Report on RTFO Stakeholder Workshop 24 April 2007

The workshop on the second half of the Consultation document covered questions 13 to 25 and took a different format from the previous workshops. Because of the complexity of the questions and the range and depth of stakeholder views, the decision was made to divide attendees into groups so that they could each discuss four questions in depth. There was also an opportunity for all delegates to post comments to any of the questions. The aim of the session was twofold: to allow all attendees to feed back their views and also to stimulate discussion among the groups which could then be reflected in the written submissions to the consultation.

In general, a wide variety of views were expressed. There appeared to be a high degree of consensus, though not unanimity, with the view that there should be analysis of the effects of carbon and sustainability reporting before any further decisions were made. There was also widespread support for the view that UK should be part of an EU wide solution

The following is a summary of the main points made while the bullet points represent the views largely as they were expressed.

Question 13: Should the Government specify that, from a given date, credits under the RTFO should be linked to the GHG-saving of the fuel?  If so, what arrangements should operate and how quickly should this requirement be introduced?

There was widespread support for credits being linked to GHG savings; some felt that ideally it would be from the outset, others believed that it should be done at a future date when it was practically possible. There was less agreement about how soon this might be. Some delegates suggested that 2010 should be the aspirational date, others favoured 2011/12. Delegates from the oil sector stressed that industry needed a clear indication when such a system might be introduced. There was widespread support for EU wide standards. There was also concern that companies that moved early should not be penalized and there was a suggestion that grandfathering might prove a solution.  Some delegates favoured incremental implementation.

• There should be proportional graduated incentives based on scientific data on GHG savings.
• How GHG savings are measured needs to be agreed
• Continuous improvement should be rewarded across the fuel chain
• Sustainability issues also need to be addressed
• The methodology needs to be robust and tested

Question 14: Should the Government specify that, from a given date, only those biofuels meeting certain minimum environmental and social standards should qualify for credits under the RTFO?  If so, what standards should be applied, and from what date?

There was a degree of consensus that minimum standards were necessary and should be introduced as soon as possible but there was disagreement about what the actual date should be. Again there was consensus that there should be an EU standard, but some of the people who answered this question believed that while work progressed on developing an EU standard the RTFO should impose a requirement for a minimum 50% carbon saving. Concern was expressed that the RTFO could lead to displacement or substitution and that the high demand for palm oil as a result of fuel requirements would lead to the rain forest being eroded to make way for palm plantations for food use.

• In the transition phase there should be a traffic light system
• There should be minimum standards from day 1
• There should 50% carbon savings in order to qualify for credits
• The baseline for land use should be 1990 rather than 2005
• Social standards are already set out in SAN 8000
• The RTFO should include grandfathering provisions so that there was protection for early movers
• It was also essential to monitor performance and adjust the rules in the light of experience 
• Monitoring changes in land use was critical
• The UK was an international leader and this would be an opportunity to exert influence
• There should be a fixed minimum of 50% carbon savings pending agreement on wider sustainability issues
• The only viable minimum environmental/ social standard that could be introduced in a reasonable time frame would be no imported oils
• There should be no credits for zero or negative GHG impacts

Question 15: Is the Government right to await the review of the relevant fuel quality standards before setting targets higher than 5%?

The consensus on this question appeared to be a qualified yes. Delegates mostly felt that the industry needed experience with fuels at the 5% level before there was a commitment to blends greater than 5%, though a minority believed that a target should be in line with the EU indicative target of 5.75% from the outset. The point was also made that there needed to be agreement on carbon accounting.

• Targets need to be aligned with fuel quality standards
• The Government is probably correct in waiting to review quality standards but should put pressure on vehicle manufacturers to raise the allowable percentage especially where they were already marketing some models which permit higher percentages in other countries
• 5.75% by energy content by 2010 was not a mistake
• Targets should be reviewed annually and modified as necessary in the light of technical progress
• Vehicle manufacturers should future-proof engines to allow for higher percentages in the future.

Question 16: To what extent should Government support for biofuels be constrained by the impact on fuel prices at the pump?

On this question there seemed to be a high degree of consensus that the Government should not be constrained by the impact on fuel prices but there was recognition that it was a political issue and that the Government would need to communicate with the public.

