This is the Renewable Fuels Agency’s first Annual Report to Parliament on the Renewable Transport Fuel Obligation, covering the period 15 April 2008 – 14 April 2009, as required under the Renewable Transport Fuel Obligations Order 2007 (as amended). The aim of this report is to provide a post implementation
review of the first year of the Renewable Transport Fuel Obligation (RTFO), and includes consideration of the national and global impacts of the supply of biofuel in the UK.
In response to the significant threat posed by climate change, the UK has national and international commitments to substantially reduce its carbon emissions and to increase the use of renewable energy, including in transport. The RTFO sets targets for increasing the use of renewable fuels in UK road transport with the aim of reducing carbon emissions. The RTFO is likely to be the basis of the implementation of the transport element of the EU’s Renewable Energy Directive (RED), which sets long term targets for the use of renewable fuels in transport to 2020. The RTFO puts an obligation on refiners and importers of fossil fuels supplying at least 450,000 litres a year (‘obligated suppliers’). In 2008/09, the Obligation was to ensure that 2.5%1 by volume of the road fuel they supply in the UK is made up of renewable fuels. These obligated suppliers must demonstrate that they have met their Obligation by redeeming Renewable Transport Fuel Certificates (RTFCs) to the Renewable Fuels Agency (RFA) at the end of the year. One RTFC is awarded for every litre (or kilogram in the case of biogas) of biofuel reported to the RFA, and an obligated supplier can obtain them either by supplying biofuel itself, or by buying them from biofuel suppliers. Non-obligated biofuel suppliers registered under the RTFO also report to the RFA, receive RTFCs and can sell their certificates. Trading certificates provides potential financial support for the production of biofuels. The RTFO is set to become the prime mechanism to support the supply of biofuels in the UK (a 20p per litre duty incentive is due to be removed from April 2010, except for biofuel from used cooking oil which will retain the duty incentive for a further two years). The value of certificates, as tradable commodities, is determined by the market. There is also an option to ‘buy-out’ of the Obligation for 15p per litre instead of redeeming certificates. This acts as a ‘safety valve’ – if the additional marginal cost of supplying biofuel compared to fossil fuel were to rise above 15p per litre (or 35p per litre taking into account the current duty incentive), suppliers would be able to meet their Obligation more cheaply by paying the buy-out than by supplying biofuel.

By: UK Renewable Fuels Agency

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