160804 Obstacles to an internal market for biofuels DEF · market does not exist for biofuels....

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Obstaclestoachieveaninternalmarketfortransportationfuelswithbio-components

RobVierhout,MSc

Disclaimer

ThisreporthasbeenproducedfortheEuropeanCommission.Theviewsrepresentedinthereportare those of the author and do not represent the views or official position of the EuropeanCommission.

July,2016

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Takeawaymessages

• TheEUbiofuelsmarket isbadly fragmentedandnothing that approachesa "commonmarket".

• It isnearly impossibleformarketoperatorstoobtainaclearandreliableviewonhowMemberStates(MS)havetransposedandimplementedtheEUlegislationonrenewableenergy.Acomprehensiveoverviewislongoverdue.Greatertransparencyinthisrespectwould help the European Commission to identify potential threats to the commonmarketandtheprincipleoffreemovementofgoods.

• The Commission should bemore forceful in starting infringement cases. Seven yearsaftertheREDhasbeenadoptedtherearestillMSthathavenotcompliedwiththelaw.

• Thepresentsystemofsustainabilitycertificatesissuedisnottransparentenough.Onlyalimited number of Voluntary Schemes (VS) have registers (or database) of certificatesissued. A EU register will minimise the risk of fraud with certificates and will makemonitoringandcontrolofcertificatesmucheasier.

• The various Communications (guidelines) the Commission published to clarify thelegislation did not prevent that MS transposed and implemented the law in quitedifferentways.TheGuidelinesareeithernotclearenoughorstillleavetoomuchroomforinterpretation.

• The highest differentiation can be noted in the way the double counting measure iscompliedwith.

• The rules on mutual recognition of VS are not clear enough and results in marketoperatorshaving toobtain various certificates for the samebatchof fuel. Thismeansadditionalcostsandpotentiallycasesoffraud.

The best way to minimize or avoid national rules that obstruct a common market fortransportationfuelswithbio-componentsistohaveEUlawthatallowsaslittleasroompossiblefor interpretation of the law (harmonization) with the lowest possible level of complexity;implementationrulestobesetatCommunitylevel.

Thevarietyintranspositioninnationallawandimplementationatnationallevelisobstructingatruly common market for trading transportation fuels with bio-components cross border.Considering that advanced biofuels’ role to play in reducing emissions from transport shouldincreasestrongly,acoherentandconsistenttranspositionofDirective2015/1513isvital.

TheCommissionhasnot (yet) issuedanyguidancedocuments forMemberStatesandmarketoperators on how to comply or to transpose in the best possible way Directive 2015/1513.Considering the history of how MS have transposed the previous Directives on renewableenergy it is strongly recommended. If guidance is not provided for we can expect continuedfragmentationofthemarketandfurtherconfusionformarketoperators.

EventhoughEUlegislationisclearonthemaximumlevelofbio-componentthancanbeblendedtherearedifferencesbetweentheMShowmuchbio-componentisallowedorcanbeusedforboth ethanol and bio-diesel. This makes it difficult for fuel suppliers to trade fuel with bio-componentscrossborder.

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TodatetwoMShaveasysteminplacetotradebiofuelsthroughasystemofticketsorcredits(similartotheUSRIN-system).Thebenefitofsuchasystemisthatbiofuelcanbeusedalsoinsectors (such as shipping or aviation) onwhich no obligation rests,whereas the operators inthesesectorscanselltheticketsagainstmarketvaluetoobligatedparties.TheticketingsystemcanalsofostervirtualtradeinbiofuelstoMSthathavelessambitioninpromotingbiofueluse.

ItisunclearhowthenewregimeonVS(Directive2015/1513)willapplytothoseschemesthatstillhavealicensetooperateunderDirective2009/28.Theobjectiveshouldbetohavealevel-playingfieldbetweenallVS,operatingunderidenticalrules.

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TableofContents

Takeawaymessages...............................................................................................................2

1. Introduction......................................................................................................................5

2. Purposeofthestudy.......................................................................................................6

3. Approach............................................................................................................................7

4. Thelegislativeframeworkataglance......................................................................8

5. Transpositionandimplementation.......................................................................10

Transpositionandimplementation:Aratherscatteredimage...........................................................10Voluntaryschemes...................................................................................................................................................15Conclusions.................................................................................................................................................................18

6. Theviewofmarketoperators..................................................................................20

Introduction................................................................................................................................................................20Outcomeofthequestionnaire.............................................................................................................................21Conclusions.................................................................................................................................................................27

7. Keyfindingsandrecommendations.......................................................................29

References........................................................................................................................................................32

Annex1:ImplementationofEUbiofuelpolicyatMemberStatelevel.................................33

Annex2:OverviewVoluntarySchemesonsustainability...........................................................46

Annex3:Questionnaireforstakeholders...........................................................................................47

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1. Introduction

Since2003theEuropeanUnionispursuingapolicytoincreasetheuseofrenewableenergy(RE)in transport with the objectives to diversify energy use in the transport sector, to reducegreenhousegasemissionsinthatsectorandtogiveaboosttoregionaldevelopmentespeciallyinruralandisolatedareas.1

Even though there is in the EuropeanUnion a singlemarket for road fuel and road vehicles2there isaconcern,especiallyamongstsmallandmediumsize fuel suppliers thatsuchasinglemarketdoesnotexistforbiofuels.Thesemarketoperatorsfeelthattheyhavetooperate inafragmentedmarketconfrontedwithmanydifferentrulesinagreatnumberofMemberStates.

Notwithstandingthatthereisalreadyformorethan12yearsEUlegislationonbiofuelsthestageofatrulyinternalmarketonbiofuelsisstillnotachieved.

BesidesthefactthatMemberStateshavearatherdifferentapproachonhowtotransposeandimplement the EU law there is also the frequent changes of legislation at EU level itself thatcontributes to increasedcomplexityanduncertainty.Since2003theEU legislationonbiofuelshas changed twice substantially, not to simplify the lawbut first and foremost to expand thenumber of rules. There is, unfortunately, less energy put in explaining the law and to pursueactionsthatwouldreducethelevelofinconsistencyintransposition.

Thereisgeneralagreementthatbiofuelshavearoletoplayinthedecarbonisationoftransport.Having 28 different sets of implementation rules will make this task very hard to achieve.Considerationhowthiscanbechangedisurgentlyneededespeciallyifmoreadvancedbiofuelsneedtogetintothemarket.ThefindingsofthisreportwillhopefullycontributetobringingtheEUbiofuelmarketclosertoatrulysinglemarket.

1Directive2009/28/EC,whereas1.2CommissionRoadmapontheCommunicationondecarbonisingthetransportsector,7.4.2016,page8

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2. Purposeofthestudy

ThepurposeofthisstudyistomapoutthekindandleveloffragmentationintheEUmarketforfuelswithbio-components(biofuels)andtoproviderecommendationshowthisfragmentationcouldbeaddressed.

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3. Approach

Only limited time was given to prepare this report and therefore only a limited number ofsourcescouldbeconsultedandequallyonlylimitedfieldworkwaspossible.

AsafirststepdeskresearchwascarriedouttocollectdataonhowMemberStates(MS)havetransposed and implemented Directive 2009/28 (RED) and Directive 2009/30 (FQD).3This hasbeendoneunder theassumption that theway theEU law is transposedand implementedatnational level is the single most important explanation why market fragmentation could beoccurring.

Sources used were reports available in the public domain, national policy documents andlegislation,progressreportsbothnationalandEUreports,Eurobserv’ERBiofuelBarometerandstatistics.

Secondly, a questionnaire was compiled and sent to a number of small and medium-sizedmarketoperatorsaswellasbiofuelstakeholderstoobtainanunderstandingwhattheyseeasmarketbarriersandwhatshouldorcouldbedoneaboutit.

Finally, a few non-structured interviews were conducted following the analysis of MSimplementation and feedback on the questionnaire. Some interviews took place face-to-faceothersbyphone.

ThereportfirstprovidesacompressedoverviewoftheEUlegislativeframeworkfollowedbyasummary and analysis how Member States have transposed and implemented the EUlegislation.4Annex IholdsadetailedoverviewhowatMemberState level theEU legislation istransposed and implemented. The next paragraph represents and analyzes the views of thestakeholders.

The report provides for some conclusions and makes a number of recommendations howfragmentationcanbereducedandhopefullypreventedeventually.

3Directive2009/28/EConthepromotionoftheuseofenergyfromrenewablesourcesandamendingandsubsequentlyrepealingDirectives2001/77/ECand200/30/EC.OJL140/16of5.6.2009alsoknownasREDandDirective2009/30/ECamendingDirective98/70/ECasregardsthespecificationofpetroldieselandgas-oilandintroducingamechanismtomonitorandreduceGHGemissionsandamendingCouncilDirective1999/32/ECasregardsthespecificationoffuelusedbyinlandwaterwayvesselsandreplacingDirective93/12/EEC.OJL140/88of5.6.2009(FQD).Directive2015/1513amendedbothREDandFQD,however,thisreportdoesnotexplicitlycoverthetranspositionandimplementationofthisDirective,unlessindicatedotherwise.4ThisreportcouldnotcoverthetranspositionofDirective2015/1513asthisprocessisstillongoing.MShaveuntil27September2017totransposethisDirective.

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4. Thelegislativeframeworkataglance

TheEUbiofuellegislationdatesfrom20035andwassubstantiallyamendedin2009.Sincethenthe Union has two Directives6that have determined the biofuel development and use in theEuropeanUnion.Incomparisontothe2003DirectivetheREDintroducedamandatorytargetofrenewable energy (RE) in transport (10% in energy terms by 2020) as well as a set ofenvironmental sustainability criteria thathave tobemet to supplybiofuels to themarket. Toboostbiofuelsmadefromwastestreams,residuesandligno-cellulosicmaterialthemeasureofdoublecountingwasintroduced.ThelawalsointroducedthelevelofGHGemissionsavingsthathadtoberealized.Tothisendarathercomplexmethodologywaswrittenintothelawthatgivemarketoperators thepossibility tocalculate theactualvalueof theemissionsavingachieved.Market operators (suppliers of road transportation fuel) need to provide evidence that thebiofuelissustainableandtothisendcanuseoneorseveralofthenow19existingsustainabilityverificationschemesoperationalintheEUmarket.

Within the Fuel Quality Directive (FQD) identical sustainability criteria are included as in theRenewableEnergyDirective(RED)beitthatthesavingtobeachievedby2020isexpressedinarelativenumberofCO2tobeachieved:6%comparedto2010levelsoftheentirelifecycleofthefossilfuel.IntheFQDthereisnodoublecountingmechanismlikeintheRED.WhereastheREDputs a mandate upon Member States, the FQD binds the Member States to force marketoperators(fuelsuppliers)tocomplywiththetarget.

In2015aFQD implementationDirectivewasadopted7thatdetermines theemissionvaluesoffossil fuel. TheMember States need to have transposed thisDirective by 21April 2017. TheCommission has not (yet) issued any guidance documents for Member States and marketoperatorshowtocomplywiththisDirective.

The Commission issued a number of guiding documents Communications, Decisions andRegulationshowtoimplement/understandtheDirectives:

• Communication on the practical implementation of the EU biofuels and bioliquidssustainabilityschemeandoncountingrulesforbiofuels.8

• Communication on voluntary schemes and default values in the EU biofuels andbioliquidssustainabilityschemes.9

• CommissionDecisiononcertaintypesofinformationaboutbiofuelsandbioliquidstobesubmittedbyeconomicoperatorstoMemberStates.10

• CommissionDecisiononguidelinesforthecalculationoflandcarbonstocks.11

• CommissionRegulationonhighlybiodiversegrasslands.12

5Directive2003/30/EConthepromotionoftheuseofbiofuelsorotherrenewablefuelsfortransport.OJL123/42of17.5.2003.6Seefootnote2.7CouncilDirective2015/625of20April2015layingdowncalculationmethodsandreportingrequirementstoDirective98/70/ECoftheEPandtheCouncilrelatingtothequalityofpetrolanddieselfuels.OJL107/26of25.4.2015.8OJC160/8of19.6.2010.9OJC160/1of19.6.2010.10OJL9/11of13.1.2011.11OJL151/19of17.6.2010.12OJL351/3of9.12.2014.

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ExternalconsultantsdraftedguidancedocumentsonGHGandlandcarbonstockcalculationaswellasonlandstatus.

