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Accounting methods for biojet fuel Final report

Accounting methods for biojet fuel - Ecofys Consultancy 1 Executive Summary The aviation industry is developing and piloting the use of biojet fuel blends as a key means to reduce

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Page 1: Accounting methods for biojet fuel - Ecofys Consultancy 1 Executive Summary The aviation industry is developing and piloting the use of biojet fuel blends as a key means to reduce

Accounting methods for biojet fuel

Final report

Page 2: Accounting methods for biojet fuel - Ecofys Consultancy 1 Executive Summary The aviation industry is developing and piloting the use of biojet fuel blends as a key means to reduce

ECOFYS Germany GmbH | Am Karlsbad 11 | 10785 Berlin | T +49 (0)30 29773579-0 | F +49 (0)30 29773579-99 | E [email protected] | I www.ecofys.com

Managing Director C. Petersdorff | Register Court: Local Court Cologne | Chamber of commerce Cologne HRB 28527 | VAT ID DE 187378615

Accounting methods for biojet fuel Final report

By: Gemma Toop, Maarten Cuijpers, Bram Borkent, Matthias Spöttle

Date: 19 December 2014

Project number: BIEDE14313

© Ecofys 2014 by order of: International Air Transport Association (IATA)

Page 3: Accounting methods for biojet fuel - Ecofys Consultancy 1 Executive Summary The aviation industry is developing and piloting the use of biojet fuel blends as a key means to reduce

ECOFYS Germany GmbH | Am Karlsbad 11 | 10785 Berlin | T +49 (0)30 29773579-0 | F +49 (0)30 29773579-99 | E [email protected] | I www.ecofys.com

Managing Director C. Petersdorff | Register Court: Local Court Cologne | Chamber of commerce Cologne HRB 28527 | VAT ID DE 187378615

Acknowledgments

The authors would like to thank the following persons for their valuable contributions to this project:

Leigh Hudson (British Airways), Emma Harvey and Jonathan Pardoe (Virgin Atlantic), Mike Farmery

(independent consultant), Eline Schapers and Susanne Dekker (SkyNRG), Alex Menotti (Airlines for

America), Greg Kozak, Angela Foster-Rice and Mihir Thakkar (United Airlines), Lydia Pforte, Jan

Pechstein and Lukas Rohleder (aireg e.V.), Susan Pond (AISAF), Deborah O’Connell (CSIRO), Flyn

van Ewijk (Qantas), and Virpi Kroger (Neste Oil).

Furthermore the authors like to thank the experts from IATA for their assis tance with the report:

Dr. Thomas Roetger, Robert Boyd, Michael Schneider, Michel Adam, Jon Godson and Haldane Dodd

(ATAG).

Page 4: Accounting methods for biojet fuel - Ecofys Consultancy 1 Executive Summary The aviation industry is developing and piloting the use of biojet fuel blends as a key means to reduce

ECOFYS Germany GmbH | Am Karlsbad 11 | 10785 Berlin | T +49 (0)30 29773579-0 | F +49 (0)30 29773579-99 | E [email protected] | I www.ecofys.com

Managing Director C. Petersdorff | Register Court: Local Court Cologne | Chamber of commerce Cologne HRB 28527 | VAT ID DE 187378615

Foreword

In 2014, over 3 billion passengers will have boarded an aircraft somewhere on the planet. There are

many factors that drive aviation demand, from holidays to business or visiting friends and relatives,

not to mention the need for the speedy transportation of perishable and high value goods to which

we have grown so accustomed. And demand for aviation is not slowing. In fact, it is forecast that

passenger demand will increase globally by approximately 5% per annum in the medium term. While

this translates into a tremendous economic opportunity, it also exposes the rising challenge of

growing in a sustainable manner.

IATA member airlines cover around 85% of all commercial flight operations. They have committed to

ambitious climate change targets including carbon neutral growth from 2020 and a halving of CO2

emissions from the sector by 2050. While technological advances will play a role in this, sustainable

aviation fuels have a crucial role to play in helping to completely de-couple emissions from growth. As

both the technology and the economics of sustainable aviation fuel improve, we hope that the scale

of use will increase considerably in future years. Without standards, the integrity of any product or

system is weakened. Necessarily, many governments or regional bodies have established localised

metrics of how to measure their sustainability claims. The technical certification concerning aviation

fuel quality, is designed and administered globally and with many airlines flying to numerous different

countries and regions each day, there simply cannot be any variance in fuel performance. As the

industry develops and scales up it will be important to have harmonised accounting rules to ensure

that airlines can demonstrate their sustainability, prove their contribution to renewable energy goals

and quantify and allocate greenhouse gas emissions savings in a transparent and consistent way that

also ensures that claims from a specific batch of biojet fuel are not made more than once.

Furthermore, we believe that this report will make a valuable contribution to the success of the

ongoing work taking place at ICAO on the development of a global Market Based Measure (MBM) for

aviation.

I commend this detailed and thoughtful analysis from Ecofys, produced with the assistance of IATA’s

own experts. They have tackled a complex and challenging topic and provided some clear ideas to be

developed on the path towards designing an accounting system for biojet fuel that could be

implemented by airlines.

Michael Gill

Director, Aviation Environment

IATA

Page 5: Accounting methods for biojet fuel - Ecofys Consultancy 1 Executive Summary The aviation industry is developing and piloting the use of biojet fuel blends as a key means to reduce

ECOFYS Germany GmbH | Am Karlsbad 11 | 10785 Berlin | T +49 (0)30 29773579-0 | F +49 (0)30 29773579-99 | E [email protected] | I www.ecofys.com

Managing Director C. Petersdorff | Register Court: Local Court Cologne | Chamber of commerce Cologne HRB 28527 | VAT ID DE 187378615

Abbreviations

ACARS Automatic Computerised Aircraft Reporting System

ACI Airports Council International

AFTF ICAO Alternative Fuels Task Force

ASTM American Society for Testing and Materials - international standards organisation for airline

fuel quality specifications

ATJ Alcohol to Jet

CAEP ICAO Committee on Aviation Environmental Protection

CANSO Civil Air Navigation Services Organisation

CDP Carbon Disclosure Project

CoA Certificate of Analysis

CO2 Carbon dioxide

DSHC Direct sugar to hydrocarbons

EC European Commission

EPA Environmental Protection Agency (US)

EU ETS European Emissions Trading Scheme

FFC Fuel Facility Corporation

FT Fisher-Tropsch

GHG Greenhouse Gas

GMTF ICAO Global Market Based Measure Technical Task Force

HEFA Hydroprocessed Esters and Fatty Acids

HPO Hydrogenated Pyrolysis Oil

IATA International Air Transport Association

IBAC International Business Aviation Council

ICAO International Civil Aviation Organization

ICCAIA International Coordinating Council of Aerospace Industry Associations

ISP Independent Service Provider

ITAKA Initiative Towards sustAinable Kerosene for Aviation

JUHI Joint User Hydrant Installation

MBM Market Based Measure

MRV Monitoring, Reporting and Verification

RCQ Refinery Certificate of Quality

RED Renewable Energy Directive (EU)

RFS2 Renewable Fuel Standard (US)

RIN Renewable Identification Number – tradable unit in RFS2

RTC Recertification Test Certificate

RTFO Renewable Transport Fuel Obligation (UK)

RTK Revenue tonne kilometre

UCO Used Cooking Oil

Page 6: Accounting methods for biojet fuel - Ecofys Consultancy 1 Executive Summary The aviation industry is developing and piloting the use of biojet fuel blends as a key means to reduce

ECOFYS Germany GmbH | Am Karlsbad 11 | 10785 Berlin | T +49 (0)30 29773579-0 | F +49 (0)30 29773579-99 | E [email protected] | I www.ecofys.com

Managing Director C. Petersdorff | Register Court: Local Court Cologne | Chamber of commerce Cologne HRB 28527 | VAT ID DE 187378615

