DfT consultation about subsidising development of biofuels for aviation, through RTFO
The DfT has published a consultation (ending 22nd January 2017) on “The Renewable Transport Fuel Obligations Order. (RTFO) Proposed amendments.” Its aim is to encourage development of biofuels for transport, in the hope that transport can continue to expand but its carbon emissions will be slightly reduced. The DfT’s John Hayes says: “Our strategy is therefore to provide a positive investment environment beyond 2020 to further encourage the development of waste-based and advanced fuels, while limiting the use of fuels made from crops.” They are partly aware of the adverse impacts from ILUC (indirect land use impacts) of many biofuels, which have the effect of shifting damage and ultimately competing with land for food, or causing deforestation. The DfT is keen to boost biofuels for aviation. They say: “We wish to promote the development of sustainable renewable fuel for aviation … We propose to extend eligibility for reward under the RTFO to both renewable avtur and renewable avgas. ….” ie. they get money back, effectively as a subsidy for these fuels. (Avtur is normal jet fuel, and avgas is largely for general aviation). The DfT proposes to “reward renewable aviation fuels under the RTFO” and “suppliers would be able to claim Renewable Transport Fuel Certificates (RTFCs) for eligible fuel.”
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“The Renewable Transport Fuel Obligations Order. Proposed amendments”
This long document contains a section on aviation. Page 58 – 61
Aviation fuels
We wish to promote the development of sustainable renewable fuel for aviation, a transport mode that appears unlikely to be electrified.
We propose to extend eligibility for reward under the RTFO to both renewable avtur and renewable avgas. They will be subject to the same sustainability criteria as other renewable fuels. Renewable aviation fuels which do not meet the sustainability criteria will not receive a reward and will be subject to an obligation under the RTFO.
[Avtur is ordinary jet fuel used by commercial aircraft; avgas is mainly used by small planes for general aviation. AW note]
Why include renewable aviation fuel?
2.1 The UK aviation industry has for some time advocated that eligibility for reward under the RTFO would help to provide the support needed to kick-start the use of aviation biofuels, which at present are not produced or supplied in the UK.
2.2 In the absence of new measures, aviation emissions are likely to grow significantly towards 2050, both as a proportion of UK emissions and in absolute terms. Low carbon fuels, such as biofuels, are considered to be the only viable energy source available to significantly limit aviation emissions by 2050.
2.3 The UK supports a global agreement on a market-based measure at the International Civil Aviation Organisation (ICAO) as the most effective way of addressing the growth in aviation emissions. However, other measures are likely to be required if aviation is to make a significant contribution towards reducing emissions.
2.4 There are two types of aviation fuel:
Aviation turbine fuel (avtur) which is high specification kerosene used in jet and turboprop aircraft. This is not subject to fuel duty, except when it is for ‘private pleasure’ use.30
Aviation gasoline (avgas) also known as aviation spirit in the UK, which is a high specification petrol, used in spark-ignited piston engines. This is subject to fuel duty.
30 See Section 16 of Excise Notice 554 for a definition https://www.gov.uk/Government/publications/excise-notice-554-fuel-used-inprivate-pleasure-craft-and-for-private-pleasure-flying/excise-notice-554-fuel-used-in-private-pleasure-craft-and-for-private-pleasureflying
Q 16 Do you agree that both renewable avtur and renewable avgas should be eligible for reward under the RTFO? When replying please provide any evidence as to why you agree or disagree.
How would aviation fuels be treated under the revised RTFO?
2.5 Since the market for renewable aviation fuels is in its infancy, we are not proposing to provide a mandate for their supply, which could put the UK at a commercial disadvantage relative to EU and international competitors. We are therefore proposing that fossil aviation fuels will not be subject to the RTFO.
2.6 It is proposed that renewable aviation fuels will be eligible for rewards in line with liquid road fuels, i.e. they will be eligible for 1 RTFC per litre. They will also be eligible for the double rewards under the RTFO for biofuels made from wastes and residues, and for counting towards the development fuels sub-target if they meet the applicable requirements.
