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 Concerns raised by oleochemical industry and others that Government • • support for biofuels would have adverse impacts by increasing the price of support for biofuels would have adverse impacts by increasing the price of tallow and forcing them to use less environmentally friendly alternatives (palm tallow and forcing them to use less environmentally friendly alternatives (palm oil). oil). During the passage of the RTFO order through Parliament in October 2007, During the passage of the RTFO order through Parliament in October 2007, • • DfT Minister, Jim Fitzpatrick, said that: DfT Minister, Jim Fitzpatrick, said that: “ The Government will commission an independent review of the likely “ The Government will commission an independent review of the likely impacts of the RTFO on the other UK industries that use tallow as a 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 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 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 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 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 ." 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 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 before the RTFO commenced on 15 April 2008. They contacted a range of stakeholders including biodiesel manufacturers, oleochemical industry and renderers. stakeholders including biodiesel manufacturers, oleochemical industry and renderers. The review had four main tasks:- The review had four main tasks:- • • To gain an understanding of the UK market for tallow 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 using tallow for making biodiesel on tallow prices • • Assess the impact of the RTFO on the UK oleochemical, speciality chemicals and Assess the impact of the RTFO on the UK oleochemical, speciality chemicals and • • the cleaning product industries. the cleaning product industries. Assess whether the diversion of tallow into biodiesel from other industries will Assess whether the diversion of tallow into biodiesel from other industries will • • have a beneficial or harmful greenhouse gas impact have a beneficial or harmful greenhouse gas impact A number of interviews and workshops were held and AEA’s final report was A number of interviews and workshops were held and AEA’s final report was • • published on 9 April. published on 9 April. http://www.dft.gov.uk/pgr/roads/environment/rtfo/tallow/tallowfinalreport.pdf 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 The review compares two scenarios. Both assume that the replacement raw • • material for tallow will be palm oil:- material for tallow will be palm oil:- Scenario 1: All UK tallow is used for soap and oleochemicals with the 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 balance burnt as boiler fuel (at rendering plants). Biodiesel production in UK that would have used tallow is made from imported palm oil instead. 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 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. 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 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 unlikely given the higher costs. All tallow produced in UK is used for some economic purpose. economic purpose. The main uses are: The main uses are: • • • Category 1 – only for burning or fuel, • Category 1 – only for burning or fuel, • Category 2 – industrial applications, • Category 2 – industrial applications, • Category 3 – soaps and cosmetics. • Category 3 – soaps and cosmetics. If category 1 prices increase sufficiently (by about 25%) this acts as a 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 disincentive for the production of categories 2 and 3 tallow and their availability decreases. availability decreases.
Key Findings cont’d A high crude oil price might still give an economic incentive to divert tallow A high crude oil price might still give an economic incentive to divert tallow • • into biodiesel production - even without RTFO and duty incentives. into biodiesel production - even without RTFO and duty incentives. The least cost solution to meet the RTFO targets results in biodiesel The least cost solution to meet the RTFO targets results in biodiesel • • producers buying all available domestic supply of tallow. producers buying all available domestic supply of tallow. Diversion will have a significant effect on the oleochemicals and soap Diversion will have a significant effect on the oleochemicals and soap • • industry as alternative feedstocks are not available in the UK and buying industry as alternative feedstocks are not available in the UK and buying alternatives, ie palm oil, would have significant effects - closure of a alternatives, ie palm oil, would have significant effects - closure of a significant part of its production in the UK and job losses. 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 Renderers would be likely to buy low sulphur fuel oil to replace the tallow • • used for heat and steam in their plants. used for heat and steam in their plants. Diverting tallow to biodiesel leads to a net increase in GHG emissions Diverting tallow to biodiesel leads to a net increase in GHG emissions • • equivalent to c. 1 tonne of CO2e per tonne of tallow displaced. equivalent to c. 1 tonne of CO2e per tonne of tallow displaced. Diverting all UK tallow to biodiesel could therefore increase CO2 emissions Diverting all UK tallow to biodiesel could therefore increase CO2 emissions • • by almost 200,000 tonnes by almost 200,000 tonnes
Key findings cont'd RTFO should consider the effect of substitution on the overall sustainability of RTFO should consider the effect of substitution on the overall sustainability of • • switching tallow to biofuels production. Indirect impacts on GHG emissions switching tallow to biofuels production. Indirect impacts on GHG emissions should be considered. should be considered. Switching tallow to biodiesel will also have a net negative effect on Switching tallow to biodiesel will also have a net negative effect on • • employment, gross value added and the balance of trade. (income from employment, gross value added and the balance of trade. (income from oleochemicals exports reduces if switch to imported oleochemicals, not oleochemicals exports reduces if switch to imported oleochemicals, not compensated by the decrease in imported diesel.) compensated by the decrease in imported diesel.) Oleochemicals industry in the UK is facing a number of problems, including Oleochemicals industry in the UK is facing a number of problems, including • • increased competition from the Far East. Demand for tallow for biodiesel is 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 likely to be a contributory factor but there is not much direct evidence that this is happening at present. is happening at present.
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