The RTFO
The RTFO, which stands for Renewable Transport Fuels Obligation, requires suppliers of fossil fuels to ensure that a specified percentage of the road fuels they supply in the UK is made up of renewable fuels. The target for the first year of the obligation, 2008-9, is 2.5% by volume.
As well as obliging fuel suppliers to meet targets for the volumes of biofuels supplied, the RTFO requires companies to submit reports on the carbon emission savings and sustainability of the biofuels. It is administered by the RFA.
The RTFO Order is available to download here.
What led to the development of the Renewable Transport Fuel Obligation (RTFO)?
The UK government is introducing the RTFO as part of a wider program of measures to combat climate change. These measures are being taken in the context of the UK's Kyoto Protocol commitment to reduce CO2 emissions by 12.5% as compared to 1990 levels, and the UK government's own targets from the 2003 Energy White Paper of a 20% reduction in carbon dioxide emissions by 2010 and to a 60% carbon saving by 2050. In addition, the EU has passed Directive (2003/30EC) aimed at both reducing greenhouse gas emissions and reducing EU reliance on external fuel sources. This directive requires member states to set indicative targets for increasing the use of biofuels so that they account for 5.75% of EU transport fuels by 2010.
Given the potential to both reduce UK greenhouse gas emissions and improve energy security through the use of biofuels, and with a view to fulfilling its responsibilities under EU Directive (2003/30EC), the government announced in its 2004 pre-budget report that it would undertake a feasibility study and consultation into the prospects for increasing the use of blended biofuels in transport fuels. The feasibility study led to a Regulatory Impact Assessment which considered 4 main options. These were:
- to take no action at all,
- to increase the fuel duty incentive,
- to seek a voluntary agreement with industry,
- to introduce an obligation (Renewable Transport Fuel Obligation).
The report concluded that introducing the RTFO represented the best option, providing the greatest certainty of achieving the objective of increasing biofuel sales for road transport and the highest amount of carbon savings. It acknowledged that biofuels cost more than fossil fuels, but considered that the potential environmental, climatic and social benefits of increasing biofuel use justify these costs.
The primary legislation for such a scheme was passed in the Energy Act in 2004. The Government has committed to introduce the RTFO from April 2008 as a high profile policy and a key element of the Government's Climate Change Programme.