25 April 2013 22:57 [Source: ICIS news]
The new RINs contracts will be available for trading starting 13 May and will allow customers to hedge risk in three types of renewable fuels including D4 biodiesel, D5 advanced biofuel and D6 ethanol.
"With the recent increase in volatility in RINs prices, we've seen strong interest from our customers and other market participants for cost-effective ways to manage their risk in this market," said Gary Morsches, managing director of global energy at CME Group.
These futures contracts will provide a useful hedge for the price risk associated with the US Environmental Protection Agency's (EPA) Renewable Fuel Standard (RFS), according to the CME Group.
The US Congress passed a law in 2007 that required refineries to blend biodiesel with petroleum-based diesel. To keep track of how the mandate is being completed, producers use 38-character RINs.
Buyers such as refineries can use the RINs to show the EPA they have met their share of the annual mandate, and they can sell credits above their share to other buyers, giving flexibility to buyers who are not close to biodiesel fuel producers.
The CME Group announcement follows the EPA's discovery of more than 140m fraudulently created biodiesel RINs and its decision to assess fines against refiners who purchased these RINs from EPA-registered biodiesel producers.
Under the EPA's current structure, obligated parties who unknowingly purchased fraudulent RINs are required to replace the RINs, incurring high costs that ultimately get passed down to the consumer.
Many in the biodiesel industry have started using private, voluntary verification services for RIN buyers so they can prove their credits are legitimate and reduce risk.
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