Amajor overhaul of the legislation (bothRED and FQD) took place in 2015 as a result of thediscussionaroundpossibleadditionalemissionfromlanduseforgrowingfeedstockforbiofuelproduction.Thenewlegislation13setalimitof7%point(ofthe10%)ontheuseofbiofuelmadefromfood/feedcrops(sugar;starchandvegetableoil)and introducednewmeasurestoboosttheproductionanduseofadvancedbiofuels(AB).Toachievethelatteranindicativemandatorysub-targetof0.5%ABwasset for2020anda listof feedstockwasagreeduponthatcouldbeused formaking those biofuels. Given the limited volume of AB available this biofuelwouldcount double. However, certain waste-based biofuels such as UCO (Used Cooking Oils) andanimal fatsshallcountdoublebutarenotconsideredAB.Furthermoreemissionthresholdstobe achieved were increased, rules on voluntary sustainability schemes tightened and ILUCemissions values agreed to report upon. Renewable electricity is countedmultiple times themultiplierdependingonwhether it isused for road (5x)or rail transport (2.5x). ThisDirectiveneeds to be transposed by theMember States by 10 September 2017 be it thatMS need topresent their plan on how to achieve the 0.5% AB target already by 6 April 2017. TheCommission has not (yet) issued any guidance documents for Member States and marketoperatorshowtocomplywiththisDirective.

13Directive 2015/1513 amending Directive 98/70/EC relating to the quality of petrol and diesel fuels and amending Directive2009/28/EConthepromotionoftheuseofenergyfromrenewablesources.OJL239/1of15.9.2015.

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5. Transpositionandimplementation

Finding an overview how RED/FQD have been transposed and implemented at MS-level isdifficult.AtthewebsiteoftheCommissionthereexistsnosuchoverview.ThenextbestthingistheMSbiofuelreportsbuttheseareverydifferentinthedetailofinformationgiven,thereisnoreportingtemplateusedwhichmakescomparisonverydifficult,andseveralMSdonotreportintimeornotatall.Thereareafewstudies,buttheseoftenlookatonlyalimitednumberofMS,andthereisofcoursetheBiofuelProgressreport.(Commission,2015)Thatisbasicallytheendof the story. Remarkably the best source is to be found outside the EU: theUSGAIN annualreportonbiofuelsintheEU(USDAForeignAgriculturalService’sGlobalAgriculturalInformationNetwork).(GAIN,2015,2016)

In summary there is no single, publicly available, document that shows in a structured waywhere Member States are in terms of transposition and implementation of the EU law onrenewableenergyintransport.

InannexIisgivenanoverviewofwhenandhowtheMStransposed/implementedtheREDandFQD. The information in the table is collected by consulting various reports and, asmuch aspossible,nationallegislation.

ThewayandspeedinwhichMemberStates(MS)transposeandimplementEUlegislationiskeyforachievingasinglemarketatEuropeanlevel.It isnotuncommonthatMStaketheirtimetotranspose legislation, not respecting the deadline agreed by themselves, or transpose the EUlawinsuchawaythateffectivelynewandmoremarketobstaclesarecreatedthanreduced.

TheEuropeanCommission(COM)hasthedutytowatchover(timely)compliance.IfMSfailtodeliveronwhatwasagreedoraretoo‘creative’ inhowtotransposeandimplementtheCOMhas the task to start an infringement procedurewhich can result in case for the EU Court ofJustice (CoJ). Also in on biofuel legislation the first case has been brought to the CoJ14butconsideringthatthisissixyearsafterthelawhasbeenpublisheddemonstrateshowmuchtimeitcantaketogetEUlawappliedcorrectly.

IftheassumptionisthathavingaharmonizedtranspositionandcoherentimplementationofEUlawatnationalleveliscrucialforavoidingafragmentedEuropeanmarketontransportationfuelwith bio-components then the first step is to map out how MS did transpose the relevantDirectives(REDandFQD).Thenextstepisthentoshowwheretheinconsistenciesare.

Transpositionandimplementation:Aratherscatteredimage

Inthetable(AnnexI)anumberof(obvious)topicshavebeenmappedout.Thechoiceoftopicsis based onwhat is expected to be relevant information formarket operators to know. Thefollowingtopicswerechosen:

• Whatistheyearofimplementationandhavetargetsbeensetupto2020?

• Are thereoverall and/or separate targets for the twobiofuels (biodiesel and ethanol)andatwhatlevelaretheseset?

14CommissionrefersPolandtoEUCoJbecauseofrestrictionstosomeimportedbiofuelsandbiofuelrawmaterials.IP-16-1824of26.5.2016.

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• Howhavethetargetsbeenexpressed;involume(V)orenergy(E)?

• Istheannualtargetsetbeenachieved?

• Istherearetaxincentives,yes/no?Andifso,howmuchandforwhatfuel?

• IsthereatargetsetonGHGemissionsaving?

• Is there a double counting measure / rule in place? If yes, what are the kinds offeedstockallowed?Arethereanyotherconsiderations?

• Isthereapenaltyinplacefornon-compliance?

• IsArticle7aoftheFQDtransposed?

Besidesthisinformationcommentswereaddedwhereneeded.Alsoinsomecasesalinkisgiventotherelevantnationallegislation.

Thedatathathavebeencollectedshowthefollowingresults.

Yearofimplementationandtargetsetting

The year of implementation or setting a target or multi-annual targets gives a veryscatteredimage.WecandistinctfourgroupsofMS:

• 9MSsetalreadyatargetin2010.

• Only6MS (CZ, SF,D, IT,NLandES) set targets for theentiredecade (2010-2020);Spainlowereditstargetin2013.

• 15MShavesetafinaltargetfor2020.Threecountries,Italy,FranceandFinlandsetatargetforbeyond2020.

• 5MS(GR,H,LT,LxB,SV)settargetsforonlyafewyearsbutnonefor2010or2020.

• OneMS(Estonia)hassetnottargetsatall;hasstillnolegislationinplace.

Kindoftargets

Alsoas regards the targets there isa rather scattered image.ThemajorityofMS (21 intotal)havesetoverall targets.Allothers (exceptEstonia)haveset (additionally in somecases)separatetargetsforbio-dieselandethanol.Inmostcasethetargetforbiodieselishigherthanforethanol.

OneMS(Finland)hassetatargetof20%(e)by2020whereasDenmarkhassetfor2020atargetofonly5.75%(e).Francehassetatargetofjustover10%for2020.AndtheUKistheleastambitiousbysettingatargetfor2015(!)ofnomorethan4.75%byvolume.

Atotalof18MSexpresstargetsinenergyterms,alltherestinvolume.OneMS(Slovakia)has overall targets expressed in energy and specific targets for biodiesel and ethanolexpressedinvolume.

Germany is the only MS that has introduced an annual to be achieved GHG emissionsavingtargetandnolongerexpressingtheREDtargetinvolumeorenergyterms.

Targetsforadvancedbiofuels

TwoMS(Italy,Francesetintheirlegislationadditionaltargetsonadvancedbiofuels.Italyhassetthefollowingtargets:1.2%by2018and2019,1.6%for2020and2021and2%for

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2022%.Francesetforpetroltargetsof1.6%in2018and3.4%by2023andfordiesel1%in2018 and 2.3% in 2023. In France double counting no longer applies and the followingfeedstock are allowed on top of Annex IX, Part A of Directive 2015/1513:molasses, c-starch,andacidoils.Denmarkhasannouncedthatitwillsetanoverall0.9%ABtargetfor2020.TheNetherlandsministryofenvironmentissubmittingadraftlawonanadvancedbiofueltargettotheParliamentthisyearmostlikelyproposingatargetthatgoesbeyond0.5%.

What’sachieved?

Maybe less relevant for this report, but still interesting to note, is that in general theannual targets aremet (if data available).Most remarkable is Finland that achieved in2014almost25%ofbiofuelinitsfuelpool.ForanumberofMSitwasnotpossibletofinddata (CR,CZ,H, IRL, IT,LXB,MT,PT,RO,SLO,SV).ManyMSdonothaveresultsyet for2015.

Taxincentives

OnlyaveryfewMShavestillataxincentiveinplaceforhighblends.Thetaxrebatediffersfrom30to100%dependingonthefueland,forexample,inFrance,theregion.

GHGemissionsavingandArticle7aFQD

MostoftheMShavesetatargetof6%GHGemissionsavingby2020.Clearly,thistargetisflowingfromArticle7aoftheFQD,butnoMShasyetindicatedhowtotransposetheFQD.

Doublecounting(DC)

This is probably the measure that fragments the market more than any otherimplementationmeasure.

17oftheMSallowdoublecountedbiofuels.Ofthisgroupthereare3MS(A,BandIRL)thatallowDConacase-to-casebasisonlyoneofthose17MS(Spain)hasnoprocedureinplace yet to allowDCbiofuels. Austria has cappedDCbiofuel to 1.5%point (in volumehalf)andFrancehassetceilingsforDCbiodiesel(0.35%point)andethanol(0.25%point).BothPolandandCroatiaareintheprocessofdesigninglegislationforDC.WhenGermanyintroducedtheGHGemissionsavingtargetitabolishedtheDCmeasure.

Thosecountries that ‘actively’allowDCbiofuelshaveallapositive listof feedstockthatcanbeusedformakingaDCbiofuel.However,notwithstandingthatanumberofMShaveidentical lists there are also substantial differencebetween some lists.Moreover, someMSdonotallowcertainfeedstocktobeusedlikeusedcookingoilsand(some)animalfats.

ThishighlydiversewayoftransposingandimplementingtheDCarticleisaclearobstacletoafreeflowoffuelwithbio-components.

ThecontributionofDCbiofuelinachievingthetarget(s)isquiteskewedinEurope.IntheUK54%ofthebiofuelusedisDCbiofuelwhereasinotherMSthecontributionis0%.15

15UKDepartmentforTransport,RenewableTransportFuelObligationstatistics:period8,2015/16,report3,issued5.5.2016.Inthisreportingperiod400millionlitresofbio-dieselwereusedofwhich320millionwasUCO.RFTO(2016).

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Penaltyincaseofnon-compliance

24MShaveasystemoffiscalpenaltyinplaceincaseofnon-compliance.TheNLconsidersnon-compliance a misdemeanor liable for prosecution. The UK works with a buy-outoption.

From this overview it becomes clear that the RED (and the sustainability articles of the FQD)havebeentransposedatMS-levelinanotsoharmoniousway.

EventhoughtheCOMissuedanumberofguidancedocuments(seepage7)itdidnotdelivertheintended result of a truly harmonized transposition. The reasons for this couldbe various. Tonameafew:

• EvenwiththehelpoftheCommunicationsthelawremainscomplex;

• TheCommunicationsarenotalwaysexplicitorclearenough;

• MShaveadifferentpoliticalagendathantowhattheyhavesignedupto.

IntheCommunicationonthepracticalimplementationofthebiofuelsustainabilityschemeitiswritten in the section harmonization of sustainability criteria that these “…. criteria are fullyharmonisedatCommunity levelandwereadoptedunderArticle95(internalmarket)oftheECTreaty.Therefore,MemberStatesmaynotsetadditionalcriteriaoftheirown….“and“…maynot for those purposes exclude biofuels/bioliquids on other sustainability grounds than thesustainability criteria laid down in the Directive.” 16 Unfortunately this logic has not beenextended to the Article that regulates the double counting, the area where the strongestfragmentationexists.OnecouldhaveexpectedandhopedthattheCOMwouldhavebeenmoreforcefulinexpressingasimilarviewonthemeasureofdoublecounting.Withhindsightthelawshould have included a list of allowed feedstock, which has been (partly) corrected withDirective 2015/1513, instead of leaving the choice of feedstock open for interpretation. ButevenwiththenewlawinplaceitremainstobeseeniftheproblemissolvedasthelawleavesroomforMStoallowfeedstocktobeusedthatisallowedunderthe‘old’RED.

Thereareafewotherdevelopmentsthatarereasonforconcern.