• If the Government wants to encourage biofuels they will need to support the industry
• It’s a political decision and the Government needs to be brave
• The Government should not be constrained but needs to communicate with the public
• Hardly at all: increased prices will incentivise new technology

Question 17: Does the RTFO have an adverse impact on other sectors?  To what extent should this constrain future Government support for biofuels?

There was a general concern that the RTFO might have an adverse impact on food prices but there was a lack of agreement about how this might be addressed.   Other sectors where it was thought that the RTFO might have an impact included, power, transport, oleo chemicals and other users of irrigation especially in developing countries. Concern was expressed that developing countries might suffer but some delegates considered that increased demand might have a beneficial effect by incentivising producers there. Some delegates thought the RTFO might have a positive impact by bringing marginal unproductive land into production.

• UK has sufficient arable capacity for biofuels to meet the 5% target
• There is an EU deficit in oil seeds
• There is a need for harmonisation across sectors
• Feedstocks might displace more flexible crops
• There could be an impact particularly once marginal land was used up
• There is a need to review frequently
• More research is needed
• Global markets are already affected
• The impact on other sectors will be difficult to measure
• Displacement of land from foods to fuels may distort markets but UK markets can be met by UK grown crops with little impact
• There needs to be a "joined up" policy to ensure that other sectors are not adversely affected
• There is limited land to meet all our needs
• There is a danger of creating monocultures which would have an adverse impact on biodiversity and have wider social and economic impacts.
• Improved markets worldwide would increase wealth
• There is a trade-off between transport and power and it depends largely on the relative subsidies - the ROCs versus the RTFO

Question 18: Do you consider the above analysis of the options correct? (for setting future targets.) Are there any other options that the Government should consider?

In general delegates appeared to support the analysis of the options but there was strong support for EU harmonisation of targets and a desire to see an early move to targets based on carbon savings once the systems for monitoring sustainability were proven. Some delegates questioned whether there might be separate obligations on different fuels but others believed that this would reduce flexibility. 

• The volume option is the simplest and the best for start up
• Look at GHG for the longer term
• Need to consider secondary market for RTFO certificates (simple is best)
• Must resist constant change
• No other obvious methods for setting targets
• Prefer EU harmonisation of targets
• Should be based on robust carbon and sustainability standards being in place and a thorough environmental impact assessment
• There should be more support for higher percentage blends
• There should be specific credits for advanced biofuels

Question 19: What are your views on the relative merits of the different ways in which future RTFO levels might be expressed?

Delegates were divided whether the RTFO should be based on GHG savings or should remain as volume based targets which were simpler to administer.

• Retain volume based targets; they are simple, measurable and used for fuel quality
• Targets must be linked to GHG savings and sustainability if they are to lead to a reduction in emissions
• Targets should be based on energy content
• The levels should be based on energy content which is consistent with EU units, rather than volume measurements; it is possible to use default conversion factors.
• There should be consistency with the Fuel Quality Directive review
• Targets should not favour specific fuel chains but incentivise low carbon fuel chains.

Question 20: is the Government right to insist that robust carbon-saving and sustainability criteria are built into future EU-wide biofuel targets and support mechanisms?

There appeared to be a considerable degree of consensus on this question. Delegates strongly agreed that the Government was right to push for robust carbon savings and sustainability criteria. If EU standards could be agreed it was felt that it would avoid intra EU distortions and perverse outcomes. Some delegates also felt that the EU standards should go beyond transport fuels and take in food and electricity.

• There is no point in changing from one environmentally damaging fuel to another suspect fuel with unexpected consequences
• There is a need for GHG savings and sustainability reporting measures so as to ensure that the forecast reductions in emissions are achieved
• There should be encouragement of best practice for all EU production and imports

Question 21: What should the level of the RTFO target be in future years (eg 2015 and 2020)?  Should the level of ambition be maintained at the 2010/11 level, or increased?

A number of delegates believed that targets beyond 2010 should be set EU wide and in line with EU fuel specifications. There was also widespread agreement that the carbon and sustainability reporting had to be demonstrably working before there was any increase in the targets. Some delegates felt that by 2020 the target should be 10%. The view was expressed that there should always be three years' notice of an increased target to allow industry to respond.