2.7 In common with the treatment of all other renewable fuels under the RTFO, all renewable aviation fuel will be required to meet the sustainability criteria in order to be eligible for reward.
2.8 Renewable fuels which do not meet the sustainability criteria may have contributed to environmental damage during their production. Under the RTFO, these are treated in the same way as fossil fuels and are therefore subject to an obligation. We propose to treat renewable aviation fuels which do not meet the sustainability criteria in the same way, i.e. they will become obligated.
Accounting for aviation fuels
2.9 Under the current RTFO, the duty point, i.e. the time when duty of excise becomes payable, is used as the control point for all fuels. This control point is used to determine which fuels should be counted, when they should be counted and to determine ownership at the time of counting. Owners of eligible fuels at the control point can apply for RTFCs.
2.10 Because avtur for commercial purposes is not subject to fuel duty, we need to define a control point which is not dependent on the duty system.
2.11 All aviation fuel in the UK must meet certain stringent quality standards. For avtur, the main specifications used are Defence Standard 91-91, ASTM D7566, and ASTM D1655. These currently permit the blending of specified amounts of certain renewable fuels into fossil avtur, and then require that the resulting blend is certified. Since this applies to all renewable avtur, it is proposed that the point at which the blending and certification of the blend occurs, i.e. the blending/certification point, is used as the control point for renewable avtur for commercial use.
2.12 Avtur for private pleasure use is subject to fuel duty, therefore we have the option to use the duty point as the control point for this fuel. However, for simplicity it is proposed that avtur for private pleasure use is treated the same as avtur for commercial use and both use the blending/certification point as the control point.
Q 17 Do you agree that the blending/certification point is a suitable control point for renewable avtur used for both commercial and private pleasure use?
Q 18 Is there an alternative control point which we should consider? When replying please provide an explanation as to why you agree or disagree.
2.13 All avgas is subject to fuel duty. Therefore it is proposed that any renewable avgas should use the duty point as the control point, in line with most other fuels under the RTFO.
Q 19 Do you agree that the duty point is a suitable control point for renewable avgas? When replying please provide an explanation as to why you agree or disagree. Additional powers for the Administrator to validate volumes of aviation fuel
2.14 One advantage of using the duty point as a control point for fuels in the RTFO, is that the Administrator is able to access HMRC records to validate the fuel volumes which have been reported. Since comparable records are not available for avtur, an alternative method of validating renewable avtur volumes will be required.
2.15 Whilst the industry is still developing, it is possible that direct examination by the Administrator of evidence held by industry on fuel supply may be feasible. However, once a significant number of applications are being received each month, it may be necessary to require independent assurance (verification) of the fuel. It is therefore proposed that the Administrator will be given powers to do this as necessary.
2.16 It is envisaged that this independent assurance would be as similar as possible to the verification of sustainability information already required under the RTFO, and therefore that it would be carried out using the standards set out in the International Standard on Assurance Engagements (ISAE) 3000.31
2.17 In order to provide the Administrator with the required level of assurance over the volumes supplied, and one that is comparable to the cross checking of all volumes against HMRC data, we believe that it is necessary to require the more detailed ‘reasonable’ assurance level provided for under ISAE 3000 for fuel volumes, rather than the ‘limited’ level which is used for renewable fuel sustainability information.
Q 20 Do you agree that for renewable avtur, it is appropriate for the Administrator to require independent assurance of the volume of fuel when necessary?
Q 21 Do you agree that the requirement for a reasonable level of assurance, rather than the lower limited level of assurance, is appropriate for renewable avtur? Please provide an explanation and evidence to support your answers.
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Whole document is at
Deadline to comment is 22nd January 2017
The consultation period began on 29 November 2016 and will run until 22 January 2017. Please ensure that your response reaches us before the closing date.