Firstofall,MSare (sometimesvery) slow in transposingand implementing theEU law. In therecent Court of Auditors report on the EU system for the certification of sustainable biofuels(CoA,2016)itisstated,that:“AllMSwererequiredtotransposetheREDintonationallegislationbyDecember5,2010.”Following thisdeadline, theEUhashandledwarningand infringementcases with six MS. Cases for failure to transpose the Directive against Cyprus, Ireland, andPoland were all dropped. In 2015, the EU asked Spain and Poland to correctly apply theprovisionsoftheDirective,statingthatbothcountrieshadincorrectlytransposedit.Specifically,both Spain and Poland suspended the sustainability targets in regards to the 10 percentrenewable sourcing requirements for transport fuel. Should Spain andPoland fail to correctlyapplytheDirective,theEUcouldpotentiallyseekactionwiththeEUCourtofJustice.AsofApril2016, the EU had issued an “Urge to Comply”message to Portugal in reference to the RED.Portugal currently favors domestically produced biofuels in addition to imposing strictersustainability standards for selectbiofuels—anactionviolating theDirective. InMay2016 theCommission referredPoland to theCourt of Justice becauseof restrictions to some importedbiofuelsandbiofuelrawmaterial(Commission,2016b).OneMS,Estonia,hasstillnolegislationonbiofuels,whichismindboggling7yearsaftertheREDwasadopted.

16Communication2010C160/02,page10.

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Secondly, Member States have a tendency to adopt, in some case, very complicated anddetailed implementation rules that are not always easy and self-explanatory especially if amarketoperatorisbasedinadifferentMS.

Thirdly, some MS keep changing the rules every year, like the UK and NL. It is almost likechangingthegoalpostsduringamatch.Itmakeslonger-termandstrategicplanningformarketoperators difficult, evenmore so if theMS are late in fixing the targets for the running year(whichisthecaseinanumberofMS).

The decision of Germany tomove away from a volumetric target to a GHG emission savingstargethashadamajor impact in themarket.Firstand foremostactualemissionsavingswereverymuchhigherthantheEUlawrequires;onaverage60%andinsomecasesevenover100%savingmaking it veryunpredictablehowbig theGermanmarketwill be in volumeeveryyearagain(thehigherthesavinginemissionthelowerthevolumeneeded).Secondly,amarketpricedistortionmaydevelop,likehappenedwithDCmaterial,becauseanidenticalbiofuelmayhaveadifferentpricedependingonthemarketwhereitissoldwhichmakeadministrativetransfersofbiofuelsasgoodasimpossible.

Bio-tickets

TwoMS (UKandNL)have introducedapaper-basedsystemtocomplywiththe targets set, which makes it possible to trade biofuels between marketoperatorsonpaperaslongasthereisunderlyingphysicalproductused.

TheDutchlawdetermineswhichoperatorsareobligedtocomplywiththeREtarget. For every 1 GJ of RE in transport a so-called HBE (HernieuwbareBrandstofEenheden–RenewableFuelUnits)orbio-tickets iscreated.TheseHBEareplaced ina registerand thosecompanies thathaveanentry in theregistercantradethesebio-tickets.WiththebioticketstheobligatedpartiescanredeemtheirRE-obligation.Abiofuelproducercanalsosellitsbiofueltonon-obligated parties such as aviation and shipping. These two sectors canthensellthebio-ticketsthatgowiththebiofueltoobligatedparties.TheUKhasa similar system (RTFCs -RenewableTransportFuelCertificates)and sodoestheUSwiththeirRIN(Renewable IdentificationNumber)system. (EPA,2016)

This paper-system has the advantage over the mandatory physical use ofbiofuels that itwouldallowaneasyopt-out for thoseMSthatprefer touselessbiofuelontheir territorybutstillcancontributetoachievingtargetssetatEUlevel.AccordingtoCEDelftthebio-ticketsystemalsolowerstheriskoffraud (double use of PoS – Proof of Sustainability) and reduces theadministrativecostsformarketoperators(CEDelft,2015).

InarecentstudyfromCEDelftonthecurrentimplementationoftheRED/FQDresearchersalsotried to provide an overview of MS positions, intentions and plans to implement Directive2015/1513andtheFQDtarget(CEDelft,2015).

OneoftheconclusionsoftheresearchersisthattheyanticipatesignificantdifferencesbetweenMember States regarding national implementation choices, which may further decrease thelevel of harmonisation. Furthermore, there is the impression thatMember States are finding

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implementationofDirective2015/652challenging (theDirectivethat implementsArticle7aofthe FQD). According to CE Delft “MS are still awaiting the guidelines of the EC for furtherclarification. A comparison is often made with the verification systems in place for thesustainability of biofuels. Because therewill be no overall EU verification system, the level ofharmonizationwill be under pressure.” Another observationmade by CE Delft is that severalMemberStatesthinkthatthesub-targetonadvancedbiofueldoesnotoffersufficientflexibility,whileothersareconcernedaboutthesustainabilityofsomeofthefeedstocksonthelist.Ifthisindeed iscorrect it ishighly likelythatthefragmentationforthemarketonadvancedbiofuelswill continue to exist, which would be very unfortunate considering that the Community isbankingsomuchonmoreadvancedbiofuelsinthemarket,especiallypost2020.

Voluntaryschemes

Biofuelsreceivingpublicsupportorusedforachievingnationaltargetsneedtocomplywiththesustainabilitycriteria(Articles17,18and19oftheRED).Todemonstratecompliancecompaniescanmakeuseofvoluntaryschemes(VS)providedsuchaschemehasreceivedrecognitionfromthe EU.17A scheme receives a license to operate for no more than 5 years, which can berenewed.Atpresentthereare19VSrecognized.Annex2providesanoverviewofthevariousschemes.

Someschemesareverypopularsomeareusedhardlyandsomenotatall.Themostandbest-known scheme is ISCC (International Sustainability and Carbon Certification) that has issuedsince it became operation more than 10,000 certificates in 100 countries whereas RSB hasissued amodest 17 certificates and certificates fromGAFTA Trade Assurance Scheme, TASCC(Trade Assurance Scheme for Combinable Crops) or Ensus Voluntary Scheme under RED forEnsusBioethanolProductionhaveneverbeenseeninthemarket.18

Fuel suppliers can only claim the use of biofuel if the biofuel batch is accompanied by acertificatethatstatestheProofofSustainability. Ideallythefuelsupplierwouldneedonlyonecertificateforeachbatch,however,accordingtosomeeconomicoperatorsinsomecasesmorePoScertificatesareneeded.

Newregimebringsuncertainty

TherulesonVSwerechangedbytheadoptionofDirective2015/1513(Article2(b)-((d)).Themain reason forchanging towardsastricter reportingsystemwas triggeredbyconcernsofcertainMS(France,GermanyandPoland)onrumoursonfraudwithwaste-basedbiofuels.19

From2016onwardsVSarethusputunderamorestrictregimeandwillhavetoreportonanannual basis providing information on a range of issues such as independence, auditing,transparency, governance, stakeholder involvement, robustness of the scheme, itsmarket.The Commission can introduce rules on independent auditing if the reporting by the VSjustifiesthis.

The first 6 approved schemes (ISCC, Bonsucro EU, RTRS EU RED, RSB EU RED, 2BSvs andRBSA)areupforrenewalthisyear.Thoseschemesthatwillaskforrenewaloftheirpermit

17Formoreinformationonvoluntaryschemessee:https://ec.europa.eu/energy/en/topics/renewable-energy/biofuels/voluntary-schemes18ThisnumberistakenfromthelatestRSBannualreport,http://rsb.org/news-and-publications/rsb-newsletters/19Thesewereconcernsaboutthepossibilitythatvirginvegetableoilcouldbeeasilychangedintoausedcookingoilordoubleuseoftheseusedcookingoils.

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will have to do this under the new regime whereas those schemes that not yet need torenew their permit can continueunder theoldRED rules. Thiswould undermine the levelplayingfieldbetweentheVS.

How VS need tomove forward is rather uncertain at this stage. It is for example unclearwhenthenewandamendedrequirements,e.g.regardingGHGemissioncalculation,mustbeimplemented by all VS especially by those schemes, that are currently not due for re-recognition.Additionally,fromletterssenttotheVSbytheCommission,itisnotclearifitisobligatoryforVStoimplementthecontentandbywhen.Furthermore,thelegalframeworkin the individualEUMemberStatesneeds tobeamended (transposition intonational law)whichisnotnecessarilydoneatthesametimeinallEUMemberStates.UntiltheamendedEU legislation is transposed into national law, the national law of EUMember StatesmayrequireVStocomplywiththeoldrequirements.

This lack of synchronization and transparency may lead to further fragmentation of themarket. Recognized VS will comply with different versions of the EU biofuel legislation.Economic operatorsmay switch to those schemes,which have not (yet) implemented theadjustedand/orstricterrequirements.Furthermore,thereisahighuncertaintyforeconomicoperatorswhichVSmeettherelevantrequirements.

Besidesthis legaluncertaintyfollowingthenewregimethereareotherproblemsVSarefacedwiththatwillimpactthewaymarketoperatorscancomplywiththelaw.20

Additionaladministrativerequirements

SomeMSintroducedadditionaladministrativerequirements.TheclearestexampleisPoland:EUrecognizedVSactiveonPolishterritoryarerequiredbynationallawtoregisterwiththePolishauthorities.Otherwise,certifiedmaterialfromPolishterritorymaynotbeacceptedforthePolishbiofuelquotaevenifthematerialwascertifiedassustainableunderarecognizedVS.PreconditionsforregistrationwiththePolishauthoritiesinclude,interalia,settingupanofficeoftheVSinPoland,officialtranslationsofallschemedocumentsintoPolishlanguageresultinginsubstantialhighercostsforVSandhencethosethatneedtocertified.

Wasteandresidues

Another major problem for VS is the fact that within the EU there is no harmonizedclassification of materials that are accepted as waste or residues eligible for biofuelproduction.Instead,thewasteandresidueclassificationandtheeligibilitytocounttowardsthe national biofuel quota depend on each individual EU Member State where the finalbiofuelisbroughttothemarket.Theclassificationinfluencesthecertificationprocess(land-relatedsustainabilitycriteriamandatoryornot)andtheGHGemissionvaluealreadyatthebeginning of the supply chain. However, economic operators are not necessarily in thepositiontoidentifytheEUMemberStatewherethefinalbiofuelwillcometothemarket.Ifeconomic operators sell a material certified as waste or residue, this material may beaccepted in oneMS, accepting thematerial aswaste/residue, butmaynot be accepted inanotherMSduetoaclassificationas(co-)product.

Furthermore,theverificationrequirementsspecifiedbytheCommissionarenotnecessarilyimplemented and controlled equivalently by all VS. Not all schemes apply a reliableprocedure on how to distinguish between products, waste and residues. Therefore,

20TheinformationonVSwasobtainedthroughface-to-faceinterviewswithmanagersofsomeVS.TheCommissionlettersmentionedareNOTinthepublicdomain.

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economic operators with the intention to receive incentives, e.g. double-counting, maychoose the schemewith the less strict verification requirements. This increases the risk offraudulentlydeclaringactual(co-)productsaswasteorresidue.

Co-processing

EUMemberStateshavenon-harmonizednationallegislationregardingco-processedbiofuel(biofuelthatisprocessedtogetherwithfossilfuel).Forexample,co-processedbiofuelisnoteligible for the biofuel quota in Germany but it is in Spain. Other Member States haveimplemented specific requirements that must be met. However, recognition of the co-processing approach does notmean that co-processed biofuel complies with the nationalrequirements.ThereisnoguidanceorspecificrequirementsfromtheCommissionavailablehowVSmustimplementandcertifyco-processinginthecontextoftheEUbiofuellegislation.This can lead to significant competitive imbalancesbetween theVSaseconomicoperatorsmayfavourthoseschemeswith“flexible”or“lessstrict”approach.

Cross-borderTradeofBio-methaneasaTransportFuelviatheGasGrid

Not all EU Member States allow for bio-methane extracted from the grid to be countedtowards their national biofuel quota if the bio-methane was fed into the grid in anothercountry.BeforetheEUCourtofJusticeacaseispendingonthisproblem.21

Company-ownedVoluntarySchemes

Compared to the ‘generic’ VS there is a lack of transparency of company-owned VS. Forexample several of these company schemeshavenowebsite and if there is awebsite theinformationprovided is scarce.TheseVSpublishnocertificatesorotherbasic information.The Commission has communicated requirements on transparency in a letter to the VS.However, as of yet not all schemes have implemented these letters accordingly. The newDirective2015/1513shouldaddressthesegovernanceissues.

NewRequirementsforActualGHGEmissions

TheCommissionhas specified in a letter to theVSnewGHG requirements for individuallycalculated emissions. The new requirements adjust the process on how to forward andreportsuchGHGemissiondata.Accordingtothenewprocedure,economicoperatorsmustreport specific element of the GHG calculation methodology separately throughout theentire(global)supplychain.Thissignificantly increasesthecomplexityofdatahandlingandthus the administrative burden for all economic operators. There is, however, little to noadditionalbenefit to thenewprocess.Furthermore, it isnotclear if thenewrequirementsapplyonamandatorybasis toall recognizedVSandnationalschemesat thesametime. Iftheydonotapplytoallschemesequallyandatthesametime,economicoperatorsmaynotbeinthepositiontoacceptindividuallycalculatedGHGvaluesfromtheirsupplierscertifiedunderanotherVS.

