My Lords, this instrument makes several important changes to the Renewable Transport Fuel Obligations Order 2007, which established a certificate trading scheme known as the renewable transport fuel obligation, or RTFO. This draft instrument would improve the RTFO scheme, ensuring that renewable fuels continue to play a key role in reducing emissions from road transport and, in the longer term, from transport modes with more limited decarbonisation options, such as aviation and maritime.
While the instrument relies on powers contained within the Energy Act 2004, parts of the 2007 order were previously amended by instruments made under Section 2(2) of the European Communities Act 1972. Accordingly, Schedule 8 to the European Union (Withdrawal) Act 2018 applies. The Secondary Legislation Scrutiny Committee’s report of 25 November acknowledges that the committee has no specific comments on the instrument and notes that during the enhanced scrutiny process, and in response to industry comments, the instrument has been somewhat amended and improved. The instrument was also considered by the Joint Committee on Statutory Instruments on 17 November, and that committee identified no matters requiring report.
The RTFO scheme, changed by this instrument, promotes a market for renewable fuels used in transport. The scheme places obligations on larger suppliers of fossil fuel to ensure the supply of renewable fuels which reduce carbon emissions. These obligations are calculated as a percentage of the volume of fossil fuel supplied over a calendar year. They are met by acquiring certificates which are issued for the supply of sustainable renewable fuels. The trade of these certificates provides a revenue stream for suppliers of renewable fuels.
This instrument delivers several commitments made in our transport decarbonisation plan to upgrade the RTFO. It increases the main RTFO obligation level from 9.6% to 14.6% by 2032, continuing at that level in subsequent years, with 1.5% of this RTFO target increase being made in 2022, to maximise the carbon savings from the introduction of greener E10 petrol this September. The instrument also improves RTFO support for suppliers of renewable hydrogen by extending certificate eligibility to renewable hydrogen used in maritime vessels, and in fuel cell-powered rail and non-road vehicles. As targets for the supply of renewable vehicles increase and new end uses are included in the RTFO, the instrument strengthens the sustainability and greenhouse gas emissions savings criteria that renewable fuels must meet.
In addition, the instrument replaces references to various EU enactments with equivalent criteria. It replaces these references through changes made to the 2007 order itself, and by using technical guidance issued by the administrator. Technical guidance on sustainability reporting covers the values, formulas, and methodologies used to calculate carbon savings. To reflect changing international standards and evolving fuel production processes, and to ensure no obstacles to trade, the RTFO administrator proactively updates its technical guidance, a draft of which was published alongside this instrument.
Renewable fuels supplied under the RTFO scheme currently deliver about a third of all domestic transport carbon savings under current carbon budgets. They will also make an important contribution to future UK carbon budgets. I commend this instrument to the Committee.