• The RTFO level for future years should not be mooted nor decided before the 5% RTFO had been analysed in respect of the effect on vehicles, carbon savings and sustainability
• It must depend on GHG and sustainability issues
• Improving vehicle efficiencies is much more important
• The target should be set ahead of production with a gap of 1% in order to support the buy-out price
• The Government needs to encourage car manufacturers and injector manufacturers to accept higher blends and give warranties
• Not ready to set 2015 targets today
• The EU duty/buy out package will force supplies to countries with the highest return

Question 22: When should the Government set targets for years beyond 2010/11?

Delegates were divided on this question between those who believed that the Government should set targets for the years beyond 2010 as soon as possible, once carbon and sustainability standards had been agreed and those who thought that the Government should wait and analyse the consequences of a 5% RTFO

Once it has been proved that the GHG savings have been made without negative impact on sustainability criteria
EU standards must be in place
After C&S standards are mandatory and after EN590 /228 specifications have been modified for above 5% volume
DfT needs to educate the public to ensure consumer acceptance of biofuels

Question 23: Is our approach to setting the level of the buy-out price a reasonable one?  Does the 30 pence per litre "package" strike the right balance between encouraging the use of renewable transport fuels and protecting consumers?  For how many years into the future should it be guaranteed?

The approach was seen to be a balance between managing the burden between the tax payer and the consumer, There were some doubts whether a 30p per litre package was enough. It was pointed out that it was at the bottom of the range: the 20p duty incentive had had little impact and the additional amount was insufficient. Some delegates felt it important that there was a clear and transparent formula. One delegate questioned whether the buy out price would work in the event of a crisis affecting the availability of agricultural raw materials.

Few delegates suggested a date to which the package should be guaranteed. One delegate suggested that it should be retained until 2027 in line with the Renewables Obligation.

• The fee should not be fixed but related to the difference between hydrocarbon and bio-component prices
• There should be regular reviews.
• Germany has a higher package

Question 24: Will rewarding different biofuels on the basis of their relative carbon saving performance be sufficient to bring these fuels onto the market?  If not, in what other ways might the Government support the development and use of "advanced" renewable transport fuels?

A number of delegates thought that the policy had the potential to bring advanced fuels to the market. Some made the point that the key was the buy out price which needed to be high enough to act as an incentive. Some delegates thought there should be a clear formula for setting the buy out price taking into account the feedstock prices and the crude oil price. Delegates also made the point that much would depend on the value of certificates. Many attendees also thought the Government should consider other mechanisms including support for research and development projects and tax credits, capital allowances, regional support grants and other forms of grants

• The Government should not get hung up about consumer costs. People will adapt and buy more fuel efficient vehicles
• Further research is needed to lower the costs of 2nd generation fuels
• First generation fuels have a long way to go
• If the carbon credits are high enough and the default values low enough  the market will drive for higher carbon savings
• There needs to be sufficient headroom for long term stable contracting and efficient market development.
• Rewards on greenhouse gas savings might be insufficient to bring 2nd generation fuels to the market, they should be broadened to take in sustainability criteria.
• The duty incentive should be retained for  better performing fuels
• The principle can work but the outcome for advanced fuels is uncertain as it depends on the value of carbon

Question 25: Should the Government consider providing additional support to encourage the use of high blend biofuels?

Delegates were divided on this question; some people firmly believed that the Government should provide additional support. A number of people posted a yes to this question. Others believed it to be more complicated, some suggesting that it was important to sort out EU specifications or sustainability and GHG measurements first.

• The public should have the opportunity to buy specific green fuels
• There was a need for the percentage allowed under fuel standards to increase and for vehicle manufacturers to allow higher percentages.
• The Government should follow the Swedish example
• E85 blends could be important if they deliver GHG savings and meet sustainability standards
• High blends could play an important role through niche markets
• Consideration should be given to other transport sectors such as trains.
• The consumer pays the cost either directly or indirectly
• High blends require significant investment in infrastructure such as pumps. Support for this should be separate from the RTFO
• B20 may have air quality benefits