Netherlands proposes to reduce biofuel crediting

The Dutch government is proposing to reduce multipliers for various types of liquid and gaseous biofuels (as well as electromobility) in transport regulation. The move comes as the country tries to encourage higher levels of biofuel consumption amid concerns that too many compliance credits are being awarded.

An email dated Wednesday, November 2, from the Netherlands National Emissions Agency (NEa) included a link to a revised consultation document dated November 1, which set out changes that the Dutch environment ministry wants to make.

“This amending regulation reduces the multipliers of energy content reduced for entries of liquid and gaseous renewable fuels, electricity and advanced fuels,”. The document states that the government wants to see higher volumetric levels of physical blending of biofuels to reduce the country’s reliance on fossil fuels in the wake of Russia’s war on Ukraine and counter potential diesel shortages.

“It is a sudden new development,” said a source with close knowledge of the rationale for the changes set out in the consultation.

Proposed amendments

Under the changes, liquid biofuels, including traditional FAME-based biodiesel and hydrotreated vegetable oil (using standard wastes and ‘advanced’ feedstock), and biogas would be subject to an x1.6 multiplier instead of the currently mandated x2.

Meanwhile, the multipliers for electricity supplied to transport (recharging) and renewable fuels of non-biological origin would be reduced from the current x2.5 to x2.

In its justification of the changes, the environment ministry also referenced the EU’s ‘Fit for 55’ package of climate and energy measures that includes a much more ambitious version of the Renewable Energy Directive.

The draft version of the revised regulation cited other reasons why multipliers should be lowered, referring to the share of renewable fuels supplied to maritime shipping as “rising sharply” and “at the expense of the blending of (high-quality) biofuels in road transport.”

It added: “By using this amendment scheme to reduce the multipliers of the energy content for entries of liquid and gaseous renewable fuels, electricity and advanced fuels, additional deployment of renewable energy becomes necessary.”

With its proposals to reduce multipliers for a wide range of biofuels and for electromobility, the announcement made on Wednesday has widened the changes beyond the marine biofuel sector, which appeared to be the main focus of a previous consultation document set out in early October that proposes to reduce the credits on offer for biofuel supplied to international shipping.

Participants in the Dutch renewable fuels market, and the associated HBE compliance credit market, have said for several years that the large volumes of advanced biofuels flowing to the marine sector – which are subject to a multiplier of x0.8 – was pumping up the volume of credits at the expense of physical blending.

The ‘market distortion’ in compliance credits caused by large volumes of ‘advanced biofuels’ used in marine – much of it thought to be sourced from effluent and residues from palm oil and other crop cultivation – is blamed for crimping demand for hydrotreated vegetable oil in particular.

The Netherlands is poised to become one of Europe’s biggest producers of HVO (renewable diesel), with thousands of new jobs being created in Rotterdam as new production plants are being built for 2024-25.

Given that demand for HVO is in part driven by the biofuel’s high GHG savings compared with fossil diesel, it is a valuable commodity in terms of reducing the carbon footprints of retail, freight, and logistics, reductions that aren’t fully reflected in the volumetric-based HBE system.

However, measures to curb crediting for advanced biofuels, biogas and electromobility are likely to irk some companies in these sectors because projects will have secured financing partly on the assumption that certain multipliers would be in play.

The consultation on the newly-proposed changes will last until November 8, and extends a deadline by a week for interested parties to lodge their views and feedback on what are sweeping changes to the main set of policies that dictate the use of renewable fuels in one of the world’s leading countries in the sector.

For more information on the current biofuels market, take a look at our dedicated page for biofuels news.