Any company failing to meet its obligation will have to buy compliance certificates from other suppliers or pay a buy-out price of 15 pence per litre.
The first half of the consultation explains which fuel suppliers will be affected and how obligations will be calculated.
The obligation will fall on refiners, importers and suppliers of road fuels when they pay excise duty. But it will only apply to companies supplying more than 450,000 litres of fuel per year. This will exclude firms supplying fuel for specialist uses such as engine testing and motor sport. The DfT estimates about 20 companies fall above the threshold.
Each company’s obligation will be expressed as a percentage of fossil fuel sales, rather than total fuel sales. This means to meet the 5% target for total fuel sales, about 5.26% of a company’s fossil fuel sales will actually have to be biofuels to prevent a shortfall.
This is the same as the current legal limit on blending biofuels into petrol and diesel. However, the DfT hopes companies will also use high-biofuel products such as E85 to meet their obligations.
Companies will prove compliance with the obligation by presenting renewable transport fuel certificates to an administrator. These will be awarded for the supply of one litre of biofuel, provided duty has been paid and a report detailing the fuel’s carbon savings and sustainability impacts has been completed.
Consultancies E4tech and Ecofys have been commissioned, respectively, to develop a methodology for measuring greenhouse gas emissions and criteria for sustainability reporting (ENDS Report 383, p 15 ). These will be consulted on this spring.
The government intends the RTFO to save a million tonnes of carbon a year. For this to occur, the average carbon saving of each litre of biofuel must be 60%, the consultation’s partial regulatory impact assessment says.
The DfT will publish details of each fuel supplier’s carbon savings once per year. "It is intended that this publication will encourage suppliers to improve the carbon savings attributable to the fuels they supply and to ensure that the fuels come from proven sustainable sources," it says.
The consultation also looks at how the RTFO will evolve after 2010/11 but does not include targets. "The government has made clear that it is committed to increasing the level of the RTFO beyond 5% after 2010/11," it says, "but only provided certain conditions are met."
These include "confidence that biofuels will be produced in a sustainable way", the cost to consumers will be acceptable and it will not impact adversely on the food and oleochemical industries. "The government will also want to be satisfied that this represents an effective use of our biomass resources."
The cautious approach will be welcomed by environmental campaigners but not biofuel producers eager for certainty over the scheme’s future.
While the document acknowledges the importance of long-term signals for industry, it cautions "the full effects of a 5% biofuel penetration… will not be known until 2010 at the earliest."
The DfT stresses that any future target has to take account of work by the European Commission. In its renewables roadmap published in January, the Commission proposed a binding target for biofuels to make up 10% of fuels, by energy content, by 2020 (ENDS Report 384, pp 28-29 ).
The RTFO may change design after 2010/11 so that obligation levels are similarly based on the energy content of fuels, the DfT says. But it also welcomes views on whether they should be based on the amount of greenhouse gas emissions saved.
The government intends to extend the RTFO’s environmental reporting requirements, perhaps linking the award of compliance certificates with greenhouse gas savings. "It might also be possible to specify that… only those biofuels meeting certain minimum environmental and social standards qualify for credits under the RTFO," it says.
The DfT asks for views on whether this would encourage development of "second-generation" biofuels such as cellulosic ethanol.
The consultation runs until 17 May.