ObligatoryRecognitionofNationalCertificationSchemes

VS are obligated by the European Commission to accept national schemes that arerecognizedbytheCommission.Thismeans,thatmaterialfromsuchnationalschemesmustbeacceptedassustainableaccordingtotheRED.However,thereisnodetailedinformationabout the requirements thatnational schemesmust complywithavailable. Thisprocedure

21CoJ,C-549/15

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jeopardises the strict requirements applicable toVS. Furthermore, it jeopardises theeffortundertaken by such VS that apply higher standards and additional requirements than themerelegalobligations.

MutualRecognitionofVS

It is currentlynotensured thatallVSareobligated toapply the same requirementsat thesametime.IfsomeVSalreadyapplythenewandadjustedEUbiofuelsregulations,whereasothers still operate under the old requirements, a mutual recognition between VS is notpossible. This means, economic operators cannot necessarily rely on all recognized VSequivalently. Economic operators need to assess the scope for which a VS is actuallyrecognized.Furthermore,economicoperatorsmustinvestigatewhichVSaccepteachother.For example, it must be ensured, that the same GHG emission calculation rules andrequirementstoforwardinformationthroughthesupplychainapplytoallVS.

AlevelplayingfieldiscrucialforthemutualrecognitionofmultipleVS.Alevelplayingfieldmeansharmonizedandobligatoryrequirementswithabinding implementationdate forallVS. Without a level playing field, mutual recognition between recognized VS will becomeimpossibleleadingtofurthermarketdistortionandfragmentation.

Conclusions

ThemainconclusiontobedrawnfromtheoverviewhowMShavetransposedandimplementedtheREDisthatthisisdoneinafarfromharmonizedway.

Furthermore,MemberStateswereslowintransposingthelaw,whichaddstocreatingmarketobstaclesanduncertaintyformarketoperators.TheCommissioncouldandshouldbemorepro-activeincorrectingthedelayintransposition.

The combination of a fairly high level of freedom forMS to transpose the legislation as theydeem fit combined with a fairly limited number of explanatory notes / guidelines /CommunicationsfromtheCommissionhasallowedthistohappen.

Some MS have added to the already as fairly complex perceived legislation a complex anddetailedsetofnationalrulesandregulationsmakingitevenmoredifficulttoachieveacommonmarket.

Most confusing is theway thedouble countingprovisionhasbeen transposed. There is greatvarietyinallowedfeedstockwhichhampersafreeflowoffuelsblendedwithadvancedbiofuels.

The immediate consequence is that it is impossibleunder these circumstances tohavea fullyfree flowof fuelwithbio-components. In thecaseofbio-methane there isno freecirculationpossibleatall(seenextsection).

ThesystemofvoluntaryschemesonsustainabilitycertificationisoneofthegreatachievementsoftheEUlawontheuseofbiofuels.22Nowhereelseintheworldsuchasystemexists.ItwasnotthepurposeofthisreporttoanalysetheVS,butthereareclearindicationsthatthesystemhasworkedwell (forexample:neverhavebeenidentifiedcasesoffraud).Still, thesystemofVS is22TheCourtofAuditorspublishedareportontheEUsystemforthecertificationofsustainablebiofuels,(CoA,2016).Besidesthesomewhatstrangetitle(thesystemisdesignedtocertifythatbiofuelsareprovensustainable;nottocertifysustainablebiofuels)thereportisjudgingandcriticizingthesystemondisputablegrounds.ManyoftheflaggedconcernshavebeenaddressedinDirective2015/1513andhencethereportmissesrelevance.Moreover,thereisnowordofappreciationoftheconceptofVS,whichisamissedopportunity.

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notworkingperfecteither.Firstofallitisquestionableifthereisaneedforsomanyschemes.There is nothing wrong about competition but considering that most schemes are not usedquestionstheneedforsomany.Butmoreimportantlythoseschemesthatareusedshouldallcover the same sustainability criteria, perform in the same rigourous way so that mutualrecognitionbecomespossibleandMScannotquestionaparticularschemeorcreateadditionalcriteria forVStooperate.Thepresentsystemalsodrivesupbureaucracyandcosts for theVSand the fuel suppliers.Thechangeover toanewregimeunder thenewDirective (2015/1513)risks creating twodifferent leaguesofVS: those thatoperateunder thenewrulesandothersstillundertheoldsetofrules.Fromaninternalmarketpointofviewthisisdifficulttojustify.

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6. Theviewofmarketoperators

Introduction

FuelsuppliersaretheeconomicoperatorsthatneedtosupplythemotorfuelblendedwithbiocomponentstothemarketinaccordancewiththeEuropeanandnationalrequirements.TheseoperatorsareavitalpartofthebiofuelchainandmostlikelytheeconomicoperatorsknowbestifandhowfragmentedtheEUmarketis.

Inthecaseofconventional fuels likepetrolanddieselthere isatrulysingleEUmarket.Thosefuels can be traded freely throughout the European Union, provided petrol complies withstandardEN228anddieselwithstandardEN590.Furthermorethefuelneedstocomplywithenvironmental standards as stipulated in Directive 98/70/EC (the so-called Fuel QualityDirective). If theseconditionsarefulfilledthere isnoobstacle inshippingthemotorfuelcrossborder.

This common market is, however, not that obvious for motor fuels that are a blend ofpetrol/ethanol and diesel/bio-diesel. Even though there are standards for both ethanol (EN15376)andbiodiesel(EN14214)itisnotsufficienttoallowafreetradeinpetrol/dieselblendedwith bio components. There are a few reasons why cross border trade of fuels with biocomponentsisproblematic.

The first reason is that Member States, as was shown in the previous section, set differentblendingrates,varyingalsoyear-to-year.AfuelsuppliercanthereforenotautomaticallyshipablendfromMSAtoMSBiftheblendingmandatesaredifferent.Thesupplierneedstodealwithdifferentnational‘specifications’notneededinthecaseofabiofuel-freefuel.

ThesecondreasonisthattheFuelQualityDirectiveintroducedupperlimitsinthevolumeofbiocomponent that can be blended: for ethanol 10%by volume and for biodiesel (FAME) 7%byvolume, whereas some countries allow E10 (France, Germany, Finland, Netherlands, andBelgium form1/1/2017onwards) othersnot and (only) Franceallowsmore than7%FAME inbio-diesel.

A third obstacle is that in certainMS adding ETBE23to petrol is allowed provided the rule onoxygen content (set in the FQD at maximum 3.7% m/m) is respected whereas in other MSaddingETBEisnotcommonorevennotallowed(Denmark).Forbiodieselthereistheissueofadding insteadof FAME-basedbiodieselHVO,24which isnot limitedby the7%v/v ceilingandcanbeblendeduptoalevelof30%,butnotallowedinallMSduetosustainabilityissues.

A fourth complicating factor is the different national rules on advanced biofuels, which inextremiscouldmeanthatabiofuelconsideredadvancedinonecountryisnotinanother.

Afinalcausethatismakingtradedifficultisthesustainabilitycertificationofthebiocomponent.As already outlined in the previous chapter the voluntary schemes are not identical, do notcertify always the same sustainability criteria, are sometimes inconsistent and mutual

23ETBE,Ethyltert-butylether.scommonlyusedasanoxygenategasolineadditiveintheproductionofgasolinefromcrudeoil. ETBEoffersequalorgreaterairqualitybenefits thanethanol,whilebeing technicallyand logistically lesschallenging.24HVO,HydrotreatedVegetableOil.Itisregardeda‘drop-in’fuelor‘fit-for-purpose’fuel.

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recognition is not guaranteed. It could result in the fact that a fuel supplier needs to havemultipleproofsofsustainabilitybeforetheblendcanbebroughttothemarket.

Not that any of these factors make trade impossible but they make trade very much morecomplicatedandintoafarmorebureaucratichasslethanfuelswithoutbiocomponents.

However, forbio-methanecross-border trade isnotpossible.Even though thebio-methane isbrought to the quality level of natural gas, the biogas cannot be injected into the pipeline tobringittoanotherEUMemberStates.Wherebio-dieselorethanolcanbeputinabarge,train,ortrucktotransportitfromoneMStoanotherthiscannothappenwithbiogasorbio-methane.Forbiogas/bio-methane there isnoEUcommonmarketatallwhile there ishugepotential inusingagriculturalwastestreamsinCentralandEasternEuropetoproducebio-methane.

Tounderstandbetterwhatfuelsuppliersconceiveorexperienceasproblematictooperateinafuelmarket that requiresbiocomponentsa shortquestionnairewas sent tomainly smallandmedium-sizedfuelsuppliers.TheassumptionisthattheoilmajorscanoperateinamuchmoreflexiblewaygiventheirsizeandtheirpresenceinmanyMS.

ThroughUPEI(Europe’sorganizationrepresentingtheinterestsofindependentfuelsuppliers)9openquestionsweresenttoitsmembership.

Outcomeofthequestionnaire

Followingisasummaryoftheanswersprovidedbythemarketoperators.

Question1

Thefirstquestionaskedtherespondenttolistthe5mostpressingissues,andthisinorderofpriority,thatcausefragmentationoftheEUbiofuelsmarket.Besidesindicatingtheproblemrespondentswereaskedinwhatwaytradeinbiofuelsishampered;iftheproblemhadtodowiththewaytheEUbiofuellegislationhasbeentransposedbyMS;inwhatMStheidentifiedproblem(s)occur(s);andfinallyifguidancefromtheEU(Commission)wouldbehelpful/needinsolvingtheproblem.

Alargenumberofissueswereidentified.Thoseidentifiedhavebeengroupedintothe5mostpressingissues.

1.InconsistenttranspositionoftheEUlegislation

TheinconsistenttranspositionbytheMSisseenasthemostimportantreasonforcausingafragmented market. This applies especially to the rules on double counting, (additional)sustainabilitycriteriaandwaystomeasurethebio-contentinfuel(volume,energyorMJ).

EspeciallythedoublecountingprovisionintheRED(Article21§2)isseenasallowingaleveloffreedomtotheMSthatcausesfragmentationinthemarket.FirstofallbecausenotallMSallowdouble counting and secondlybecause those countries that havedouble counting inplacehavedifferentruleson(howmuch) feedstockallowed.Thisdifferent transpositionofthe DC-mechanism results in biofuels having different value and this impacts commercialpossibilities.

TheDirectiveallowsMStosetdifferentinterpretationofsustainabilitycriteriaandmoreoverthecontrolofit.SomeMSaddconditionsandcriteria,whichsometimesmakeitimpossible

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for biofuels producers or importers tomeet the demands of theMS and thus limiting thecommercialpossibilities.

PLhasnostringentsystemtotracktheuseofPoS,additionallythe lawallowsfulfilmentofquotathroughexporttoothercountries.

There are different regulations how to fulfil the biofuels obligation. For example in someMemberStatesexista systemwhereby thebiofuelquantitiesofpurchasearedecisiveandnotthemarketedquantitiescreatingthepossibilitytotradethebiofuelsagainafterpurchaseunless there is awater-tight systemof registration. This creates conditionsofunequal andunfaircompetition.

2.RestrictivepoliciesofsomeMemberStates

Closely linkedtothepreviousproblem is the fact thatsomeMShave introducedmeasuresthatareequaltoaprotectionistmeasure,eithertoprotectnationalbiofuelproducersorfuelsuppliers.

ForexampleSpainisrestrictiveinallowingimportsofpetrol,FAMEandHVOandinEstoniaallbiofuelshavetobepre-blendedeitherintherefineryorin-tankinexcisewarehouse.Thebiocontenthastobeindicatedinthequalitycertificatethatshallbeissuedbeforereleasingfuelstotheinternalmarket.Inthiswayitisimpossibletobringdifferentbiofuelsblendsintothemarketbecauseeachgradehastobestoredintheterminalinseparatetanks.

ExplicitlymentionedarePoland,Spain,FranceandAustriahavingrestrictiverulesinplace.