Table of contents

Executive Summary 1

1 Introduction 4

1.1 Policy context 4

1.2 Drivers to report biojet fuel and GHG emissions 5

1.3 Aim of the report 8

2 Biojet supply chains 9 2.1 Biomass feedstock and biojet fuel production 10

2.2 Blending & certification 12

2.3 Transport & distribution 13

2.4 Use 14

3 Proposed chain of custody approach 15

3.1 Introduction to chain of custody approaches 15

3.1.1 Book and claim 16 3.1.2 Mass balance 17

3.1.3 Physical segregation 19

3.1.4 Identity preservation 20

3.2 Comparison of book and claim and mass balance approaches 21

4 Design choices for biojet fuel accounting methods 24

4.1 Design of the proposed Global Market Based Measure 24 4.2 Chain of custody approach 25

4.3 Overview of design choices for the accounting system 27

4.3.1 Control point 28

4.3.2 Airport or airline level accounting 29

4.3.3 Central registry or verification at the fuel system level 32

4.3.4 Limit on percentage of biojet fuel reported 33

4.3.5 Treatment of upstream GHG emissions 36

4.3.6 Timeframe 38

5 Policy recommendations and next steps 41

Appendix A: Characteristics of selected legislative accounting methods 44

A.1 EU Emissions Trading Scheme 44

A.2 EU Renewable Energy Directive 47

A.3 US Renewable Identification Number (RIN) system 50

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BIEDE14313 1

Executive Summary

The aviation industry is developing and piloting the use of biojet fuel blends as a key means to

reduce emissions from the sector. Biojet fuels produced via the Fischer-Tropsch (FT) process, via the

hydroprocessing of oils and fats (HEFA), or via the direct sugar to hydrocarbons (DSHC) route, can all

be certified to the international ASTM jet fuel technical specifications when blended up to a certain

percentage with fossil jet fuel.

Today biojet fuels are produced batchwise in bespoke supply chains and delivered in dedicated

consignments, so reporting the physical use of biojet fuel is straightforward for airlines. However the

ultimate aim of the aviation industry is that the ‘drop-in’ nature of biojet fuels will allow the fuels to

be fully integrated into the conventional jet fuel storage and distribution systems, and therefore be

used by all aircraft refuelling from those systems with no barriers. At that point it will no longer be

possible, or desirable even if it were theoretically possible, for airlines to physically test individual fuel

loads before uplift to calculate their physical biojet fuel content.

In response to the increasing initiatives and drivers for airlines to report their emissions, and in

particular spurred by the Member State directive to the International Civil Aviation Organization

(ICAO) to develop a global Market Based Measure (MBM) to be voted for approval in 2016, to cover

emissions from the sector, IATA has identified the need to develop proposals for biojet fuel

accounting methodologies for the aviation industry. A separation has to be made between the

physical use of biojet fuel and how the use of the fuel is administered. The rules need to be

transparent, consistent, practical, with a minimum of additional administrative burden, and should

have flexibility to feed into different regulations around the world.

The goal of this report is to assess design choices for (regulatory or voluntary) accounting systems

for biojet fuels that could be implemented by airlines. The design choices take into account the

properties of drop-in fuels and of the aviation fuel supply logistics. Representatives from several

airlines provided input to the development of these design choices, which were also presented at a

stakeholder workshop hosted by IATA in June 2014 to gather feedback on the initial set of options.

Key recommendations are set out below. For some of the options, the most appropriate design

choice will depend on the final design for the proposed global MBM. Design choices are therefore

presented throughout this report with their relative advantages and disadvantages, and implications,

to enable flexibility in the approach, depending on the choices made at ICAO level.

Ecofys recommends a hybrid chain of custody approach, including elements from a mass balance

as well as a book and claim system, to account for the use of biojet fuel in the aviation sector. We

recommend that the airline industry uses the existing mass balance chain of custody rules that are in

operation for the road biofuel supply chain from the feedstock production up to a defined ‘control

point’. From that control point onwards a book and claim system using sustainable biojet fuel

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BIEDE14313 2

certificates would allow airlines to claim their use of biojet fuel in a robust way. The ‘control point’

should be the blending and certification point. The blending point can be at different points in

different supply chains and different parties in the supply chain might own the fuel at the blending

point, but this point is nevertheless the most appropriate point, as it defines the moment that the

final biojet fuel is made and it is known that it will enter commercial aviation.

The proposed global MBM that is under development at ICAO could potentially exempt smaller and/or

less developed countries, and could therefore have a geographical constraint. The information from

which airport or fuel system the fuel was uplifted and for which routes (for some airlines measured at

individual flight level) is already recorded by airlines, and could therefore be integrated into a biojet

fuel accounting system. However the option of airline level accounting offers maximum flexibility for

airlines. Ecofys recommends that reporting under a proposed global MBM is required at an airline

level and that an accounting system is designed at an airline level basis and it is therefore left to

airlines to choose how and where they apply their biojet fuel usage (with some potential limitations).

However this option requires a centralised global fuel registry. If this is not deemed to be feasible,

then the accounting system may need to be designed at the airport level to ensure the robustness of

the system is not compromised.

Ecofys recommends that the option of a global central registry for issuance and transfer of

sustainable biojet fuel certificates is further explored to identify the likely costs, the key challenges

and their possible solutions. While a more thorough cost-benefit assessment of this option is

warranted, this option may offer the most robust solution and may save costs in the longer term.

This biojet fuel registry might be separate from a global registry for greenhouse gas (GHG) emissions

depending on the ultimate design of the proposed global MBM.

Ecofys recommends to IATA that a reporting limit for biojet fuel should be based on the ASTM

technical specifications of biojet fuel, so 50% for HEFA and FT and 10% for DSHC fuel. This is in line

with current fuel handling practices and will likely provide sufficient potential for airlines to report

biojet fuel for the foreseeable future. On the other hand, the main accounting barriers identified to

allowing reporting of up to 100% biojet fuel use are that fuel purchase records would need to

demonstrate both the physical biojet fuel used and the administrative biojet fuel purchased to ensure

that the blend keeps within the technical limits, and that there could be possible concerns about

public perception and communication if high blends are reported that could not physically have been

used. This option could be further explored and developed, if flexibility in reporting for airlines is

considered to be a leading objective.

Different biojet fuel routes deliver different GHG emission reductions. The system could use

conservative default values as a basis for the GHG accounting, with the opportunity to substitute

these with actual GHG calculations from the specific supply chain, to incentivise use of biojet fuels

with higher GHG savings. A global MBM could be designed in such a way to give additional incentives

to biojet fuels with higher GHG savings, potentially offsetting any additional costs to do more detailed

GHG calculations.

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Timeframes for the validity of certificates within supply chains should be chosen to be in line with

the existing road transport biofuel supply chains and the voluntary schemes that they use. Within the

system of sustainable biojet fuel certificates, there is no strong accounting reason to set a maximum

timeframe within which fuel suppliers have to transfer their sustainable biojet fuel certificates, as long

as the control point and verification of the system is robust. However, situations should be avoided

where the physical fuel use and the emissions claim are many years apart. Ecofys therefore

recommends that as a minimum, biojet fuel certificates are marked with the date (at least the year)

that they are created, to track whether unexpected situations are occurring in the market. The time

limit on airlines using a certificate that proves the purchase of biojet fuel should be chosen at an

appropriate level, configured to the potential global MBM reporting period. Lessons should be learnt

from existing biofuel and carbon markets.

In the next steps, IATA should continue to proactively engage with ICAO on the design of the global

MBM. The recommendations presented in this report may support these discussions, particularly

among the members of the GMTF and AFTF. The European Emissions Trading Scheme (EU ETS)

provides an opportunity to test some of these ideas in practice and it will be important to remain

engaged with the European Commission as the monitoring, reporting and verification guidance is

further developed for aviation in the EU ETS. In addition it will be important to engage with biojet fuel

pilot projects and test flights in other parts of the world to put the accounting methodology and

options into practice to see how well it works and what issues arise. Specifically engaging pipeline

and fuelling system owners and operators, as well as airlines and fuel suppliers, will also be important

in the next steps to understand the key challenges they foresee of integrating biojet fuel into the

existing infrastructure and fuel inventory accounting systems, and to be able to identify solutions.

Ensuring consistent, practical and robust accounting systems will be a crucial step to secure the

integrity of the evolving biojet fuel market and to ensure the success of a global MBM for aviation.

