York, 15th September 2017 - Following years of policy uncertainty and market stagnation,
the Department for Transport (DfT) has announced its intention to raise the
target under the Renewable Transport Fuel Obligation (RTFO), paving the way for
future growth of the UK biofuels industry.
The Government response to its consultation on proposed
amendments to the Renewable Transport Fuel Obligations Order has indicated that
the target level under the Obligation will rise to 7.25% from April 2018, further
increasing to 9.75% in 2020 and to 12.4% by 2032. By providing long term
certainty, the DfT hope to encourage future investment in a sector that
investors have been steadily losing faith in.
However, the Government has imposed restrictions on how this
target can be met, limiting the contribution that crop-based biofuels can make
towards the obligation to 4% in 2020, steadily declining to 2% in 2032. This
will inevitably place a significant demand on waste biofuel feedstocks, notably
on used cooking oil. Waste oils already provide close to 700 million litres of
the UK’s biodiesel supply, with consumption likely to more than double over the
next few years if targets are to be met. Over the longer term, demand for waste
feedstocks will continue to increase as the RTFO target level increases and
crop cap reduces, posing a potential risk to circular economy efforts to reduce
waste generation. Due to these conflicting interests, it remains vital that
robust verification processes are enforced to ensure that waste biofuels are
produced from legitimate waste streams.
Meanwhile, there remains criticism from industry that the
crop cap is too low and that it could unnecessarily restrict the market for biofuels
that can demonstrate significant GHG savings and provide a meaningful
contribution to the UK economy, such as wheat bioethanol. There are equally
concerns that this policy will limit the UK’s competitiveness, with other EU
member states likely to enforce a crop cap set at 7%, as mandated under the EU
Indirect Land Use Change (ILUC) Directive.
Further to these changes, the UK has agreed the
implementation of a new sub-target within the obligation, focused on
encouraging investment in fuels that meets the DfT’s long terms strategic aims of
decarbonising the heavy goods vehicle and aviation sectors and encouraging
innovation in the UK fuels sector. The new ‘Development Fuel’ sub-target will
provide support to a range of high-blend renewable fuels produced from wastes,
including bio-substitute natural gas, renewable hydrogen, renewable aviation fuels
and any other fuel that can be blended above 25% and still meet relevant fuel
standards. However, additional support will not be provided to biopropane,
hydrogenated vegetable oil, biobutanol and biomethane from anaerobic digestion,
as was originally proposed. The target will rise steadily from 0.1% in 2019 to
2.8% in 2032, providing demand for upwards of 500 million litres of
‘development fuel’ by 2030.
Most of the fuels supported under the sub-target are not widely
available commercially and so it remains difficult to predict how the target
will impact the fuels industry and ultimately whether it will encourage UK
investment in new fuel technologies. Regardless, it remains a bold attempt by
the Government to support truly innovative and sustainable fuel technologies.
With the changes due to be enforced from April 2018, we can
but hope that after suffering many years of difficulties the UK biofuels sector
can now begin to flourish, setting an example for other bio-based industries to
The full Government response to it consultation on proposed
amendments to the Renewable Transport Fuel Obligations Order can be found here.