3.Administrativeburden

Thetwoproblemsmentionedearliercauseadditionaladministrativeburden.MSdemandalotof–sometimescommerciallysensitive–informationandlargedossiers,whichalsotakealong time tobeevaluated,before theyacceptabiofuel fromanotherMS.Thismeans thatsomeproducersdon’teventrytoenterthemarketofsomeMS.Besidestheinformationthatneeds to be provided there is extra burden due to requiring knowledge of the respective(national)legislationandregulations.Especiallyatregulatoryleveltherecanbeahighdegreeofdetail.Inthisrespectmentionedare:NL,BE,LUX,GER,FR,AU.

Some respondents suggest to introducea systemofbio tickets (whatexistsnow in theNLandtheUK)atEUlevel,whichwouldmakeitmucheasier(lessbureaucracy)tocomplywiththetargets.EquallyaEU-widesystemofregistrationofProofofSustainabilitycertificates,asystem based on the German Nabisy25model, would make trade easier and lower thepossibilityoffraud.

4.Fuelstandards

The fuel standards EN 590 and EN 228 limit the use of biofuels,whichmake it difficult toachievethe10%REtarget.Thesestandardsshouldallowforhigherlevelofbiofuels.

5.Policyuncertaintyalsopost2020

ManyMSarelateinsettingnationalmandatesupto2020,whichcreatesuncertaintyforfuelsuppliers in making medium-term planning. It is argued that the EU should not just settargetsbutalsoagreeonaroadmaptomakethemarketdevelopmentmorepredictable.

25https://nabisy.ble.de/nabima-web/app/start

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Question2:Respondentswereaskedtoindicatewhatcausedtheproblemtheyhadidentified.

AsregardstheinconsistentandsometimesrestrictivetranspositionoftheEUlegislationthemostoftencitedexplanationgivenwas theverycomplexnatureof theEU legislation (REDandFQD)notalwayscorrectlyunderstoodbynationaladministrationsandhence ‘wrongly’anddifferentlytransposed.However,thisisnotseenastheonlyexplanation.TheEUlawalsoleaves toomuch room for interpretation, whichmakesMS creative in their transposition.Furthermore,nationaladministrationssometimestrytoreinventthewheelorgotoalevelofdetailthatmakesitburdensometocomplywiththelaw.FinallyMSalsohavethetendencyto protect national economic interests (be it farm, oil or biofuel interests) introducingmeasuresthatmaketheirpolicymorerestrictivecomparedtowhatisallowedunderEUlaw.The absenceofmutual recognition is anobstacle to getting towards a harmonised systemandcontributestoafragmentedmarket.

TheSpanishcase

The Spanish fuel distribution system shows how fragmented the biofuel market canbecomeandmarketabusecantakeplace.

Importsofpetrol

More than 80% of fuels that are marketed in Spain are conducted acrossterminalsandpipe-linesofCLH (CompañíaLogísticadeHidrocarburos,which isnowaprivatecompanyowningtheSpanishpipe-linenetworkandtheaccessorylogistics).

When 10% compulsory target of renewables for transport set by Directive2009/28wasimplementedinSpainbymeansofcompulsorybiofuelstargetsandparticularly, a minimum percentage for gasoline, CLH raised the fact thatadapting its logistic system tomore than twogradesof gasoline (unleaded95andunleaded98)wasunaffordable

Alternatives were (1) to substitute unleaded 95 gasoline by BOB and set upblending facilities in all terminals and (2) to produce a finished unleaded 95gasolinecontainingETBEtowhichethanolcouldbeaddedonlyinterminalswithahighervolumeofgasoline.

The 2nd alternative was preferred as the 1st one was not compatible with thelegalobligation tomarket, inall petrol stations, the so-calledprotectiongradegasoline(havingamaximum2,7%oxygencontentsandamaximum5%ethanolcontents) in accordance with article 3 of Directive 2009/30. Such a limit forethanol contentsdidnotallowmeeting the requiredpercentageofbiofuels forgasoline. This choice also allowed refiners to take advantage of their co-processedETBE.

Oncethechoicewasmade,petrolimportsbecameunviablefortworeasons:• ThereisontheinternationalmarketnopetrolproducedwithETBE.• BOBisnottechnicallysuitabletobecirculatedacrossCLH’slogistics

CLH’s logisticsarecompatiblewith importedgasolinecontainingMTBEbutthischoicewouldnotallowtheimportertomeettherequiredpercentageofbiofuelsforgasolinefortworeasons:

• Theimporterwouldonlybeabletoblendethanolin9of36terminals.

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• TheimporterwouldnotbeabletoaddthequantityofethanolthatwouldfitwithitsproductbutonlytheoneprogrammedforCLH’scommingledsystem(max2%in9terminals).

Thecostofnot fulfilling thebiofuelsobligation is substantiallyhigher thananyothercompetitiveadvantagethatcouldcomefromimportinggasoline.

Since 1 January 2016, there are no longer separate targets for gasoline andtherefore,thedescribedsituation isatthemomentnotpressingbutassoonasthe global target for gasoline and diesel goes up, approaching the maximumcontents of FAME admitted for diesel, the Spanishmarket will face again thesameproblem.Thiswillhappeninoneyearortwo.

ImportsofFAME

Suchasystemwassetupin2012,meaningtheclosureofthenationalmarkettoany producers that were excluded. Although open to the EU, this systemwasestablished in order to protect the Spanish FAME industry, specially, againstimportssubsidizedbythirdcountries.Itcanbedescribedasfollows.• Amaximumvolume5.5milliontonsofFAMEqualifyingforcertificatescanbe

annually offered in Spain. This volume covers the internal demand inconditionsofacertaincompetition.

• ThetotalisdistributedamongstthoseEUandnon-EUproducers,whichhaveobtained permission to sell FAME qualifying for certificate. Distribution ismade according to several criteria: environmental protection, security ofsupply,productioncapacityandfinancialsolvency.

The quota system started to be applied in May 2015. However, only a fewfactories got to recover from their insolvency, supply became uncertain,completiondisappearedandpriceswentup.Theapplicationof thesystemwasinitiallyfor2yearsbutcouldbeextendedforanothertwoyears.

HVO

Refinery co-processed HVO is accounted towards the obligation. As aconsequence of this, Spanish refineries are meeting the mandatory biofuelstargets at HVO self-producing cost while independents have to meet thosetargets at FAMEmarket prices (standalone HVO is technically available but ismoreexpensive).Another factor of this problem is that bio certificates can legally be dissociatefromthephysicalproductsothattheycanbekeptbythesellerinsteadofbeingtransferred with the product that is sold. This is what is being practiced byrefiners towards the independents wholesalers when imports are notcompetitive.

The combination of both factors make it more difficult and costly forindependentstomeetthebiotargetsandthesamesituationisforeseeableinthenext future as regards the GHG emissions reduction targets. This extremelydifficult situation for independents prevents independents fromotherMS fromenteringtheSpanishmarket.”

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Question 3: Respondents were asked to list what the solutionmight be to solve the problemidentified.

Themost frequentlymentioned solution to inconsistent transposition is the production ofclearguidelinesby theCommissions to theMShow to transposedirectives,explaining theconsequences if aMS decides to deviate from the guidelines. These guidelines should notonlybegiventotheMSbutalsototheconcernedindustry.GuidelineswillhelpinavoidingthatMSneedtointerprettheDirectiveastheydeemfit.

Avoiding fragmentation also requires mutual recognition of certification system and a EUrecognizedlistoruniformregulationonallowablefeedstockformakingbiofuels.26

Reducing the administrative burden could be achieved by, again, common guidance forregulators but also a common database system that registers every issued Proof ofSustainability (PoS). The administrative burden can also be reduced by using one and thesamemetricintheEUtoexpressthebiocontentinfuels.

The market distortion occurring with HVO in Spain should be solved by not allowing co-processedHVOtobecountedtowards the target. It is felt that theCommissionshouldactagainstthisasaninfringementoftheRED.

FurthermoreitissuggestedtochangetheEUWasteDirective(Directive2008/98/EC)insuchawaythatbiofuelproductionisregardedasrecycling.

Question4:Thisquestiontriedtoidentifyifandwhattheadditionalcostsarefortheproblemssignalled.

Themarketobstacles identifiedresult inhighercosts formarketoperatorsas theyneedtofind“creativesolutions”todealwiththeseobstacles.Theprecisecostsarenotpredictablebecause they depend on many factors. One of these is the administrative burden, i.e.necessaryrecruitmentofnewstaffaswellasimplementationofnewsystems.Anotherfactoris the competitivedisadvantageasmentioned in thepointsbefore so that someparticularcommercial transactions cannot be done which could lead to financial losses. One fuelsupplierquotedadditionalestimatedcostsof2-5€/mtforexportingdieselandpetrolfromGermanytoAustriaasaresultofthedifferenttranspositionofEUlegislation.

Atthesametimefuelsuppliersarefacingahugeuncertaintyinthepricestheywillfindinthemarket due to high volatility in the biofuels market. This volatility is mainly due to afragmentedlegislationthatallowstraderstodirectproductfromonecountrytoanother infunctionofthenewrulesimplemented.

Question 5: Though not immediately relevant to all fuel suppliers the question was askedwhethertheproblemshavehadanimpactoninvestmentsinthebiofuelsector.

Itwasclearlyfeltthatthelackofstabilityofthelegislation(“changingimplementationrulesevery year”) has had an adverse impact on investment making long-term planning nearimpossible; one responding companymadeexplicit that theyhad stopped all investments.More inparticular itwasquotedthatseveral investments inthe(advanced)biofuelssectorhave been stopped because of the unavailability of an open internal market. There is an

26ThisispartlyachievedwiththelistincludedinDirective2015/1513;AnnexIXpartAandpartB.

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expectation that investmentwill take place outside the EU so that biofuels can be sold toEuropeinsteadofproducedinEurope.

Question6:Aretheproblemsmakingbusinessimpossible(forexampletoobureaucraticandtooexpensive)?

Thereisageneralfeelingthatbusinessisdifficulteventhoughnotimpossiblebutmanyfearthatdoingbusinesswill becomemoredifficult for the small andmedium-sized companies;notnecessarily thebigplayersor traders.Someseedifficultiesahead,highercosts,due tolackofproduct(advancedbiofuels),volatilityofthemarketandincreasedbureaucracy.Thelackofa level-playingfieldwiththeconventionalfuelswill increaseloopholesevenfurther.In oneparticular case theblending requirements put upon fuel suppliers are so restrictivethattheuseofbiofuelsbecomeseffectivelyimpossibleunlessagainstmuchhighercosts.ThisisthecaseofEstoniaasreportedbyfuelsuppliers.

ThecaseofEstonia

“InEstoniaallbiofuelsshallbepre-blendedeither intherefineryor in-tank inan excise warehouse. The bio content shall be indicated in the qualitycertificatethatshallbeissuedbeforereleasingfuelstotheinternalmarket.Inthis way it is impossible to bring different biofuels blends into the marketbecauseeachgradeshallbestored intheterminal inseparatetanks. It is thesimplestsolutionforthegovernmentbecauseitmeanslowbureaucracyforthestate. As explained above, this is causing inflexibility in the system and theresult of this will be the lower competition in the fuel supply into Estonia.Without allowing the blending/injection of biofuels into fuel flows duringloadingofaroadtanker(splashblending)thenumberofpossiblesuppliersarelimited.Inadditionthepossibilitiesforblendingin-tankintheexcisewarehouseare limited with the number of available tanks. Therefore the supplies fromDenmark,Sweden,RussiaandBelaruswillbeverylimitedorstoppedatall.Itisobviousthatthiswillresultinlowercompetitionandhigherfuelprices.”

Question7:DoyouknowREFUREC?Ifso,haveyouhadevercontactwithaREFURECdelegate?27

This question had as objective to know if the respondentwas familiarwith the body thatbrings togethernational regulators.Thequestionwasraised firstofall toobtain insightonknowledgeabout themereexistenceofREFURECand secondly toobtainevidence if thereare(regular)contactsbetweenindustryandregulators.

NotasinglerespondentknowsREFUREC.MaybenotentirelystrangeasthisbodyisnotmentionedintheEUDirective,contrarytoCARES28theconcertedactionontheREDirective.REFURECwassetupbythe initiativeoftheUKRegulatorybodyand isan informalclubthatoffersapan-Europeanplatformfordiscussion,informationexchangeandtacklingcross-borderissuesrelatingtothebiofuelsmarketintheEuropeanUnionandbeyond.

ThefactthatREFURECisnotknownbytheindustrycouldimplythateitherREFURECiskeepingaverylowprofileorthattheindustryislessawareofhowMSinteractwitheachother.