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1 Introduction

1.1 Policy context

The aviation sector is currently responsible for around 2% of man-made global greenhouse gas

(GHG) emissions, which is a relatively small share when compared to other modes of transport such

as road transport. However, aviation is the fastest growing transport mode and is projected to grow

by around 4 to 5% annually up to 2050, although emissions growth is expected to be significantly

less, thanks to continuous fuel efficiency improvement.

Recognising growing global demand for air transport and hence its potential future impact on the

environment, the aviation industry declared it will work towards sustainable development. In 2009

the International Air Transport Association (IATA), together with the other global aviation industry

associations1, committed to a set of ambitious targets to proactively contribute to a sustainable

development and to reduce carbon emissions from aviation: In the short term, fuel efficiency shall be

improved by 1.5% on average per year until 2020. From 2020 onwards global net carbon emissions

are to be stabilised, despite increasing air traffic volume (carbon-neutral growth). The long-term goal

is to reduce net CO2 emissions by 50% by 2050, compared to 2005 levels. Significant efficiency

improvements in technology, operations and infrastructure continue to be implemented, as in the

past. However, to achieve the targeted carbon reductions in aviation in the long term, a shift towards

low-carbon fuels is also necessary. Plant oil derived aviation biofuel could reduce the carbon footprint

of the industry by up to 80% (EurActiv, 2012). This, however, is only feasible if biofuels for aviation

are produced in a sustainable manner and in line with respective regulations.

The aviation and biofuel industries are working hard to develop the fuels and prove the technical

feasibility of flying on biojet fuel. Currently single test flights and small numbers of commercial flights

are fuelled with a bespoke batch of biojet fuel, making it relatively straightforward to demonstrate

the sustainability and GHG emissions saving from that flight. However, as the industry develops and

scales up, it will be important to have harmonised accounting rules to ensure that airlines can

demonstrate their sustainability, prove their contribution to renewable energy goals and quantify and

allocate GHG emissions savings in a transparent and consistent way that also ensures credibility of

the system, preventing any opportunities for multiple claims from a specific batch of biojet..

The ‘drop-in’ nature of biojet fuel will allow it to be blended into the conventional airport fuel system

and distributed to all aircraft refuelling at that airport. It will not be possible, or desirable even if it

were theoretically possible, for airlines to physically test individual fuel loads to calculate their biojet

fuel content and the associated GHG saving. Therefore rules have to be used to allocate fuel to

different airlines, flying to different countries, which might have different legislations in place.

1 A irports Council International (ACI), Civil Air Navigation Services Organisation (CANSO), International Business Aviation Council (IBAC) and

International Coordinating Council of A erospace Industry Associations (ICCAIA)

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Significant lessons can be transferred from the existing road transport biofuel market, which is

already tackling some of these challenges, but the airline industry has a uniquely international nature

and must learn the lessons and adapt the solutions to best fit the industry structure.

In Europe, monitoring, reporting and verification guidelines have been developed separately for the

aviation sector and for stationary installations (e.g. power plants) under the EU Emissions Trading

Scheme (EU ETS). Any biojet fuels that are used within the European aviation sector that will count

towards emissions reductions under the EU ETS and/or towards the European Renewable Energy

Directive (RED) renewable transport fuel target have to comply with mandatory sustainability criteria.

Compliance has to be demonstrated by passing information about the sustainability of the biomass

used to make the fuel through the supply chain. That information has to be passed through the chain

using so-called mass balance chain of custody rules set out in European legislation (see also chapter

3). These rules offer a good starting point in Europe for how to account for biojet fuel use, but rules

for the industry will need to be applicable globally or regionally, especially as ICAO works towards

developing a global MBM for the aviation industry.

In October 2013, the 38th ICAO General Assembly agreed to develop a global MBM for the aviation

sector by the next ICAO General Assembly in 2016. The goal is to implement a system by 2020 which

would enable the international aviation industry to reach carbon neutrality in their emissions growth

from 2020. Many questions are still to be answered with respect to how the global MBM will operate

in practice and significant work is now underway to design the details of the scheme.

In response to the increasing initiatives and drivers for airlines to report their emissions, and in

particular spurred by the commitment from ICAO to now develop a global scheme to cover emissions

from the sector, IATA identified the need to develop proposals for biojet fuel accounting

methodologies for the aviation industry. The rules need to be transparent, consistent, practical, with

a minimum of additional administrative burden, and should have flexibility to feed into different

regulations around the world. This report aims to support IATA and the wider aviation industry in this

goal.

1.2 Drivers to report biojet fuel and GHG emissions

Fuel use is the largest component of an airline’s operational cost and airlines are therefore well used

to recording and tracking their fuel use. In general airlines have good information on their total fuel

purchase, and can therefore make good calculations on their fuel consumption. Integrating reporting

on biojet fuel use, and on the GHG savings of that biojet fuel, into this fuel recording system in an

efficient and robust manner is a challenge by virtue of the fact that the biojet fuel component and its

GHG savings cannot be physically measured. There is therefore a need for clear and consistent

allocation rules between airlines.

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There are a number of drivers and regulatory mechanisms requiring airlines to record and track their

biojet fuel use and GHG emissions, an overview of which is shown in Table 1. International sector

ambitions and market based measures, as well as voluntary reporting, apply to the airlines

themselves. Biofuel mandates, in place in several regions in the world, tend to apply to the fuel

suppliers rather than the airlines directly, although airlines will naturally rely on information from

their fuel suppliers to be able to record and report their biojet fuel use and associated GHG

emissions. Each type of driver might have different aims and objectives from the perspective of the

aviation industry and will have different rules and regulations and actors involved. It is therefore

important to understand the range of applications before the design choices for the accounting

method are developed to ensure that the proposed accounting method can be widely and coherently

used.

Table 1: Key reporting drivers and regulatory mechanisms for airlines to record biojet fuel use and GHG emissions

Application type Examples and explanation

International sector

ambitions

IATA GHG targets - At IATA’s annual general meeting in June 2009,

targets for emissions reduction were agreed upon. These collective

targets have been endorsed by the whole aviation industry and

submitted to ICAO at its 37th Assembly in 2010. The goals commit

to stop the growth of net emissions resulting from international

aviation from 2020 and to halve emissions by 2050 compared to

2005 levels. Biofuels is expected to deliver a large contribution to

achieving these targets.

Market Based Measures

ICAO Global Market Based Measure – A Global Market Based

Measure Technical Task Force (GMTF) has been formed within

ICAO’s Committee on Aviation Environmental Protection (CAEP) to

oversee development of the details of the global MBM. This Task

Force aims to develop the structure of the global MBM, to be

presented at the next ICAO General Assembly in 2016, for

implementation from 2020. CAEP will undertake technical work to

inform the detailed development of the scheme.

EU Emissions Trading Scheme – Biojet fuel is counted as zero-

emissions under the EU ETS. To be regarded as biofuel, the

sustainability requirements of the RED are applicable. Furthermore

the biojet fuel reported may not exceed the total fuel usage of an

airline for their flights departing from a specific airport that is within

the EU ETS, to avoid that airlines can get substantial exemptions

from the EU ETS by using biojet fuel mainly on routes not subject to

the EU ETS.

Biofuel mandates

EU Renewable Energy Directive - The RED sets a 10% target for the

use of renewable energy in transport by 2020. It is measured

against the use of fuel in road transport (denominator), but can be

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Application type Examples and explanation

fulfilled by any renewable energy in any form of transport

(numerator), thus including air transport.

EU Fuel Quality Directive - The FQD sets a 6% target of GHG

emission reduction from all energy used in transport for 2020

compared with 2010. The RED and the FQD have harmonised

requirements regarding biofuel sustainability. Similarly, for biofuels

to be zero emissions rated in the EU ETS they will also have to

demonstrate that they meet these RED sustainability criteria.

