Annual report to Parliament on the Renewable Transport Fuel Obligation, 2009/10

2011·14.3 MB·English

by  Great Britain. Renewable Fuels Agency

Year Two of the RTFO
Renewable Fuels Agency report on the
Renewable Transport Fuel Obligation
2009/10
1i  Renewable Fuels Agency YearTwooftheRTFO

Renewable Fuels Agency
2009/10 Annual Report to
Parliament on the Renewable
Transport Fuel Obligation
Presented to Parliament pursuant to The Renewable Transport Fuel
Obligations Order 2007 (SI 2007 no 3072).
January 2011 London: The Stationery Office £19.75
© Renewable Fuels Agency 2011
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Contents
Section 1 - Introduction
3 Foreword
4 Executive summary
8 Introduction
11 Performance of the RFA
Section 2 - RTFO 2009/10
16 Year of RTFO results
18 Supplier compliance with the RTFO
21 Supplier performance
27 Supplier sustainability work
31 The verification process
35 Effectiveness of carbon and sustainability reporting
Section 3 - Effects of the RTFO and the fuels supplied
39 Effects of the RTFO on greenhouse gas emissions
44 Effects of the RTFO in the UK
49 International effects of the RTFO
Section 4 - Towards sustainable biofuels
57 Agricultural production models
60 Working with other EU member states
61 Food and fuel
62 iLUC update
64 Development of sustainability standards
Section 5 - Concluding remarks
68 Concluding remarks
70 Acronyms and abbreviations
The oildrop images on the section divider pages represent the five main biofuel feedstocks supplied to the UK during the first year of the RTFO, ordered by
volumes in litres: soy - 480m, sugar cane - 308m, oilseed rape - 250m, tallow - 182m, palm - 99m.
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Section 1
Introduction
2  Renewable Fuels Agency YearTwooftheRTFO
Foreword
This annual report from the openly and transparently with full consultation to enable the
Renewable Fuels Agency Government to formulate biofuels policy, and the consumer
marks the end of the to make purchasing decisions, based on the best possible
second full reporting cycle evidence.
of the Renewable Transport
Fuel Obligation, under In undertaking these tasks, I would like to acknowledge the
which obligated companies support over the past year from our stakeholders and our
are required to report on colleagues in the Department for Transport, and on behalf of
both the quantity of biofuels the Board to thank our staff for their productive work and for
they have supplied and the positive way they are facing the challenges ahead.
their performance against
carbon reduction and other Professor Ed Gallagher,
sustainability targets set by
the UK Government.
I am pleased to say that, during the period covered by the
report, from April 2009 to April 2010, we have continued to
provide accurate and timely data, confirming our position
as the first regulator in the world to monitor and report
independently verified information on the carbon and
sustainability performance of biofuels. Chair
Almost 1.6 billion litres of biofuels has been reported, 7 January 2011
accounting for 3.3% of the UK transport fuels and exceeding
the UK Government target of 3.25%. This has resulted in
significant carbon savings of 51% compared to petrol and
diesel fuels, making an important contribution to reducing
climate change inducing emissions in the transport sector.
These savings must, of course, be weighed against the
possible increase in emissions associated with indirect land-
use change.
Against this success story we are disappointed that some
large oil companies have failed to take significant steps
towards reporting and sourcing biofuels sustainably.
Mandatory carbon and sustainability requirements will be
introduced in the near future through implementation of
the EU Renewable Energy Directive. Those fuels that are
not sourced sustainably in accordance with the Directive’s
requirements will quite simply not count towards targets.
These reporting and sourcing requirements may be further
strengthened by the subsequent introduction of the Fuel
Quality Directive. Nearly all companies, and particularly those
who are currently under performing, will need to raise their
performance to meet these new requirements.
Biofuels remain a controversial subject. The Agency is
committed to providing accurate and independent data,
technical information and advice on both the current and
any proposed aspects of biofuel monitoring. We will do this
YearTwooftheRTFO         Renewable Fuels Agency  3
Executive summary
Table 1.2: Number of targets met by obligated companies
Supply of biofuel
In 2009/10, the second year of operation, the Renewable Number of targets
Obligated company
Transport Fuel Obligation (RTFO) helped drive the market met
for sustainable biofuels in the UK. Of the UK’s total road
Greenergy
transport fuel supply, 3.33% was biofuel, which was slightly
over the target of 3.25% required by the RTFO Order and a Lissan
significant increase on the 2.7% supplied in 2008/09. Biofuel 3
Mabanaft
was supplied from at least 31 countries, and at least 17
different feedstocks. Topaza
Esso
Table 1.1: Targets vs. performance
Harvest
Target for Performance 2
2009/10 2009/10 Petroplus
Percentage of feedstock Shell
meeting a Qualifying 50% 31%
Environmental Standard 1 ConocoPhillips
Annual GHG saving of BP
45% 51%
fuel supplied
Chevron
Data reporting of
INEOS
renewable fuel 70% 72%
0
characteristics
Morgan Stanley
Murco
With one exception, the suppliers obligated under the RTFO
met their obligations in full. Most did this by redeeming
Total
Renewable Transport Fuel Certificates whilst one chose to
buy out of its obligation. The RFA has pursued Yorkshire Unverified 0 Prax
Petroleum Company Ltd (Yopec), which failed to meet its a Topaz, as a low volume supplier of biofuels, was not required to verify its
obligation in full, and has recovered a partial buy-out payment data.
at the time of writing. The proceeds of the buy-out will be
redistributed to suppliers in line with the requirements of the As might be expected from a system based on voluntary
Order. targets, some suppliers have embraced the targets while
others have chosen simply to comply with their minimum
Of the carbon and sustainability data reported to the RFA, legal obligations. At the top of the scale, Greenergy, Lissan,
98.7% was verified, 0.2% came from small suppliers and Mabanaft and Topaz met all three targets. At the other end
was not subject to verification, and the remaining 1.1% did are those that performed poorly against the targets, meeting
not receive the limited assurance required. This is a significant just one or even none at all. These were ConocoPhillips (one
improvement on last year, when 5.4% of the data remained target) and BP, Chevron, INEOS, Morgan Stanley, Murco
unverified. and Total (no targets met) and Prax, which failed to submit a
verified sustainability report meaning provisional claims were
Supplier environmental performance not backed by adequate assurance.
When the RTFO was established the Government set targets
requiring obligated suppliers to report on how much of their This was the second year that Prax failed to submit a verified
feedstock met a Qualifying Environmental Standard; the report. As the data was not verified, the RFA changed all of
average greenhouse gas (GHG) savings of their biofuels; and Prax’s biofuel sustainability claims to ‘unknown’ – a default
how much data on the source of biofuels had been reliably that assumes poor sustainability performance and high
captured. While the targets are voluntary, reporting against carbon intensity. Significant improvement will be required by
them is not – though suppliers can opt to report ‘unknown’ many suppliers. As well as sourcing sustainably, suppliers
in which case carbon emissions default to the biofuel source will need to ensure that information from supply chains is
with the worst GHG emissions. collected and can be verified in order to meet the challenges
4  Renewable Fuels Agency YearTwooftheRTFO
3.33%

