EU: Fuels: Renewable Transportation Fuel Policies
Background
An important policy tool in the European Union’s efforts to reduce GHG emissions is the Renewable Energy Directive. It was first published in 2009 and recast in 2018 and 2023. In 2009, targets for 2020 were set and sustainability criteria defined. The 2018 recast set targets to 2030 and further refined the sustainability criteria. The Renewable Energy Directive focuses on fuels for road and rail transport.
In 2021, the Fit for 55 package was released that included several policy instruments to further promote renewable fuels for transport. This included a recast of the Renewable Energy Directive as well as other policy proposals to increase the uptake of renewable fuels in aviation and marine as well as a policy to ensure the deployment of sufficient alternative fuels infrastructure for these applications.
Renewable Energy Directive
RED
In 2009, the European Union passed two important directives affecting transportation fuels. The Renewable Energy Directive (RED) set an overall target for renewable energy consumption of 20% by 2020 as well as a sub-target mandating 10% of the energy used for transport to be produced with renewable sources [6216]. The Fuel Quality Directive (FQD) set a greenhouse gas (GHG) reduction target for fuel suppliers, requiring them to reduce the GHG intensity of the transportation fuel mix by a minimum of 6% by 2020 [6205]. These directives also defined sustainability criteria for renewable fuels including the exclusion of biofuels produced from feedstocks obtained from land with high biodiversity value, high carbon stock and those produced on recently deforested land or drained peatland. To qualify towards the renewable energy target, biofuels were required to provide at least a 35% GHG reduction compared to fossil fuels. While these directives did not account for indirect land use change (ILUC) emissions, a 2015 amendment capped the contribution of food- and feed-based biofuels used in transport to a maximum share of 7% [6217].
As noted by the European Environment Agency, the 6% GHG reduction by 2020 was not met. Without accounting for ILUCs, the GHG intensity of transportation fuels decreased by 5.5% between 2010 and 2020. If ILUCs are included, the decrease was 3.3% [6240].
RED II
In 2018, the Renewable Energy Directive (RED II) was recast, setting the overall EU renewable energy consumption to 32% by 2030 with a sub-target of 14% of road and rail transport energy [6208][6231]. The 14% transport target included a sub-target for advanced biofuels of a minimum of 3.5% by 2030. Advanced biofuels (see Annex IX, part A, of the Directive) would be double counted towards both the 3.5% target and towards the 14% target. Biofuels produced from used cooking oil and animal fats with high risk for human health or those suitable for soil enhancement (see Annex IX, part B, of the Directive) were capped at 1.7% in 2030 and were also double counted towards the 14% target. The maximum contribution of biofuels produced from food and feed crops were frozen at 2020 consumption levels plus an additional 1% with a maximum cap of 7% of road and rail transport fuel in each member state. Renewable electricity was counted 4 times its energy content towards the 14% target when used in road vehicles, and 1.5 times when used in rail transport. Fuels used in the aviation and maritime sectors were excluded from the 14% obligation but could optionally be counted towards the target. A 1.2 times multiplier for renewable aviation and marine fuel applied unless they were produced from food- and feed-based feedstocks. RED II also defined sustainability and GHG emission criteria, some of which were carried over from the original RED, while others were new or reformulated.
Other noteworthy aspects of RED II included the treatment of intermediate crops, high indirect land-use change (ILUC) feedstocks, renewable fuels of nonbiological origin (RFNBOs) and recycled carbon fuels (RCFs). RFNBOs and RCFs can also be used towards the 14% transportation target.
- Excluded from the definition of food and feed crops were intermediate crops that are produced outside the main growing season. However, these can include crops used as food and feed.
- High ILUC feedstocks, defined as those for which a significant fraction of the expanded production area occurs on high carbon-stock land, were to be phased out by 2030. In a 2019 delegated regulation, only palm oil was identified as a high ILUC feedstock [6221].
- RFNBOs include hydrogen and e-fuels produced via electrolysis using renewable electricity and are required to provide a 70% GHG reduction compared to fossil fuels. A delegated regulation published in 2023 details rules on how to ensure that the electricity used to produce RFNBOs is fully renewable [6222].
