (RFS) requires blending increasing quantities of biofuels into the surface vehicle fuel supply. The RFS requirements are met through a system of tradable permits called Renewable (fuel) Identification Numbers, or RINs. We exploit the large fluctuations in RIN prices during 2013–15 to estimate the pass-through of RIN prices to US wholesale and retail fuel prices. We control for common factors by examining spreads of physically similar fuels with different RIN obligations. Pooling six different wholesale petroleum fuel spreads, we estimate a pooled long-run or equilibrium pass-through coefficient of 1.00 with a standard error of 0.11. This pass-through occurs within two business days. The only fuel for which we find economically and statistically significant failure of pass-through is retail E85, which contains up to 83% ethanol; the pass-through of RIN prices to the retail E85–E10 spread is precisely estimated to be close to zero. Keywords: E85; Energy prices; Fuels markers; RBOB; Retail fuel spreads; Wholesale fuel spreads 2019-02-28T19:08:29Z 2019-02-28T19:08:29Z 2017-09 2015-07 2019-02-19T17:16:28Z Article http://purl.org/eprint/type/JournalArticle 2333-5955 2333-5963 http://hdl.handle.net/1721.1/120581 Knittel, Christopher R. et al. “The Pass-Through of RIN Prices to Wholesale and Retail Fuels Under the Renewable Fuel Standard.” Journal of the Association of Environmental and Resource Economists 4, 4 (December 2017): 1081–1119 © 2017 University of Chicago Press https://orcid.org/0000-0002-7654-8641 http://dx.doi.org/10.1086/692071 Journal of the Association of Environmental and Resource Economists Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf University of Chicago Press NBER |
| spellingShingle | Meiselman, Ben S. Stock, James H. Knittel, Christopher Roland The Pass-Through of RIN Prices to Wholesale and Retail Fuels under the Renewable Fuel Standard |
| title | The Pass-Through of RIN Prices to Wholesale and Retail Fuels under the Renewable Fuel Standard |
| title_full | The Pass-Through of RIN Prices to Wholesale and Retail Fuels under the Renewable Fuel Standard |
| title_fullStr | The Pass-Through of RIN Prices to Wholesale and Retail Fuels under the Renewable Fuel Standard |
| title_full_unstemmed | The Pass-Through of RIN Prices to Wholesale and Retail Fuels under the Renewable Fuel Standard |
| title_short | The Pass-Through of RIN Prices to Wholesale and Retail Fuels under the Renewable Fuel Standard |
| title_sort | pass through of rin prices to wholesale and retail fuels under the renewable fuel standard |
| url | http://hdl.handle.net/1721.1/120581 https://orcid.org/0000-0002-7654-8641 |
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