Lot of assumptions on this thread. The company involved here is claiming that hasn't committed a crime, which isn't a very interesting claim. The agency that's launched and investigation hasn't gotten a chance to, you know, conduct that investigation yet. There's also a possibility that this was all a mistake that just needs sorted out. So before we all jump on the incentives-gone-wrong and government-is-inefficient trains, maybe give the government a chance?
But if we are going to speculate--and let's face it, we are--let's at least have a gander at the relevant regulations. IANAL, etc, but from my reading Title 40 Part 80 Subpart M [1] it seems really unlikely that assigning the same volume of fuel different RINs is legal. There's a bunch there about assigning specific numbers to specific volumes of fuel, but there's also the super specific:
> (5) Importers shall not generate RINs for renewable fuel that has already been assigned RINs by a registered foreign producer.[2]
The important bit here is that expiration failure "glitch", and the details thereof. If it's just a straight up glitch and the law called for the expiration of the RINs after one crossing then this is a pretty clear-cut case of fraud. If a bank error puts a million dollars in your account, or if a car falls off a shipping truck into your front yard, that doesn't make it yours. By the same token, a glitch in the expiration system doesn't make exploiting that glitch legal.
As much as I dislike the idea of new government departments, it sounds like they do need some kind of 'evil' department who's only job is to think up ways to abuse proposed new laws and regulations before they go into effect.
Similar to how generals have the intelligence section of their staff put on only the enemy hat and poke holes in their plans.
I don't think you need a new department for that. Take the tax code. Who knows how to exploit the tax code the best? The accountants at the IRS. Have the IRS give an employee a bonus each time they find an exploit and write a report on how it works and recommendations on fixing it. It shouldn't be that different from the way major software vendors pay rewards for reported bugs/exploits.
You could provide similar incentives for reports on efficiency improvements (and to prevent exploitation of a system like this, you could have the bonus provided only if the improvement/fix is actually implemented, or based on how significant it is, or something.) Prize and crowd-sourcing systems have worked pretty well when it comes to a lot of things, so why not apply them to improving government bureaucracy?
As it stands, our system does the opposite - it rewards people for finding and abusing exploits in the system instead of fixing them (see - every corporate scandal and stock market crash ever.)
A fun sci-fi read would be about a futuristic government that "subsidizes" an Industry for much-debated, but ultimately politically driven reasons.
Rather than simply making cash-handouts, however, the Government & the Industry conspire to hide these handouts by creating new by-products for sale to consumers.
The Industry grows and rejoices, extending its products into as far ranging lines as sweeteners, fuels, and plastics.
To drive adoption they interrupt the free market through price manipulation and straight forward mandate from their "Environmental" agency.
Despite overwhelming evidence that consumers are being harmed by these by-products - record obesity, less efficient engines, and environmental damage - the subsidies only grow.
I'd like to see how the protagonist would drive change as presently my best solution is to rage via comment board into the echo chamber.
Am i missing the joke? Whats sci-fi about this? And how many industries are like this? Meat, diary, cars, arms, power, oil, medical, prisons. And these are just the ones that come to read from stories I have read recently.
Yes, let's blame the government for people abusing regulations. Except the regulations we like, of course. We'll call it "arbitrage" when we abuse regulations we don't like, and "fraud" when we abuse regulations we do like (like property).
What problem did the EPA create exactly? They created a rule that the company disagreed with? That does not give them a right to break it. That's not how the law works.
This is a typical case of how incentives have a tendency to go wrong. I recommend you to listen to this Freakonomics Radio podcast which tells a series of stories about incentive failure, for example an indian town which started farming cobras when a ruler started giving out money for each cobra head after an infestation.
The companies maintain that this practice was legal. Another company, Northern Biodiesel, appears to have been put out of business by the practice.
The EPA has investigated several other cases of RIN fraud, including one against Jeffrey David Gunselman, the CEO of Absolute Fuels who was arrested in July, accused of selling more than $50 million in fake RIN credits.
So yeah, keep telling yourself that this is another case of the dum dum gubmint who needs to stay out of our way and how no one ever goes bankrupt after defrauding the gubmint because I mean, it all sounded great when Rush said it right?
I don't understand what you are saying (aside from trolling, which is heavily frowned upon). It reads to me like the government is either creating perverse incentives, failing to implement correctly or failing to monitor. If it is the first, we'd be better off without the interference. If it is the second, what is wrong with the government that it can't implement it's policies correctly (perhaps too complex)? If it is the last, then why is the government not policing the policies better?
And finally, do RIN credits provide better incentives than no credits? That is the real question that should be asked with regard to the government being involved. The government's track-record isn't great.
Hilarious. Sounds legal and I doubt they would have done it otherwise. Good example of why most regulation is ridiculous because it's generally easy to find and exploit loopholes.
If Bioversal/Verdaso employees who cooked this up ever apply to YC, they have a good answer for the "Tell us about the time you most successfully hacked some (non-computer) system to your advantage?" question.