- RCFs include fuels produced from industrial flue gases and waste plastics. A delegated regulation published in 2023 set a requirement that they provide a 70% GHG reduction compared to fossil fuels as well as defining the methodology to calculate the greenhouse gas emissions savings [6223].
Fit for 55 Package
Regulatory Components
In July 2021, the European Commission released the “Fit for 55” package with a goal of reducing the European Union’s GHG emissions by 55% in 2030 compared to 1990 levels. Included in this package were:
- updating the Renewable Energy Directive to set more ambitious 2030 targets (RED III) [6207][6209][6232][6233],
- the ReFuelEU Aviation regulation that set EU-wide blending targets for renewable fuel in aviation [6224],
- the FuelEU Maritime regulation that introduced GHG intensity reduction requirements for the energy used on board by ships [6225],
- a recast of the EU’s Emission Trading System (EU ETS) to include GHGs from marine vessels [6229][6230] and
- the Alternative Fuels Infrastructure Regulation (AFIR) that converts the Alternative Fuels Infrastructure Directive into a regulation and introduces mandatory deployment targets for electric charging stations and hydrogen refueling stations for Member States [6226].
RED III
The RED III increased the ambition of the 2030 target for renewable energy in transport to either a 14.5% GHG intensity reduction or a 29% renewable energy target, leaving it up to individual Member States to select between these two options. The scope of the target was expanded to include fuel supplied for marine and aviation transport. The GHG reduction thresholds to determine eligibility for biofuels and RFNBOs remain unchanged. The 6% GHG intensity reduction target by 2020 in the Fuels Quality Directive as well as related calculation methods and reporting requirements was also removed. A combined 5.5% advanced biofuel and RFNBO target by 2030 (minimum 1% from RFNBO), with an interim target of 1% by 2025, was introduced and is calculated on an energy basis. Advanced biofuels and RFNBOs are double counted towards the overall target. Biogas injected into the national transmission and distribution infrastructure may count towards the target [6207]. Table 1 summarizes some of the important changes in RED III [6233].
| 2018 RED II | 2023 RED III | |
|---|---|---|
| Renewable energy in transport | 14% energy target for road and rail | 14.5% GHG intensity reduction target or 29% renewable energy target for all transport |
| Advanced biofuels (Annex IX, part A) | 3.5% for road and rail | 5.5% combined with a 1% RFNBO minimum for all transport |
| Renewable fuels of nonbiological origin (RFNBOs) | No target | |
| Waste oils (Annex IX, part B) | 1.7% cap for road and rail | 1.7% cap for all transport |
| Food- and feed-based biofuels | Cap at whichever is lower: 7% or 2020 consumption in each member state + 1% (road and rail) | Cap at whichever is lower: 7% or 2020 consumption in each member state + 1% (all transport) |
| Multipliers |
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Towards the overall 29% renewable energy target and all applicable sub targets for either an energy target or GHG target:
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| Fossil comparator |
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ReFuelEU Aviation
The ReFuelEU Aviation regulation provides EU-wide blending targets for sustainable aviation fuel (SAF) from 2025 to 2050. SAF includes synthetic aviation fuels, aviation biofuels and recycled carbon aviation fuels. Synthetic aviation fuels are RFNBOs. Renewable hydrogen can also be used towards the targets. SAF produced from food and feed crops, intermediate crops, palm fatty acid distillate and palm and soy-derived materials, and soap stock and its derivatives are excluded. The regulation applies to aviation fuel suppliers. Table 2 summarizes the targets and shares of SAF are calculated on a volume basis. Flexibilities in achieving the targets in Table 2 are available until 12.2034 [6224].
| Date | SAF min. % (V/V) | Synthetic aviation fuel (RFNBO) min. % (V/V) |
|---|---|---|
| 2025.01 | 2% | |
| 2030.01 | 6% | 1.2% average (0.7% min. in each year) |
| 2032.01 | 6% | 2.0% average (1.2% min. in each year) |
| 2034.01 | 6% | 2.0% |
| 2035.01 | 20% | 5% |
| 2040.01 | 34% | 10% |
| 2045.01 | 42% | 15% |
| 2050.01 | 70% | 35% |
FuelEU Maritime
The FuelEU Maritime regulation introduces a limit on the greenhouse gas (GHG) intensity of energy used on board a ship and an obligation to use on-shore power supply (OPS) or zero-emission technology in-port. It applies to all ships of above 5 000 gross tonnage arriving at, staying within or departing from ports under the jurisdiction of a Member State. It applies to all energy used on ships at EU ports and on voyages between EU ports and to half of the energy used on voyages between an EU port and a third country or an EU port in an outermost region [6225].
