Draft Renewable Transport Fuel Obligations (Amendment) Order 2024
(2 weeks ago)
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The Parliamentary Under-Secretary of State for Transport (Anthony Browne)
I beg to move,
That the Committee has considered the draft Renewable Transport Fuel Obligations (Amendment) Order 2024.
The legislation amends the Renewable Transport Fuel Obligations Order 2007 so that recycled carbon fuels—RCFs—are eligible for support under the renewable transport fuel obligation scheme. The RTFO scheme places an obligation on fuel suppliers to drive the supply of renewable fuels. In practical terms, it helps deliver the E10 in petrol and biodiesels.
The amount of renewable fuel that should be supplied is a percentage of the volume of relevant fossil fuel supplied in a calendar year. That obligation is met by acquiring certificates that are issued for the supply of sustainable renewable fuels. Those certificates can be redeemed at the end of an obligation period, as well as traded between parties. The value of the certificates provides a revenue stream for producers of renewable fuels and provides demand for their products in the fuel market. The RTFO scheme has operated successfully since 2008, but it is important that it continues to adapt as new technologies and opportunities for emission-reducing fuels are developed.
We committed to supporting RCFs in the Government’s transport decarbonisation plan and this statutory instrument delivers on that goal. It is the product of two consultations with industry and in-depth working with industry experts and across Government Departments. By broadening the available feedstocks for eligible fuels, the instrument will help to maximise the greenhouse gas savings that can be achieved under the RTFO scheme and encourage the development of a new industry.
What are these new fuels? RCFs are fuels produced from fossil wastes that cannot be avoided, reused or recycled, and that have the potential to reduce greenhouse gas emissions relative to petrol, diesel or kerosene. To date, the RTFO scheme has only supported purely renewable fuels, but emerging technologies and production methods mean that it is possible for fuels produced from fossil wastes to contribute to emissions reductions to a similar degree as renewable fuels.
For example, municipal solid waste—such as the greasy pizza boxes that we all know, or dirty yoghurt pots—can be processed using advanced techniques to form alternatives to fossil diesel and jet fuel. Producing those fuels can be a more sustainable and green way of utilising the wastes compared with their alternative end-of-life fate, which would usually be incineration in an energy-from-waste plant or being sent to landfill. The UK is leading the way in developing many of the technologies required to create those fuels, supported by grant funding from the Department for Transport via the future fuels for flight and freight competition, and more recently the advanced fuels fund.
Renewable fuels already contribute one third of transport’s emission reductions from the current carbon budget. Widening eligibility to include RCFs will ensure that such fuels continue to make that important contribution as part of the transition to the electrification of road vehicles.
The Government have also committed to introducing a mandate for sustainable aviation fuel. That will come into effect from 1 January 2025 and will operate in a similar way to the RTFO scheme but for the aviation sector. Introducing RCFs into the RTFO scheme now sets a helpful precedent for the forthcoming mandate, and including RCFs in both schemes is important as production processes mean that many facilities will produce road fuel and SAF at the same time.
Supporting RCFs under the RTFO scheme will also increase the range of feedstocks eligible for support and encourage the innovation needed to increase deployment of low carbon fuels in harder-to-decarbonise vehicles, such as heavy goods vehicles. RCF production utilises many of the same processes and technologies that need to be developed to increase the efficiency and capability of chemical recycling. Providing extra investment into those processes will lead to wider waste management benefits in future.
Recent amendments to the Energy Act 2004, made via the Energy Act 2023, permit RCFs to be included in the RTFO scheme—as well as in other renewable transport support schemes, such as the forthcoming mandate for sustainable aviation fuels—provided that they cause or contribute to a reduction in carbon emissions. The change to the 2004 Act recognised that RCFs can play an important role in decarbonising different transport modes, including harder-to-electrify vehicles such as heavy goods vehicles and airliners.