An official response form is provided at Annex C, please submit your responses using this form.
When responding, please state whether you are responding as an individual or representing the views of an organisation. If responding on behalf of a larger organisation, please make it clear who the organisation represents and, where applicable, how the views of members were assembled.
In addition, when responding to the questions please provide supporting reasons and/or evidence as to why you agree or disagree with the proposals set out in this consultation.
Please send consultation responses to:
Michael Wright
Department for Transport
Great Minster House
33 Horseferry Road
London SW1P 4DR
Email:
LowCarbonFuel.Consultation@dft.gsi.gov.uk
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This is the Foreword: Rt Hon John Hayes CBE MP
29.11.2016 (DfT)
Climate change is an issue of global importance. Efforts to implement the Paris Agreement [An agreement within the United Nations Framework Convention on Climate Change. It seeks to limit global temperature rises to less than 2 degrees Celsius. It seeks to mitigate greenhouse gas emissions, improve climate change adaptation, and finance initiatives to
achieve these goals] to tackle this century-defining challenge will require both global co-operation and domestic action to reduce emissions. To that end, the UK has committed to considerable greenhouse gas emission reductions – 80% by 2050 – which will require transformative changes across all areas of the economy.
Transport, which accounts for around a quarter of our domestic greenhouse gas emissions, will be a key part of that transformation. Indeed, achieving our 2050 target will require us
to make the transition to near zero-emissions in transport, and it is the Government’s ambition that by 2040 every new car and van bought in the UK will be zero emission.
As we transition to electric cars, we will continue to need low carbon liquid and gaseous fuels for decades to come, particularly to decarbonise transport sectors that are not as
easy to electrify, such as planes and lorries.
New challenges bring new opportunities. Today, the UK is a net importer of fossil diesel. We have already reduced our reliance on these imports by producing over a quarter of a billion pounds worth of low carbon biodiesel in the UK each year. [ This is a total gross value estimate based on anticipated biodiesel production for 2016-7, sourced from UK biodiesel producers, and recent biodiesel prices, sourced from Bloomberg New Energy Finance ]
In carbon terms, biofuels delivered under our Renewable Transport Fuel Obligations are equivalent to taking over a million cars off UK roads each year.
Looking ahead it is clear that low carbon fuels have further potential to deliver economic benefits and carbon reductions. This is because industry, with Government support, is
developing fuels made from wastes and residues. These ‘advanced’ biofuels could offer significant carbon savings without the sustainability concerns of those derived from crops.
And crucially, thanks to the use of high-tech, novel processing technologies, these fuels are also up to the task of fuelling aviation and freight while lowering carbon emissions.
Advanced biofuels also offer an economic opportunity with real potential for the development of a domestic industry contributing to economic growth and highly-skilled jobs in a global market worth up to £15 billion by 2030. [ Medium scenario estimation of global advanced biofuel industry turnover over in 2030, based on estimated deployment figures and technology costs, E4Tech/Ricardo-AEA Advanced Biofuel Demonstration Competition Feasibility Study]
Our strategy is therefore to provide a positive investment environment beyond 2020 to further encourage the development of waste-based and advanced fuels, while limiting
the use of fuels made from crops. This should provide a firm platform for the development of sustainable advanced fuels, whilst ensuring costs are tightly controlled in line with
developments in the market. The proposals in this consultation put these principles into practice and aim to identify, and ultimately implement, the most effective approach to deploying renewable fuels and meeting both our 2020 renewable energy and greenhouse gas emission savings targets and help to make sure transport is able to meet its share of the Carbon Budget reductions required by 2050. The proposals outlined in the coming pages have been informed by the work of the Transport Energy Taskforce, whose open approach to policy-making created a framework of shared evidence and transparent scenarios.
