Review of the impacts of the RTFO on other users of tallow Update - - PowerPoint PPT Presentation

Review of the impacts of the RTFO on other users of tallow Update for LowCVP Fuels Working Group, 20 May 2008

Tallow Report - Background

• Concerns raised by oleochemical industry and others that Government

support for biofuels would have adverse impacts by increasing the price of tallow and forcing them to use less environmentally friendly alternatives (palm

• il).
• During the passage of the RTFO order through Parliament in October 2007,

DfT Minister, Jim Fitzpatrick, said that: “The Government will commission an independent review of the likely impacts of the RTFO on the other UK industries that use tallow as a

• feedstock. The review will also consider the wider environmental impacts of

supporting the use of tallow as a biodiesel feedstock…. In the light of the review’s

findings, the Government will consider whether changes need to and can be made to the design of the RTFO. Any changes to the RTFO order would not take effect until 2009 at the earliest and may need to be approved by the European Commission."

• Concerns raised by oleochemical industry and others that Government

support for biofuels would have adverse impacts by increasing the price of tallow and forcing them to use less environmentally friendly alternatives (palm

• il).
• During the passage of the RTFO order through Parliament in October 2007,

DfT Minister, Jim Fitzpatrick, said that: “The Government will commission an independent review of the likely impacts of the RTFO on the other UK industries that use tallow as a

• feedstock. The review will also consider the wider environmental impacts of

supporting the use of tallow as a biodiesel feedstock…. In the light of the review’s

findings, the Government will consider whether changes need to and can be made to the design of the RTFO. Any changes to the RTFO order would not take effect until 2009 at the earliest and may need to be approved by the European Commission."

AEA Independent Report

• AEA Technology were commissioned to carry out the review and complete a report

before the RTFO commenced on 15 April 2008. They contacted a range of stakeholders including biodiesel manufacturers, oleochemical industry and renderers.

• The review had four main tasks:-
• To gain an understanding of the UK market for tallow
• Assess the impact of using tallow for making biodiesel on tallow prices
• Assess the impact of the RTFO on the UK oleochemical, speciality chemicals and

the cleaning product industries.

• Assess whether the diversion of tallow into biodiesel from other industries will

have a beneficial or harmful greenhouse gas impact

• A number of interviews and workshops were held and AEA’s final report was

published on 9 April.

• http://www.dft.gov.uk/pgr/roads/environment/rtfo/tallow/tallowfinalreport.pdf
• AEA Technology were commissioned to carry out the review and complete a report

before the RTFO commenced on 15 April 2008. They contacted a range of stakeholders including biodiesel manufacturers, oleochemical industry and renderers.

• The review had four main tasks:-
• To gain an understanding of the UK market for tallow
• Assess the impact of using tallow for making biodiesel on tallow prices
• Assess the impact of the RTFO on the UK oleochemical, speciality chemicals and

the cleaning product industries.

• Assess whether the diversion of tallow into biodiesel from other industries will

have a beneficial or harmful greenhouse gas impact

• A number of interviews and workshops were held and AEA’s final report was

published on 9 April.

• http://www.dft.gov.uk/pgr/roads/environment/rtfo/tallow/tallowfinalreport.pdf

AEA report cont’d

• The review compares two scenarios. Both assume that the replacement raw

material for tallow will be palm oil:-

• Scenario 1: All UK tallow is used for soap and oleochemicals with the

balance burnt as boiler fuel (at rendering plants). Biodiesel production in UK that would have used tallow is made from imported palm oil instead.

• Scenario 2: All UK tallow is used for biodiesel. Rendering plants burn fuel oil

instead of tallow. Oleochemicals are made in the Far East from palm oil.

• The review compares two scenarios. Both assume that the replacement raw

material for tallow will be palm oil:-

• Scenario 1: All UK tallow is used for soap and oleochemicals with the

balance burnt as boiler fuel (at rendering plants). Biodiesel production in UK that would have used tallow is made from imported palm oil instead.

• Scenario 2: All UK tallow is used for biodiesel. Rendering plants burn fuel oil

instead of tallow. Oleochemicals are made in the Far East from palm oil.

Key Findings:

• Tallow is a limited resource and imports from abroad to expand supply are

unlikely given the higher costs. All tallow produced in UK is used for some economic purpose.

• The main uses are:
• Category 1 – only for burning or fuel,
• Category 2 – industrial applications,
• Category 3 – soaps and cosmetics.
• If category 1 prices increase sufficiently (by about 25%) this acts as a

disincentive for the production of categories 2 and 3 tallow and their availability decreases.

• Tallow is a limited resource and imports from abroad to expand supply are

unlikely given the higher costs. All tallow produced in UK is used for some economic purpose.

• The main uses are:
• Category 1 – only for burning or fuel,
• Category 2 – industrial applications,
• Category 3 – soaps and cosmetics.
• If category 1 prices increase sufficiently (by about 25%) this acts as a

disincentive for the production of categories 2 and 3 tallow and their availability decreases.