On the statutory instrument’s specific content, it amends the RTFO order to add wastes of fossil origin as an eligible feedstock for fuel production. Importantly, it also designates RCFs as development fuels, which can be used to fill a sub-target within the RTFO scheme designed to encourage the supply of novel and strategically important emerging technologies for fuel production. As a development fuel, qualifying RCFs must also meet additional eligibility criteria that ensure that only fuels that comply with existing fuel standards can qualify. That mitigates any air-quality or compatibility concerns, as the fuels will essentially be chemically comparable with transport fuels that are already in use today—indeed, they will often be indistinguishable from them.
The measure will allow RCFs to claim one development fuel certificate per litre of fuel supplied, which is half the amount for similar eligible renewable fuels. That recognises the fact that truly renewable fuels remain more valuable, while still rewarding emission savings from RCFs. To ensure that we mitigate any unintended consequences, the measures also introduce detailed sustainability criteria that ensure that support is provided only to fuels that are produced from genuine, non-recyclable wastes, and that they provide carbon emissions savings of at least 50% compared with traditional fossil fuels such as petrol or diesel. The criteria ensure that the policy complements the waste hierarchy and avoids incentivising the creation of wastes, while still delivering emissions savings compared with the alternative likely end-of-life fate for different waste streams.
In conclusion, as I have said, fuels supplied under the RTFO scheme currently deliver about one third of all domestic transport carbon savings under the current carbon budgets. However, it is vital that we expand the range of feedstocks that we use if we are to continue to grow their contribution and meet our net zero goal. RCFs have the potential to deliver emissions savings across the transport sector while also supporting the efficient handling of waste, and provide an opportunity for a valuable, emerging UK industry, which we should all support. I commend the statutory instrument to the House.
Simon Lightwood (Wakefield) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Rosindell. I thank the Minister for introducing this delegated legislation. As we all know, transport has the highest carbon emissions of any sector, so decarbonisation should be a key priority. The Government first consulted on the amendment in this order in 2021, so why has it taken until today for us to consider it? Nevertheless, Labour supports this legislation.
The RTFO order is a key policy for reducing greenhouse gas emissions in transport—and, might I add, it was introduced by a Labour Government. The extension of the order to include recycled carbon fuels is welcome; after all, RCFs can be as much as 50% less polluting compared with fossil fuels. By 2033, the change is projected to result in the supply of more than 1 billion litres of additional low-carbon fuel, resulting in a saving of more than 15 million tonnes of greenhouse carbon dioxide equivalents. Crucially, the increase in the number of qualifying fuels in the RTFO order will contribute to lower costs for general road fuel consumers.
I welcome the caveats for RCFs in the order; thankfully, the Government recognise that they are not renewable. I am glad that RCFs will receive only rate 1 certificates per litre of fuel, rather than full credits, and to see the publication of the technical guidance on the specifics of how fuel suppliers can fulfil their obligations.
The exemption of small businesses that employ fewer than 50 people is welcome, but it raises a number of questions on which I seek the Minister’s clarification. Are the Government confident that recycled carbon fuels can perform the same action as ethanol, or are they to be diverted exclusively to sustainable aviation fuel? If the latter, what are the Government’s intentions for the RTFO-supported fuels that currently go into petrol? What assessment have the Government made of the impact of the change on UK fuel products that trade internationally?
More widely, why is there a nuanced understanding of the necessity to decarbonise here, but not in the recently published national networks national policy statement, which allows the inclusion of residual emissions in new projects? Why has the Prime Minister rowed back on the Government’s commitment to vehicle electrification by moving the petrol and diesel vehicle ban back to 2035? Where is the Government’s commitment to rail freight, hydrogen and biogas?
Overall, Labour supports this delegated legislation and the necessary wider decarbonisation of our public transport, but we must ensure that the Government have assessed the impact on the UK’s wider fuel sector.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
It is a pleasure to see you in the Chair, Mr Rosindell.