US Renewable Fuel Standard - Congress established the RFS in

2005 which set annual targets for biofuel blending into gasoline up

to 2008. In 2007 the RFS was amended (RFS2) to include other

biofuel types and set annual volume targets up to 2022, as well as

minimum GHG savings compared to conventional fuels. The USA

uses tradable certificates called Renewable Identification Numbers

(RINs) to facilitate demonstrating compliance with the RFS2. RINs

can also be traded with obligated parties. Although jet fuel is not

mandated under the RFS2, RINs can be generated for biojet fuel

provided the fuel meets the correct definition of renewable fuel.2

Voluntary carbon

footprinting and

reporting methodologies

Company Reporting – Airlines are increasingly reporting their

sustainability performance on a voluntary basis, including their

carbon footprints. Organisational footprinting guidelines contain

specific requirements for the use of biofuels.

Carbon Disclosure Project – The CDP is a voluntary database in

which large companies report their GHG emissions. A number of

large international airlines annually report their GHG emission to

the CDP.

The GHG Protocol is the most widely used international accounting

tool for companies to understand, quantify, and manage their GHG

emissions. The GHG Protocol is a partnership between the World

Resources Institute and the World Business Council for Sustainable

Development and provides an accounting framework for many

industries.

From an airline’s perspective, currently the only legislative driver for reporting biojet fuel use is the

EU ETS, which at the moment applies to intra-European flights only.

2 More information on the RED and the RFS2 is provided in Appendix A and in: Ecofys, Assessment of sustainability s tandards for biojet fuel,

2014.

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Biojet fuel can also be used to count towards the biofuel mandates in the EU under the RED and in

the US as part of the RFS2, in which case accounting rules would apply to the fuel supplier. However

biojet fuel use towards these mandates has been very limited, as they have so far been fulfilled

primarily in the road transport sector, so the systems are relatively untested in relation to biojet fuel.

In the EU, the Netherlands is the only country to have actively implemented the provision for biojet

fuel to count towards the RED target in their national legislation. Nevertheless lessons can be learned

from the key characteristics of the accounting methods required for road transport biofuels under

these three legislative drivers.

IATA already asks its members to report their total fuel consumption including biofuel use. IATA is

currently working on more detailed rules to report biofuel consumption. Other key (voluntary)

initiatives that require airlines to report on fuel use and GHG emissions are the Carbon Disclosure

Project, to whom for instance British Airways, Air France-KLM and Qantas report their emissions, and

organisational footprinting standards such as the GHG Protocol which is used by companies worldwide

to report on their GHG emissions.

1.3 Aim of the report

The goal of this report is to assess design choices for (regulatory or voluntary) accounting systems

for biojet fuels that could be implemented by airlines. The design choices take into account the

properties of drop-in fuels and of the aviation fuel supply logistics. The choices strive to be practical

and relatively simple to implement in existing day-to-day operations of the aviation industry, with a

minimum of additional administrative burden, having the required flexibility to feed into different

regulations around the world and following as much as possible the regulatory systems that have

already been implemented in the biofuel supply chain. Representatives from several airlines provided

input to the development of these design choices, which were also presented at a stakeholder

workshop hosted by IATA in June 2014 to gather feedback on the initial set of options.

The purpose of this report is to equip IATA with a framework of design choices which can be taken

further and contribute to the design of future accounting rules for the sector, particularly with the

development of the proposed global MBM at the ICAO level in mind. For some of the options, the

most appropriate design choice will depend on the final design of the global MBM. Design choices are

therefore presented with their relative advantages and disadvantages, and implications, to enable

flexibility in the approach, depending on the choices made at ICAO level. This report also provides

background information for IATA of relevance to the development of the proposals. Chapter 2

describes the characteristics of typical biojet fuel supply chains, today and in the future. An

introduction to traceability or so-called ‘chain of custody’ approaches is given in chapter 3, followed

by chapter 4 which describes the detailed accounting methodology options. These sections together

build the basis for the recommendations in chapter 5.

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2 Biojet supply chains

In this chapter the structure of biojet fuel supply chains globally is described and analysed. The

structure of the current supply chain for the (test and commercial) biojet fuel flights that have taken

place around the world is described as well as how the biojet fuel supply chain could be linked to the

fossil jet fuel supply chain in the future.

Since 2008, when Virgin Atlantic was the first airline to fly on a 20% biojet fuel blend in one of the

engines of their Boeing 747, several major global airlines have performed test flights on biojet fuel.

Since the certification of biojet fuels in 2011 (see section 2.2), twenty one airlines have performed

over 1600 commercial flights powered by biojet fuel blends; some of them, including KLM and

Lufthansa, have even run longer series of commercial flights on biojet fuel over several months.3 The

nature of the biojet fuel supply chain has evolved since the first single test flights, and it is expected

to evolve further as biojet fuel volumes increase, as different companies carve out their roles in the

supply chains, and the biojet fuel industry becomes more mainstream. Some aspects of biojet fuel

supply chains are likely to become more closely coupled to the fossil jet fuel supply chain, whilst

other aspects may evolve to form new commercial structures more suited to the unique

characteristics of biojet fuel supply chains.

The biojet fuel supply chain always consists of the same basic elements including biomass feedstock

production (or sourcing in the case of waste materials), biojet fuel production, blending and

certification, transport and distribution, and use. Furthermore, certain quality documentation,

sustainability information and financial and operational data travel through the supply chain. The

building blocks of the supply chain and the information flows therein are illustrated in Figure 1 and

the elements in the Figure are described in further detail throughout chapter 2.

3 http://www.ecofys.com/en/publication/biofuels-for-aviation/

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Figure 1: Biojet fuel supply chain and information f lows

2.1 Biomass feedstock and biojet fuel production

Feedstock production is done either by companies that operate dedicated biomass plantations or by

companies collecting and processing wastes such as used cooking oil (UCO) from restaurant and

other sources. These companies can sell their products directly to the biofuel producers, or via

feedstock collectors or wholesalers.

Waste feedstocks are popular for the production of biojet fuels as they provide the combination of

limited sustainability risks and relative affordability. UCO and other waste streams from the food

industry can come from a variety of sources, for instance from food processors and restaurants. The

fragmented first step of the supply chain requires appropriate systems to be put in place to ensure

that information on the origin of the material can be traced back from the later phases of the supply

chain in a way which is robust and accurate, but also proportionate to the sustainability risks posed

by such waste materials.

The international ASTM D75664 standard provides the technical specifications for biojet fuel produced

either through the gasification of biomass combined with the Fischer-Tropsch (FT) process, or

produced via the hydroprocessing of oils and fats (HEFA) or the direct sugar to hydrocarbons (DSHC)

process. Other biojet fuel conversion routes exist, including Alcohol-to-Jet (ATJ) and hydrogenated

pyrolysis oil (HPO), but these alternatives have not (yet) been ASTM approved for use in aviation.

4 A merican Society for Testing and Materials - international s tandards organisation for airline fuel quality specifications

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ATJ is expected to become ASTM certified in 2015, enabling a fourth possible route of biomass to jet

fuel conversion. In Table 2 an overview of conversion routes and feedstock inputs is presented.

Table 2: Biojet fuel production routes and feedstocks

Biojet fuel production route Type of feedstock ASTM Certified

Hydroprocessed Esters and Fatty Acids

(HEFA)

Vegetable oils

Waste streams from food industry

Vegetable oil refining by-products

Algal oil

Yes

Fischer-Tropsch (FT)

Woody (lignocellulosic) biomass

Municipal waste

Agricultural waste

Forestry waste

Yes

Direct Sugar to Hydrocarbon (DSHC)

Any fermentable sugar

Aiming for cellulosic biomass and

by-product streams, e.g. bagasse

Yes (but max. blend of 10%,

certified in June 2014)

Alcohol to Jet (ATJ) Sugars

Starches No (expected in 2015)

Hydrogenated Pyrolysis Oil (HPO)

Woody (lignocellulosic) biomass

Municipal waste

Agricultural waste

Forestry waste

No

Biojet fuel is produced by a small number of companies, primarily in Europe and the US. Biojet fuels

are currently produced batchwise, as the demand is not yet sufficient to justify continuous

production. The HEFA biojet fuel production route is currently the most popular, using a variety of

feedstock types as input for the conversion process. Some examples are:

The biojet fuel used by Lufthansa for their series of flights in 2011 originated from Camelina

(80%), Jatropha (15%) and Animal Fats (5%) and was produced by Neste Oil.