27REFUREC:http://www.refurec.org/28http://www.ca-res.eu/index.php?id=7

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Question 8: What in your view could or should the European Commission do to reduce marketfragmentation?

ThewaytheEU lawsonbiofuelhasbeentransposedand implemented isnotconducivetohavea fair competition according to several respondents. Thenowoverly complex systeminducesmarketvolatility,whichbenefits largeroperatorsand tradersmore than small andmedium sized players. The most frequently suggested approach is for the Commission todraft clearguidelines for transpositionofEUdirectives,which shouldandwouldallow lessfreedom for interpretation. There should also be a common guidance ideally compulsorysystemforbiocontentratioandbiocalculation.

FurthermoreitisrecommendedthattheCommissionproducesfromtime-totimestudiesonpossiblemarketbarriers.

Finally a few questions were raised on a) the need to consult other stakeholders; b) ifrespondents were available for a follow-up interview; and c) if they would like to make anyadditionalcomments.

Itwassuggestedtocontactbiofuelproducerstoasktheiropinion.Afewbiofuelproducerswerecontactedbyphonebuttheydidnotbringanynewinformationtothetablethatwasnotyetfoundintherepliesoftherespondents.Mostrespondentsindicatedthattheywereavailableforafollow-upinterview.Giventime-constraintsnofollow-upinterviewstookplace,exceptwith1.Notfurthercommentsweremade.

Conclusions

Theoverall feelingbymarketoperators is that there is a competitiveness imbalancebetweentheMember States because of the different market conditions and requirements. ThereforetradingofbiofuelsbetweentheMemberStatesisdifficult.Theoperatorstrytofindsolutionstofulfiltheobligationbutiftheissuesabovedescribedarenottackled,itbecomesmoreandmoredifficult to shift fuels from one country to another and future increase of biofuels obligationshallnotbereached.

ItisgenerallyfeltthattheEuropeanDirectivesallowtoomuchfreedomtoMStotransposeandimplement those sameDirectiveswhereasat the same timeallMSneed toachieve the samegoal.Therearetoomanydifferentroadsthatleaduptothesamegoalandthathamperaneasyflow of transportation fuels with bio-components. If there would be an obligation of mutualrecognitionofthevariousnationalsystemsacommonmarketwouldbepossible.

Anotherway to reducemarket fragmentation is the introductionof a harmonizedwayof biocontentcalculation;forexampleineachlitreanaverageeitherbyvolume%,orenergy%,orallcalculatedinMJ,butmostimportantlyinonesingleunit.Inthisrespectitwouldbehelpfulthatthere would be a common guidance that sets out the compulsory bio content or toleranceallowed.

Furthermore fragmentation can be substantially reduced if the European law stipulates thatmember states shall not establish any restrictions to the system in bringing the biofuels intomarket.Thesystemshallbeflexibleallowingdifferentbiofuelsgradesintomarket.Thesystemwouldbemoreflexible incasetherewouldbethepossibilitytoblend/injectbiofuels intofuelflowduringloadingthefuelintoroadtanker.Thisgivesthepossibilitytoblende.g.B7(orE10)intooneroadtankerandB30(orE20)intoanotherroadtanker.

28

Forbio-methanecross-bordertradeisnotpossibleandthisshouldberesolvedsoon.

Toreducetheriskoffraud(forexampledoubleuseofthesamebio-component)itispreferablethatphysicalvolumeofbiofuelsalwayscorrespondstotheamountofusedpaperproofs.AEU-wideregistrationsystemcouldhelp.

Fuel suppliers and REFUREC members seem to live on different planets. Regular contactsbetweenindustryandRegulators(alsoCARES)couldbehelpfulinreducingborderobstacles.

29

7. Keyfindingsandrecommendations

OneofthepillarsoftheEuropeanUnionistheSingleorCommonMarket.Thispresupposesthata free flow of goods is possible, national obstacles kept to the bear minimum. For theconventional(unblended)motorfuelssuchacommonmarketexists.However,oncethesefuelsare blended with bio-components border obstacles do arise and especially if these bio-components are advanced. Hence, there is no unified EU market for transportation fuelsblendedwithbio-components;themarketisfragmented.

A scan of howMS have transposed and implemented the EU biofuel legislation delivers theevidence that this isdone ina far fromharmonizedway. Therearedifferences in trajectoriestowards2020,differencesinnationaltargets(sometimesfortheentirefuelmarket,sometimesdifferentiatedbybiofuel),differentunitsformeasurement,differentsupportschemes,differentpenaltysystemsandalso,substantial,differenceonthemechanismofdoublecountingbiofuels.

ItisalsorecognizedthattheMShavebeendraggingtheirfeetonthetranspositionofthelaw.TheCommissionhasbeentooforthcominginMStakingtheirtimeforthis.WhetherthereasonwasthecomplexityofthelaworthefactthatMSsimplyhadsecondthoughtsintransposingtowhat they had agreed to is notmaterial. Important is that the Commission can forceMS tocomplywiththeagreedtimetableoftranspositionandchoosenottodoso.

Marketoperatorsstrugglewiththesenationaldifferences,arefacedwithmorebureaucracyandhighercostsasthesurveyshowed.Somemarketsaresimplyclosedduetothesehurdles.

Themainreasonforthesedifferencesinnationallegislationistwofold:theEUlawallowingtoomuch interpretation freedom on how to transpose and implement the law and secondly thecomplexity of the legislation further increased by the most recent amendments to Directive2009/28 (RED). TheEU lawon renewableenergyon transporthas got itself lost in either toomuchvaguenessor toomany incomprehensibledetails.The lackofguidancehowto read thelawdidn'thelpeither.

Most worrying is theway the double countingmechanism is applied. This was amechanismintendedtodriveinnovationforadvancedbiofuels.Todatethathasnothappenedbutinsteadusedcookingoilsgotallthebenefitwhereasitsconversionprocessintobiofuelrepresentsnoorverylimitedinnovation.Substantialvolumesofinnovativebiofuelsdidnotcometothemarketandrestrictionsontradewereputupforcertainbiofuelsthatwereregardeddoublecountinginonecountrybutnotinanother.ItcanonlybehopedforthatthenewDirective(2015/1513)willbringabout theneededharmonizedapproachrequiredtoboost thedevelopment,productionanduseoftrulyadvancedbiofuels.

ThesystemofvoluntaryschemesonsustainabilitycertificationisoneofthegreatachievementsoftheEUlaw.Butitisquestionableifthereisaneedforsomanyschemes.Moreimportantlyisthatthoseschemesthatareusedshouldallcoverthesamesustainabilitycriteria,performinthesame rigorous way so that mutual recognition becomes possible and MS cannot question aparticularschemeorcreateadditionalcriteriaforVoluntarySchemestooperate.

30

Recommendations

I.Recommendationonclearlegislation

a) The best way to minimize or avoid national rules that obstruct a common market fortransportation fuelswith bio-components is to have EU law that allows as little as roompossible for interpretation of the law (harmonization) with the lowest possible level ofcomplexity;implementationrulestobesetatCommunityorCommitteelevel.Forexample,insteadofhavingtargetsin%,caloriesorMJitwouldbeeasiertohaveonesingleunitfixedinthelegislation.

II.RecommendationonCommissionGuidanceandinfringement

a) The various Communications (guidelines) the Commission published to clarify thelegislationdidnotpreventthatMStransposedandimplementedthelawinquitedifferentways. This variety in national law is obstructing a truly common market for tradingtransportationfuelswithbio-componentscrossborder.Thehighestdifferentiationcanbenoted in the way the double counting measure is complied with. Considering thatadvanced biofuels’ role to play in reducing emissions from transport should increasestrongly, a coherent and consistent transpositionof the newDirective is vital.Obviously,theCOMisnottheEUCoJandcannotissuebindinginterpretationbutclarificationonhowtheCOMreadsthelawwouldbehelpfulforbothmarketoperatorsandMemberStatesandwouldpossiblyavoidalackofharmonization,frustration,uncertaintyandadditionalcosts.

b) The Commission has not (yet) issued any guidance documents for Member States andmarket operators how to comply or to transpose in the best possible way Directive2015/1513.ConsideringthehistoryofhowMShavetransposedthepreviousDirectivesonrenewableenergyitisstronglyrecommended.Ifguidanceisnotprovidedforwecanexpectcontinuedfragmentationofthemarketandfurtherconfusionformarketoperators.

c) CoherentandconsistenttranspositionandimplementationofEUlawarekeytoachieveacommonmarket. The Commission has the power under the Treaty (TEU) to forceMS tosticktothetimetableoftranspositionandtobeincompliance.SevenyearsaftertheREDhasbeenadoptedtherearestillMSthathavenotcompliedwiththe law.Infringement isslow. Even though the Commission is confident that the Member States will correctlyimplement the RED including the recent amendments by 2020 (CoA, 2016) it isrecommendedthatinthecaseofcompliancewithDirective2015/1513theCommissionwillactforcefullyandwillnotallowanyadditionaladministrativeburdenputuponstakeholdersandmarketoperators.

III.RecommendationonTransparencyoftransposition

a) ObtainingaclearandreliableviewonhowMShavetransposedand implementedtheEUlegislation on renewable energy is difficult. Besides the language barrier there aredifferences nationally in legal structures andhierarchy in law. The EuropeanCommissioncould provide on itswebsite for a dynamic overview of the state-of-play atMS-level; anoverviewof transposition and implementation listing national targets, supportmeasures,penalties, blends allowed, double counting measures, references to national law andpossiblyotherdatasothateverymarketoperatorandstakeholderknowswhatthelawand

31

regulations are at MS level. Both REFUREC and CARES can play a coordinating role inproducingthisoverviewandtobeupdatedyearly.

IV.RecommendationonTradabilityoffuelswithbio-components

a) Even thoughEU legislation is clearon themaximum level of bio-component than canbeblendedtherearedifferencesbetweentheMShowmuchbio-componentisallowedorcanbeused forbothethanol andbio-diesel. Thismakes itdifficult for fuel suppliers to tradefuelwithbio-components crossborder.Market fragmentation canbe reducedbywritingintotheEUlegislationthatbyacertaindateaminimumlevelofbio-componentsisrequiredsimilar to the way the FQD has prescribed the need for the existence of a so-calledprotection-gradetypefuel(Directive2009/30Article1(3)(a)§3).29

b) To date twoMS have a system in place to trade biofuels through a system of tickets orcredits (similar totheUSRIN-system).Thebenefitofsuchasystemis thatbiofuelcanbeusedalsoinsectors(suchasshippingoraviation)onwhichnoobligationrests,whereastheoperatorsinthesesectorscanselltheticketsagainstmarketvaluetoobligatedparties.Theticketing systemcanalso foster virtual trade inbiofuels toMS thathave lessambition inpromotingbiofueluse(clearly,theremustbeunderlyingphysicalproduct).Withaviewonthe new renewable energy policy post 2020 the Commission is recommend to study theintroductionofaticketsystemanditsprosandcons.

V.RecommendationonMutualrecognitionofVS,theirtransparencyandthenewrules

a) Several issues around governance of VS are addressed by Directive 2015/1513 not,however, the compatibility of VS. The rules on mutual recognition of VS are not clearenoughandresults inmarketoperatorshavingtoobtainvariouscertificatesforthesamebatchof fuel.Thismeansadditionalcostsandpotentiallycasesof fraud.TheCommissionshould issue a clarifying note on mutual recognition of VS: what schemes areinterchangeableandinwhichcasesthisisnotpossible.

b) Thepresent systemof sustainability certificates issued is not transparent enough.Only alimitednumberofVShaveregisters(ordatabase)ofcertificatesissued.Itisrecommendtodesign a EU-wide register on sustainability certificates managed and operated by theEuropeanCommissionsimilartotheGermanNABISY.Sucharegisterwillminimisetheriskoffraudwithcertificates,makesmonitoringandcontrolofcertificatesmucheasier.SucharegisterwillprovideusefulinformationonthefrequencyofVSused.

c) Directive2015/1513addressesmanyconcernsthathavebeenraisedbyMS,somemarketoperatorsandmostrecentlybytheEUCourtofAuditors.However, it isrecommendedtoprovide in the least possible delay clarity tomarket operators how the new regimewillapplytothoseVSthatstillhavealicensetooperateunderDirective2009/28.Theobjectiveshouldbetohavealevel-playingfieldbetweenallVS,operatingallunderidenticalrules.

29The“protection-gradetypefueldate”isjustmentionedasanexampleanditisnotimpliedtoadvocateproliferationofprotection-gradetypeoffuels.

