EUROPEAN COMMISSION Brussels, 8.10.2014 SWD(2014) 295 final/2 CORRIGENDUM

This document corrects document SWD(2014) 295 final of 6.10.2014

Concerns EN version ( coverpage - reference and date were missing ) COMMISSION STAFF WORKING DOCUMENT



EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT

on the calculation methods and reporting requirements pursuant to Article 7a of Directive 98/70/EC of the European Parliament and of the Council relating to the quality of petrol and diesel fuels

Accompanying the document COUNCIL DIRECTIVE ../.../EU laying down calculation methods and reporting requirements pursuant to Directive 98/70/EC of the European Parliament and of the Council relating to the quality of petrol and diesel fuels {COM(2014) 617 final}

{SWD(2014) 296 final}



COMMISSION STAFF WORKING DOCUMENT



EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT

on the calculation methods and reporting requirements pursuant to Article 7a of Directive 98/70/EC of the European Parliament and of the Council relating to the quality of petrol and diesel fuels

Accompanying the document COUNCIL DIRECTIVE ../.../EU laying down calculation methods and reporting requirements pursuant to Directive 98/70/EC of the European Parliament and of the Council relating to the quality of petrol and diesel fuels 1.INTRODUCTION In 2009, the Fuel Quality Directive (“FQD”') introduced an obligation on fuel suppliers to reduce by 6% the lifecycle greenhouse gas (“GHG”) intensity of all road (and non-road mobile machinery) fuels by 2020. To comply with this requirement fuel suppliers need to report and account for the GHG emissions associated with the fuels they supply. The methodology for calculating the lifecycle GHG intensity of fuels of non-biological origin was left to be developed through comitology. A methodology for calculating the lifecycle GHG intensity of biofuels is already prescribed in the FQD. In this context, a draft implementing measure was discussed in the Fuel Quality Committee with the Member States during 2011 and 2012 and resulted in a "no opinion" vote. In accordance with the provisions of the Comitology Decision, the Commission is now obliged to submit a proposal to the Council. This impact assessment supports such a proposal. 2.PROBLEM DEFINITION Under article 7a of the FQD fuel suppliers are to report annually the total volumes of fuel types/energy supplied indicating their origin and place of purchase, and their life cycle GHG emissions per unit of energy to Member States’ authorities. The reporting mechanism aims to ensure accuracy, in respect to the GHG emissions reductions to be achieved, as well as data on the actual average GHG intensity of the pertinent fuels consumed in the EU in order to update the fossil fuel comparator, which measures the GHG savings provided by biofuels. A number of variations are possible for developing such a methodology according to which level of disaggregation is used (e.g. product, feedstock or consignment), and whether actual calculations of GHG emissions and/or default values are permitted. The possible methodologies impose different demands on industry depending on their complexity, and will ultimately lead to different price signals which will influence the final fuel mix and corresponding associated mitigation actions. The aim of this impact assessment is to assess the appropriateness of the options for developing such a methodology and their associated environmental, economic and social impacts. To support its assessment, the Commission launched an external study in 2012, whose interim findings were discussed with stakeholders in December 2012 and April 2013. 3.SUBSIDIARITY The obligation on suppliers to reduce by 6% by 2020 the lifecycle GHG intensity of road fuels used in road vehicles (and in non-road mobile machinery) was introduced with the adoption of the FQD. 4.POLICY OBJECTIVES The chosen methodology needs to address the general objective of the FQD: To ensure that the GHG intensity of road transport fuels is accurately measured and reduced by at least 6% compared to 2010. Given the following specific objective: To establish a suitable methodology for fuel suppliers to accurately estimate and report the volumes, origin, place of purchase and the life-cycle greenhouse gas emissions of the fuels that they supply.