The biojet fuel used by KLM in 2013 for their weekly flights from New York to Amsterdam

originated from UCO and was produced by Dynamic Fuels in the United States.

Biojet fuels from the FT process are not yet produced on a commercial scale. In the GreenSky London

partnership, British Airways and biofuel producer Solena have announced plans to build a plant that

will process 575,000 tonnes of post-recycled municipal waste to 120,000 tonnes of liquid fuel (50,000

tonnes biojet fuel) using the FT process from 2017 onwards.

It might be expected that biojet fuel producers will seek more vertical integration in their business

models to have additional control over the supply chains. For the end user (airlines) the use of

biofuels produced from unsustainable feedstock holds a high risk of negative publicity. ‘Tolling

agreements’ – in which the biojet fuel buyer acquires and delivers the feedstock to the biofuel

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producer – are one of the options upstream. Some supply chain parties may also wish to gain more

control over the downstream activities. In general also more unconventional and innovative supply

chain roles may also be expected to emerge to fit the distinct characteristics of the biojet fuel supply

chain. SkyNRG for example, as a biojet fuel supplier, is involved in the sourcing of feedstock as well

as being a supplier of biojet fuel to airlines, thereby effectively covering multiple building blocks of

the supply chain.

2.2 Blending & certification

After production, the biojet fuel quality is tested according to the ASTM D7566 specification. If the

quality of the biojet fuel meets the specification a Certificate of Analysis is issued by an independent

testing company. The certified biojet fuel is blended up to a maximum percentage by volume (50%

for HEFA and FT, 10% for DSHC) with fossil ASTM D1655 certified Jet A1 fuel.5 The blending can in

principle be done at any point in the supply chain, be it at the biojet fuel refinery, a petroleum

refinery or at a separate facility. The blending point is considered to be the point of manufacture of

the final jet fuel. The final blended fuel is tested to the requirements of the ASTM D7566 standard

and is then recertified without further conditions as standard ASTM D1655 fossil jet fuel. From this

point onwards, the biojet fuel blend can be handled as regular Jet A1 fuel (see also Figure 1).

Technical documents demonstrating fuel quality must accompany the product to its destination. The

most common of these documents are listed here:6

Refinery Certificate of Quality (RCQ) - the definitive original document describing the

quality of an aviation fuel product. It contains the results of measurements, made by the

product originator’s laboratory, of all the properties listed in the latest issue of the relevant

specification. It also provides information regarding additives, including both the type and

amount of any such additives. Furthermore, it includes details relating to the identity of the

originating refinery and traceability of the product is described. RCQs must always be dated

and signed by an authorized signatory.

Certificate of Analysis (CoA) - may be issued by independent inspectors and/or

laboratories that are certified and accredited, and contains the results of measurements made

of all the properties included in the latest issue of the relevant specification. It cannot,

however, include details of the additives added previously. It shall include details of the

originating refiner and the traceability of the product described. It must be dated and signed

by an authorized signatory.

5 The 50% blend limit for HEFA and FT is currently in place as a precautionary measure enabling the industry to start using sustainable jet

fuels , while additional assessments are undertaken on the need to maintain required levels of aromatic content in fuels. In the future higher

blending percentages might be permitted to be certified. The blend limit for DSHC fuel is fixed at 10%, as DSHC consists of a s ingle molecule

with 15 carbon atoms (farnesane), whereas conventional jet fuel, as well as other biojet fuel types, are a mix of hydrocarbons of different

carbon chain lengths. A strongly modified carbon chain length distribution could alter the properties of the blend, hence the lower limit

currently for DSHC. 6 IATA (2012) IATA Guidance Material for Biojet Fuel Management

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Recertification Test Certificate (RTC) - demonstrates that recertification testing has been

carried out to verify that the quality of the aviation fuel concerned has not changed and

remains within the specification limits, for example, after transportation in ocean tankers or

multiproduct pipelines, etc. Where aviation product is transferred to an installation under

circumstances which could potentially result in contamination, then before further use or

transfer, recertification is necessary. The RTC must be dated and signed by an authorized

representative of the laboratory carrying out the testing. The results of all recertification tests

are checked to confirm that the specification limits are met, and no significant changes have

occurred in any of the properties.

The above documents are all transferred to the last party that is responsible for the quality of the

fuel, i.e. the party that supplies the fuel at the airport.

2.3 Transport & distribution

Currently, transport of biojet fuels is done in batches as the volumes are limited. Dedicated transport

chains are constructed that keep the biojet fuel or biojet fuel blend separate from the conventional

jet fuel transport supply chain. For instance, the biojet fuel blend for the Lufthansa test flights was

produced in Finland and transported by truck to Hamburg, where it was stored separately from the

fossil jet fuel in dedicated fuel containers at the airport.

Effectively, therefore, today’s biojet fuel supply chains are kept physically segregated from

conventional fossil jet supply chains. However, as the industry scales up, building up a parallel supply

infrastructure for biojet fuel would require prohibitive costs. Furthermore it is not considered

necessary as, once the biojet fuel blend has received ASTM D1655 certification after blending, there

are no technical limitations for transporting and distributing the fuel in the conventional

infrastructure. This means that the biojet fuel blend could be transported via e.g. the existing pipeline

infrastructure alongside conventional jet fuels. Furthermore there are no technical limitations to

blending the biojet fuel into fuel storage tanks in ports or airports.

The ultimate aim of the aviation industry is that the ‘drop-in’ nature of biojet fuel will allow it to be

blended into the conventional airport fuel systems and distributed to all aircraft refuelling from those

systems with no barriers. At that point it will no longer be possible, or desirable even if it were

theoretically possible, to physically test individual fuel loads before uplift to calculate their physical

biojet fuel content. Therefore some sort of decoupling has to be made between the physical presence

of biojet fuel molecules and how the use of the fuel is administered, to ensure that biojet fuel use can

be allocated to different airlines for reporting purposes on a consistent, robust and transparent basis.

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2.4 Use

Currently, biojet fuel distribution at the airport is a custom-made solution for a limited number of test

or demonstration flights. The conventional fuel distribution infrastructure is generally not used and

the biojet fuel is delivered into the wing using dedicated trucks. However, the ultimate aim of the

aviation industry is to fully integrate biojet fuel into conventional fuel transport, storage, distribution

and use.

The ongoing ITAKA (Initiative Towards sustAinable Kerosene for Aviation) project is expected to

support the development of aviation biofuels by improving the readiness of existing technology and

infrastructures. This will be achieved through a collaborative project of industry partners with the EC.

The project will develop a full value-chain in Europe to produce sustainable drop-in kerosene

containing up to 50% HEFA at a scale large enough to allow testing of its use in existing logistics

systems and in normal flight operations in the EU. The project plans to use the hydrant system at

Schiphol airport, in Amsterdam, the Netherlands, for the distribution of the biojet fuel. In June 2014,

Karlstad Airport in Sweden became the first airport worldwide to introduce a permanent, dedicated

biojet fuel storage tank, in an initiative led by Statoil and SkyNRG. Airports generally have one or

multiple large storage tanks for the storage of jet fuel. One or more companies can provide refuelling

services at the airport. Refuelling can be done by dedicated refuelling trucks (bowser trucks) or using

mobile hydrant dispensers that link the aircraft to the airport’s Joint User Hydrant Installation (JUHI).

In general fuel purchasing and distribution can take many different forms. In some cases airline fuel

purchasing departments source the fuel required at their main “home” airport themselves. Visiting

airlines tend to have a direct relation with oil companies supplying the fuel at the airport. Fuel

purchase contracts will have different commercial conditions and may have different durations or be

for different volumes, and airlines may purchase a proportion of their fuel directly on the spot

market. In the case of biojet fuel it might be expected that in the early years airlines will have

dedicated contracts with a biojet fuel producer or supplier to supply a certain volume of biojet fuel. In

the longer term, however, as the price of biojet fuel approaches fossil fuel, contracts might be

expected to evolve to form the mix of different contract types seen in the fossil fuel purchasing world.

In some cases a single oil company is responsible for the distribution network at the airport and the

quality of the fuel. In other cases a separate company or a consortium of oil companies is responsible

for fuel distribution. Oil companies selling jet fuel to airlines can also hire an intermediary or an

Independent Service Provider (ISP) to perform the actual fuelling service into the aircraft.