Fuels that can be used to lower the GHG intensity include biofuels, biogas, RFNBOs, RCFs, and any fuels that have been certified according to the EU’s Gas Directive [6227]. RFNBOs receive a 2 times multiplier towards the GHG reduction target from 2025 through 2033.
The yearly average GHG intensity of the energy used on board a ship during a reporting period shall not exceed the limit calculated by reducing the reference value of 91.16 gCO2e/MJ by an increasing percentage reduction, Table 3.
| Date | Reduction | Required GHG intensity gCO2e/MJ |
|---|---|---|
| 2025.01 | 2% | 89.3 |
| 2030.01 | 6% | 85.7 |
| 2035.01 | 14.5% | 77.9 |
| 2040.01 | 31% | 62.9 |
| 2045.01 | 62% | 34.6 |
| 2050.01 | 80% | 18.2 |
The limits apply at a fleet level as opposed to individual vessels. Surpluses from overcompliance with the GHG intensity targets for one reporting period (such as a calendar year) may be banked for use in the next reporting period. Ship operators may incur a deficit of up to 2% of the GHG intensity limit in one year but must make up the deficit plus 10% in the subsequent year. This cannot be done in two consecutive years.
The requirement to use onshore power supply (OPS) or a zero-emission alternative when berthed at major European ports takes effect in 2030 for container and passenger vessels and is extended to a wider range of ports from 2035.
EU ETS
A recast of the EU’s Emission Trading System to include maritime transport was another aspect of the Fit for 55 package [6229][6230]. The ETS puts a cap on the total GHG emissions for sectors it regulates. The cap decreases over time and forces those sectors to decarbonize.
The requirements for the EU ETS are tied closely with the requirements of the monitoring, reporting and verification of maritime CO2 emissions regulation established in 2015. Prior to the inclusion of shipping into the EU ETS, monitoring, reporting and verification (MRV) of tank-to-wake (TtW) CO2 emissions was established effective 2018 for ships above 5,000 gross tonnage [6234]. In 2023, this regulation was expanded to include methane (CH4) and nitrous oxide (N2O) and to include general cargo ships between 400 and 5,000 gross tonnage and offshore ships above 400 gross tonnage starting in 2025 [6228].
Starting 2024.01, the EU ETS covers emissions from shipping. It covers 100% of emissions from voyages between European ports (EU, Norwegian and Icelandic (EEA) ports) and 50% of emissions between European and non-European ports. In 2024, 40% of reported eligible CO2 emissions will be subject to the ETS, 70% in 2025 and 100% in 2026. CH4 and N2O emissions will be included in the MRV from 2024 for reporting in 2025 and will be included in ETS from 2026.
The tank-to-wake (TtW) CO2 emissions from cargo and passenger ships of 5,000GT and above, reported under the MRV system in 2024, will be subject to the ETS starting in 2025. For offshore ships and general cargo ships of 400GT to 5000GT, and for offshore ships of 5000GT and above, MRV reporting will be applicable from 2025. A review of the subsequent inclusion of offshore ships of 5,000GT and above for inclusion in the ETS from 2027 is scheduled for 2026. A review of whether emissions should be considered on a Well-to-Wake (WtW) instead of TtW basis is also to be carried out in 2026.
By 2025.09, CO2 emissions from vessels subject to the MRV requirements in 2024, will need to be offset with EU Allowances, traded via the European Energy Exchange, to cover 40% of their 2024 tank-to-wake (TtW) CO2 emissions. This rises to 70% of 2025 CO2 emissions by 2026.09 and 100% of 2026 CO2, CH4 and N2O emissions by 2027.09. Failure to surrender sufficient allowances each September to cover the previous year’s emissions will result in a penalty being accrued, in addition to the owed EU allowance.