Renewable Transport Fuel Obligation DfT presentation to LowCVP Fuels Working group, 5 October 2006
I ntroduction • Currently finalising details of scheme prior to formal consultation in early 2007 • A number of detailed issues still to be resolved – slides below set out current working assumptions and should not be taken as a statement of Government policy • Areas for further discussion include: � Charging � Banking � Carbon and sustainability reporting
Explaining the Schem e Design • Key Assumptions • Main Operational Processes
1. We have made a number of assumptions in order to take the design forward within programme timescales… • The Obligation period is one year, from April 15 th to April 14 th. • The Obligation rate covers all road fuels except road fuel gases and is applied to total fuel sales • Certificates are currency units associated with a period – they do not have an identifier, an expiry date or other properties • Anyone who can supply the required information can register on the scheme and trade certificates
Assumptions (continued) • There will be banking and redemption of certificates from previous periods • Recycling will be required and permissible • Monthly reporting of CES data and other scheme performance information will be required. • There will not be an information gateway from the HMRC • There will not be any charging, at least in the early years of the scheme.
Assumptions (continued) • There will be banking and redemption of certificates from previous periods • Recycling will be required and permissible • Monthly reporting of CES data and other scheme performance information will be required. • There will not be an information gateway from the HMRC • There will not be any charging, at least in the early years of the scheme.
2. Main Operational Processes • Registration process • Awarding of certificates • Trading of certificates • End of year reconciliation • Processing of carbon and sustainability reports • Possible establishment of certification system for C&S reports • Compliance and enforcement
The “Register a new account” process The Administrator Suppliers and Traders • Fossil fuel suppliers above the de minimis level log-on and do first part of registration: • Identity of organisation, directors and Administrator verifies identity (max 3) users information • Proofs of identity • Expected volumes Administrator requests further information e.g. user We expect that most supplier names and passwords, bank accounts will be registered during system piloting and details for payments etc roll-out Confirm user names and complete security process Confirm log-on successful, provide account number etc.
The “Aw ard Certificates” process The Administrator Suppliers 15 Aug 14 Sept Monthly reporting interval Suppliers submit volume Suppliers submit C&S data that they have data apportioned to the previously given to fuel delivered HMRC 14 Oct Monthly reporting deadline Administrator asks for confirmation • Automated data upload • Automated validity check Administrator does risk profiling • No evidence provided to identify any unusual volumes Evidence is requested in the A “cooling-off” period allows any inadvertent case of suspicious volumes and errors to be corrected certificate issue is suspended Administrator awards certificates to all approved balances 14 Nov End of cooling-off period
The “Trade Certificates” process The Administrator Suppliers and Traders Suppliers agree Suppliers agree the details of a the details of a trade trade • Data is submitted via Vendor submits details internet interface of number of • Transaction is automated certificates, date of transaction and purchaser account number Administrator transfers the certificates from one account to the other Purchaser can check • No purchaser confirmation is details of trade on required certificate balance • Any disputes between suppliers re the value or timing of the transaction are outside the scheme.
The “End-of-period reconciliation” process The Administrator Suppliers 14 June End of cooling-off period Administrator issues provisional fuel volumes and obligation volumes Suppliers finalise their volumes with HMRC and provide an auditor’s opinion that the volumes reported to the Administrator and HMRC tally. 14 Aug Auditor’s opinion deadline Administrator issues revised Suppliers may trade to meet any further deficit in fuel volumes and obligation their position volumes 31 Aug Supplementary trading period ends Administrator issues final Suppliers meet their obligations with certificates volumes and/or buy-out payments Biofuel suppliers decide whether to surrender or bank certificates 7 Nov Late payment deadline Administrator recycles buy-out funds to suppliers
Processing m onthly C&S reports • Projects on C&S initiated –extensive consultation process • Monthly reporting provides regular data for Ministers about scheme impact on C&S • Reporting requirement gradual, evolving as the global industry changes its practices to report more data • Evolution subject to discussion and agreement with stakeholders • Issue of certificates dependent on timely receipt of the C&S report, but not the values of any fields requested. • The intention is to move to issuing more certificates for fuel with a better carbon saving performance and possibly minimum sustainability standards
Possible certification regim e for C&S reporting • We are investigating the possibility of establishing a certification system for C&S reporting . • This may constitute an additional section within an existing standard e.g. ISO 9000 • The standard would be agreed under the auspices of UKAS • UKAS would then accredit organisations (e.g. BSi, VCA) to assess suppliers against the standard
Possible certification regim e for C&S reporting ( cont) • Suppliers could apply for certification, be assessed and then be granted certification that their C&S reporting systems meet the standard • Suppliers so certified would not be subject to C&S reporting audits by the Administrator • We will seek to make the standard and the assessment process as light touch as possible, and economical for all suppliers
The “Inspect for, and enforce, compliance” process comprises of a set of activities designed to ensure compliance and minimise fraud • The Administrator must protect the Government and the scheme from fraud. • Fraud can arise in a number of ways, including: • Evasion of the obligation • Under reporting of fossil fuels • Over reporting of biofuels • Bogus certificate claims (i.e. by persons / organisations with no biofuel capability whatsoever, but hoping to claim and sell certificates without discovery) • Hacking into the Administrator’s systems
Compliance process (cont) • The Administrator will have a number of tools at his disposal to combat these risks: • Rigorous registration process • Desk research, risk profiling, access to public information • Requests for evidence • Auditor’s opinion on suppliers’ volumes • Audits of “high-risk” suppliers
Conclusions • Grateful for feedback on any of the issues raised here • Still time to make changes ahead of formal consultation • Believe scheme design strikes good balance between protecting integrity of scheme and minimising administrative workload
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