Key Findings cont’d

• A high crude oil price might still give an economic incentive to divert tallow

into biodiesel production - even without RTFO and duty incentives.

• The least cost solution to meet the RTFO targets results in biodiesel

producers buying all available domestic supply of tallow.

• Diversion will have a significant effect on the oleochemicals and soap

industry as alternative feedstocks are not available in the UK and buying alternatives, ie palm oil, would have significant effects - closure of a significant part of its production in the UK and job losses.

• Renderers would be likely to buy low sulphur fuel oil to replace the tallow

used for heat and steam in their plants.

• Diverting tallow to biodiesel leads to a net increase in GHG emissions

equivalent to c. 1 tonne of CO2e per tonne of tallow displaced.

• Diverting all UK tallow to biodiesel could therefore increase CO2 emissions

by almost 200,000 tonnes

• A high crude oil price might still give an economic incentive to divert tallow

into biodiesel production - even without RTFO and duty incentives.

• The least cost solution to meet the RTFO targets results in biodiesel

producers buying all available domestic supply of tallow.

• Diversion will have a significant effect on the oleochemicals and soap

industry as alternative feedstocks are not available in the UK and buying alternatives, ie palm oil, would have significant effects - closure of a significant part of its production in the UK and job losses.

• Renderers would be likely to buy low sulphur fuel oil to replace the tallow

used for heat and steam in their plants.

• Diverting tallow to biodiesel leads to a net increase in GHG emissions

equivalent to c. 1 tonne of CO2e per tonne of tallow displaced.

• Diverting all UK tallow to biodiesel could therefore increase CO2 emissions

by almost 200,000 tonnes

Key findings cont'd

• RTFO should consider the effect of substitution on the overall sustainability of

switching tallow to biofuels production. Indirect impacts on GHG emissions should be considered.

• Switching tallow to biodiesel will also have a net negative effect on

employment, gross value added and the balance of trade. (income from

• leochemicals exports reduces if switch to imported oleochemicals, not

compensated by the decrease in imported diesel.)

• Oleochemicals industry in the UK is facing a number of problems, including

increased competition from the Far East. Demand for tallow for biodiesel is likely to be a contributory factor but there is not much direct evidence that this is happening at present.

• RTFO should consider the effect of substitution on the overall sustainability of

switching tallow to biofuels production. Indirect impacts on GHG emissions should be considered.

• Switching tallow to biodiesel will also have a net negative effect on

employment, gross value added and the balance of trade. (income from

• leochemicals exports reduces if switch to imported oleochemicals, not

compensated by the decrease in imported diesel.)

• Oleochemicals industry in the UK is facing a number of problems, including

increased competition from the Far East. Demand for tallow for biodiesel is likely to be a contributory factor but there is not much direct evidence that this is happening at present.

AEA’s Recommendations

• The scope of the RTFO 's carbon reporting methodology should be expanded

to ensure it takes account of any fuel switches which occur at the rendering plant.

• The EU draft Renewable Energy Directive proposes double rewards for

biofuels produced from waste such as tallow - however this approach makes no provision for displacement impacts or other indirect effects. Government should draw Commission's attention to this.

• UK Government should share findings of AEA report with EU and other

Member States.

• The scope of the RTFO 's carbon reporting methodology should be expanded

to ensure it takes account of any fuel switches which occur at the rendering plant.

• The EU draft Renewable Energy Directive proposes double rewards for

biofuels produced from waste such as tallow - however this approach makes no provision for displacement impacts or other indirect effects. Government should draw Commission's attention to this.

• UK Government should share findings of AEA report with EU and other

Member States.

Next steps.

• DfT will be discussing the report's findings with stakeholders over the months

ahead, and will consider them carefully in the context of current EU negotiations on future biofuel targets.

• DfT will discuss with the Renewable Fuels Agency the recommendation that

changes are made to the carbon saving assumptions of tallow in the carbon and sustainability reporting mechanism. This will require consultation on the details.

• The draft Renewable Energy Directive (RED) proposes that biofuels

produced from wastes, such as tallow, should be eligible for double rewards under obligations such as the RTFO. We will take the findings of the review into account in EU negotiations on the RED.

• AEA's report is being considered as an input to the Gallagher review on the

wider displacement impacts of biofuel production and what these mean for future biofuel policies and targets. RFA's report is due to be published in late June.

• DfT will be discussing the report's findings with stakeholders over the months

ahead, and will consider them carefully in the context of current EU negotiations on future biofuel targets.

• DfT will discuss with the Renewable Fuels Agency the recommendation that

changes are made to the carbon saving assumptions of tallow in the carbon and sustainability reporting mechanism. This will require consultation on the details.

• The draft Renewable Energy Directive (RED) proposes that biofuels

produced from wastes, such as tallow, should be eligible for double rewards under obligations such as the RTFO. We will take the findings of the review into account in EU negotiations on the RED.

• AEA's report is being considered as an input to the Gallagher review on the

wider displacement impacts of biofuel production and what these mean for future biofuel policies and targets. RFA's report is due to be published in late June.