Driving Change: Government Launches Call for Evidence on the RTFO

The Renewable Transport Fuel Obligation (RTFO) is the government's key scheme for incentivising the use of low carbon fuels (such as biofuels, hydrogen and synthetic alternatives to petrol or diesel) in road vehicles, non-road mobile machinery (including trains, mobile generators and certain types of vessels) and other surface transport modes. Since its introduction in 2008, over 27 billion litres (equivalent) of sustainable low carbon fuel have been supplied under the RTFO and resulted in greenhouse gas (GHG) savings of almost 54MtCO₂e.

Successive UK Governments have remained committed to updating the RTFO in response to changing policy imperatives, technology landscapes and market conditions. The last comprehensive review was launched in 2021 (see our earlier blog post). Now, with the Sustainable Aviation Fuel Mandate starting in 2025 and a maritime decarbonisation strategy in development, the Government is considering how the RTFO might need to evolve. On 25 November 2024, the Government published a Call for Evidence seeking views from stakeholders on the future of the RTFO.

This call for evidence seeks stakeholder feedback on the operation of the RTFO scheme, the policies that underpin it, and how the RTFO could be improved across 6 main areas:

1. RTFO main obligation target: The RTFO main obligation target requires a certain percentage of fuel (by volume) supplied by fuel suppliers to comprise sustainable low carbon fuel. The target is now 11.8%, rising to 12.15% in 2025 and 14.6% by 2032. Due to the shrinking road fuel market, the target needs further increases to maintain current low carbon fuel volumes. However, meeting higher percentages is challenging due to blend limits on E10 petrol and B7 biodiesel although Government considers that advances in waste-derived ethanol and hydrotreated vegetable oil (HVO) may help mitigate these limits. In light of these new challenges and opportunities, the Government is seeking views on whether the targets set, both in the lead-up to 2032 and beyond, are appropriate.
2. How low carbon fuels are rewarded under the RTFO: In contrast to the SAF mandate, RTFO related certificates are currently awarded based on the volume of eligible low carbon fuel supplied, rather than on the corresponding GHG savings achieved. The Call for Evidence highlights the potential benefit of switching the RTFO to a GHG-based scheme incentivising producers to invest in production efficiencies, possibly reducing the GHG emissions of the fuels already supplied. However, the difficulty lies in the fact that the RTFO has a much broader feedstock eligibility compared to the SAF mandate, which means the switch would require a major change in policies and may not achieve significantly higher emissions savings. The Government is therefore seeking feedback from stakeholders on the risks and opportunities associated with such a change, and to determine if it is justified.
3. Treatment of fuels derived from crops: In 2018, a 'crop cap' was introduced which restricted the extent to which biofuels made from agricultural crops can count towards suppliers' obligations, given the associated land use change and food security risks. Government statistics show that the actual percentage of crop-based renewable fuels supplied was significantly below the cap from the crop-cap's introduction in 2018 until 2022. Therefore, the Government is seeking feedback on whether the crop cap is set at the right level, and on its impact on UK biofuel producers, suppliers and operators since its introduction.
4. Treatment of fuels derived from wastes: The RTFO allows double counting of low carbon fuels made from certain waste feedstocks given their associated GHG savings and limited environmental impact. This approach has been effective in increasing the percentage of biofuel sourced from wastes. Currently, the majority of sustainable wastes and residues are double counted to incentivise their use. The Government is seeking feedback on whether this approach remains effective, or whether there should be more flexibility to address different types of waste, for example rewarding certain feedstocks with more certificates than others.
5. RTFO Development Fuel Obligation: A significant RTFO change in 2018 was the introduction of the development fuel obligation to encourage novel fuel technologies. Despite incentives (such as double-counting), investment in development fuels has not met expectations, with most suppliers opting for the buy-out route. Challenges include competition for feedstocks, slow technological progress, construction delays, and revenue uncertainty. Given rising global demand for low carbon fuels and evolving technologies, the Government is seeking views on all areas of the development fuel obligation policy to ensure it encourages innovation and diversifies the feedstocks and production processes for delivering sustainable fuels. In particular, the Government also highlighted the opportunities with carbon capture usage and storage-enabled hydrogen (blue hydrogen) and seeks stakeholder feedback on how the RTFO, alongside other support schemes, can better support these opportunities.
6. Administration of the RTFO: The RTFO is currently administered by the Department for Transport. The Government is seeking general feedback on the adequacy of the day-to-day administration, including in relation to the provision of scheme guidance and statistics.

The Call for Evidence will remain open until 27 January 2025. The Department for Transport has indicated that a summary of responses, including the next steps, will be published alongside a statutory review of the operation and future of the RTFO scheme, as soon as possible in 2025. Responses to the Call for Evidence and the statutory review will help inform potential changes to the RTFO, which will be subject to further consultation. The review is a clear marker of the Government's intention to ensure that the RTFO continues to effectively promote innovation, reduce GHG emissions, and support the evolving low carbon fuel industry.