[+] [-] icambron|13 years ago|reply
But if we are going to speculate--and let's face it, we are--let's at least have a gander at the relevant regulations. IANAL, etc, but from my reading Title 40 Part 80 Subpart M [1] it seems really unlikely that assigning the same volume of fuel different RINs is legal. There's a bunch there about assigning specific numbers to specific volumes of fuel, but there's also the super specific:
> (5) Importers shall not generate RINs for renewable fuel that has already been assigned RINs by a registered foreign producer.[2]
Sounds pretty clear.
[1] http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=27e92597...
[2] http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=27e92597...
[+] [-] EwanToo|13 years ago|reply
If nobody is arrested or punished for it, then that's more like weak enforcement than clever use of the system.
http://en.wikipedia.org/wiki/Missing_trader_fraud#Carousel_f...
[+] [-] bdunbar|13 years ago|reply
I assume the companies ran this by legal before going forward with the plan. Loopholes aren't illegal, they're just exploits.
[+] [-] InclinedPlane|13 years ago|reply
[+] [-] coopdog|13 years ago|reply
Similar to how generals have the intelligence section of their staff put on only the enemy hat and poke holes in their plans.
[+] [-] rndmize|13 years ago|reply
You could provide similar incentives for reports on efficiency improvements (and to prevent exploitation of a system like this, you could have the bonus provided only if the improvement/fix is actually implemented, or based on how significant it is, or something.) Prize and crowd-sourcing systems have worked pretty well when it comes to a lot of things, so why not apply them to improving government bureaucracy?
As it stands, our system does the opposite - it rewards people for finding and abusing exploits in the system instead of fixing them (see - every corporate scandal and stock market crash ever.)
[+] [-] mtgx|13 years ago|reply
[+] [-] aresant|13 years ago|reply
Rather than simply making cash-handouts, however, the Government & the Industry conspire to hide these handouts by creating new by-products for sale to consumers.
The Industry grows and rejoices, extending its products into as far ranging lines as sweeteners, fuels, and plastics.
To drive adoption they interrupt the free market through price manipulation and straight forward mandate from their "Environmental" agency.
Despite overwhelming evidence that consumers are being harmed by these by-products - record obesity, less efficient engines, and environmental damage - the subsidies only grow.
I'd like to see how the protagonist would drive change as presently my best solution is to rage via comment board into the echo chamber.
[+] [-] lostlogin|13 years ago|reply
[+] [-] jere|13 years ago|reply
[+] [-] exabrial|13 years ago|reply
[+] [-] rayiner|13 years ago|reply
[+] [-] rgbrenner|13 years ago|reply
[+] [-] mmanfrin|13 years ago|reply
[+] [-] eagsalazar2|13 years ago|reply
[+] [-] Mooby|13 years ago|reply
[deleted]
[+] [-] z_|13 years ago|reply
[+] [-] bmuon|13 years ago|reply
http://www.freakonomics.com/2012/10/11/the-cobra-effect-a-ne...
[+] [-] Steko|13 years ago|reply
The companies maintain that this practice was legal. Another company, Northern Biodiesel, appears to have been put out of business by the practice.
The EPA has investigated several other cases of RIN fraud, including one against Jeffrey David Gunselman, the CEO of Absolute Fuels who was arrested in July, accused of selling more than $50 million in fake RIN credits.
So yeah, keep telling yourself that this is another case of the dum dum gubmint who needs to stay out of our way and how no one ever goes bankrupt after defrauding the gubmint because I mean, it all sounded great when Rush said it right?
[+] [-] SoftwareMaven|13 years ago|reply
And finally, do RIN credits provide better incentives than no credits? That is the real question that should be asked with regard to the government being involved. The government's track-record isn't great.
[+] [-] johnpmayer|13 years ago|reply
Inside job? Sounds like the type of "glitch" that was in Office Space.
But probably not (Hanlon)
[+] [-] SideburnsOfDoom|13 years ago|reply
[+] [-] gvb|13 years ago|reply
Again.
[+] [-] gsibble|13 years ago|reply
[+] [-] SideburnsOfDoom|13 years ago|reply
On the contrary, sounds a lot like a standard "carousel fraud"
> and I doubt they would have done it otherwise.
... Which happens despite being illegal.
> Good example of why most regulation is ridiculous
Laws aren't perfect, lets try no laws!
[+] [-] eagsalazar2|13 years ago|reply
[+] [-] ucee054|13 years ago|reply
See Kowloon Walled City http://en.wikipedia.org/wiki/Kowloon_Walled_City
Also: see Somalia 10 years ago
[+] [-] gojomo|13 years ago|reply
[+] [-] dsr_|13 years ago|reply
[+] [-] eagsalazar2|13 years ago|reply
[+] [-] kunle|13 years ago|reply
[+] [-] ck2|13 years ago|reply
[+] [-] wayne_h|13 years ago|reply
[+] [-] frere|13 years ago|reply