Somebody is going to have to set US energy policy as well as environmental standards for the next four years and now we know who that will be. But while Donald Trump is a very big fan of Drill Baby Drill, we know less about his plans for the EPA and, more specifically, the perennial hobgoblin of the Renewable Fuel Standard (RFS). Does the President Elect plan to do anything about this subject which has been a burr under conservative saddles all through the Obama administration? He’d better. And to boost along that idea, energy CEO Carl Icahn takes to the pages of the Wall Street Journal this week with a rather dire warning about the effect of these programs on the economy.

A decade ago, the term “mortgage-backed securities” probably sounded to most people like made-up business-school nonsense. But then in 2008 the Wall Street engineers overreached and caused one of the largest financial crises in American history. Today the threat looming over the U.S. economy is similarly obscure: a shadowy, unregulated trade in electronic credits called Renewable Identification Numbers (RINs) that threatens to destroy America’s oil refineries, send gasoline prices skyward and devastate the U.S. economy.

That’s some serious doom porn level forecasting, but it’s not the first time that Icahn has sounded the alarm. In the heat of the presidential campaign back in August he was sounding the warning bells in an interview with Fortunate Magazine. At that time he was attempting to explain to voters what a rigged game the government was running with these RIN credits and how traders were using them as a government endorsed market game which amounts to “the mother of all short squeezes.”

Icahn expressed worries about the market for renewable identification number (RIN) credits, which the EPA calls the “currency” of a renewable fuel standard program designed to reduce reliance on imported oil and the emission of greenhouse gases.

“The RIN market is the quintessential example of a ‘rigged’ market where large gas station chains, big oil companies and large speculators are assured to make windfall profits at the expense of small and mid-sized independent refineries which have been designated the ‘obligated parties’ to deliver RINs,” Icahn wrote.

“As a result, the RIN market has become ‘the mother of all short squeezes,’” he added. “It is not too late to fix this problem if the EPA acts quickly.”

There are many layers to the EPA cake which lead us to this impasse. The RFS mandates how much ethanol must be blended into the fuel supply as a way to “save the environment” but it’s turned into a gigantic political boondoggle. Part of this system involves the use of the Renewable Identification Number (RIN) credits which Icahn is talking about. If a smaller refiner doesn’t have the capacity to create a sufficient amount of ethanol or can’t afford it when prices skyrocket, they need to purchase these RIN credits to make up for it. That turns the credits into the equivalent of a government endorsed, unregulated trading market. If enough pressure is applied to that system to make the credits unaffordable it could put the smaller refiners out of business, taking their jobs with them.

So what can we expect from Donald Trump and whoever he chooses to put in charge of the EPA? On the campaign trail Trump was more than disappointing on this subject. He went on record in Iowa calling for even higher ethanol mandates as opposed to ending this damaging program. (To be fair, so did pretty much all the candidates except Cruz and even he seemed to waver at times.) So was this all just campaign talk to win a few more votes in corn country or was Trump serious about it?

We’ll find out soon enough. But if Trump wants to solidify his support in conservative circles he could use the power of the new EPA staff to put the brakes on this largely useless and expensive program in the early days of his administration.

kingcorn