CME to offer three contracts in RINs starting in late May

By Susanne Retka Schill | April 09, 2013

CME Group is working on the specifications for three contracts to be offered on renewable identification numbers (RINs), including one for ethanol and one for biodiesel. The contracts should be available for trading on the NYMEX by the end of May, a spokesman for CME Group said. “We’re still putting together the contract specifications,” he added, “more specifics should be available in a few days.”

RINs are the compliance mechanism used by obligated parties to show the U.S. EPA that the mandated amount of renewable fuels has been blending into transportation fuels.  After years of ethanol RINs being valued at a few pennies, the price of D6 RINs shot up to more than $1 per RIN briefly before settling into a range around 60 cents per RINs in the past few months. Currently, a number of brokerage services working in the ethanol and oil industries offer price-discovery platforms, but the private trading system lacks transparency.

In the ethanol space, ethanol producers register the gallons manufactured on a daily basis with the EPA’s Moderated Transaction System (EMTS) to generate the RINs. For ethanol, each gallon generates one RIN, which then follows the product documentation as the ethanol is distributed. At the point where the ethanol is blended into gasoline, the RIN is separated. If the blender is an obligated party, the RIN can be registered with the EPA as proof of meeting the renewable volume obligation. Many blenders, though, have more RINs than needed or are not obligated parties under EPA rules and thus offer the excess RINs for sale.