The fuel industry is gearing up for its biggest change in recent years - and it’s all in an effort to go green. Last month MPs voted in favour of the government’s Renewable Transport Fuels Obligation (RTFO), which aims to bring the UK into line with EU environmental targets.
The legislation in the UK is being driven primarily by the government’s commitment to tackling climate change. And the RTFO is all about cutting greenhouse gas emissions by increasing the use of biofuels.
The move means that from next April, 2.5% of suppliers’ fuel sales must come from biofuels. In other words, oil companies will be responsible for making sure that the fuel they provide to retailers contains a minimum amount of 2.5% biofuels.
The RTFO states that this figure will increase to 3.75% in 2009. And by 2010/11, all diesel and petrol sold on UK forecourts will have to contain at least 5% of biofuel blends.
The amounts will be measured over the course of the year, from April 15 to April 14.
The government has included a buy-out option for suppliers who choose not to participate in the scheme. This will total 35p for every litre of fuel sold which comes from non-renewable sources. The penalty will be made up of a duty reduction of 20p per litre and the 15p per litre buyout cost.
According to the UK Petroleum Industry Association (UKPIA), the buy-out price of 35p per litre will fall to 30p in 2010/11.
UKPIA spokesman Nick Vandervell said: "The RTFO is the biggest change to petrol and diesel since the introduction of unleaded petrol. And the aim of the industry is to make sure the change has minimal impact on customers."
He said biofuels still accounted for a very small percentage of the UK fuel market - making up less than 2% of sales. UKPIA estimates that biofuel sales in the UK total just over 300m litres for the year 2006/7, consisting of 213m litres of biodiesel and about 90m litres of ethanol.
"Even after the Renewable Transport Fuels Obligation is implemented, it’s still going to be a small amount," added Vandervell.
The government is investing heavily in the RTFO. Rupert Furnish, of the Cleaner Fuels and Vehicles Division of the Department of Transport, heads up the team which has been developing the legislation.
He said the government mainly supports biofuels because they are believed to have huge benefits for fighting climate change - even though he admitted the whole biofuels issue was still something of a grey area.
"On a ’well to wheel’ basis, biofuels generally emit less carbon than fossil fuels," he said. "But they do raise some difficult social and environmental issues - and the UK is at the forefront of attempts to address these."
Biofuels are controversial for many reasons. There are questions about their sustainability, with some objectors claiming an increasing amout of the world’s resources - such as rainforests - will be destroyed so that crops can be planted for biofuels.
There is also the ’food for fuel’ debate which questions whether land which should be used for growing food will be used for producing biofuels, potentially leaving the world’s poorest starving so that rich Westeners can indulge their love for the car.
There are also criticisms biofuels are too expensive and we should be looking to cut emissions in other ways.
The government is determined to get the UK moving away from using traditional petrol and diesel. But the implementation of the RTFO looks likely to be complex, time-consuming and costly.
According to Furnish, a new IT system will need to be built to process the system. Meanwhile, the government is in the process of setting up the RTFO Administrator, an agency called the Renewable Fuels Agency.
A core group of eight UK refiners and three to ten importers will become ’obligated suppliers’. They will have to register and open an account with the Administrator, which will have about a dozen staff. They will also need to submit monthly and annual reports about fuel supplies.
Electronic RTF Certificates will then be awarded to suppliers for providing renewable fuels. Certificates can be awarded to both obligated and non-obligated suppliers, and these can be traded among account holders.
In the early years all biofuels will score equally, although from April 2010 the government aims to reward biofuels under the RTFO according to their carbon savings. And from April 2011, they will only be rewarded if they meet appropriate sustainability standards.
Vandervell warned that there were concerns about the accuracy of the data on how much CO2 was actually saved by using biofuels. He said for this reason, UKPIA fully supported the carbon accreditation and sustainability reporting criteria that will form part of the RTFO from 2010, and the organisation was also involved with the development of a reporting system.
UKPIA states that CO2 from road transport accounts for about 25% of UK greenhouse gas emissions, the equivalent of 112.5m tonnes of CO2 in 2003.
So if all the biofuels targets in the RTFO are met, how much energy will the UK really save?
According to Furnish, it will be the equivalent of reducing road transport by 5-10%. But to him, there are bigger reasons for changing to ’greener’ fuels.
"We have to set the example in the West so the emerging economies will follow," he said.
l For further discussion on fuels of the future, turn to our report on the Forecourt Trader Top Indies Fuel Track Day on page 24.
=== Key points ===
? Biofuels can offer significant and immediate carbon saving benefits.
? But they raise some difficult social and environmental issues such as sustainability.
? The RTFO is due to come into effect on April 15, 2008.
? Oil suppliers will have to make sure the fuel they sell on forecourts contains at least 2.5% biofuels, rising to 5% by 2010/11.
? The government aims to move the RTFO to a carbon basis, if possible, from 2010/2011.
? More information is available at [http://www.dft.gov.uk/pgr/roads/environment/rtfo].