Shane Malone and Cathal Ó Cléirigh examine the forthcoming implementation of the amended fuel quality directive, which will introduce a new target for reducing life-cycle greenhouse gas emissions from fuels used in transport in Ireland
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Environmental specifications for transport fuels in the EU are set out in the 1998 fuel quality directive (FQD) (98/70/EC). A 2009 directive (2009/30/EC) amended the original FQD and introduced a target for fuel suppliers to reduce life-cycle greenhouse gas emissions (GHG) emissions from transport fuels by the end of 2020. However, several member states, including Ireland, have yet to transpose this amending directive. The transposition deadline is April 2017.

This article examines the GHG emission reduction target, the progress that Ireland’s fuel suppliers have made towards it and some of the challenges that they will face in achieving it.

The FQD requires the suppliers of transport fuels to reduce the average life-cycle GHG emissions per unit energy (i.e. the GHG intensity) of the fuel they supply by 6 per cent, by the end of 2020, compared to a 2010 baseline of 94.1 gCO2eq/MJ. This baseline represents the average GHG intensity of transport fuel used across the EU in 2010.

Therefore, to comply with the 6 per cent FQD target, the GHG intensity of suppliers’ fuel and energy mix in 2020 must be less than or equal to 88.5 gCO2eq/MJ. The 88.5 gCO2eq/MJ level applies for all qualifying suppliers, no matter what each individual supplier’s GHG intensity was in 2010. The target applies to fuel used in all forms of transport, except for marine vessels and aviation.

Member states may also introduce intermediate targets, i.e. for the year(s) preceding 2020. Since January 2015, suppliers to the German market have been required to meet an annual GHG reduction target.

How will the targets be met?


The primary mechanism for reducing the GHG intensity of transport fuel will be through the substitution of fossil fuels with biofuels. The use of electric vehicles (EVs) and upstream emission reductions (UERs) may also contribute.

The latter are reductions to GHG emissions emitted prior to the raw material (e.g. crude oil) entering a refinery or processing plant. Suppliers will be required to report the quantity and life-cycle GHG intensity of all fuel types (fossil or renewable) and electricity that they supply. Suppliers will be permitted to cooperate to meet the GHG reduction target, i.e. a supplier will be able to trade GHG emission savings or credits with other suppliers.

The suppliers of electricity for use in EVs may opt to contribute to the GHG reduction target. As the GHG intensity of electricity is lower than that of fossil fuels (when adjusted for energy conversion efficiency), suppliers of electricity will likely be in a position to trade ‘excess’ GHG savings with fossil fuel suppliers.

Under the renewable energy directive (RED), some 10 per cent of the final energy consumed in road and rail transport in Ireland in 2020 must come from renewable sources (RES-T target). There are strong links between the 10 per cent RES-T target and the 6 per cent FQD GHG reduction target. Compliance with both will rely, to a large extent, on substituting fossil fuels with biofuels.

Biofuel EV

EV charging point

The main policy instrument for supporting renewable energy in transport in Ireland has been the biofuel obligation scheme, which promotes the use of biofuels in road transport. While Government policy also supports the uptake of EVs, the 2015 energy white paper confirmed that ‘sustainable liquid biofuels will be the largest contributor to RES-T in the period to 2020, with a small contribution coming from electrification’. It is probable that most of the companies currently obligated under the biofuel obligation scheme will be required to meet the FQD target.

While the two targets have much in common, meeting one will not necessarily ensure compliance with the other. There are several reasons for this, including the nature of the fuel mix, the carbon intensity of the biofuels placed on the market and, most importantly, the fact that the RED allows for double counting of biofuels produced from ’wastes, residues, non-food cellulosic material, and ligno-cellulosic material’.

Such biofuels are awarded two certificates per litre through the biofuel obligation scheme and they make up the majority of the biofuels placed on the Irish market. In 2015, 76 per cent of biofuel (by energy) placed on the Irish market was double counted. All of this was biodiesel and it accounted for 99 per cent of all biodiesel on the market.

Used cooking oil (UCO) was the primary biodiesel feedstock; it accounted for 74 per cent of the double-counted biodiesel. The remainder was produced from category 1 tallow (21 per cent) and from spent bleaching earth (4 per cent).

Biofuels cannot be double counted under the FQD; this is the primary reason why the two targets are not completely aligned.

