ICE launches renewable volume obligation futures

Intercontinental Exchange Inc. (ICE), a leading global provider of data, technology, and market infrastructure, on March 28 announced the launch of two renewable volume obligation (RVO) futures contracts, expanding ICE’s U.S. renewable fuels futures markets.

The U.S. EPA’s Renewable Fuel Standard mandates the incorporation of renewable fuels into transportation fuel. Each year, the EPA outlines the volume requirements for each renewable fuel category and sets those volumes through the annual renewable volume obligation (RVO).

Obligated parties under the RFS program include refiners and importers of transportation fuel in the U.S. Each year these companies calculate their renewable fuel obligation by multiplying the RVO percentage across the four renewable fuel categories under the RFS, by the volume of transportation fuel they produced or imported that compliance year.

The RVO applies to a basket of U.S. renewable identification numbers (RINs) which are credits generated by renewable fuel producers to track the compliance of transportation fuel under the RFS program. Companies must either generate RINs or purchase them to meet their annual commitments. The RVO is critical to the margin calculations of refiners, as well as importers and exporters of transportation fuels, and is an important consideration when exporting fuel and determining whether arbitrage opportunities exist, as well as influencing the crack spread for refiners using the fuel to create other products.