Tradeable credits are a central component of market-based regulations.Traditionally,tradeable credits have been used in place of command and control regulations.More recently,however,credits have been used in programs that mandate increased consumption of environmental services for which future compliance requires large scale investments by many economic agents in new technologies.Under these policies,credits provide an important value stream for _rms making investments that would otherwise be unmarketable.In this paper we provide a comprehensive study of credit prices under such a policy,the Renewable Fuel Standard(RFS2).We develop a dynamic model of an industry facing a RFS2 to account for the dynamic nature of the program,which highlights the importance of expectations in driving current credit prices.We then provide a test of market e_ciency,and study historical cost drivers of prices.We provide evidence that the introduction of policy uncertainty can lead to large swings in the value of credits,undermining the programs goals.In particular,we _nd that a single announcement by the Environmental Protection Agency suggesting it would reduce the future mandate requirements of the program reduced the implicit subsidy (tax)for the biofuel(fossil fuel)industry by nearly $7 billion dollars over two days.The large swings in prices after policy announcements reect a regulatory failure to send a stable price signal to the fuel industry,and introduces a large option value to delaying large capital investments in advanced fuel infrastructure due to policy uncertainty.