and operational objectives: To establish a methodology for fuel suppliers to report as accurately as possible the life-cycle greenhouse gas emissions, covering all relevant stages including extraction, land-use changes, transport and distribution, processing and combustion, irrespective of where those emissions occur, of the fuel and energy other than biofuels that they supply. To ensure that the methodology results in as accurate as possible fossil fuel comparator. To ensure that the reporting methodology is as consistent as possible with that already established in the legislation for biofuels. To ensure that such methodology enables Member States to verify compliance by fuel suppliers with their obligation in a way which does not lead to an unacceptable level of administrative burden for suppliers and competent authorities. 5.POLICY OPTIONS The policy options considered in the impact assessment are described below: Options/sub-options Description A) No methodology No methodology would be proposed and so Member States would not be able to implement the FQD. The Commission thus fails to act; accordingly this option is discarded without any further analysis. B) GHG default values by fuel type This approach would represent the simplest reporting requirement. It requires an average default GHG intensity value to be developed for the main four fuel types consumed in the EU (i.e. petrol, diesel/gasoil, liquefied petroleum gas and compressed natural gas). It does not differentiate between suppliers according to the feedstocks that are included in their fuel mix as these are integrated in the EU (option B1) or Member State (option B2) average. As Option B2 leads to internal market barriers (different requirements would apply to fuel suppliers depending on which Member State the fuel is supplied to), which is against the objective of the FQD, this option has been discarded and only option B1 has been further assessed. Option B1 is favoured by the oil industry (including oil majors, independents and traders), certain exporting oil countries and certain Member States. C) GHG default values by feedstock type Under this option, the GHG intensity of all feedstocks used in the EU would be reported separately through the use of average default values (i.e. petrol and diesel/gasoil from oil, natural bitumen, oil shale, coal to liquid, gaseous fuel and electric energy, etc.). Therefore, differences between suppliers according to the feedstocks that are included in their fuel mix would be reported. This methodology would require suppliers to collect information beyond their existing levels as well as additional requirements to track it throughout the supply chain. Option C was the measure submitted to the Member States in October 2011. This option is favoured by environmental NGOs and certain Member States. D) GHG default values by feedstock type or actual GHG values Under this option, suppliers’ compliance would be based on the GHG impact of all feedstocks used in the EU (e.g., petrol and diesel/gasoil from oil, natural bitumen, oil shale, coal to liquid, gaseous fuel and electric energy, etc.). Suppliers would report default values based on average (option D1) or conservative, higher than average, GHG intensity values (D2). These options would require reporting of the origin of fossil fuel feedstocks. Alternatively, suppliers may choose to provide actual values. This option implies the same data collection and traceability requirements as option C, the compliance effort of option B1, and additional efforts for those suppliers choosing to report actual values. Options D1 and D2 are favoured by environmental NGOs, and stakeholders from the bioenergy and agricultural sectors as this is the methodology applied to biofuels. E) Actual GHG values This option requires upstream GHG emissions estimates for individual fuel consignments to be calculated and reported (e.g. field level, trade name, Marketable Crude Oil Name, etc.) by suppliers. This option should provide the most accurate reporting of the GHG intensity of fuels consumed in the EU but is also the most complex, as suppliers would need to provide their own values and data limitations currently exist. Option E is not favoured by any specific stakeholder group, although it is seen by some Member States and certain oil exporting third countries as the fairest approach as it is based on full differentiation of all fuels. 6.ASSESSMENT OF THE POLICY OPTIONS This summary presents the options in terms of their effectiveness in achieving the key objectives as well as their implications for wider environmental, social and economic impacts. 6.1.Effectiveness The most effective option for reporting the GHG intensity of fuels at EU and supplier level is option E, as it requires all fuel suppliers to report actual values. However, actual disaggregated data may not currently be available for all fuel types and suppliers; it is also the most complex from a verification perspective and carries the largest risk of fraud. The second most accurate option for reporting GHG intensity at EU and supplier level is option C, as fuel disaggregation at a feedstock level already captures most of the variation between fuels according to their GHG intensity. This methodology requires additional data collection and tracking efforts from fuel suppliers and verification by Member States would be of a medium complexity. The third most accurate options are D1 and D2. These options provide modest accuracy for reporting the GHG intensity at supplier level, for similar reasons as B1. However, given that only suppliers with a lower GHG intensity than the EU average would be encouraged to report actual values under this option, the reported average EU emissions could be underestimated by up to 1 p.p. of the overall 6% target in the case of option D1. This effect could be mitigated under D2 as the conservative default value would also encourage suppliers of fuels with higher emissions than the average to report actual values. This methodology does require significant additional data collection and tracking efforts from fuel suppliers and verification by the Member States would be complex. Arrangements would be more complex for those suppliers choosing to provide actual values. The simplest and least cost option is B1 (average default values per fuel). However, it is also less accurate due to the fact that the reporting requirements based on averages do not capture either GHG intensity variations between (i.e. conventional versus unconventional fuels) and within (higher intensity conventional fuels versus lower intensity conventional fuels) feedstock categories. While this option poses some risks with regards to the accuracy of the reported average EU emissions as well as the development of the fossil fuel comparator values as no market information is collected, this option would enable Member States to verify compliance in the simplest possible way and minimise possibilities for fraud through implementing a methodology with the least administrative complexity . With regards to policy coherence with biofuels, option D2 would be most consistent, while option D1 and C would be partly consistent with the biofuel methodology. Furthermore, option E would be more burdensome on fuel suppliers. Clearly option B1 would be less burdensome. 6.2.Environmental impacts The production of fuels can have a negative impact on the environment because of upstream and downstream activities, which can lead to negative air quality and biodiversity impacts as well as the consumption of large amounts of resources, particularly for unconventional sources. Although all options lead to some positive environmental impacts compared to the baseline scenario, these are highest under option C as the reduction in the consumption of more resource intense and more polluting unconventional sources is greater. 6.3.Economic and social impacts 6.3.1.Administrative costs