of the UK’s total road transport fuel supply was biofuel
of mandatory sustainability requirements under the EU’s gas emissions from indirect land-use change (iLUC) driven
forthcoming Renewable Energy Directive (RED). by the use of biofuels could be significant, but iLUC remains
a highly controversial issue. The European Commission
Carbon emissions is considering how to address this issue in the Renewable
Lifecycle savings, direct effects Energy Directive.
Based on the RFA’s lifecycle analysis methodology, the fuels
supplied under the RTFO in 2009/10 delivered a 51% carbon The RFA has been at the forefront of those working towards
saving compared to the equivalent fossil fuels, a reduction practical solutions to the iLUC issue. Following the Gallagher
in carbon emissions of two million tonnes of carbon dioxide recommendations, the RFA sponsored the development of a
equivalent (CO e). This is in excess of the Government’s target practical methodology to demonstrably avoid iLUC, focusing
2
of 50% savings and consistent with the original Regulatory on the use of new low carbon stock areas for production
Impact Assessment (2007) for the RTFO legislation. The and the integration of livestock and crop production systems.
RED requires the use of a different lifecycle methodology. An This provides one route – there are undoubtedly others – to
analysis using the default emissions factors contained in the the promise of fully sustainable biofuels from crops.
RED suggests that we would have reported a similar overall
carbon saving. Agriculture
The majority of cultivated feedstocks used for biofuel are not
In 2009/10, 29% of previous land-use was reported as grown primarily as energy crops, but rather for the food and
‘unknown’ due to a lack of verifiable evidence gathered drinks sector or as fodder for livestock.
from supply chains. This was a considerable improvement
on the previous year, where suppliers were unable to verify While some voluntary sustainability schemes were initially
the land use for 42% of their biofuel feedstock. The RTFO developed for food production, the sustainability reporting
carbon lifecycle methodology assumes that feedstock from required under the RTFO and forthcoming RED requirements
an unknown land-use actually came from land that was have considerably raised the profile of these issues in
cropland in 2005. It is therefore possible that some fraction of agriculture.
the unknown land-use was recently converted to agriculture,
in which case there would have been a potentially significant As part of its research programme this year, the RFA looked
release of stored carbon. Under the RED, suppliers will have at agricultural production models and methods for the biofuel
to demonstrate that their feedstocks were not sourced from used in the UK, including the kind of practices promoted by
carbon rich land or land with high biodiversity value. voluntary schemes. The study considered nine crop/country
combinations with a focus on the largest feedstock streams.
There are examples of good practice where tracking actual A summary of the study and its findings can be found on
carbon emissions data has allowed companies to report page 57 of this report.
substantially better than default emissions savings, for
example for UK sugar beet. More generally, in the long term, A study commissioned by the RFA investigating stakeholder
substantial reductions in emissions from biofuels should be perceptions and levels of knowledge suggested that there is
achievable. For instance, it should be possible to reduce soil still a limited awareness of biofuels and associated regulation
emissions of nitrous oxide with improved understanding of among UK farmers. Most understanding of the RTFO and
optimum fertiliser application rates. Specific activities such potential commercial advantages from certificate trading
as methane capture for palm oil mill effluent also offer large comes further up the supply chain. Some of the results from
potential savings. this study can be found on page 44.
Indirect effects Other economic activities
The indirect effects of biofuel production are not accounted The RTFO affects businesses at all stages in the biofuels
for under the RTFO. These are currently difficult to assess supply chain, with economic costs and benefits varying
with any degree of accuracy. While it may be relatively easy significantly by company type.
to see the direct land-use changes associated with growing
feedstock for biofuel, it is considerably less straightforward Analysis of the price differentials between biodiesel and fossil
