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The Government has recently issued several publications
impacting the UK renewable fuels market:
- a
consultation addressing a potential incentives loophole for
renewable fuels and their chemical precursors in the UK through
changes to the Renewable Transport Fuel Obligation (RTFO) and
upcoming sustainable aviation fuel (SAF) mandate (click
here); - a
response to a consultation in 2022 confirming the
Government’s intention to bring recycled carbon fuels (RCFs)
within the scope of the RTFO (click
here); and - a consultation regarding a future policy
framework for biomethane production (click
here)
1. Multiple Incentives Consultation
Currently, under article 16 of the RTFO (Article 16) any
renewable fuel (or chemical precursor to that fuel) must not at the
time of application for a renewable transport fuel certificate
under the RTFO or at any time in the future:
- be counted under any other UK renewable energy obligation
(other than the RTFO); or - be counted under any a UK or EEA ‘support scheme’ the
promotes the use of energy from renewable sources.
The Government is concerned that the globally traded nature of
renewable fuels means that it might be possible for such fuels or
chemical precursors to receive support both under the RTFO (and the
future SAF mandate) in addition to support in their country of
production. This could distort the market and be damaging to UK
domestic suppliers.
In particular, following the departure of the UK from the
European Union, the Government is concerned about the distinction
between the treatment of fuels produced and imported from EEA
member states and those produced and imported from countries
outside the EEA.
Through the recent consultation the Government looked to promote
a fair market by proposing three options to address the potential
for multiple incentives being claimed in different countries. The
three options were as follows:
Option 1 | Article 16 would be amended to cover renewable fuel
or chemical precursors supplied globally but the ‘support scheme’ definition would not include reference to tax-based incentives due to:
This is the Government’s preferred option.
|
Option 2 | Article 16 would be amended to extend the current
rules applying to the UK and EEA to the rest of the world. This option would capture any tax based support for fuel
The Government is concerned that there could be complexities and
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Option 3 | Under this option Article 16 would be amended so
that renewable fuels produced in the EEA would be treated the same as the rest of the world. This change would mean that fuels produced and supported in the
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The consultation closed on 18 March 2024, after which the
Department for Transport will publish a summary of responses. Any
adopted proposal will also be included in the proposed sustainable
aviation fuel mandate.
The consultation also noted that as both the RTFO and future SAF
mandate required renewable transport fuels to achieve minimum
greenhouse gas emissions savings, both the RTFO and SAF mandate
will need to take account of carbon capture and storage CCUS)
schemes being developed both in the UK and internationally. The
Government flagged that as the CCUS sector developed further
changes may be required to the eligibility criteria for fuels to
ensure a level playing field is maintained for domestics and
international producers.
2. Recycled Carbon Fuels
As non-renewable resources that come from fossil-derived wastes,
RCFs are not currently supported under the RTFO. However, their
potential role in meeting net zero targets means the Government is
now seeking to incentivise their supply. In its recent consultation
response, the Government outlined its approach in three key aspects
of RCF policy.
1. Criteria for eligibility | (a) Feedstock eligibility
In terms of feedstock eligibility, the RTFO Administrator will
Imported non-renewable feedstocks will need to meet the same
The eligibility of feedstocks will be determined on a rolling
(b) Biogenic content requirements
Departing from an earlier consultation in 2021, the Government
|
2. Ensuring RCF
sustainability |
The safeguards that exist under the RTFO to
maintain sustainability and environmental standards will also be applied to RCFs. In this regard the Government confirmed that:
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3. Rewarding RCF supply | Departing from its initial proposal of a level of
reward of 0.5 development renewable transport fuel certificates (dRTFCs) per litre equivalent to the relevant RCF supplied, the Government confirmed it will proceed with a reward rate of 1 dRTFC/kg/litre. This incentivisation is considered sufficient as it (i) remains
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The passage of the Energy Act 2023 last year means that the
Department for Transport now have the necessary powers to amend the
RTFO to include RCFs. The relevant amendments to the RTFO will be
implemented under secondary legislation when parliamentary time
allows.
3. Biomethane Production Policy Framework
In a call for evidence, the Department for Energy Security and
Net Zero (DESNZ) has published a consultation on
developing a new policy framework for biomethane production that
would incentivise the continued growth in biomethane industry
following the end of Green Gas Support Scheme (GGSS) in March 2028
and enable the UK biomethane industry to contribute meaningfully to
net zero targets.
DESNZ’s objective in developing a new policy framework is to
ensure a smooth transition following the end of the GGSS in March
2028 and “to facilitate a biomethane market where a
sufficient volume of biomethane is produced to meet strategic aims,
in a way that is environmentally sustainable, efficient, and
commercially viable.” To this end the consultation
focuses on five key areas:
1. Design and scope of a new policy
framework |
DESNZ proposes (and invites comments on) a number
of key principles in respect of biomethane production:
Respondents are asked to provide insight on their view of
|
2. Role of biomethane | Referencing the Biomass Strategy published in
August 2023, the consultation details the role of biomethane and its potential in reaching net zero goals, whilst noting that there is no current annual target for biomethane production. It aims to gather evidence on whether a target should be set and, if so, what parameters should be applied. |
3. Accelerating biomethane
growth |
Evidence is sought on the economics of biomethane
production, including:
DESNZ expects that some form of incentive mechanism will be
|
4. Sustainability | DESNZ has identified opportunities to improve or
amend biomethane sustainability standards and encourages respondents to provide evidence on key sustainability factors in biomethane production, such as feedstocks, digestate and methane emissions. Recognising the particular impact of feedstock sustainability on
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5. Planning and standards | Evidence is sought on the difficulties concerning
the planning and permitting processes for AD plants, in order to minimise these going forward, and on potential changes to the permitting regime so that AD sites for waste and non-waste feedstocks have the same regulatory standards applied to them. Also highlighting a regulatory gap in the biomethane production
The consultation notes that whilst current plant locations are
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The DESNZ consultation closes on 25 April 2024, with responses
used to inform the development of a new policy framework and
publication of a more detailed future consultation.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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