Speculators are being blamed for increases in ethanol RIN credits! Renewable Identification Number (RIN) credits are issued to manufacturers for every gallon of ethanol that they blend into gasoline. All manufacturers are required to meet targets for blending ethanol into their gasoline – in order to meet national Renewable Fuels Standards. If they fail to meet their targets, they have to pay substantial penalties. Some manufacturers exceed their targets so they have excess credits that they are allowed to sell. Others fail to meet their targets and either have to purchase credits from other manufacturers or pay the penalties. If, for the entire market, it appears there will be a shortage then the price of the credits will go up. If it were possible for a few speculators to “corner the market”, then they might be able to hold out for higher prices. But, the there were truly a shortage, then manufacturers who have excess credits could just as easily do the same. In either case, this puts pressure on manufacturers to blend more ethanol. If there is a shortage of ethanol, then the price of ethanol should rise. If the price of ethanol rises than ethanol producers will try to increase their production to capture more profit. In any case, the credits are doing what they are supposed to do: reward manufacturers who blend excess gallons and penalize those who blend less than their target. If the entire market is below the target, then there will be incentives to produce more ethanol. Speculators help the market to work as it was intended. The real problem here is the entire Renewable Fuel Standards that uses force, in the form of money penalties, to make everyone use more ethanol than they would in a voluntary market. This is a classic case of unintended consequences that occurs when people discover, as Friedrich Hayek wrote, “…how little they know about what they imagine they can design.”
Tag Archives: Environment
Global warming and government.
It appears that our Earth is warming more quickly and is likely due, in part, to human action. Our climate has always changed and will always continue to change. The key question is: “What is the role of government?” I don’t think it is to try to stop climate change. Government has a proper role in regulating pollution of our common environment. But our air and water have never been perfectly clean. As our society has become more affluent, we have done much to clean up our environment. We still have work to do.
Government’s proper role is to help us adapt to the changes. Increasing the availability and lowering the cost of energy will improve our lives and our health more than government efforts to reduce carbon emissions to try to slow global warming. Taxing energy not only makes it less affordable, but Increasing the flow of money to Washington also has its own negative consequences.
We will be best able to adapt to climate changes if we are economically prosperous. People are more prosperous when energy costs are lower. Energy costs are lower when there is a truly free market in energy. Government policies that force us to be “energy independent” raise energy costs. Government should not prohibit free international trade in energy. We should stop subsidizing all forms of energy – treat them all equally. Government should regulate incrementally to continue to reduce pollution, but not make major changes that dramatically increase the cost of energy or that increase the flow of money to Washington.
Vote NO on Water and Land Legacy bond issue in Polk County, Iowa
Emotionally, I support the Water and Land Legacy bond proposal that Polk County, Iowa, voters will vote to approve or reject on election day. I want clean rivers and believe that it is a proper role of government to regulate our environment. But, if we feel that we should spend more on water quality and recreation, then we should pay today, not bind people in the future to pay the cost. As we have become more prosperous, we have done a better and better job of cleaning up our environment. We should continue our current path of spending what we can pay for today. Vote NO on the Water and Land Legacy bond proposal on the back side of your ballot.