Formerly a few cents per gallon, the price of a RIN recently reached $1.40 as businesses covered by the RFS — and speculators — snapped them up in anticipation of the "blend wall."
Industry experts expect companies to pass the cost along to consumers, to the tune of at least 19 cents per gallon at the pump, according to a study by the Energy Policy Research Foundation. The total cost would reach $25 billion a year.
Last week, the Environmental Protection Agency bowed to these realities, announcing that it would use its waiver authority to reduce the ethanol mandates for 2014. That provides industry a reprieve of sorts; it certainly may spare politicians of both parties the trouble of running for office in the middle of a government-induced spike in gas prices.
Still, the EPA's action is far from a permanent fix. The 2007 law allows the agency to grant such waivers for only a year at a time. Oh, and here's another perversity: Eliminating the "blend wall" would destroy the value of RINs people have bought to cope with it.
Meanwhile, a central purpose of the 2007 law — energy "independence"— is well on its way to being met through other means, chiefly a boom in oil production that Congress and the Bush administration never anticipated. The Energy Department projected earlier this year that the United States will be able to supply two-thirds of its petroleum needs through the next three decades.
The ethanol industry grouses that the whole mess with the RFS and RINs could have been avoided but for the refusal of "Big Oil" to invest in the production and distribution of gasoline containing 15 percent ethanol, or 85 percent ethanol "flex fuel."
I suppose they have a point — if you think it's plausible that any industry would have willingly invested billions of dollars to help sell a competing product.
This is the sort of argument between rent-seekers that occurs when government tries to meet public-policy objectives through complex subsidies and mandates — rather than by setting broad incentives and letting market participants respond to them.
A gas-tax increase would clean up the environment and cut oil imports, with the revenue going to reduce the federal deficit — as opposed to lining the pockets of various well-connected industries. Perish the thought.
Charles Lane is a member of The Washington Post's editorial board.