….. and the whole document is at
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See also a briefing, in March 2016, from AEF (the Aviation Environment Federation) by Cait Hewitt, on
Aviation Biofuel and the Renewable Transport Fuels Obligation
http://www.aef.org.uk/uploads/AEF-RTFO-biofuel-briefing.pdf
A few extracts from the AEF briefing:
Biofuels were at one time seen as playing a significant future role in decarbonising our power supply. But it soon emerged that production of biofuels from crops could have unwanted social effects such as displacement of farmers, and – when a full lifecycle analysis was undertaken – could in fact accelerate climate change, for example through deforestation and ‘indirect land use change’ .
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Policy on aviation biofuel Competition for sustainable biofuels is therefore high. While the aviation industry would like to cite biofuel use as a meaningful part of the answer to limiting the sector’s emissions, having better green credentials is not currently a sufficiently strong motivator for airlines to pay a premium for their fuel and development of biokerosene production in the UK has stalled.
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Some in the industry, including the UK industry coalition ‘Sustainable Aviation’ (SA) have called publicly for policy action by way of changes to the Renewable Transport Fuels Obligation (RTFO) to help address the current disincentive of high cost. SA has also called for the financing of aviation biofuel development projects through Government underwriting of risk, and increased Research and Development funding.
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The Renewable Transport Fuels Obligation
The RTFO5 was introduced in 2008 and places an obligation on owners of liquid fossil fuel for road transport to ensure that a certain amount of biofuel is supplied (or that a substitute amount of money is paid). Owners of biofuel at the duty point are awarded one Renewable Transport Fuel Certificate (RTFC) per litre of biofuel supplied. RTFCs may then be traded between participants in the scheme; their commercial value has been estimated at 200 – 300 USD per tonne of fuel.
SA has called on Government to allow producers of aviation biofuel to claim RTFCs. These certificates could then be sold to fuel users covered by an obligation to use a given proportion of biofuel, creating a commercial incentive for production of aviation biofuel, and thus reducing the cost of these fuels for airlines wishing to purchase them. No mandate or obligation would need to be imposed on aviation fuel users directly, and the UK aviation industry has so far opposed the introduction of sector-specific biofuel targets.
AEF’s view
AEF considers that biofuel, if produced sustainably, may have a role to play in limiting aviation emissions growth, but that this role is likely to be very limited due to the limited availability of feedstock. The latest DfT forecasts predict that only 2.5% of aviation fuel will come from renewable sources by 20506 . We will be interested to see if the Government anticipates changes to the RTFO having a material impact on this forecast, but in order to make the right policy decisions on other areas such as airport capacity, it remains critical not to overplay the likely role of biofuel in solving the aviation emissions challenge.
It is worth noting that when the Committee on Climate Change produced its 2009 report on aviation emissions7 (as requested by the then Labour government), it anticipated as much as 10% of aviation fuel coming from renewable sources by 2050 (with a corresponding 5% reduction in emissions) and that even allowing for this much more optimistic modelling assumption it concluded that passenger demand growth would need to be limited to 60% over 2005 levels in order to meet the requirements of the Climate Change Act – a recommendation CCC maintains to this day.
AEF also supports the recommendation of the Committee on Climate Change that given the scarcity of sustainable biofuel it should be used as efficiently as possible. To the extent, for example, that biofuel can be used together with Carbon Capture and Storage technology, such as in heat generation, this is likely to be preferable to its use in aircraft.
Similarly, we believe that the Government’s investment priorities in relation to climate change measures generally should be evidence-based in terms of delivering maximum CO2 reductions, and that support for aviation biofuel development (rather than, for example, subsidising wind energy) would need to be assessed in this framework. Since aviation already pays neither fuel tax nor VAT we would be very cautious about supporting allocation of public money to help industry pay its climate costs. We nevertheless remain open-minded about possible aviation access to RTFCs.
Full briefing here
http://www.aef.org.uk/uploads/AEF-RTFO-biofuel-briefing.pdf
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In his letter to the Environmental Audit Cttee, on 8.11.2016, about environmental aspects of a Heathrow runway, Chris Grayling says:
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Full letter at
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