UK Department for Transport announces biofuel reforms

By NNFCC Ltd. | September 19, 2017

Following years of policy uncertainty and market stagnation, the U.K.’s Department for Transport has announced its intention to raise the target under the Renewable Transport Fuel Obligation, paving the way for future growth of the U.K. biofuels industry.

The government response to its consultation on proposed amendments to the RTFO order has indicated that the target level under the obligation will rise to 7.25 percent from April 2018, further increasing to 9.75 percent in 2020 and to 12.4 percent by 2032. By providing long-term certainty, the department hopes 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 percent in 2020, steadily declining to 2 percent 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 liters of the U.K.’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 U.K. economy, such as wheat bioethanol. There are equally concerns that this policy will limit the U.K.’s competitiveness with other EU member states likely to enforce a crop cap set at 7 percent, as mandated under the EU Indirect Land Use Change Directive.

Further to these changes, the U.K. has agreed the implementation of a new subtarget within the obligation, focused on encouraging investment in fuels that meets the Department for Transport’s long-term strategic aims of decarbonizing the heavy goods vehicle and aviation sectors and encouraging innovation in the U.K. fuels sector. The new “development fuel” subtarget will provide support to a range of high-blend renewable fuels produced from wastes, including biogas, renewable hydrogen, renewable aviation fuels and any other fuel that can be blended above 25 percent 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 percent in 2019 to 2.8 percent in 2032, providing demand for upwards of 500 million liters of development fuel by 2030.

Most of the fuels supported under the subtarget 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 U.K. 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 U.K. biofuels sector can now begin to flourish, setting an example for other biobased industries to follow.

The full government response to it consultation on proposed amendments to the RTFO order can be found here.

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