Would Canada challenge Ted Cruz’s plan to attach RINs to U.S. ethanol exports?

The Renewable Fuel Standard (RFS) is currently the subject of heavy debate in the United States, as President Donald Trump tries to satisfy both the farm and energy industries in his base.

On one side, you have Ted Cruz (R-TX) working hard on behalf of the refiners to push for changes to the RFS and its requirement to incorporate ethanol in fuel. As you might have guessed, farmers in the U.S. and the ethanol lobby are pushing back hard.

After seven meetings involving the White House, both sides agreed to the following earlier this week:

  • To not cap RIN credit prices — a price cap would have started a slow death to the RFS according to the National Corn Growers Association and Renewable Fuels Association. (A RIN or Renewable Identification Number is a number assigned to a batch of biofuel for the purpose of tracking its production, use, and trading under the RFS. RINs can be sold and traded);
  • To have E15 fuel be sold year-round — this decision by President Trump will create further opportunity for domestic ethanol blending;
  • Hardship waivers — no pullback on the waivers that are supposed to be reserved for refiners that are struggling financially to comply with the RFS — a decision not supported by farmers. These hardship waivers have been cloaked in secrecy, leaving EPA Administrator Scott Pruitt under heavy criticism.

Since Cruz did not get the RIN price cap he desired, he is now going about RFS destruction another way. Cruz is pushing for RINs to be attached to ethanol exports. This has many people in the U.S. ethanol industry very concerned, as it could be interpreted by other countries as a violation under the WTO.

Canada is potentially one of the concerned countries. In 2017, Canada was the second largest importer of U.S. ethanol, second only to Brazil. (Canada was number one in 2016.) At 7.8 million barrels, Canada took approximately 24 percent of U.S. ethanol exports (32.8 million barrels.)

“If the RIN is attached to a gallon of exported ethanol, do you really think that this will not be viewed as an export subsidy? The Canadians already told us last summer that this would not be acceptable. ‘If this happens you can be rest assured we [Canada] will be slapping a tariff on imported ethanol to level the playing field’,” noted the Renewable Fuel Association’s Geoff Cooper on Agritalk on May 10th.

Renewable Industries Canada, the lobby group of the Canadian biofuel industry, agrees with the position of the RFA.

“Renewable Industries Canada is closely following the issue of RIN accumulation on the export of U.S. ethanol. While there is substantial opposition from within the U.S., if implemented, this policy (which is effectively an export subsidy) would unfairly disadvantage Canada’s domestic biofuel producers,” Jim Gray, chair of RICanada says in a statement to RealAgriculture. “As more details emerge, we hope that the U.S. administration considers this direct impact on its closest of trading partner.”

“…leaders in the Canadian biofuels industry said they would advocate for a tariff or some other retaliatory barrier if we got export RINs,” clarified the RFA’s Geoff Cooper, in comments to RealAgriculture following his appearance on AgriTalk on Thursday.

At a time when the NAFTA talks are facing a looming deadline and many trade issues to resolve, Canada’s Global Affairs department certainly doesn’t need a biofuel trade dispute with the U.S. dropped in its lap.

Wake up with RealAgriculture

Subscribe to our daily newsletters to keep you up-to-date with our latest coverage every morning.

Wake up with RealAgriculture