Government submits to Parliament its proposal to add biogas and electrofuels to distribution obligation

On 8 April 2021, the Government submitted to Parliament a proposal, which would extend the national distribution obligation of transport fuels to biogas and to other renewable liquid and gaseous fuels of non-biological origin.

The purpose of the extension is to more rapidly decrease the use of fossil fuels in the transport sector in a cost-effective manner, to improve the diversification of energy sources in the sector and to promote innovation, growth and job creation.

“Promoting domestic renewable fuels will reduce transport emissions and create growth and jobs. Including biogas in the distribution obligation is a significant step towards the increased use of gas in transport. I also strongly believe that electrofuels will become more common during this decade. The proposal encourages investments in biogas and in the development and production of new low-emission fuels,” says Minister of Economic Affairs Mika Lintilä.

The proposal aims to ensure that new fuels are included in the distribution obligation system in a suitable way and that the system will continue to reduce transport emissions in a cost-effective manner requiring little administrative work.

The Government proposes to amend the Act on the Promotion of the Use of Biofuels for Transport, the Act on Biofuels and Bioliquids, the Act on the Promotion of the Use of Biofuels and the Act on the Energy Agency. 

The proposal implements the EU’s revised renewable energy directive (RED II) concerning the limits for biofuels, biogas and bioliquids produced from certain materials and the greenhouse gas emission reduction criteria for renewable liquid and gaseous transport fuels of non-biological origin.

The amendment would allow the distributor of transport fuels to fulfil its distribution obligation not only with biofuels but also with biogas and renewable liquid and gaseous transport fuels of non-biological origin (RFNBO fuels, incl. electrofuels).

The range of renewable fuels available to distributors would expand, which in turn would increase cost-effectiveness and reduce dependence on individual fuels or fuel suppliers. 

Biogas will become more profitable if it is included in the distribution obligation. The extension would not immediately change the relative competitiveness of transport fuels or the price relationships between them. 

The commercialisation of electrofuels is only likely when their price level is competitive with corresponding biofuels and biogas. However, inclusion in the distribution obligation will create demand for electrofuels far into the future and thereby encourage companies to invest in research, development and production facilities.

The determination of the scope of the Act would still be based on the volume of transport fuels supplied by the distributor for consumption during a calendar year. In the case of liquid fuels, the limit for the application of the distribution obligation would remain at one million litres. For distributors of gaseous fuels, the limit would be nine gigawatt hours. In addition, distributors who do not fall within the scope of application would be offered the possibility of voluntarily joining the distribution obligation system through a confirmation procedure. This would mean, for example, that farm-sized units of biogas plants could join the distribution obligation system, if they distribute sufficient biogas to transport.

Including biogas and electrofuels in the distribution obligation will expand the possibilities for low-emission transport. The proposal also implements the decision in the Government Programme to include biogas in the distribution obligation.

No changes are proposed to the level of distribution obligation, which is 30% in 2030. The levels will be assessed based on studies and impact assessments in autumn 2021 as part of the preparation for the climate and energy strategy. 

The laws are scheduled to enter into force on 30 June 2021. In accordance with the proposed transitional provisions of the Act on the Promotion of the Use of Biofuels for Transport, biogas would be added to the distribution obligation on 1 January 2022 and RFNBO fuels on 1 January 2023. 

Inquiries: 
Inkeri Lilleberg, Senior Specialist, Ministry of Economic Affairs and Employment, tel. +359 29 504 7092 
Teppo Säkkinen, Special Adviser to the Minister of Economic Affairs, tel. +358 50 516 2868
Jukka Saarinen, Chief Engineer, Ministry of Economic Affairs and Employment, tel. +358 29 506 4806
Harri Haavisto, Senior Specialist, Ministry of Economic Affairs and Employment, tel. +358 29 504 7059