32

References

CEDelft,(2015a),Mid-termevaluationoftheRenewableEnergyDirective,April2015

CEDelft,(2015b),AssessingprogresstowardsimplementationoftheILUCDirective,December2015

Commission,(2015),Commissionstaffworkingdocument:TechnicalassessmentoftheEUbiofuelsustainabilityandfeasibilityof10%renewableenergytargetintransport,SWD(2015)117final,15June2015

Commission,(2016a),https://ec.europa.eu/energy/en/topics/renewable-energy/biofuels

Commission,(2016b),IP-16-1824_EN

CoA,(2016),TheEUsystemforthecertificationofsustainablebiofuels,Specialreport18,2016

EPA,(2016),https://www.epa.gov/renewable-fuel-standard-program/renewable-identification-numbers-rins-under-renewable-fuel-standard

Eurobserv’ER,(2015),BiofuelsBarometer,July2015

EUCourtofAuditors,(2016),

GAINReport,(2015),BiofuelMandatesintheEUMemberStates,13July2015

GAINReport,(2016a),BiofuelsMandatesintheEUbyMemberStates-2016,22June2016

GAINReport,(2016b),EU-28BiofuelsAnnual2016,29July2016

ECN,(2015),Post2020visionsandNationalPlansforSustainableTransport,June2015

RFTO,(2016),https://www.gov.uk/government/collections/biofuels-statistics#obligation-year-8-biofuels-data

UPEI,(2014),2014Annualreport

Annex1:ImplementationofEUbiofuelpolicyatMemberStatelevel

MS Year Overalltarget%

V(olume)orE(nergy)

Differentiatedtargets Achieved Taxincentive

GHGemissionsavingtarget

DoubleCounting Penaltynon-compliance

FQD(Directive2015/652)Article7atransposed

Comments Legalbasis

Biodiesel%

EtOH% Overall Biodies

el EtOH

Y/N Feedstock

Allowed Not-allowed

A 20102011201220132014201520162017201820192020

5.755.755.755.755.755.758.45

E 6.36.36.36.36.36.3

3.43.43.43.43.43.4

6.586.756.776.197.70?

N Y6%by2021

Y DConacase-by-casebasis

YAdministrativepenalty

N Advancedbiofuelsarecappedat1.5%doublecounted.So,effectivelynotmorethan0.75%

OrdinanceBGBL.IINr.250/2010(BGBL.IINr.250/2010)ActBGBL.INr.75/2011ActBGBL/IINr.398/2012Abfallwirtschassgesetz2002AWG2002’Nr.102/2002.

B 20102011201220132014201520162017201820192020

V 555566-76-76-7

777744-54-58.5

4.544.434.604.635.87?

5.986.136.106.084.16?

N Y6%by2021

Possible;case-by-casebasis

Y€900per1000liter

N Belgianregulatorsarelookingattheoptiontoshiftthe10%REintransportobligationtofuelsuppliers.E10willbeintroducedinthemarketfrom1/1/2017onwards.

BG 20102011201220132014201520162017201820192020

V 666666666

3457778910

6666

3457

N Y6%by2021

N YAdministrativepenalty

N

34



V(olume)orE(nergy)





Comments Legalbasis

Biodiesel%


el EtOH

Y/N Feedstock

Allowed Not-allowed

CR 20102011201220132014201520162017201820192020

1.453.31-5.99-8.239.18

E ? 100%forB100

Y6%by2021

? YIfthesupplierhasnotfulfilledtheobligation,hehastoputonthemarkettheobligatoryamountforthecurrentyearplustheamountwhichhadnotbeenputinthepreviousyear.Ifobligationnotfulfilledfortwoconsecutiveyears,supplierwillpayanenvironmentalfeeof0.088HRK(0,012€/MJ),andanadministrationfineof10,000-150,000HRK(1,300-20,000€).

N Max.7%volFAMEindiesel.Legislationonadvancedbiofuelsisinpreparation.

CY 20102011201220132014201520162017201820192020

2.02.42.42.42.42.42.4

E 1.932.422.822.62.62?

N Y6%by2021

Y UseslanguageoftheREDwithoutspecifyingsortoffeedstock

YFraudcanresultinimprisonmentupto5yearsand/orafineof€85247

N

35



V(olume)orE(nergy)





Comments Legalbasis

Biodiesel%


el EtOH

Y/N Feedstock

Allowed Not-allowed

CZ 20102011201220132014201520162017201820192020

V 6.36.36.36.36.36.36.36.36.36.36.3

4.14.14.14.14.14.14.14.14.14.14.1

??????

??????

UntilbeginningofthisyeartaxsupportforB30,B100andE85butallloweredandnolongereconomic

Y2%by20154%by20176%by2020

N YPenaltyofCZK40(€1.45)foreveryliterofmissingbiofuel

N ThegovernmenthasapprovedtheintroductionofE-10.Gasoline95(Natural95)willremainavailableatleastuntil2018.Anamendmenttothebiofuelslegislationwouldintroducedoublecountingprovisionsforwaste-basedbiofuelfromApril2017.Italsoincludesanenforceduseofotheralternativefuelssuchasnaturalgasproducts,LPG,electricityorhydrogenunderthequotas.

DK 20102011201220132014201520162017201820192020

5.755.755.755.755.755.755.755.755.755.75/0.9

E 5.755.755.755.755.75

N Y6%by2021

Y Positivelistthatincludes:straw,bagasse,husks,bellows,non-ediblepartofcorncobs,nutshells,animalmanure,rawglycerine,sulphatepitch,animalfatC1&2

UCO YPenaltytobesetbytheCourt

N Discussionongoinghowtoachieve10%by2020.Danishgovernmentannounceda0.9%advancedbiofuelsblendingmandateby2020putuponallsuppliersoftransportfuels,includinggasoline,dieselandgas,andwillbemetwithallkindsofadvancedbiofuels.

DenmarkhasaCO2andEnergytaxonfuels.TheDanishgovernmentproposedatargetforadvancedbiofuelsof0.9%by2020

EST 20102011201220132014201520162017201820192020

N Governmentproposed:min3.3%e/eby2017;6.5%in2018to10%by2020.Gasoline98octaneexcludedfromblendingobligation

36



V(olume)orE(nergy)





Comments Legalbasis

Biodiesel%


el EtOH

Y/N Feedstock

Allowed Not-allowed

SF 20102011201220132014201520162017201820192020

4.06.06.06.06.08.010.012151820

E ???1223.5?

Y6%by2021

Y Wasteorremainsorinediblecelluloseorligno-cellulosicmaterial

YPenaltyof€0.04/MJwhichis€0.84/Lofethanoland€1.32forbiodiesel

N

F 201020112012201320142015201620172018201920202023

6.56.97.27.57.67.78.48.89.41010.5

E 7.07.07.07.07.77.77.71%2.3%

6.857.077.047.017.72?1.6%3.4%

6.706.846.836.787.45?

7.07.07.07.07.07.07.0

6.857.077.047.017.72?

E85:Between50-100%lesstaxdependingonregion

Y10%by2021

N AllfeedstockaslistedbyAnnexIXPartAofDirective2015/1513plusMolasses,C-starchandacidoils.

YPollutiontax(TGAP-TaxeGénéralesurlesActivitésPolluantes)tobepaidbysuppliersthatdonotcomplywiththeblendingobligation

N Limitonvolumeofmaterialthatcanbedoublecounted:0.35%ofbiodieseland0.25%ofEtOHallbyenergyEveryyearnewrulesonDC

ByDecreeDEVR1607461AFranceintroducedadvancedbiofueltargetsforpetrolanddiesel.Doublecountingnolongerapplies.

D 20102011201220132014201520162017201820192020

6.256.256.256.256.253.5%3.5%4%4%4%6%

E 4.44.44.44.44.4

2.82.82.82.82.8

7.086.587.086.96?

8.597.526.916.29?

4.694.775.316.11?

2.14cts/lforB100100%forE85

Y6%by2021

N YPenaltyof€470/tCO2eq

N ThedecarbonisationoftransportgoalhasbeenchangedintoaGHGemissionreductiontoberealisedinstepstoachieve6%in2020.Animalfatsarenotallowedasbiofuel.

Noco-processingallowed

37



V(olume)orE(nergy)





Comments Legalbasis

Biodiesel%


el EtOH

Y/N Feedstock

Allowed Not-allowed

GR 20102011201220132014201520162017201820192020

V 7.07.07.0

7.0?

N Y6%by2021

Y Listthatincludes:UCO,animalfats,non-foodcellulosicandligno-cellulosicmaterial(straw,nutshells)wasteandresiduesofAG,forestryandaquaculture

Y

N Onlyatargetsetforbiodiesel

H 20102011201220132014201520162017201820192020

4.94.94.94.9

E 4.94.9

4.94.9

??

??

??

100%forE85

Y6%by2021

Y waste,AG/forestryresidues,non-food,(ligno)-cellulosicmaterial

YPenaltyofHUF35/MJ(€0.12/MJ)

N From2016onwardsnolongerseparatetargetsfordieselandpetrol

IRL 20102011201220132014201520162017201820192020

4.06.06.06.06.010

V ????

N Y6%by2021

YPossible;case-by-casebasis

Nolistofeligiblefeedstockbutthefeedstockshouldbeabiodegradablewaste,residue,non-food,(ligno-)cellulosicmaterialoralgae.POME(PalmOilMillEffluentisauthorised

YPenaltyof0.45Eurocents/l

N

IT 20102011201220132014201520162017201820192020

3.54.04.54.54.55.05.56.57.5/1.29.0/1.210.0/1.6

E ??????

N Y6%by2021

Y Workswithapositivelistoffeedstockforadvancedbiofuels:(a)Algaeifcultivatedonlandinpondsorphotobioreactors.(b)Biomassfractionofmixedmunicipalwaste,butnotseparatedhouseholdwastesubjectto

UCO,animalfats

YPenaltyof€750foreverymissingcertificate(10Gcal)ofbiofuel

N Onlycountrythathassettargetsforbeyond2020andminimaltargetforABfrom2018until2022.Biodiesel:blendingupto7%inretailmarket.Blendingwith25%forthewholesalemarket.Bioethanol:blendingupto10%inretailmarket.Blending

TheItalianlawsetsadvancedbiofuelstargetsfrom2018onwardsgoingfrom1.2%to2.0%in2022.

38



V(olume)orE(nergy)





Comments Legalbasis

Biodiesel%


el EtOH

Y/N Feedstock

Allowed Not-allowed

20212022

10.0/1.610.0/2.0

recyclingtargetsunderArticle11(2)(a)oftheWasteDirective(ba)Bio-wasteasdefinedinArticle3(4)ofWasteDirective,(c)Biomassfractionofindustrialwastenotfitforuseinthefoodorfeedchain,includingmaterialfromretailandwholesaleandtheagro-foodandfishandaquacultureindustry,andexcludingfeedstockslistedinPartBofthisAnnex,(d)Straw.(e)Animalmanureandsewagesludge.(g)Talloilpitch.(h)Crudeglycerine.(i)Bagasse(j)Grapemarcsandwinelees.(k)Nutshells.(l)Husks.(m)Cobscleanedofkernelsofcorn.(n)Biomassfractionofwastesandresiduesfromforestryandforest-basedindustries,i.e.bark,branches,pre-commercialthinnings,leaves,needles,treetops,sawdust,cuttershavings,blackliquor,brownliquor,fibresludge,ligninandtalloil.(o)Othernon-foodcellulosicmaterialasdefinedinpointr).THISINCLUDESARUNDO,MISCANTHUS,(p)Otherligno-cellulosicmaterialasdefinedinpoints).THIS

with25%forthewholesalemarket

39



V(olume)orE(nergy)





Comments Legalbasis

Biodiesel%


el EtOH

Y/N Feedstock

Allowed Not-allowed

INCLUDESFORESTRESIDUESETC(q)Renewableliquidandgaseousfuelsofnon-biologicalorigin.

LV 20102011201220132014201520162017201820192020

2.62.62.52.52.6?

E 2.52.62.32.32.5?

2.82.82.73.03.1?

B100:noexciseduty;E85:minus30%onduty

Y6%by2021

N N N Mandatoryblending:gasolinewithRONis95ormorebutlessthan98-4.5-5.0%,gasolinewithRON98andmore-nobioblending,diesel-4.5-5.0%withRME(excludingArcticdieselwith0,1,2,3,4classes-withoutbio).

