Out of the frying pan, into the engine

14th January 2013


Biofuels

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David Fairchild finds that effective assurance is the only way to ensure waste feedstock for biofuels is from sustainable sources

With biofuels forming an increasingly significant component of the global energy mix, there is pressure to ensure they are sourced sustainably and are not causing indirect land-use change, which affects food supply and price.

Concern that growing demand for biofuels is producing such outcomes prompted the recent announcement by the European Commission that it plans to alter the Renewable Energy Directive (2009/28/EC) (RED) by placing a cap on the amount of crop-based feedstocks that can be used to meet the 10% biofuels target set for 2020.

So-called “second generation” biofuels are made of materials (feedstocks) that are not suitable for the human food chain and may, therefore, pose less of a threat to food supply. Biofuels can also be made from feedstocks derived from waste, which has further benefits including preventing the need for disposal of a waste product, and having no direct land requirements for their production.

These are the fuels the commission wants to encourage. “Our clear preference is for biofuels produced from non-food feedstocks, like waste or agricultural residues,” said climate action commissioner Connie Hedegaard and energy commissioner GÜnther Oettinger in a joint statement proposing the change to the RED.

Driving change

The RED and the Fuel Quality Directive (2009/30/EC) (FQD) are the main drivers behind rising demand for biofuel in Europe. While the RED sets out requirements for 20% of all energy to come from renewable sources by 2020, the FQD sets a target of 10% of transport energy to come from renewable fuels by the end of the decade.

The RED and associated commission communications contain guidance on what meets the definition of a “sustainable” biofuel, and how this definition can be met by providing evidence on land use, greenhouse-gas (GHG) emissions and traceability.

The directives became EU law in June 2009, though the sustainability components only came into force in UK legislation in December 2011. Biofuels in each EU member state are governed by national schemes and requirements. In the UK, the transport department (DfT) currently requires road fuel suppliers to blend 4.7% biofuel with road fuel under the Renewable Transport Fuel Obligation.

The need to meet EU targets has, in certain member states, led to national incentives being put in place for biofuels with the greatest carbon saving – against the fossil fuel comparator given in the RED. The UK, Germany, Holland and Italy, for example, all have double-counting schemes in place, under which certain fuels derived from waste count double towards road fuel suppliers’ obligations.

These incentives bring with them an increased risk of fraud as they increase the value of waste feedstocks; this heightens the need for effective assurance across the whole supply chain, to ensure that the biofuel feedstock is of genuine waste origin.

There is an ongoing debate around the definition of waste in relation to biofuels. The commission defines waste in this context as “any substance or object … the holder discards or intends or is required to discard”.

However, deciding what is and isn’t waste is far from a simple task. The very fact of creating a use for a waste effectively turns it into a product. As such, the wastes currently being used as a feedstock for biofuels are generally limited to those specifically defined as such in the RED, namely used cooking oil (UCO) and tallow (rendered animal fat).

Well-oiled supply chains

All biofuel supply chains, including those for waste feedstocks, can be highly complex. There may be a large number of individual sources of wastes, for example canteens and restaurants providing used cooking oil.

These small volumes tend to be aggregated by collectors, traders and finally processors into much larger parcels to sell on to road fuel producers and distributers. This diversity is critical to understanding the complexity of biofuel supply chains over those of fossil fuels, where crude oil for refining will generally originate in bulk from fewer sources.

Given these supply chain complexities and the multiple parties involved, getting a clear picture of where a batch of biofuel originated can be extremely challenging. Commercial sensitivities, language barriers and different modes of operation can further compound such complexity across international borders. This combination results in limited transparency along supply chains, giving rise to restricted information flows.

For biofuels to be counted under national obligations for renewable fuels as set out in the RED and FQD (and by road fuel suppliers), land use and GHG information has to be passed along the supply chain in a traceable manner.

There are essentially two options in the RED to determine the origin of supply: physical segregation; and operating a mass balance system. In the latter, the sustainability information attached to incoming material must match the outgoing sustainability information over a given period. As materials can be mixed, a mass balance system may reduce costs and complexity for operators compared to physical segregation, while still providing a traceable system.

Tracing the origin of used cooking oil is relatively straightforward. Once the UCO reaches the processor, it is esterified to form a used cooking oil methyl ester (UCOME), which can be blended with conventional diesel. As UCOME is derived from waste products there is no need to review land information, and there is a default GHG value given in the RED for UCO. Therefore, the only reporting requirements for UCOME are to demonstrate it originated from waste and to trace this along the full supply chain.

Evidence of original waste collection and its transfer along the supply chain can take many forms. Possibly the most robust form of evidence is a waste transfer note, which is required in some EU states, including the UK, when collecting waste products. Other types of documentation include supplier declarations and third-party statements.

Assuring traceability

For road fuel suppliers to have biofuels count against their obligation to supply a certain level of renewable fuel, independent auditing of biofuel batches is required by the relevant competent authority, which in the UK is the DfT.

Auditing is conducted on a “limited” assurance basis, where the auditor simply states that he or she has not found anything to suggest that the biofuel is not what it claims to be. This is a less stringent form of assurance than the “reasonable” level used for financial accounting, and some other environmental compliance schemes, such as the EU emissions trading scheme.

To achieve even a limited level of assurance, sustainability information must be passed along the supply chain in a transparent manner. This information is often summarised by each supplier in a carbon and sustainability statement, which is a declaration regarding the land use and GHG information linked to the supplied biofuel. Items such as contracts, bills of lading (documents used in the transport of goods by sea), transport documentation, waste transfer notes and supply chain audit reports will support this disclosure.

To aid the assurance process, the commission has approved a number of voluntary schemes to demonstrate compliance with the RED. Of these, only the ISCC, RSB, 2BSvs, RBSA, Red Cert and NTA 8080 have specific provision for waste feedstocks.

The systems for these schemes generally involve annual certification audits at each step of the supply chain, from the refinery downstream. Upstream from the refinery, supplier declarations are used to establish feedstock provenance.

While voluntary schemes ensure effective systems are in place, errors in data may only be picked up at a subsequent annual surveillance audit, by which time the fuel will have been long since passed on. Reviewing data on an individual cargo basis can add substance to information provided through voluntary schemes.

Catching up

The biofuels market has seen rapid expansion over the past few years and is set to grow further. UK capacity, for example, is predicted to reach 918 million litres this year, possibly rising to 1,268 million litres in 2016.

The pace of expansion means that suppliers and regulators are still working to fully understand supply chains, traceability and assurance requirements. Biofuels derived from waste feedstocks are an effective way to alleviate this issue, but a robust assurance approach is essential to ensure that supply is sustainable.

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