Renewable Transport Fuel Obligations (Amendment) Order 2020

Lord Rosser Excerpts

Monday 7th December 2020 Grand Committee

[Lord Rosser (Lab) [V]]

Having listened to my noble friend Lord Blunkett, I feel a lot happier to know that I am not the only one who is not an expert on this SI. The purpose of the order, as the Minister said, is to increase the renewable transport fuel obligation buyout price for fuel suppliers to 50p per litre from 30p per litre for obligation periods beginning on or after 1 January 2021. Annual obligations for the supply of renewable fuels are set for fuel suppliers under a similarly named 2007 order that commenced in April 2008. The obligations can be met by supplying renewable fuel, by purchasing renewable transport fuel certificates from other suppliers, or by paying a sum—a buyout price—to the Secretary of State. As the Minister said, it is that sum that this order has the effect of increasing.

The Government have said that increasing the buyout price to 50p per litre will mitigate the risk of suppliers buying out of their obligations and the UK losing greenhouse gas savings. Renewable fuels supported under the RTFO order have reduced greenhouse gas emissions from transport over the last 12 years and, as we heard from the Minister, they are contributing a third of the greenhouse gas emissions required for the UK’s current transport carbon budget.

Further, the Government have said that the buyout price increase will help protect the renewable transport fuel obligation scheme against rising prices for biofuels and ensure that investment in UK biofuel facilities continues to have a market. As I understand it, in August 2019 the cost differential between renewable fuels and the fossil fuels for which they are a substitute was approaching a level at which it would cost less to buy out an obligation under the RTFO rather than continue to supply renewable fuels.

Fuel suppliers are likely to pay the buyout only if the cost of renewable transport fuel certificates regularly exceeds 30p per litre. In January this year, offers for renewable transport fuel certificates for the 2020 compliance year were 30.25p per litre and since the beginning of July offers have regularly been higher. Offers for 2021 RTFCs have been reported as high as 33p per litre in September this year. RTFCs are issued for every litre of sustainable and renewable fuels blended. Lifting the buyout to 50p per litre will result in a maximum additional cost of 2p per litre to the motorist.

The renewable transport fuel obligation is designed to reduce greenhouse gas emissions from transport fuel by setting annual biofuel blending obligations for fuel suppliers. As we heard from the Minister, the obligation is 9.75% this year and will increase incrementally to 12.4% by 2032. Could the Government say in their response on what basis that incremental increase is determined; what was the percentage figure fixed in 2008; and, in 2032, what proportion of greenhouse gas emissions required for the UK’s current transport carbon budget will be contributed by renewable fuels supported by the RTFO order?

I have just a few questions on the Explanatory Memorandum. Paragraph 7.6 refers to civil penalty provisions and states:

“It is planned to consider this matter as part of other changes to the RTFO Order that will be consulted on in due course.”


What are the

“other changes to the RTFO Order”,

and by when will they have been consulted on? Paragraph 10.4 of the Explanatory Memorandum refers to “obligated suppliers”. How many obligated suppliers are there in total who are covered by the terms of this order?

Paragraph 12.1 of the Explanatory Memorandum refers to a maximum cost for 2021 to 2030 that would be incurred if all suppliers opted to buy out of the main obligation in each obligation period. How much has been paid out under the buy-out provision option under the RTFO Order 2007 to date in total, and of that how much has been in the last two years for which figures are available? To what purpose has any such money been put?

Paragraph 13.2 of the Explanatory Memorandum refers to transport fuel suppliers who are exempt from the renewable fuel obligation and fuel suppliers for whom the obligation is reduced. What is the reduction for those in that category, and how many suppliers are in that category? Finally, is it felt that the case still exists for having that reduced rate, bearing in mind the Government’s desire to enable renewable fuels to contribute to the UK’s future carbon budgets?