LT 20102011201220132014201520162017201820192020

5.8--

V 6.457.07.0

3.345.05.0

??

?7

?5

N Y6%by2021

N YPenaltybutunclearhowmuch;riskoflossofoperatinglicense.

N

LXB 20102011201220132014201520162017201820192020

4.755.405.15

E ???

N Y6%by2021

N YPenalty(pollutiontax)of€1,200per1,000litre.

N

40



V(olume)orE(nergy)





Comments Legalbasis

Biodiesel%


el EtOH

Y/N Feedstock

Allowed Not-allowed

MLT 20102011201220132014201520162017201820192020

1.52.53.55.56.257.07.758.59.2510.0

E N Y2%by20154%by201810%by2021

Y UseslanguageoftheREDwithoutspecifyingsortoffeedstock.ThedefinitionofwasteistakenfromtheWasteDirective2008/98.

YLevelofpenaltyunclear.

N Source:NeA,https://www.emissieautoriteit.nl/

NL 20102011201220132014201520162017201820192020

4.04.254.55.05.56.257.07.758.59.2510.0

E 3.53.53.53.53.5

3.53.53.53.53.5

?4.314.545.055.54?

?4.624.865.626.40

?3.783.994.074.12

Whenonanenergybasisblendingismorethan10%

Y6%by2021

Y Dutchlegislation(from2015)containsaverydetailedlistcapturedin3annexeswhatfeedstockcountsdouble(25intotal).

2annexesoffeedstockthatdoNOTcountdouble.

NHowever,non-complianceisseenasaneconomicmisdemeanourandliableforprosecution

N DutchParliamentfavoursa5%capon1Gbiofuels.Obligationofyearlyturnover(Dutchvolumesoldincludingexciseduty).SystemofRenewableEnergyUnits(HBE)https://www.emissionsauthority.nl/topics/renewable-energy-units-hbesTradingsystem:partiescantradeshortageorsurplustofulfilownobligation.Non-obligatedpartiessuchasaviationandshippingcanalsotradebiotockets

BiofuellegislationunderreviewtoadapttoDirective2015/1513.Newlawwillintroduce3typesofbiotickets:onefor1Gbiofuels(marketsharepossiblelowerthan7%);oneforadvancedbiofuels(marketshare0.5%)andoneforUCOME(maximummarketshareof3.5%).Nomoredoublecounting.Lawwillenterintoforcenotbefore1/1/2018istheexpectation.

41



V(olume)orE(nergy)





Comments Legalbasis

Biodiesel%


el EtOH

Y/N Feedstock

Allowed Not-allowed

P 20102011201220132014201520162017201820192020

5.756.26.27.17.17.17.17.88.510.0

E 5.916.065.325.676.2?

N Y6%by2021

N UseslanguageoftheRED.ThedefinitionofwasteistakenfromtheWasteDirective2008/98.Positivelistofresidues:manure,olivepomace(afterextractionofpomace),grapemarcwithoutalcohol,glycerine(notrefined),cerealstraws,ricestraw,peelfruitsandothervegetables,carobpulp,fleshyfruitpulp,certainwhey,left-overbreweries.

YLevelofpenaltyunclear.

N DCinconsideration;billonthetable.COMhasgonetoEUCoJovernon-compliancewiththeRED(26.05.2016).Firstly,fuelscanonlybemarketedifspecificfuelrequirementsareinplace,butsuchrequirementsdonotexistforhydrotreatedvegetableoil(HVO),abiofuelthatisimportedintoPoland.Secondly,preferentialtreatmentisgiventofueloperatorswhosourceatleast70%oftheirbiofuels-fromPolishmanufacturersandwhenthebiofuelsareproducedpredominantlyfromrawmaterialsoriginatingincertaincountries.Thispreferentialtreatmentdiscriminatesagainstbiofuelsmanufacturersandrawmaterialproducersinothercountries.

PT 20102011201220132014201520162017201820192020

5.57.57.59.09.010.010.0

E 6.75-----7

2.52.52.52.52.52.52.5

??

??

??

N Y10%by2021

Y YPenaltybetween€2,500and€44,891.

N TheCommissionhassenttoPortugalareasonedopinionurgingfullcompliancewiththeRED.ThePortugueselegislationonbiofuelscontradictstheDirectiveintworespects:First,itfavoursbiofuelsproducedinPortugaloverbiofuelsofothercountriesoforiginthatareequallysuitable,butproducedelsewhere.Second,thelegislationimposesstrictersustainabilityrequirementsonsomebiofuels,withoutthisbeingwarrantedbytheDirective.PortugalnowhastwomonthstoaddresstheCommission's

42



V(olume)orE(nergy)





Comments Legalbasis

Biodiesel%


el EtOH

Y/N Feedstock

Allowed Not-allowed

concerns;otherwisetheCommissionmaydecidetoreferPortugaltotheCourtofJusticeoftheEU.

RO 20102011201220132014201520162017201820192020

V 5.05.05.06.5---10.0

5.04.54.54.54.58.0-10.0

???

???

Y2%by20154%by201810%by2021

Y UseslanguageoftheREDwithoutspecifyingsortoffeedstock.

YPenaltybetween€2,500and€4,500fornotcomplyingwithadministrativeinformation,Between€6,700and11,200fornotachievingtargetfor2020.

N

SK 20102011201220132014201520162017201820192020

3.83.94.04.55.55.55.87.27.58.5

EforoveralltargetVforspecifictarget

5.25.35.36.86.86.96.99.710.111.5

3.13.23.34.14.54.64.75.96.27.0

???5.73?

???6.72?

???6.37?

100%upto5vol%blendforbio-diesel;100%forupto7.5vol%ETBE

Y2%by20154%by20186%by2021

Y EstersmadefromUCOandfats(ortheirmix)fulfillingbiodieselqualityrequirementsandsustainabilitycriteriacountdouble.

YPenaltyof€2permissinglitreofbiofuel.

N Upto5%volforBiodieseland7.05%volumeforETBEblendingiswithouttax,abovethispercentagetaxispayable.Theexcisedutyreductionforbiofuelsisgrantedonlytocompaniesthatoperateastaxwarehouses.OnlyETBEusedinpetrol,nosplashblending

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V(olume)orE(nergy)





Comments Legalbasis

Biodiesel%


el EtOH

Y/N Feedstock

Allowed Not-allowed

SLO 20102011201220132014201520162017201820192020

5.05.56.06.57.07.57.5

E ??????

Fullexemptionforpurebiofuels;blendsexcluded.

Y2%by20154%by20186%by2021

? YPenaltybetween€10,000and€100,000.

N Theproportionoftheannualquantityofbiofuelmaybereducedifthepriceofoneormoreofthehighestdailybiofuelpricesonthestockexchangeexceedstheamountofthedailystockexchangepriceofthemineralfuelwithwhichthebiofuelismixedandtheexcisedutyforthatmineralfuel.

ES 20102011201220132014201520162017201820192020

5.836.26.54.14.14.14.35.06.07.08.5

E 3.96.07.04.14.14.1

3.93.94.13.93.93.9

5.06.28.53.63.9?

5.16.79.53.63.9?

4.24.34.13.64.1?

N N Y,butnoproceduresinplacetomaketheinstrumentwork

UCOandanimalfatsCat1&2

YPenaltyof€763/TOEfornotfulfillingthetarget.MarketoperatorsnotcomplyingneedtobuycertificatesfromtheNationalCommissionforMarketsandCompetition.Thosecompaniesthatdocomplyobtaincertificates(forfree)fromthesamebody.s

N From2016onwardsnomoreoveralltargetstogiveobligatedpartiesmoreflexibility.7%caponconsumptionfortransportpurposesin2020ofbiofuelsproducedfromcertainfoodcropsandcropsonagriculturalland.IndustrygroupAPPABiocarburanteshasaskedtheIndustryMinistry(Minetur)toextendthequotasawardedtolocalandEUFAMEproducersin2014foranothertwoyears.CompanieswithaquotacandeliverFAMEunderthenationalbiofuelsquota.Thequotaswerenotlinkedtotaxadvantages,unlikeitwasthecaseinFranceuntilend-2015.ThequotasawardedbyMineturtotalledalmost5mlntonnesp.a.,comparedwithanannuallocalFAMEdemandofaround600,000-700,000tonnes.APPAstatedthatanendofthequotaswouldopentheSpanishmarketforimports,especiallyiftheanti-dumping(AD)dutiesonIndonesianandArgentineproductwerecut.AWorld

Co-processingaccepted

44



V(olume)orE(nergy)





Comments Legalbasis

Biodiesel%


el EtOH

Y/N Feedstock

Allowed Not-allowed

TradeOrganisationpanelrecentlysaidinareportthattheADdutyratesimposedbytheEUin2013werenotcalculatedcorrectly.TherewasnoresponsefromtheEuropeanCommissionyet.However,APPAsaiditseesahighriskthatacutmaycomeincomingmonths.

SV 20102011201220132014201520162017201820192020

E 5.27.512.013.0

4.74.65.15.0

16.7%

????

????

YSystemupforrenewalin2017

Y6%by2021

N N N Discussionongoingtohaveanoveralltargetof10%v/vby2020anddifferentiatedtargetsaswell.

Co-processingaccepted.SwedenhasanEnergyandCO2taxonfuels.

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V(olume)orE(nergy)





Comments Legalbasis

Biodiesel%


el EtOH

Y/N Feedstock

Allowed Not-allowed

UK 20102011201220132014201520162017201820192020

3.54.04.54.754.754.754.75(tbd)

V 3.12.73.74.44.8

N Y Thereare3tabesthatlistsfeedstockthatcountdoublelistingatotalof29feedstocks

Thereis1tableforsinglecountingandanothertablethatmentions2feedstocksthatarenotrecognised:freefattyacidsoracidoilsorsoapstocks,yellowgrease

YBuy-outof30penceforeverylitremissedtocomplywiththeobligation.Alsocivilpenaltypossibleupto£50,000or10%turnoverderivedfrombiofuels.

N Consultationprocessongoingtodeterminethetargetsupto2020andtheimplementationofDirective2015/1213

Workingonrulesfroco-processing

Totals 18(+1)

5.4%(2013)

15(16)

Sources:

• Nationallegislationtotheextentpossible• Commission,(2015),• Eurobserv’ER,(2015)• GAIN(2015,2016a)• CEDelft(2015a,2015b)• UPEIBIOMatrix,March2016http://www.upei.org/download/39/85/17?method=view• Waldheim,Lars,RenewableFuelsandBiofuelsMandatesandRegulationsOverview,March2016.(PreparedfortheCommissionexpertgrouponAdvancedBiofuels-Internaldocument).

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Annex2:OverviewVoluntarySchemesonsustainability

Source:https://www.gov.uk/government/...data/.../Table_of_voluntary_schemes_year_8.xlsx

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Annex3:Questionnaireforstakeholders

1.Listthe5mostpressingissues,andinorderofpriority,thatcausefragmentationoftheEUbiofuelsmarket;thesemayincludecountryspecificmeasuresthathavebeenintroducedbyoneMemberState.

Anyfurthercomment(s)?.............................................

2.Whatinyouropinioniscausingtheindicatedproblem?

Issue(s) Cause


3.Whatinyouropinionisthesolutiontotheindicatedproblem?

Issue(s) Solution


4.Canyougiveanestimateoftheannualadditionalcostsoftheproblemsoccurring?

5.Whathasbeentheimpactoninvestmentsinthebiofuelssectorasaresultoftheseissues?

6.Aretheproblemsmakingbusinessimpossible(tooexpensiveortoomuchbureaucracy)?

7.DoyouknowREFUREC?Ifso,haveyouhadevercontactwithaREFURECdelegate?

8.WhatinyourviewcouldorshouldtheEuropeanCommissiondotoreducemarketfragmentation?

9.Whatotherstakeholderscouldbecontacted?

10.Wouldyoubeavailableforaninterview?

11.Isthereanyadditionalsuggestionsyouwouldliketomake?

Issue(s) Pleaseindicateinwhatwaythishampersthetradeinbiofuels.

Hasthisissuearisenasaresultofthetranspositionof

EUbiofuellegislation(Directive2009/30(FQD)and/orDirective2009/28

(RED)bynationalauthorities?Pleaseexplain.

InwhichMemberState(s)doesthisproblemoccur?

WouldguidanceonthisissuefromtheEUhelptoachievea

levelplayingfield?Pleaseelaborate.

160804 Obstacles to an internal market for biofuels DEF · market does not exist for biofuels....

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