Renewable Transport Fuel Obligations (Amendment) Order 2024

Lord Tunnicliffe Excerpts

Tuesday 26th March 2024 Grand Committee

That seems to me a major misjudgment. This is being treated as a cost-benefit analysis item for the Treasury, but it has huge implications. By giving this permission, there is the possibility of dealing with a large part of municipal waste problems, and that, surely, is of significance to the public sector. So I think the Government have not looked broadly enough at the impact and potential of this statutory instrument.

[Lord Tunnicliffe (Lab)]

My Lords, I thank the Minister for his presentation of this statutory instrument. It is not an instrument that I have got on with very well. I decided to try to understand it, and that has absorbed a great deal of my time. As I tried to understand it, my old history teacher’s test came to mind: “You don’t understand it until you can explain it in your own words”. So I shall explain what I think it means, in my own words, and see whether the Minister agrees.

At one level, this is an elaborate and benign waste-management exercise. Let us look at the two comparisons here. A renewable transport fuel comes from taking CO₂ out of the atmosphere and turning it into fuel using those wonderful devices called “plants”. We then turn the energy captured in those plants into fuel and burn it in vehicle engines and so forth, which releases the energy and the CO₂ back into the atmosphere. The impact of the CO₂ is neutral: in other words, the plants’ photosynthesis activity captures energy, essentially from the sun, and that energy is turned into fuel and then released.

A recycled carbon fuel takes carbon from beneath the earth, in the form of oil or carbon or whatever, and in this case turns it into something useful such as plastic, which then becomes waste. It is then, in this process, turned into fuel. That means, essentially, that it is burned. Energy is released and the CO₂ is released into the atmosphere. The impact of CO₂ is adverse, in the sense that carbon is taken from its fossil source and put into the atmosphere, which is a bad thing.

It is only if the feedstocks are not burned wastefully, through incineration or whatever, that there is a net benign effect: only if very strict controls are applied to the feedstock to make sure that it is inevitable that the feedstock is turned into free CO₂, left to incineration et cetera—or it goes into landfill, which once again is an adverse outcome. Therefore, properly controlled, this policy is benign and has our support. So the Minister can stop his concerns; we are not going to try to vote this down, first because it is benign and, secondly, because we do not want a constitutional crisis.

Moving on, I have a few questions about this order. The emphasis in the literature seems to be on aviation fuel. Can the Minister give us some feel on the extent to which it will be a significant contribution to aviation fuel or where else it would be used in any significant amount? Indeed, will it be significant in any non-aviation applications? Next, is there an international dimension here in terms of the UK creating this instrument, which will stop the development of international agreements on this way of handling waste? Finally, is it within this instrument’s power for the Government to withdraw it, because it needs to meet two tests? The first is on the strict control of the feedstock while the second is about whether the financial incentives contained in the order actually work. If it is impossible to get a set of financial incentives that work, can the Government withdraw the instrument and its impact?

[Lord Davies of Gower (Con)]

My Lords, I thank all noble Lords for their consideration of this order. I will now attempt to respond to the specific points that they made.

Let me start by saying that the RTFO includes a range of strict eligibility criteria to ensure that all fuels supplied are sustainable and provide a minimum level of greenhouse gas savings. Although RCFs are a fossil fuel, and therefore emit fossil carbon when combusted, their carbon savings are determined by comparison to the counterfactual end-of-life fate of the waste feedstock. For instance, black binbag waste uses an assumption that the waste would otherwise be incinerated in an energy-from-waste plant and calculates the benefit seen by diverting that waste into fuel production. This still needs to provide an emissions saving of 50% compared to simply using fossil diesel.

Different counterfactuals can be considered, depending on the specific waste feedstock. This ensures that the use of these fuels delivers effective greenhouse gas savings. Converting residual non-recyclable waste plastic into recycled carbon fuels can encourage a more effective use of our waste, as it can achieve greater energy recovery than disposing of the waste via conventional means.

Any recycled fuel produced from plastics will have to meet the same fuel standards as all other fuels to gain support from the RTFO. We are aware that pyrolysis oil, which is an initial stage of chemical waste recycling, can be used as a fuel for some applications and can have negative air quality issues associated with its use. However, such fuel would not be eligible under the RTFO order proposed here, as it does not meet the relevant fuel standards outlined in the order. Pyrolysis oil created during RCF production would need to be further refined into a diesel fuel that complies with existing fuel standards to receive RTFO support. We are not aware of any evidence to suggest that this would alter the air quality performance of the final fuel compared to regular diesel.

I will now address one or two of the points that were made. The noble Lord, Lord Ravensdale, made a couple of points; in particular, he talked about nuclear-derived fuels. I can tell him that we received the primary powers required to support nuclear-derived fuels under the RTFO following Royal Assent of the Energy Act 2023. We continue to consider the inclusion of nuclear-derived fuels in the RTFO. We have confirmed that the forthcoming mandate for sustainable aviation fuels will support nuclear-derived fuels; it is on track to come into force on 1 January 2025.

On the issue of cross-departmental working, DESNZ, the DfT and the Treasury are absolutely aware of the need for it and are making great efforts to work together in order to take it forward.