Airlines can buy and sell fuel to other airlines. Fuel transactions from one airline to another are the

exception rather than the rule, but larger airlines typically have holding tanks (enough storage for

few days) at their home airports. In some cases it can be profitable for them to hold onto fuel in

these tanks rather than taking the spot price. The distribution stage of the supply chain creates one

of the crucial challenges for a biojet fuel accounting system. A robust and appropriate system needs

to be designed to ensure that only one airline can claim each unit of biojet fuel use.

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3 Proposed chain of custody approach

This chapter gives an introduction to different traceability or so-called ‘chain of custody’ options which

are used to link sustainability claims from the origin of the supply chain – where the feedstock is

produced – to the final party making the claim.

3.1 Introduction to chain of custody approaches

In this context, the term ‘chain of custody’ refers to the method by which a connection is made

between information7 that relates to the production of raw materials and any claims that are made

relating to the final product. The chain of custody normally includes all the stages in a supply chain

from the feedstock cultivation to the consumption of the biomass-based fuel.

Different chain of custody approaches can be distinguished that vary in their flexibility and in the final

‘claims’ that can be made (Figure 2). Within each approach there are design choices that can be

made. The following sections describe the key characteristics that define each of the chain of custody

approaches.

Figure 2: Dif ferent chain of custody approaches

7 In this section information refers to any information or data relating to the biomaterial or biojet fuel. This could be, for example,

information on feedstock, country of origin, environmental or social c riteria compliance, which voluntary sustainability scheme (if any) the

biomaterial is certified to, and any information relating to the GHG emission intensity of the biojet fuel. More information specifically on

sus tainability information tracked along the supply chain is provided in the Ecofys report “Assessment of sustainability s tandards for biojet

fuel.”

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3.1.1 Book and claim

A book and claim approach enables trade in the physical product to be completely decoupled from the

trade in information (or certificates). For the volume of biofuel that is claimed to be used, it can be

claimed that sufficient material with those characteristics has been added to the market (taking into

account relevant conversion factors). In other words, the end user cannot claim to have used the

biofuel.

Book and claim systems are offered by several biofuel voluntary schemes (although not for EU RED

compliance). Such systems are also commonly used to make claims about renewable electricity use,

for which it is not possible to trace the ‘green electrons’.

Key characteristics:

Transfer of sustainable volume credits/certificates from producer to end user via a (electronic)

central registry or trading platform;

Provides the lowest level of traceability.

Figure 3: Illustrative book and claim approach.

Key considerations in designing a book and claim system include:

What is the tradable unit?

Which parties in the supply chain can trade those units?

Are external parties also able to trade in those units?

How can ‘double claiming’ be avoided? Is there a need for a central registry or database?

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3.1.2 Mass balance

A mass balance approach can take various precise forms, but in essence products with different

characteristics can be physically mixed, but are kept administratively segregated. It allows mixing of

products with different characteristics at each point in the supply chain, whilst ensuring that at each

step in the chain, companies do not sell or produce more products with specific characteristics than

they sourced (taking into account relevant conversion factors). There cannot be trade in e.g.

sustainability information between parties without trading physical products, nor between the same

two parties (as is possible in a book and claim system). Each actor in the supply chain must keep

track of the amount of product with certain characteristics it sources and sells. If there is a break in

the chain, no claim can be made on the end product.

Mass balance systems are used in the road transport biofuel sector. They are required in the EU for

RED compliance and hence are implemented by all the EC-recognised voluntary schemes. Wood

sector certification schemes – FSC and PEFC – also offer mass balance as their main approach.

Key characteristics:

Administrative segregation only, no requirement for physical segregation;

Each party keeps track of the characteristics of their inputs and outputs, and cannot sell more than

they sourced.

Figure 4: Illustrative mass balance approach

Key considerations in designing a mass balance system include:

At what ‘level’ do parties have to balance their input and output records? E.g. Should the mass

balance be kept at a whole company level, at the level of a site or at the individual storage tank

level?8

8 Note that at one end of the scale where the mass balance system is kept at an international company wide scale, it shares characteristics

with a book and claim system, whereas at the other extreme where mass balance records are kept at an individual s torage tank level, the

system has a lot in common with physical segregation systems.

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Over what time period the mass balance should be ensured? E.g. annual, quarterly, monthly or

continuous.

Is a deficit for balancing-up during the time period allowed?

Is ‘borrowing’ or ‘banking’ allowed over consecutive time periods?

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3.1.3 Physical segregation

As the name physical segregation suggests, physical separation of different product streams (e.g.

certified material from non-certified material) is required throughout the supply chain. This chain of

custody approach delivers consignments that physically contain 100% of the specific product stream,

but they can be from a variety of sources. It does not therefore aim per se to provide traceability

back to the source of the feedstock (e.g. a specific farm or plantation). Physical separation can either

be by location (e.g. separate storage or distribution channels) or by time (e.g. batchwise processing

or delivery).

The US RFS2 system requires that RFS compliant fuel is segregated from non-RFS compliant fuel,

which is not as challenging as full physical segregation of all source streams. In general physical

segregation is more commonly used for supply chains where the product is solid and not so

commonly mixed, e.g. certain types of high value wood, or food supply chains. Physical segregation

is, by definition, used in batchwise production of biojet fuel today, although it will not be practical as

the industry scales up and regularly uses the common airport supply logistics. This report does not

therefore focus on key design choices for physical segregation.

Key characteristics:

Physical segregation required;

Delivers consignments that physically contain 100% certified material from a variety of sources.

Figure 5: Illustrative physical segregation approach

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3.1.4 Identity preservation

This chain of custody approach delivers consignments that physically contain 100% of the specified

product stream from single identifiable sources (identity preservation). Physical separation of

different product streams is required. This approach is easier for shorter and direct supply chains and

is more commonly used with, for example, food supply chains.

Key characteristics:

Physical segregation required;

Delivers consignments that physically contain 100% certified material from a single identifiable

source.

Figure 6: Illustrative identity preservation approach

The identity preservation approach is very challenging for commodities , such as feedstocks or fuels,

and not considered necessary or desirable for aviation biofuels. This report does not therefore focus

on key design choices for identity preservation.

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3.2 Comparison of book and claim and mass balance approaches

Typically physical segregation and identity preservation are seen as the most stringent chain of

custody forms. In practice today, biojet fuel test flights effectively operate with a physical

segregation chain of custody approach, as bespoke batches of fuel are delivered to test flights via

dedicated supply chains. However this chain of custody approach is not considered feasible or

necessary for a scaled-up biojet supply chain in the future.

This report will therefore focus on the book and claim and mass balance chain of custody approaches.

Advantages and disadvantages are compared alongside each other in Table 3, as well as examples of

existing applications of each approach.

Table 3: Advantages and disadvantages of chain of custody approaches

Book and claim Mass balance Advantages Simple implementation (no changes in

supply chain required) Offers maximum flexibility to claim the

benefits from biojet fuel that has been put into the fuelling system anywhere in the world

Any financial incentive for supplying biojet or for being certified can go more directly to the party producing the tradable units and is not spread through all parties in the supply chain

Simple implementation (no changes in supply chain required)

Inclusive approach as all supply chain parties are involved

Closer conceptual (physical) link between what is being claimed and what is physically supplied

Enables any required supply-chain specific data, such as GHG data, to be collected and passed along the chain

In line with existing rules in EU RED and EU ETS

Disadvantages Not permitted in EU RED or EU ETS Question on public perception Not all supply chain parties need

necessarily be involved, so claim could be made about certified products while maintaining some bad sustainability practices within the supply chain

No guarantee that products physically contain raw materials with the characteristics being claimed

Harder to calculate actual GHG savings if intermediate parties in supply chain are not involved

No full assurance of origin Many control points compared to book

and claim Still no guarantee that products

physically contain raw materials with the characteristics being claimed

Implications Harder to get political and societal acceptance

Not an available chain of custody option for most biofuels voluntary schemes

Requires a central database, registry or trading platform to control all claims

All supply chain parties need to keep mass balance records, otherwise there is a break in the chain

Used in the European road biofuel sector

Compatibility with most biofuel voluntary schemes

Examples RSPO, RTRS and Bonsucro (but not for EU road biofuel)

Green electricity End user “claims” for several biofuel

systems, e.g. RTFCs, RINs, Dutch biotickets

RED and EU ETS Most biofuels voluntary schemes FSC and PEFC offer two variants9 for

forestry

9 FSC refers to the two approaches as ‘percentage system’ and ‘c redit system’. The c redit system is more similar to the approach used in

road biofuels.

