Court Issues Split Decision in Cargill’s Renewable Fuel Credits Greenwash Case

January 21st, 2013 by Eric Lane Leave a reply »

The Renewable Fuel Standard (“RFS”) Program is an EPA program promulgated under the Clean Air Act which mandates that certain “obligated parties” must sell gasoline containing a certain percentage of renewable fuel.  To ensure that sufficient volumes of renewable fuel are produced in and imported into the U.S., companies in the gasoline business are required to meet annual Renewable Volume Obligations. 

One way these parties meet their obligations is by acquiring enough Renewable Identification Numbers, or RINs, to demonstrate compliance.  A RIN is a numeric code generated by a renewable fuel producer or importer that represents a gallon of renewable fuel.

Cargill, a large conglomerate known primarily in the food and agricultural industries, produces and sells biofuels and participates in energy markets.  In September of 2012, Cargill sued International Exchange Services (IES), a commodities trader, for allegedly transferring invalid RINs and failing to remedy the problem.  

According to the Cargill complaint, the disputed RINs were purportedly originally issued by a producer called Double Diamond Biofuels (Double Diamond), but the RINs were not valid and not actually generated by Double Diamond. 

In a recent decision, the court dismissed two Cargill causes of action, including the claim under the Clean Air Act.  However, Cargill may go forward with its breach of contract claim.

Because it does not involve individual green consumers and consumer products such as water bottles, cleaning supplies, or hybrid vehicles, this would not typically be thought of as a greenwashing case.  But if Cargill’s allegations are true, the fraudulent activity does represent a grave instance of greenwashing. 

The generation of invalid RINs undermines the policy of the RFS Program – to ensure a certain level of renewable fuel in U.S. gasoline – by damaging the market for valid RINs and ultimately reducing the actual volume of biofuels in circulation. 

According to a spokesman for a biodiesel trade group quoted in this StarTribune article, the RIN scam has hurt the biofuels industry by making obligated parties more wary of purchasing the credits from biodiesel producers. 

The fraud and resulting damage are recognizable when we view the putative RIN purchasers such as Cargill as green consumers, albeit commercial consumers instead of individuals, falling victim to false representations about the validity of renewable energy-based financial products.

In addition to the Cargill civil case, the StarTribune piece says the U.S. government has prosecuted two companies that were allegedly generating fraudulent RINs, and the owner of one was convicted.


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