to accurately assess the net carbon effect on global land use diesel and bioethanol and petrol, combined with the biofuel
of meeting growing demand for biofuel. The RFA’s Gallagher volumes and fuel duty relief, reveals that the total revenue
Review and subsequent work has found that greenhouse available from blending biofuels was £130 million in 2009/10
YearTwooftheRTFO         Renewable Fuels Agency  5
sustainability targets, the RTFO encourages these crops to
be produced to higher social and environmental standards
than might otherwise be the case. This in-turn facilitates
sustainable development.
In the UK, just 1.2% of our gross domestic product (GDP)
comes from farming, compared to 1.9% for the EU. By
contrast, this figure is much higher in Brazil (six percent) where
the majority of bioethanol supply into the UK was sourced
in Year Two, and Argentina (six percent), which supplied the
majority of biodiesel from soy, the single largest feedstock for
the UK by volume.
The market for certificate trading has begun to mature, with In the countries that are the major suppliers of one of the
the market now working as intended. Renewable Transport more environmentally controversial feedstocks – palm oil –
Fuel Certificates (RTFCs) traded in much greater volumes the gap is even greater, with agriculture accounting for 9% of
than last year and added real value to the sector. Certificates GDP in Malaysia and 15% in Indonesia.
traded at between six and 12 pence during the period.
Through increasing the demand for crops to be produced
Currently, there is no price premium for feedstocks with in accordance with recognised social and environmental
assured Carbon and Sustainability provenance. While most standards, the RTFO acts as a driver for change. While
stakeholders appear to agree that improved sustainability its influence here may be small, it is not insignificant – the
performance should bring added commercial value, there potential annual revenue from meeting the UK’s demand for
is currently no consensus on how this could be effectively biofuels is worth over £130 million.
introduced. Feedstocks meeting the mandatory RED criteria
may result in premiums. Finally, it should be recognised that sustainable development
is not something that only happens in other parts of the world.
As things stand under a largely voluntary system, obligated
suppliers are able to buy un-certified biofuels on the spot Here in the UK the vast majority (93%) of domestic feedstock
market, avoiding the need to establish supply contracts that met a qualifying sustainability standard. The growing market
are longer term. This can make securing inward investment for biofuel feedstock offers British farmers new market
difficult for producers seeking to supply a more sustainable opportunities as well as. helping the wider transition towards
product, as demonstrating the degree of certainty required more renewable energy in the UK’s overall energy mix.
by most investors can be difficult when they are relying on
spot market sales. At least 11% of the feedstock entering the domestic market
during this reporting period came from the UK. This included
The domestic biofuels producers expressed concern that both agricultural crops and ‘by-products’, some of which
it faced a more challenging market environment than other have the potential to help divert waste from landfill (or even to
domestic markets in the EU and beyond. For example, capture landfill gas and turn it into fuel).
respondents to the review of impacts of the RTFO on UK
business noted that the UK applies a lower tariff on ethanol The environment generally
imported from outside the EU than other EU countries, The principal drive behind increasing volumes of biofuels
making it harder for the UK industry to compete with imports used in the UK has been environmental or, more specifically,
than it is for the European neighbours. It should be noted that to deliver carbon savings. It is clearly important, therefore,
UK consumers benefit from this approach however, in that that environmental benefits can be demonstrated.
the UK has access to cheaper biofuels produced outside the
EU. Although biofuels account for a small fraction of the global
total of agricultural land, if biofuel production leads to an
Sustainable development increase in land used it may threaten biodiversity and produce
Much of the feedstock for biofuels currently supplied into the carbon emissions.
UK market comes from developing economies. By setting
6  Renewable Fuels Agency YearTwooftheRTFO