Chasing Zero: Biofuels And Renewable Transport Fuel Obligation Update – Renewables

• a lack of tax-based expertise and resources within the
  Department for Transport’s RTFO unit;




• potential difficulties in enforcing compliance; and




• unknown adverse effects, for example a renewable fuel not being
  eligible under the RTFO due to a tax incentive that is not actually
  advantageous.

This is the Government’s preferred option.

This option would capture any tax based support for fuel
production and prevent that fuel from being supported under the
RTFO or SAF mandate.

The Government is concerned that there could be complexities and
unintended consequences if this approach were implemented.

This change would mean that fuels produced and supported in the
EEA could be imported in the UK and be eligible for support under
the RTFO or the SAF mandate, with the risk of undercutting UK
domestic producers and therefore not favoured by the
Government.

In terms of feedstock eligibility, the RTFO Administrator will
take a principles-based approach to determine the effects of the
feedstock on carbon emissions, agriculture, other economic
activities, sustainable development and the environment more
generally.

Imported non-renewable feedstocks will need to meet the same
criteria as those sourced in the UK.

The eligibility of feedstocks will be determined on a rolling
basis with prospective RCF suppliers submitting applications at any
time for assessment. This mirrors the RTFO’s current approach
to biogenic wastes and residues.

(b) Biogenic content requirements

Departing from an earlier consultation in 2021, the Government
has decided to remove (with caveats) the explicit minimum biogenic
content requirement, which had previously been suggested of at
least 25%. However, the RTFO Administrator may, where appropriate,
still include a minimum biogenic content requirement in the
definition of specific feedstock types.

• A ‘single default’ counterfactual method will be
  applied to determine whether RCF feedstocks deliver environmental
  benefits. Emissions resulting from the production and use of the
  relevant RCF would be compared against emissions resulting from the
  next likely end-of-life use of that feedstock. The RTFO
  Administrator will also have an option to define alternative
  counterfactuals where necessary.




• The carbon intensity applied to the displaced electricity in
  the counterfactual will be based on the grid average emissions of
  Government’s most recent yearly figures.




• The efficiency of conversion in counterfactual use for energy
  from waste (electricity only) will be 22%, with industrial waste
  gases being determined on a plant-by-plant basis.




• Energy content allocation will be used where an RCF production
  plant produces multiple co-products.




• To receive RTF certificates a minimum greenhouse gas emission
  savings threshold must be met which will be tied to the grid carbon
  intensity and become more stringent over time.




• Reporting and verification requirements for RCFs will reflect
  the existing RTFO requirements.




• Only one of the RTFO’s ‘sustainable waste criteria’
  will be applicable to RCF suppliers, being that adequate monitoring
  or management plans are in place to address the local environmental
  impacts caused by sourcing or processing the waste.

This incentivisation is considered sufficient as it (i) remains
lower than truly renewable development fuels with greater carbon
savings and (ii) ensures that the reward rate is not so high that
the production of RCFs is made more favourable than the production
of a non-development fuel waste-based biofuel.

• sustainability;




• security;




• adaptability;




• commercial viability; and




• compatibility.

Respondents are asked to provide insight on their view of
biomethane market barriers so that these can be identified and
addressed, as well as to comment on the opportunities posed by
various biomethane production methods.

• the revenue potential of the green gas certification market and
  renewable transport fuel certificates;




• the costs and profits relating to carbon capture on anaerobic
  digestion (AD) plants;




• the barriers to maximising revenue from carbon dioxide;
  and




• the role of gate fees.

DESNZ expects that some form of incentive mechanism will be
required to support growth in the biomethane industry and the
consultation seeks to understand which market based mechanism is
best placed to provide to do this and shift the industry towards
being financially self-sustaining. The mechanisms under
consideration include:

• contracts for difference




• a supplier obligation underpinned by a tradeable certification
  scheme (like the RTFO)




• grants and loans from Government; and




• a hybrid option.

Recognising the particular impact of feedstock sustainability on
the overall biomethane production process, the consultation
outlines the six minimum criteria that could be used for assessing
feedstocks:

1. costs;




2. greenhouse gases;




3. air quality impacts;




4. land use;




5. water quality requirement; and




6. water quality impacts.

Also highlighting a regulatory gap in the biomethane production
process, as well as plant and equipment standards for AD plants,
the consultation questions whether a future framework should
include broader guidance on overarching AD plant building,
maintenance, and operating standards.

The consultation notes that whilst current plant locations are
decided via a market-led approach, this could be altered to a
government-led approach after which industry would develop the
plants, for example, through a competitive process.