Implementation of the third Renewable Energy Directive (RED III) will take place in EU member states by May this year. This marks a significant step forward in the EU's extensive plans to achieve energy transformation while respecting environmental considerations. The question, however, is will the Member States deliver on time and what will be the level of ambition in different states? How many will set more ambitious goals above the EU requirement?
In addition to monitoring the implementation of the agreed Green Deal decisions, it is interesting to follow the potential considerations the EU Commission is making towards possible framework and strategy for renewable and low carbon fuels beyond 2030.
Will these developments further boost and consolidate the position of advanced biofuels in transport defossilisation?
Getting RED III implemented swiftly is important for industry
The primary goal is to achieve a 42.5% share of renewable energy in the EU’s overall energy consumption by 2030, with an ultimate target of 45%. Targets for the transport sector have been raised significantly, increasing the required renewable energy usage from 14% to 29% and introducing new sectoral targets. Instead of energetic mandates Member States can also set mandates based on the GHG intensity of the fuel (14.5% reduction), creating the possibility to attract fuels with low GHG intensity.
The Directive mandates a minimum of 5.5% usage of advanced biofuels and renewable fuels of non-biological origin (mainly hydrogen and its derivatives). Notably, while mandates for renewable or low-emission fuels previously applied only to road transport, they now also cover waterborne and aviation transport.
Member States need to oblige fuel suppliers to meet the set goals. However, they have some flexibility in national implementation. In practice this might mean setting higher targets for fuel suppliers. It will be interesting to see what opportunities this flexibility in national implementation will bring. On the other hand, it clearly does not bring simplicity, as there are various options for implementation.
RED III complements the previously adopted Fit for 55 package, collectively charting the course for renewable energy development in Europe.
ReFuel Aviation initiative commences this year
The ReFuel Aviation initiative promotes the increased use of sustainable aviation fuels (SAF) and is the single most powerful tool to decrease aviation CO2 emissions. This measure is part of the Fit for 55 package to meet the emission reduction target of 55% by 2030.
Starting in 2025 aviation fuel suppliers at EU airports are required to ensure that all aviation fuels contain a minimum share of SAF - and a minimum sub-share of synthetic aviation fuels from 2030 onwards. This mandate begins with a 2% SAF inclusion in 2025, increasing to 6% by 2030 and reaching 20% by 2035.
Previously the use of SAF was driven by voluntary demand. Pioneers like KLM Royal Dutch Airlines and Air France in the EU have been using SAF since 2011. Both airlines aim at incorporating at least 10% SAF in their flights by 2030, exceeding the mandated requirements.
The increasing mandatory trajectory for SAF blending is very important generally for the overall advanced biofuels industry.
Credibility and transparency in value chains remains a key topic
In 2024 two major issues have dominated EU discussions regarding the credibility and transparency of biofuel value chains. Firstly, deliveries of advanced biodiesel imported from Asia have been suspected of partial fraudulence. Secondly, Upstream Emission Reduction (UER) projects outside of Europe are also under suspicion of fraud.
The EU Commission imposed antidumping duties on Chinese biodiesel and HVO exports due to an influx of mislabeled advanced biodiesel, leading to a significant drop in Chinese biodiesel volumes over the past couple of months.
Simultaneously, authorities are investigating several, mainly Chinese UER projects for fraud. The German Federal Environment Agency (UBA) revealed that 45 out of 66 projects are suspicious, with plans to reverse at least 32, securing around 4 million tonnes of CO2 in unauthorised UER certificates.
These fraudulent cases have significant consequences for the biofuels industry, including reduced market reliance and trust in sustainability, leading to reduced profitability and competitiveness for European producers. The situation is also an opportunity for companies like UPM to stand out with credible and transparent practices.
EU’s Union Database for Biofuels rolled out gradually
The Union Database for Biofuels (UDB) is a global traceability tool developed and managed by the European Commission. Its purpose is to trace biofuel consignments and their raw materials from origin to final consumption in the EU market, replacing the current paper-based proof of sustainability.
Economic operators must digitally report their transactions when selling liquid biofuels into the European market, starting from the point of origin through the entire supply chain to the final operator.
The UDB aims to ensure market transparency and traceability in the biofuel supply chain. Eventually it is expected to mitigate risks of irregularities and fraud - making it a much- needed tool to support efforts to meet the ambitious EU defossilisation targets.
The actual implementation schedule of the UDB is currently being reviewed by Member States and the Commission, leading to it being fully operational in the future. For the successful implementation of the UDB into use in the industry, a gradual rollout with enhanced system capabilities and accessibility is needed to ensure the initial targets for traceability, avoiding double counting and addressing fraud concerns, are met.
Opportunities and challenges ahead
As these initiatives unfold, the flexibility in national implementation of RED III will present both opportunities and challenges for Member States. It is now more important than ever that the value chains are transparent, regulations must be clear, and monitoring is robust, so that we can trust the markets and their operators.
The collective efforts of the EU and its Member States will be crucial in navigating these complexities and achieving the ambitious renewable energy targets set for the coming years.
This article by Liisa Ranta, Director of Sustainability and Market Development of UPM Biorefining, was first published in Biofuels International Magazine in January/February issue of 2025.