A short summary on the status of the Renewable Energy Directive II (RED II), and its potential impacts on the aviation sector

The RED establishes an overall policy for the production and promotion of energy from renewable sources in the EU. It requires the EU to fulfil at least 20% of its total energy needs with renewables by 2020 – to be achieved through the attainment of national targets. All EU countries must also ensure that at least 10% of their transport fuels come from renewable sources by 2020. However, the aviation sector and sustainable aviation fuel (SAF) are not included in the RED. Maarten van Dijk is CEO at SkyNRG and holds various advisory and board positions in SAF projects and platforms across the globe that focus on the sustainability and policy aspects of SAF. In his position as Aviation Lead in the ART Fuels Forum and core team member of both the EU Advanced Biofuel Flightpath and Bioport Holland, Maarten is involved in policy related to RED II. He will give an overview of the current RED II status and share his opinion on the potential impact for the aviation sector.

What is the current status of RED II?
To ensure continuation post-2020, the Commission published a proposal for a revised RED (RED II) in 2016 to make the EU a global leader in renewable energy and ensure that the 2030 goals will be met. The RED II will run from 2021 till 2030. Over the last 1.5 years, the Commission’s RED II proposal has been negotiated and fine-tuned by the European Parliament and Council of Ministers. On June 14th, this year, the negotiators announced that agreement was reached on RED II. No final text has been published yet, but it as far as we know the key points related to transport and fuels are:
1) The Member States must ensure that 14% of their transport fuels are derived from renewable energy sources (including 1st generation biomass)
2) Food-based biofuels (1st generation biofuels) are capped at 7%
3) Palm oil feedstock volumes are frozen at 2019 levels and will be phased out to 0 by 2030 (starting in 2023)
4) The Annex IX to the RED II specifies which feedstock can count towards the advanced biofuel sub-target. Annex IX consists of two parts: A and B. The exact content of Annex IX is not available yet
5) Fuel volumes from part B feedstocks are capped at 1.7% in 2030. Fuel volumes from part A feedstocks show a steady growth track: 0.2% in 2022, 1% in 2025, 3.5% in 2030
6) Aviation and marine sectors are not included in the mandatory fuel volumes, but will receive incentives to stimulate the uptake and development of these fuels; fuels supplied to the aviation and shipping industry will receive a multiplier of 1.2 (i.e. 1 ton of fuel counts for 1.2 tons of fuel towards the mandated targets, on an energy content basis)
7) Other multipliers: electric vehicles x4.0 and electricity for trains x1.5

Relevance of the aviation multiplier
With a multiplier of 1.2, the aviation industry is recognized by decision-makers and the European Commission as an industry with unique challenges and the need for additional incentivization. Three main questions come to mind:
1) Will the 1.2 multiplier be enough to increase the short-term uptake of SAF?
2) Will the multiplier create a viable business case for deployment of SAF production capacity, based on current commercially available production technologies?
3) What effects can this multiplier have on the medium to long-term (post-2025)?

The answers, according to us, are:
1) Maybe a little bit. At the moment, there are no SAF incentives in place in Europe, so the voluntary inclusion of SAF in the RED II is already a big step. The multiplier of 1.2 helps to close the price gap between SAF and fossil jet fuel, but a considerable premium remains. This premium still needs to be paid (e.g. through mechanisms like SkyNRG’s co-funding programs) otherwise, producers and suppliers cannot push volumes to the aviation sector
2) Not as a sole instrument without additional financial support. To create an investable business case for a SAF production unit, based on current commercially available technology, there is a need to show investors certainty of product offtake (i.e. a market). As the multiplier of 1.2 will not close the price gap by itself, there are still additional measures needed to create a business case with a positive NPV
3) Although the multiplier of 1.2 is not sufficient for current commercially available technologies, it does provide an incentivized horizon for technology developers to focus on future feedstock-technology combinations that can produce on-spec SAF

Keeping the 7% stable for 1st generation biofuels and phasing out palm oil feedstock: a good or a bad thing?
In our opinion: both decisions are in principle a good thing.
Keeping the 1st generation biofuel industry in place (instead of phasing it out, as we’ve seen proposed as well), and with that respecting all investments made so far is, in any case, a very strong signal to new investors that it is worth to provide funds for capacity deployment under the RED II. This is a good thing. That does not mean we accept all feedstocks, conventional or advanced, at face value. We believe that for all feedstocks there is a need for strong and enforceable sustainability criteria, that take the full supply chain and possible indirect effects into account. SkyNRG itself has always had a focus on waste and residues as main feedstock for its operations. We are pleased to see this is in line with the growth direction of sustainable fuels within the EU.
Phasing out palm oil as feedstock is a welcome decision in our opinion. Of course, it can be argued that palm oil can be produced in a very sustainable way as well. However, we believe sustainable palm oil should first and foremost be used to substitute volumes of unsustainable palm oil in other markets that have less raw material alternatives.

CORSIA and RED II: conflicting incentives?
The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is an emission mitigation approach for the global airline industry, developed by the International Civil Aviation Organisation (ICAO). Although CORSIA and RED II intent to accomplish two different things (CORSIA is basically a carbon offset scheme whereas the RED II is promoting the uptake of more renewable energy), it is possible that individual EU Member States will implement certain aspects of these two measures in a conflicting way (e.g. carbon accounting). The final text on RED II will be published shortly and the acceptance of CORSIA’s Standards and Recommended Practices (SARPs) is due soon as well. In the following months, the industry needs to ensure a collective effort to avoid conflicts during transposition into Member State legislation.