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Renewable Transport Fuel Obligation

Volume 464: debated on Tuesday 9 October 2007

I have today laid in the House the draft Renewable Transport Fuel Obligations Order 2007, together with its associated impact assessment and explanatory memorandum. Subject to the approval of both Houses, this order is due to give effect to the Government's renewable transport fuel obligation (RTFO) and to establish the Office of the Renewable Fuels Agency (RFA).

The RTFO is due to lead to a significant reduction in emissions of greenhouse gases from the transport sector by increasing the use of biofuels. The Government have sought stakeholders' views on the detailed design of the RTFO in two separate consultation exercises during the course of 2007, and has made a number of changes to the order and impact assessment to take account of the comments received.

The impact assessment which I am publishing today explains that the Government have revised downwards their estimate of the carbon savings that the RTFO is likely to deliver, and have revised upwards their estimate of the total costs of the policy. The total net carbon savings associated with the RTFO are now estimated at around 2.6 to 3 million tonnes of carbon dioxide (700,000 to 800,000 tonnes of carbon) per annum in 2010-11, as opposed to earlier forecasts which suggested that they should be in the region of 3.6 million tonnes of carbon dioxide (1 million tonnes of carbon) per annum. These changes have been made to reflect more accurately the marginal impact that biofuels may have on the fuel efficiency of vehicles, an issue that was raised by a number of stakeholders during the consultation process, as well as to reflect other methodological changes. Further details are set out in the impact assessment.

In practice, the environmental benefits that the RTFO is set to deliver will depend on a large number of assumptions, including the total amount of road transport fuel sales in any given year, the market share of different types of biofuel, and the amount of energy used to cultivate, harvest, process and transport the biofuels themselves. The costs of the RTFO will depend to a large extent on the relative difference in price between crude oil and agricultural commodities, which fluctuate widely.

The RTFO will provide the impetus for a long-term market for biofuels in the UK.