Sustainability of biofuels and upstream emission reductions


For a biofuel to contribute to the FQD target, it must meet the sustainability criteria set out in the FQD. The criteria, and their associated verification requirements, are the same for both the FQD and the RED.

Consequently, compliance with the RED sustainability criteria, which are administered in Ireland via the biofuels obligation scheme, is sufficient to ensure compliance with the sustainability requirements of the FQD.

Under the sustainability criteria, the life-cycle GHG emissions per unit energy from biofuels must be 35 per cent less than that of fossil fuel. From January 2018, this will increase to 50 per cent. For biofuels produced at installations that commenced operations after 5 October 2015, the GHG savings must be 60 per cent. In addition, the FQD and RED contain provisions that prohibit contributions from biofuels produced from previously high-carbon-stock land that has undergone recent land-use change.

The FQD specifies default values for GHG savings for biofuels produced from various feedstocks and processes. These values can be used by suppliers to demonstrate their progress towards the FQD target. They are the same as those specified in the RED.

Biofuel Tail Pipe

Tail-pipe emissions

Upstream emission reductions (UERs) are reductions to GHG emissions that arise prior to the raw material entering a refinery or a processing plant. According to a European Commission impact assessment, upstream emissions account for 5 per cent of the GHG intensity of fossil transport fuels, while downstream (refining and transport) and tail-pipe emissions account for 10 per cent and 85 per cent respectively.

UERs can be claimed for certain emission reduction projects, primarily at oil and gas production and extraction facilities, that commenced after 1 January 2011. For conventional crude oil, the primary target area for UERs is likely to be the reduction of flaring and venting of natural gas, particularly in West Africa and Russia.

Suppliers can claim UERs from projects that are monitored, reported and verified in accordance with ISO 14064 Greenhouse gases.

At present, it is uncertain how UERs will be accounted for and tracked through the supply chain. There is also uncertainty regarding their abundance and value.

Ireland’s progress towards FQD compliance


Applying the methodology set out in European Council Directive (EU) 2015/652 and data from the Biofuel Obligation Scheme Annual Report 2015, it is possible to determine the progress that Ireland’s suppliers had made towards the 6 per cent FQD target by the end of 2015.

The overall GHG intensity of the road transport fuel sold in Ireland in 2015 was 91.9 gCO2eq/MJ, which was 2.3 per cent lower than the 2010 fuel baseline standard (94.4 gCO2eq/MJ). This is equivalent to a shortfall of approximately 550,000 tCO2eq, relative to the 6 per cent target.

To illustrate the scale of the challenge that Ireland’s fuel suppliers will face in overcoming this shortfall, while also meeting the RES-T target, four scenarios are set out in Table 1, each of which is based on a different biofuel blend rate in gasoline and diesel for 2020. In each scenario the ratio of diesel to gasoline is 69:31 (by volume) and 99 per cent of biodiesel is double-counted, reflecting fuel supply patterns in 2015.

Scenario Bioethanol (% vol.) Biodiesel (% vol.) FQD target achieved RES-T target achieved
1 5% 7% No Yes
2 10% 7% No Yes (+ 10%)
3 5% 10% Yes Yes (+ 45%)
4 10% 9% Yes Yes (+ 40%)

Table 1: 2020 scenarios

Figure 1 illustrates how each of the four scenarios compares to the FQD and RES-T targets. Actual data for 2015 is also provided for comparison.

Figure 1: 2015 performance and 2020 scenarios for FQD compliance

Figure 1: 2015 performance and 2020 scenarios for FQD compliance [click to enlarge]

Scenarios 1 and 2 illustrate the limited potential of bioethanol to contribute to the FQD target, even in circumstances where the RES-T target could be achieved. Although the bioethanol blend rate in scenario 2 (10 per cent) is twice that in scenario 1 (5 per cent), the difference in the attributable GHG reduction (blue bar) is marginal. This is because the carbon intensity of bioethanol is, on average, much higher than that of biodiesel and because, as a proportion of the road transport market, gasoline accounts for only 31 per cent by volume.

Contributions from UERs and EVs have been omitted from this analysis. Suppliers’ UERs would contribute towards the FQD target but not towards the RES-T target, while the use of EVs would contribute to both. However, UERs are not yet available and there is little certainty about how a UER system will operate.

Electricity in EVs will contribute, but given the low penetration of EVs in the market to date and the relatively modest projections for growth to 2020, it is not expected to make a significant contribution.

