HANSARD
Renewable Transport Fuel Obligations (Amendment) Order 2024
- Considered in Grand Committee
- 4:46 pm
- Moved by
- That the Grand Committee do consider the Renewable Transport Fuel Obligations (Amendment) Order 2024.Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee
- My Lords, this order would amend the Renewable Transport Fuel Obligations Order 2007 so that recycled carbon fuels, known as RCFs, are eligible for support under the renewable transport fuel obligation—RTFO—scheme.The RTFO scheme establishes targets to drive the supply of renewable fuels. It does this by placing obligations on suppliers of transport fuel to ensure that renewable fuels make up a proportion of their overall supply. The amount of renewable fuel that should be supplied is calculated as a percentage of the volume of relevant fossil fuel supplied in a calendar year.This obligation is met by acquiring certificates which are issued for the supply of sustainable renewable fuels. These certificates can be redeemed at the end of an obligation period, as well as traded between parties. The value of these certificates therefore provides a revenue stream for producers of renewable fuels and demand for their products in the fuel market. While the RTFO has operated successfully since 2008, it is important that it continues to evolve as new technologies and opportunities for emissions-reducing fuels are developed.We committed to supporting RCFs in the Government’s transport decarbonisation plan and this statutory instrument delivers on that goal. It is the product of two consultations with industry and in-depth working with industry experts and across government departments. The instrument will help to maximise the greenhouse gas savings that can be achieved under the RTFO by broadening the available feedstocks for eligible fuels and encouraging the development of a new industry.So what are these new fuels? RCFs are fuels produced from fossil wastes that cannot be avoided, reused or recycled, and have the potential to reduce greenhouse gas emissions relative to petrol, diesel or kerosene. To date, the RTFO scheme has supported only fuels produced from renewable feedstocks, such as biomass and renewable energy. However, emerging technologies and production methods mean it is possible for fuels produced from fossil wastes to contribute to emissions reductions to a similar degree to renewable fuels.
- My Lords, I declare my interests as set out in the register, particularly as a chief engineer working for AtkinsRéalis, an engineering consultancy, and as a co-chair of Legislators for Nuclear.I very much welcome this statutory instrument, not least because I put forward and agreed with the Government the amendment to the Energy Act 2023 which gave them the primary powers to undertake this change. As the Minister said, recycled carbon fuels can provide significant carbon savings compared with traditional fossil fuels such as petrol, diesel and kerosene, and will save large quantities of carbon for hard-to-abate sectors. They will also enable RCFs as key near-term components of sustainable aviation fuels in the SAF mandate. Clearly, how these carbon savings are to be determined will be a key point in the implementation of these regulations, so can the Minister perhaps expand to the Committee on the detail of how this carbon savings process will be undertaken?Secondly, the other part to my amendments to the Energy Act 2023 related to nuclear-derived fuels and enabling these to obtain support under the RTFO. These powers will be important in the near term for plans for hydrogen-powered construction vehicles and for hydrogen-powered buses at Sizewell, and in the medium term for the SAF mandate, given the unique characteristics of nuclear plants and their ability to produce hydrogen and synthetic fuels economically and at large volumes, leveraging the heat that they generate as well as electricity to generate large volumes of sustainable aviation fuel. Can the Minister perhaps update the Committee on when we will see a similar statutory instrument for nuclear-derived fuels, and indeed on the timescales of those associated consultations?Finally, I highlight the need for cross-departmental working in this area, particularly on sustainable aviation fuels, which I know is already happening. There is a need for ministerial sponsorship of a senior-level, cross-Whitehall discussion, including the relevant departments, including the DESNZ, the DfT and the Treasury, to initiate those activities and dialogue on policy, funding and collaborations needed to unlock this SAF opportunity from recycled carbon fuels and from nuclear-derived fuels. This would really help break down those silos and move this area forward. Can the Minister also please state what plans there are for such cross-departmental work in the future?
- My Lords, I thank the Minister for his introduction. The noble Lord has just referred to the significance of this instrument. It is a very modest little piece of secondary legislation, but it could well usher in a whole new era in relation to fuels. This is about recycled carbon fuels, which are potentially a useful extension to the RTFO order. It increases the range of fuels, as the Minister has said, which can be rewarded under the order, and will therefore increase potential total carbon savings.At the heart of this is the fact that this is not zero carbon but lower carbon: up to 50% lower than traditional fossil fuels. Of course, we are with various techniques moving away from our traditional fossil fuels: therefore, one would say that perhaps 50% lower might be more modest as a percentage later on, as the move away from fossil fuels is generated. That is very important, because it is based on waste of fossil fuel origin, such as municipal solid waste. So, in terms of providing a new fuel, this is also solving an old problem, and is therefore very welcome.
- 5:00 pm
- The Explanatory Memorandum gives the example of using rejected plastics from a recycling plant. I imagine that there is a great deal of that. The EM also refers to wastes that “cannot be avoided”. There is an obvious possibility that, if you have an alternative home for your plastics, you might not bother with the more complex business of recycling your plastic to create new plastics, because recycling plastic is a very complex issue and there are all sorts of hurdles to be overcome. So what safeguards do the Government envisage to ensure that recycling plants deal rigorously with plastic, so that as much as possible is recycled and reused, rather than burned in a once and for all process, by creating, for example, sustainable aviation fuel?