It has taken far too long, but I welcome this move by the Government. If there are to be incentives for producing renewable fuels, they should apply to as broad a range of mechanisms and technologies for producing said fuels as possible. Expanding the eligibility to include recycled carbon fuels is a logical step, especially given how much the technology has advanced and is advancing all the time in that field.
Reducing the amount of waste going to landfill at the same time as reducing the carbon footprint of the energy used in the transport sector is, on the face of it, a no-brainer, particularly for hard-pressed local authorities in England that have seen their budget for waste management slashed over the last decade. The Lords debate on this SI last month saw several points raised about the inclusion of such feedstocks under the RTFO scheme, which would help with the development of sustainable aviation fuels.
I will not repeat the points that have already been made about SAF, but the consultation on a price support mechanism for SAF must start soon—in fact, it is a legal requirement on the Government under the Energy Act 2023, which states that it must open within six months of Royal Assent. To date, we have had no word on when that consultation will begin, unless it has been published today and I am none the wiser—I apologise if I am. I have submitted a named day question asking when they plan to meet their obligations, and if the Minister wants to reveal that in his response, I will happily withdraw the question at the Table Office.
We need SAF because aviation is not going away any time soon; I should say that I represent Glasgow airport and many of the 23,000 people whose livelihoods depend on it. We must do more to encourage modal shift on to rail and public transport, but no one is building a tunnel under the Atlantic any time soon—although perhaps the former Member for Uxbridge and South Ruislip could add that to his bridge or tunnel over or under the North channel. We need to develop the fuels of the future, and the SNP very much support that, in line with the SAF mandate that the Government are going to bring forward.
In addition to the questions raised by the hon. Member for Wakefield and my point about a cost-based support mechanism, I did not hear the Minister talk about maritime. I would be keen to explore how maritime can gain from renewable transport fuel obligations, if not now, then in the near future. As a sector, it is almost as difficult to decarbonise as the aviation sector, so I am keen to hear about it.
On that basis, and unless the Minister says something extraordinarily poorly in response, the SNP will be voting for this statutory instrument.
Anthony Browne
I will try to avoid saying something so terrible that the Opposition parties change their mind on this legislation. I am glad that there is cross-party support for the measure, and I thank the hon. Member for Wakefield and the hon. Member for Paisley and Renfrewshire North for that. I can answer some of the questions that have been raised, but some of the answers they will have to wait for.
Both hon. Members asked why the SI has taken so long. It is a very complicated policy. We had to ensure that there were no unintended consequences and work with the industry on the details of it, because there are interplays between different types of fuel that have impacts in other areas. We had to analyse all that, but we finally got there and we are introducing the measure today.
The hon. Member for Wakefield asked whether RCFs can be used for SAF or road fuel. They can be used for both sectors; indeed, as I said in my introductory remarks, if we speak to the oil producers, the production technology is very similar, so it is much easier for them to co-produce those fuels.
The hon. Member for Paisley and Renfrewshire North asked a lot of questions about sustainable aviation fuel. I am the Minister for sustainable aviation fuel as well, and the legal requirement is to publish the revenue certainty mechanism by 26 April, which is next Friday. I do not think Governments should break the law— I will just put it like that.
The answers to many of the other questions that were asked will come out of forthcoming strategies. We have one on the low-carbon fuel strategy that will come out later this year, which looks at the whole range of low-carbon fuels, the interactions between them and how we maximise their benefits across all modes of transport and indeed other uses. There will also be a strategy published later this year—it is no secret; it is public knowledge—on how we decarbonise the maritime sector, which is a complex sector with many different uses. Many of the more detailed questions that the hon. Gentleman asked on maritime will be covered in that strategy, rather than in this Committee.
I think I have answered all the questions; if there are others, I encourage hon. Members to ask them. I should have said at the beginning, Mr Rosindell, that it is an absolute pleasure to serve under your chairmanship—it is great to see you here. I thank the Committee members for their time and consideration, and I thank the Clerks and the staff for the work they have done.
Question put and agreed to.