On 15 August 2025, the Department for Transport published the outcome of the statutory review of the Renewable Transport Fuel Obligation (RTFO). The RTFO has been a key component of the UK's drive to decarbonise transport since 2008 and has been complemented by the Zero Emission Vehicle (ZEV) Mandate and the Sustainable Aviation Fuel (SAF) Mandate to accelerate the UK's progress towards net zero.
The requirement for a review arose as part of the changes made to the RTFO in 2018. The review requires the Government to consider whether its policy objectives have been achieved, whether such objectives remain appropriate and if so, whether they can be achieved in a more effective and efficient manner.
The Government also saw the review as an opportunity to identify future areas for policy development and launched a call for evidence (see our earlier blog here). Having considered the responses provided by stakeholders, the Government confirmed that as part of future policy developments for the RTFO it will consult, as a minimum, on the following topics:
- proposals for the future target trajectory for the RTFO up to and beyond 2032, including options for increased targets;
- how low carbon fuels are rewarded under the RTFO;
- broadening the scope of the RTFO to include fuels produced from nuclear energy and improving alignment with the SAF Mandate, as well as broadening the list of eligible non-road transports to include hydrogen fuel cell mobile generators; and
- support for development fuels.
We explore these proposed policy changes in more detail below. Subject to public consultation and parliamentary time, the Government aims for any necessary legislation to be introduced during 2026 and implemented in time for the start of the 2027 reporting year.
The Government also stated that it would convene an expert working group to explore whether ethanol blending in petrol can be increased above the current 10% level in the UK and repeated its commitment in the Maritime Decarbonisation Strategy to implement International Maritime Organisation regulations and, subject to consultation, complementary domestic fuel regulations to encourage the use of low carbon fuels.
1. Future trajectory for RTFO fuel targets
Since 2008 the RTFO has encouraged the decarbonisation of fuels used in surface transport by placing an annual obligation on fuel suppliers which requires a certain percentage of their fuel to be renewable transport fuel rather than fossil fuel. The scheme imposes two obligations upon fuel suppliers: (1) the main obligation – which supports the supply of traditional biofuels; and (2) the development fuel obligation – which supports the development of novel strategic fuels.
The main obligation target increases annually until 2032, when it reaches 14.6% and then remains constant. The review noted that the volume of low carbon fuel supplied has increased over the review period from 2018-2023, as the main obligation has increased, delivering greenhouse gas (GHG) reductions. This has meant that most of the main obligation on fuel suppliers has been satisfied via the supply of low carbon fuels with minimal levels of "buy-out" being used by suppliers.
Stakeholder responses provided a range of views as to whether the fuel targets for the main obligation should be increased before and/or after 2032. As part of committing to consult on future changes to the fuel targets the Government noted that various factors will need to be taken into account including the following:
- the delivery of UK carbon budgets and net zero by 2050;
- the increased demand and competition for feedstocks globally across various sectors such as aviation, maritime and road transport;
- the supply capacity for low carbon fuel in the UK;
- value for money and affordability for drivers and other fuel consumers; and
- the increase in zero emission vehicles which will reduce liquid fuel demand on UK roads over time.
2. Rewarding low carbon fuels under the RTFO
The RTFO currently operates by providing suppliers of low carbon fuels with certificates in proportion to the volume of fuel supplied, provided they meet certain sustainability criteria. Suppliers can use the certificates to evidence that they have satisfied their RTFO obligations. The certificates can also be traded in a market providing a flexible way for industry participants to comply with their obligations.
Further incentives are provided for the supply of waste and residue-derived fuels over crop-derived fuels, on the basis that the former offer higher GHG savings and help avoid sustainability risks, such as indirect land-use change (ILUC) and impacts on food security. This is achieved by double counting waste and residue-derived fuels and having a cap on crop-derived fuels that are eligible for certificates.
An alternative model for the RTFO, akin to the SAF Mandate, would be for it to operate on a GHG basis. This model rewards fuels based on the GHG emissions savings they achieve compared to fossil fuels, with better performing fuels receiving more certificates.
Most stakeholders supported transitioning to a GHG-based model and the Government recognised that such an approach would appear to be better aligned with the overall policy objective of reducing GHG emissions. In this context some stakeholders queried the double-counting of waste and residue-derived fuels when the fuels do not achieve double the carbon savings.
However, concerns were raised that moving to a GHG-based model could inadvertently incentivise fuels that have a greater ILUC risk associated with them potentially leading to adverse environmental impacts.
3. Increasing the eligible non-transport modes and fuels supported by the RTFO
The majority of stakeholders responding to the Government's call for evidence considered that the RTFO does not cover all the transport modes and fuel types that it needs to.
- Maritime transport and non-transport modes: A recurring theme from stakeholders was that the RTFO needs to provide more support for the use of low carbon fuels in the maritime sector either as a separate obligation or by extending the RTFO to cover maritime fuel use more generally. A number of responses also proposed the inclusion of leisure vessels in the RTFO beyond those covered by the existing RTFO concept of "non-road mobile machinery". Stakeholders also sought further clarity to the definition of "non-road mobile machinery" to facilitate the use of hydrogen fuel cell generators.
- Fuel types: Several stakeholders proposed that all low carbon hydrogen and derivative fuels should be supported through the RTFO as development fuels and this would act as an incentive to increase UK hydrogen production. In this context some stakeholders suggested that fuels produced from nuclear energy (like hydrogen and its derivatives) should be within the scope of the RTFO, aligning it with the SAF Mandate. The Government has committed to consult on this change.
Some stakeholders also proposed that the RTFO treatment of low carbon hydrogen should be aligned with the Government's Low Carbon Hydrogen Standard (LCHS). The key divergences between the two schemes relate to: (a) the eligibility of Carbon Capture, Usage and Storage (CCUS)-enabled hydrogen from natural gas; and (ii) the more stringent "additionality" requirements within the RTFO regarding the electricity used to generate the fuel.1 The Government noted that the misalignment arises from the LCHS being developed to support hydrogen production in the UK where the electricity grid is decarbonising, while the RTFO covers hydrogen produced globally and therefore would include jurisdictions where significant amounts of electricity are generated from coal (therefore requiring the "additionality" principle to ensure GHG savings are achieved). The Government is keen to address this misalignment and conscious that such work would be important for both the RTFO and SAF Mandate schemes.
4. Support for development fuels
Like the RTFO main obligation, the development fuel target is set to increase each year to 2.8% in 2032, after which it plateaus at that level. However, unlike the main obligation, there has been a significant use of the "buy-out" mechanism by suppliers. Even though fuel supply has increased over time, the pace of this increase has been slow leading to quite limited GHG savings. Consequently, the development fuel obligation is seen to be a relatively expensive decarbonisation measure.
While a number of stakeholders were optimistic about the supply of development fuels increasing as new projects become ready for commercial commissioning, there were a wide range of views as to why supply had been lower than expected and how this could be addressed.
The Government confirmed its adherence to the core principles motivating the development fuel obligation – diversification of feedstocks and support for the commercial viability of novel fuel production – and committed to consulting further to ensure that the obligation can best deliver on its objectives. As part of this the Government will explore whether development fuel is getting the necessary support and whether any changes are required to the eligibility criteria. However, it was recognised that any changes will have to be balanced against investors' need for regulatory stability.
Footnote
1. The “additionality” requirement relates to whether the renewable energy can be considered additional, in that it is produced from new, upgraded or recommissioned production capacity, and/or it would not have been produced or would have been wasted if it were not consumed in the process for producing the fuel (such as hydrogen).
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