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Mass balance is the approach required by the European Commission for biofuels in the RED and the

EU ETS (see Appendix A, sections A.1 and A.2), as this is perceived to strike a balance between

stringency and practicality. For this reason it is also the approach that has been adopted by all

biofuels voluntary schemes recognised by the Commission.

The Renewable Fuel Standard (RFS2) allows a mass balance approach to be taken within the US, but

requires a physical segregation approach for fuels produced outside the US (see Appendix A, section

A.3). Note that in practice segregating RFS and non-RFS fuel may not be as difficult as it sounds as it

is simply a requirement to segregate RFS-compliant fuel from non-RFS-compliant fuel and fossil fuel.

Fuel qualifies as RFS-compliant if it is made from any of the feedstocks on the list, so there is no

need to segregate different types of RFS fuel (e.g. different feedstocks). In practice RINs are

generated by the producer or importer, which is quite early in the chain, so fuel would tend to be in

reasonably homogeneous streams until that point. From that point, fuel can be blended and RIN

trade is decoupled from the physical fuel.

Despite all schemes operating mass balance systems for RED compliance, several of the voluntary

schemes recognised by the European Commission have also developed book and claim systems that

can be used by non-EU biofuel participants. The Roundtable on Sustainable Palm Oil (RSPO), which

was developed before the RED was drafted, was the first to offer participants the option to use a book

and claim approach. The Round Table on Responsible Soy (RTRS) and Bonsucro (focusing on sugar

cane) have both launched book and claim systems more recently. According to RTRS, in 2013, 90%

of certified soy production went through their book and claim system10, indicating the popularity of

the approach for end users in particular. Under these systems, certificate buyers are generally the

end users, so for example retailers, supermarkets, and food and feed producers. A book and claim

approach can have a lower perceived stringency by some stakeholders, although it offers a strong

first step towards providing a greater driver for sustainability in supply chains as the end users are

driven by their customers to demonstrate that their products contribute to sustainable supply chains.

It can also offer a pragmatic option in instances where it is not possible to identify the physical

product in the outputs, such as for green gas or electricity which is added to the overall grid network.

The key advantage of a book and claim system is that it would offer maximum flexibility to airlines .

Airlines could, for example, invest in and claim the climate benefits from a biofuel project in a

location where the physical fuel would be used by another airline. The popularity of a book and claim

system for end users is clearly demonstrated by the statistics on book and claim use under RTRS.

However the key disadvantage is that this kind of flexible approach can be more challenging to

communicate – you cannot claim that the end product physically contains biojet fuel, but rather that

you have purchased biojet fuel – and it is not currently an accepted approach under the RED, EU ETS

or RFS2. Book and claim is often perceived as only a first step towards providing more traceability in

the supply chain.

10 P ersonal communication Jimena Frojan, RTRS, April 2014

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For biojet fuel supply chains a mass balance system may be most interesting as it is currently used in

all major biofuels voluntary schemes and is required in the RED and EU ETS, and in the US for

domestically produced fuel. A mass balance supply chain strikes a balance between traceability and

flexibility, and enables any required information to be passed down the supply chain. However biofuel

mandates such as the RED and the RFS2 apply to fuel suppliers, rather than to airlines. A key

characteristic of a mass balance supply chain is that all parties in the chain need to keep mass

balance records to maintain the links in the supply chain at every step. The main challenge for

airlines with this approach would be the downstream – fuel distribution and use – part of the supply

chain. The downstream part of the supply chain can be complex, involving several changes of

ownership, trading and blending with fossil fuel etc. Maintaining such links at this stage of the supply

chain may be challenging. Biojet fuel will, in the future, also enter the conventional fossil fuel

distribution system, at which point it will no longer be physically distinguishable.

Airlines have expressed that they would like flexibility to uplift physical fuel where it is needed and to

report biojet use where it is most beneficial from a legislative perspective . Therefore using a mass

balance approach in the feedstock production and biojet fuel production parts of the chain – in line

with the current road transport biofuel supply chains – and introducing elements of a book and claim

system approach at the downstream end of the supply chain may be a desirable option.

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4 Design choices for biojet fuel accounting

methods

In this chapter the design choices for an accounting system are discussed. Where possible Ecofys has

made a recommendation for the most appropriate design choice, based on the existing legislation and

the stakeholder consultations with airlines and fuel suppliers. We start with a short introduction to the

proposed global MBM currently under development by ICAO, as many of the design choices for the

accounting system will depend on the final design of the global MBM.

4.1 Design of the proposed Global Market Based Measure

The design of the proposed global MBM for aviation GHG emissions that is currently being developed

by the Global Market Based Measure Technical Task Force (GMTF) of ICAO will have an impact on the

approach to accounting of biofuels. ICAO will develop a proposal for the global MBM by 2016, with the

aim of implementing it by 2020.

The design of the accounting system must be compatible with the requirements of the MBM, but at

this point in time the detailed design of the global MBM is not fully defined. We can nevertheless

indicate some important MBM design choices that will have an influence on the method for the

accounting of biojet fuels, so that the accounting system options proposed here offer sufficient

flexibility to link to the final design of the global MBM. Furthermore it is advisable to specifically

discuss these questions with members of the ICAO task force to ensure that the design of the global

MBM does not hamper the uptake of biojet fuel in commercial aviation. Key MBM design choices that

will impact the design of the accounting method are:

(1) Geographical scope

The geographical scope of the MBM is a key factor. Flights to and from which countries are included

in or excluded from the reporting obligation is one of the design choices under consideration. It could

be that flights to and from certain (small and/or developing) countries will be exempted from the

measure by a de minimis rule or similar clause.

(2) Inclusion of GHG emissions other than CO2

The scope of the emissions included could be limited to CO2, the most significant contributor from

fossil fuel combustion to climate change, but might also be extended to emissions of other gases that

have similar climate forcing effects such as NOX emissions.

(3) Sustainability requirements for biojet fuel

The production of (biojet) fuel causes upstream emissions, including emissions from feedstock

production, transport, refining and other processes in the earlier parts of the supply chain before the

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fuel is loaded into the wing. These emissions could be excluded from the carbon performance of the

biofuel within the proposed MBM, in which case biofuel would be counted as zero GHG emissions (as

is currently practiced in the EU ETS), or they could be included in the emissions report of the airlines

to the MBM.

(4) Linkage of MBM for aviation to other systems

The global MBM will create a market for emission allowances that can be traded between airlines. The

aviation sector MBM could be linked to other emissions trading systems, such as the non-aviation

sectors of the EU ETS or the Carbon Development Mechanism (CDM) mechanism to allow emission

reduction credits from outside the aviation industry to be purchased and counted towards an airline ’s

own emission reduction obligations within the aviation MBM. Linking could be either one way or two

way, i.e. it could also be agreed to permit other emissions trading systems to purchase allowances

from the aviation MBM.

In the following sections the key design choices for the accounting system are discussed. Where

possible these are linked to the global MBM design choices indicated above. Where more design

choices are possible we will indicate the preferred option based on the information from stakeholders

and a literature study.

4.2 Chain of custody approach

As discussed in section 3.2, road transport biofuel supply chains generally operate using mass

balanced based chain of custody approaches. Within the EU especially, and therefore in many of the

existing voluntary sustainability schemes, detailed design rules are already defined for the chain of

custody and are being implemented in practice. The aviation industry can look to these design rules

and should make as much use as possible of the rules that are already in place and operating well in

the market. This will be especially relevant for the biofuel production part of the supply chain that

could have significant overlap – in terms of feedstocks and producers – with the current road

transport biofuel industry.