- That is the big win with this because, although SAF is imperfect, we cannot allow the situation on aviation to continue. We have to ensure that the perfect does not become the enemy of the good, and SAF means that we can start to deal with the 7% of UK emissions caused by aviation. The Government are committed to a SAF mandate by 2025, requiring 10% of jet fuel to be from SAF by 2030. The alternatives to SAF, hydrogen and electricity, are on a much slower trajectory, so in the short term SAF is the only way to go.
- However, the UK is trailing the US and many European countries where Governments have introduced incentives to support the sustainable aviation fuel industry. In his introduction, the Minister referred to government grants and various forms of support. I would be grateful if he could provide us with more detail, so that we can judge whether the Government have gone anything like far enough to ensure that the UK becomes a world leader in sustainable aviation fuel.
- I have a supplementary question to that. Do we have any plants manufacturing in this way at the moment and, if so, how many?
- Finally, on a very much more detailed note, as a member of the Secondary Legislation Scrutiny Committee, which was referred to extensively in the previous item of business, I look with interest at impact assessments. I was disappointed to see, in paragraphs 12.3 and 12.4 of the Explanatory Memorandum, that there has been no impact assessment, because it is judged that there will be
- “no significant … impact on the public sector”.
- That seems to me a major misjudgment. This is being treated as a cost-benefit analysis item for the Treasury, but it has huge implications. By giving this permission, there is the possibility of dealing with a large part of municipal waste problems, and that, surely, is of significance to the public sector. So I think the Government have not looked broadly enough at the impact and potential of this statutory instrument.
- My Lords, I thank the Minister for his presentation of this statutory instrument. It is not an instrument that I have got on with very well. I decided to try to understand it, and that has absorbed a great deal of my time. As I tried to understand it, my old history teacher’s test came to mind: “You don’t understand it until you can explain it in your own words”. So I shall explain what I think it means, in my own words, and see whether the Minister agrees.At one level, this is an elaborate and benign waste-management exercise. Let us look at the two comparisons here. A renewable transport fuel comes from taking CO2 out of the atmosphere and turning it into fuel using those wonderful devices called “plants”. We then turn the energy captured in those plants into fuel and burn it in vehicle engines and so forth, which releases the energy and the CO2 back into the atmosphere. The impact of the CO2 is neutral: in other words, the plants’ photosynthesis activity captures energy, essentially from the sun, and that energy is turned into fuel and then released.A recycled carbon fuel takes carbon from beneath the earth, in the form of oil or carbon or whatever, and in this case turns it into something useful such as plastic, which then becomes waste. It is then, in this process, turned into fuel. That means, essentially, that it is burned. Energy is released and the CO2 is released into the atmosphere. The impact of CO2 is adverse, in the sense that carbon is taken from its fossil source and put into the atmosphere, which is a bad thing.It is only if the feedstocks are not burned wastefully, through incineration or whatever, that there is a net benign effect: only if very strict controls are applied to the feedstock to make sure that it is inevitable that the feedstock is turned into free CO2, left to incineration et cetera—or it goes into landfill, which once again is an adverse outcome. Therefore, properly controlled, this policy is benign and has our support. So the Minister can stop his concerns; we are not going to try to vote this down, first because it is benign and, secondly, because we do not want a constitutional crisis.
- My Lords, I thank all noble Lords for their consideration of this order. I will now attempt to respond to the specific points that they made.Let me start by saying that the RTFO includes a range of strict eligibility criteria to ensure that all fuels supplied are sustainable and provide a minimum level of greenhouse gas savings. Although RCFs are a fossil fuel, and therefore emit fossil carbon when combusted, their carbon savings are determined by comparison to the counterfactual end-of-life fate of the waste feedstock. For instance, black binbag waste uses an assumption that the waste would otherwise be incinerated in an energy-from-waste plant and calculates the benefit seen by diverting that waste into fuel production. This still needs to provide an emissions saving of 50% compared to simply using fossil diesel.Different counterfactuals can be considered, depending on the specific waste feedstock. This ensures that the use of these fuels delivers effective greenhouse gas savings. Converting residual non-recyclable waste plastic into recycled carbon fuels can encourage a more effective use of our waste, as it can achieve greater energy recovery than disposing of the waste via conventional means.Any recycled fuel produced from plastics will have to meet the same fuel standards as all other fuels to gain support from the RTFO. We are aware that pyrolysis oil, which is an initial stage of chemical waste recycling, can be used as a fuel for some applications and can have negative air quality issues associated with its use. However, such fuel would not be eligible under the RTFO order proposed here, as it does not meet the relevant fuel standards outlined in the order. Pyrolysis oil created during RCF production would need to be further refined into a diesel fuel that complies with existing fuel standards to receive RTFO support. We are not aware of any evidence to suggest that this would alter the air quality performance of the final fuel compared to regular diesel.
- 5:15 pm
- The noble Baroness, Lady Randerson, talked about emissions savings. They are calculated based on a counterfactual methodology which takes into account production emissions and compares them with alternative end-of-life fates. Full guidance on this has been published. The RTFO unit, which administers the scheme, conducts detailed waste assessments to ensure that the waste hierarchy is respected. Additionally, the technology development of RCFs will support the development of the advanced chemical recycling processes needed for hard-to-recycle plastics.
- The mandate for sustainable aviation fuel is on track to start on 1 January 2025. It will include support for RCF-derived aviation fuel. The Government’s response to the second consultation will set out the final design of the SAF mandate and will be published in the spring of this year.