The measures introduced by the Fuel Quality Directive are expected to give a significant boost to the European biofuels market.
The Fuel Quality Directive amends two previous European directives relating to the quality of petrol and diesel (Directive 98/70/EC of the European Parliament and Council relating to the quality of petrol and diesel fuels as amended by Directive 2003/17/EC). Broadly, the changes aim to:
- introduce a mechanism for the reporting of and reduction in the life cycle of greenhouse gas emissions from fuel;
- enable the more widespread use of ethanol in petrol; and
- tighten environmental quality standards for specified fuel parameters.
A requirement to reduce lifecycle greenhouse emissions by 6%
The Fuel Quality Directive obliges fossil fuel suppliers to reduce greenhouse gas emissions from their fuels throughout their life-cycle by 6%, a reduction from the Commission's initial proposal for a binding 10% reduction. However, the Commission will review the target in 2012 in the light of technological advances (such as the use of electricity in transport) reserving the option to increase the reduction target by a further 2%. Subject to that review, a further 2% reduction is expected to be achieved through the use of Certified Emissions Reductions (CERs) obtained from projects related to flaring reductions which are not linked to EU oil consumption.
Increasing the biofuel content of petrol and diesel
Perhaps the most significant change brought about by the Fuel Quality Directive is the increase in the permissible content of biological components of petrol to up to 10% by the phasing in of 10% Ethanol (E10) petrol. Petrol meeting current requirements (containing up to 5% by volume of ethanol) will continue to be marketed until 2013, with the possibility of an extension. This transitional period has been introduced to mitigate the potential damage that would be caused to vehicles which are not calibrated or covered by a warranty allowing the use of petrol with an ethanol content of over 5% by volume.
The Fuel Quality Directive also provides for changes to the current diesel specifications, allowing a content of fatty acid methyl ester (FAME) of up to 7% by volume, with no limit on other advanced biodiesel blends in the conventional diesel specification. Although allowances are made for Member States that want to make biodiesel blends with a FAME content of 10% by volume available, as a result of the new specification, diesel constituting up to 7% by volume of FAME (B7) is likely to be the grade of diesel predominately available on the European market.
Sustainability criteria still to be established
European legislators intend the Fuel Quality Directive to incorporate sustainability criteria for biofuels used to meet greenhouse gas reduction requirements. Despite criteria being set out in the Renewable Energy Directive, these criteria had not been agreed by the time that the package was adopted. The European Commission has been tasked with developing a methodology to assess the environmental impact of biofuels across their life-cycle by December 2010.
Member States have until 31 December 2010 to transpose the Fuel Quality Directive into national law. Once implemented, it is likely to have a significant impact on fuel suppliers throughout the distribution chain as well as fuel producers, who more so than other affected parties, will have to adapt to meet the new quality criteria.