Missing the FQD by 1.9 per cent (as depicted in scenario 1) would require 282,000 tCO2eq to be offset by UERs or EVs. If EVs alone were to compensate for the shortfall, in the order of 300,000 additional EVs would be needed.

Blend wall limitations


Scenarios 3 and 4 illustrate how the FQD target could be reached using biofuels alone, i.e. with no reliance on EVs or UERs. Both scenarios show a requirement for significantly more biofuel (around 9 per cent blend) than needed for RES-T compliance.

However, this could not be achieved using conventional biofuels because of ‘blend wall’ limitations (10 per cent ethanol in gasoline and 7 per cent conventional biodiesel (FAME) in diesel). Gasoline currently sold in Ireland is E5 (contains up to 5 per cent ethanol); however, the European standard for gasoline (EN 228) allows for E10 (up to 10 per cent ethanol).

The European standard for diesel (EN 590) allows for a conventional biodiesel content of up to 7 per cent (referred to as ‘B7’).

Biofuel 2

Used cooking oil

Hydrotreated vegetable oil (HVO), also referred to as ‘renewable diesel’, is one possible solution to the blend wall limitation. It is a like-for-like replacement for diesel and is not subject to a blend limit. HVO can be produced in a hydrotreating process from feedstocks currently used to produce biodiesel (e.g. used cooking oil, spent bleaching earth and tallow).

The availability and use of HVO is currently limited: it accounted for approximately 3 per cent (by energy) of all biofuels consumed in Ireland in 2015.

Biodiesel, including HVO, will almost certainly play a more significant role than bioethanol in assisting suppliers reduce the GHG intensity of their fuels because:

  • The market share of diesel is larger than that of gasoline;
  • The GHG intensity of biodiesel is less than half that of bioethanol (based on 2015 averages); and,
  • There are significant logistical, technical and commercial obstacles to be overcome, before 2020, in order to introduce E10 (gasoline with 10 per cent bioethanol) to the Irish market.

It is likely that biofuels that are not restricted by a blend wall, such as HVO, will play a particularly important role if the FQD target is to be met.

Other options


Biofuels used in transport, other than for road and rail purposes, can also contribute to the FQD and RED targets. Suppliers of aviation fuel are not subject to the FQD target; however, member states have the option of allowing aviation biofuel suppliers to choose to participate. This would allow the GHG savings associated with such biofuels to contribute.

Biofuel 3

Suppliers of aviation fuel are not subject to the FQD target

In the UK, for example, a recent consultation by the Department for Transport has identified biofuel use in aviation as a potential contributor to achieving targets, and the sector will benefit from policy support. Other renewable fuels, such as hydrogen and biomethane, can also make a contribution to both the FQD and RED targets.

The European Commission has published a proposal for a revised RED, which proposes the establishment of annual renewable energy targets for the period up to 2030. However, the Commission has made no indication that there will be a successor to the 2020 FQD GHG reduction target.

Complying with the FQD target will be very challenging for Ireland’s suppliers. There is uncertainty surrounding the contribution from EVs and UERs and, therefore, it is likely that biofuels will be the primary means of reducing the GHG intensity of transport fuel.

There are, however, significant barriers to increasing the volumes of biofuels on the market and with only three years to go until the compliance deadline, the means by which Ireland’s fuel and energy suppliers can reach the target are far from certain.

Authors:


Shane Malone, chartered engineer, BE MIE MIEI, is a partner with Byrne Ó Cléirigh with over 13 years’ experience in engineering and management consultancy. He is the project manager for the biofuels obligation scheme in Ireland and is an expert on compliance with transport energy targets. He also has extensive experience in the wider energy sector, particularly the oil industry, and with assisting private and public sector clients with a broad range of technical and business challenges.

Cathal Ó Cléirigh, BE MIEI, is a project engineer with Byrne Ó Cléirigh. He is a mechanical engineer with substantial experience in energy policy and the computational modelling of energy systems. He also assists clients in the areas of environmental compliance and risk management.

Byrne Ó Cléirigh is a firm of professional engineers and management consultants. The firm provides practical, innovative solutions to management challenges and enables leading organisations to realise their operational and strategic opportunities.

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Environmental specifications for transport fuels in the EU are set out in the 1998 fuel quality directive (FQD) (98/70/EC). A 2009 directive (2009/30/EC) amended the original FQD and introduced a target for fuel suppliers to reduce life-cycle greenhouse gas emissions (GHG) emissions from transport fuels by the end of...