A key difference between the regulatory situation for biofuels in road transport and in aviation is that

the airline industry, as the end user of biojet fuel, will be the party required under certain

regulations, such as the EU ETS and the future ICAO global MBM, to record and report the biojet fuel

they use (red arrow in Figure 7). Biojet fuel use will be important to know in order to calculate an

airline’s emissions to be reported under the global MBM (blue arrow in Figure 7). The fact that airlines

are the end users of the fuel and the party responsible for reporting is unlike the road transport

biofuel industry for which the end users – car or truck drivers, for example – are not required to

report their emissions, and the obligations are placed instead on the fuel suppliers. The same is valid

for biojet fuel under the US RFS2.

If the chain of custody method from the road biofuels sector is followed, this means that a mass

balance system is operated until a control point, which should be defined to ensure that it guarantees

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that a certain amount of sustainable biojet fuel has been entered into the aviation sector fuelling

system. However, the mass balance system does not yet allocate the use of the biojet fuel to a

certain airline. To be able to do this, the verification of the biojet fuel quantity at the control point

should be coupled to a system that allows airlines to robustly claim the use of biojet fuel.

Ecofys recommends a book and claim system can be used by airlines from the control point onwards.

At the control point (see 4.3.1) sustainable biojet fuel ‘certificates’11 are generated by the fuel

supplier in line with the amount of biojet fuel that is supplied. These certificates or tickets relate to a

volume of biojet fuel. They can then be sold directly from the fuel suppliers to the airlines, uncoupled

from the actual delivery of the biojet fuel to that specific airline. The assumption that underlies this

certificate based trading is that whenever biojet fuel reaches the control point, it will be used in the

aviation sector somewhere, thus reducing the GHG emissions of the sector as a whole. The company

(airline) that can claim the emission reductions is the company that has bought the sustainable biojet

fuel certificates.

The system could be set up so that airlines can trade sustainable biojet fuel certificates amongst each

other. An argument for having this tradable set up could be price differences for biojet fuel in

different parts of the world. For instance, in countries were feedstock prices are lower, the biojet may

also be less costly than in other parts of the world. An airline might therefore want to buy certificates

from such biojet fuel from other airlines to offset their own emissions. This market for biojet fuel

certificates could increase the flexibility of the accounting system for biojet fuels, however Ecofys

does not recommend it. It is possible that the global MBM will include a market for tradable GHG

certificates. If there is a market for GHG emissions in the global MBM, which is currently under

development, this should provide an appropriate platform to trade ‘environmentally friendly flying’

with other airlines. Additionally creating a market for biojet fuel volume certificates in parallel to a

GHG emission market would increase the complexity and therefore the risk of mistakes and double

claiming.

11 The term ‘certificates’ is a generic term, used to refer to a volume of biojet fuel that is proven to be sustainable. The ‘certificates’ or

‘tickets’ can be transferred directly from fuel suppliers to airlines in a book and claim type system to demonstrate the transfer of a volume of

biojet fuel. The term ‘certificates’ here is not intended to refer specifically to a certificate from a voluntary sustainabil ity scheme, such as

RSB or ISCC, which might be used to demonstrate the sustainability of the biojet fuel.

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Figure 7: Hybrid mass balance / book and claim accounting system

Recommendation – Ecofys recommends a hybrid chain of custody approach, including elements

from a mass balance and a book and claim system, to account for the use of biojet fuel in the

aviation sector. We recommend that the airline industry uses the existing mass balance chain of

custody rules in operation for the road biofuel supply chain as much as possible until a defined

‘control point’. From that control point onwards a book and claim system using sustainable biojet fuel

certificates will allow airlines to claim the use of biojet fuel. Airlines should not be able to trade

sustainable biojet fuel certificates, if the MBM already provides an appropriate platform to trade

sustainability performance (i.e. GHG emission allowances) with other airlines.

4.3 Overview of design choices for the accounting system

The following sub-sections cover the detailed design choices that will need to be defined for a robust

biojet fuel accounting system for airlines. All design choices described below build upon the

assumption that a hybrid mass balance / book and cla im system described in section 4.2 is used for

biojet fuel accounting. The key design choices for the accounting system that will be described in the

section include:

Choice of a robust control point;

Airport or airline level reporting;

Verification through a central registry or at the fuel inventory level;

Limit on percentage of biojet reported;

Treatment of upstream GHG emissions;

Timeframe.

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4.3.1 Control point

A ‘control point’ needs to be defined that refers to a point in the chain where the total fuel going to

the aviation sector can be identified. This is also the point in the chain that compliance with any

sustainability criteria is demonstrated. It should be a well-defined point which is consistent across all

supply chains, to ensure that all biojet fuel going into the aviation sector is captured within the

system. It should also be an appropriate point in the supply chain to verify any sustainability or GHG

claims made about the biojet fuel.

Under the RED, the European Commission recommends that the requirement to demonstrate

compliance with the sustainability criteria is placed at the fuel duty point (for road biofuel), as fuel

volumes that cross this point are robustly monitored and recorded for tax purposes. This obligation is

therefore usually with fossil fuel suppliers, although the fuel duty point varie s slightly between

Member States, so the party who owns the fuel when it crosses the duty point can sometimes be a

fuel producer, a refiner, blender, or importer, for example. This point, at which the reports on the

biofuel use, and its associated sustainability and GHG characteristics are verified, is referred to as the

control point of the supply chain. Therefore for airlines an appropriate point in the supply chain of

biojet fuel has to be defined for the purposes of consistent reporting on biojet fuel use, and its

associated sustainability and GHG characteristics.

As international jet fuel is not subject to fuel duty12, there is no established equivalent to the fuel

duty point in jet fuel supply chains. Furthermore airlines will have to report their emissions from

activities in different countries, which means that the point at which the claims are verified will have

to be recognised internationally. The importance of the control point is to choose a point in the chain

where the total fuel going to the aviation sector can be identified. Logically this should be the point of

blending and certification (see Figure 1), at which point the biojet fuel has been blended with fossil

fuel as a final ASTM D1655 certified fuel that fully meets the technical specifications and thus it can

be assumed that this fuel will be used in the commercial aviation sector. As indicated in section 2.2,

this point is considered to be the point at which the fuel is created for quality certification. Similar to

the road transport chain, it could be possible that different parties would own the fuel at the blending

and certification point in the chain, depending on the particular supply chain.

Any requirements for the sustainability and GHG emissions of the biojet fuel should be controlled at

this blending and certification point. One important implication of this is that any GHG emissions

resulting from actions later in the supply chain after the control point would need to be included by

using a standardised ‘default’ factor as it would no longer be possible to use actual GHG emissions

(as that future part of the supply chain is not yet known). This is also done in the RED GHG

methodology where a default factor is applied for the final distribution and retail of biofuel. The

earlier in the supply chain the control point is placed, the more emissions would have to be included

in this default factor.

12 In some cases tax is paid for fuel used in domestic flights (e.g. in Australia and some s tates in the US), but generally no tax is paid on

aviation fuel.

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Jet fuel supply chains can become quite complex during the fuel delivery and use part of the supply

chain. It is possible for the fuel to change ownership several times between its production and its

final use, with the potential involvement of traders and airlines who might trade fuel on paper without

having any impact on the GHG impact. Therefore, the later in the supply chain the control point is

placed, the more complex the mass balance chain of custody approach might be for several steps in

the chain.

Recommendation – The accounting system should be a hybrid chain of custody system with mass

balance up to the blending and certification point and book and claim between the fuel suppliers and

the airlines afterwards. The blending point can be at different points in different supply chains and

different parties in the supply chain might own the fuel at the blending point, depending on the

specific supply chain. This point defines the moment that the final biojet fuel is made and it is known

that it will enter commercial aviation.

4.3.2 Airport or airline level accounting

The proposed global MBM (or another emission reporting purpose) might have a “geographical

constraint”, which rules emissions from flights from or to certain countries in or out of the scope of

reporting. An example is the current design of the EU ETS, in which only intra-European flights are

included in the scope of the reporting. A future global MBM might include all global (commercial)

flights or it might exempt flights in certain countries from the scope of the reporting because of their

limited contribution to emissions from the aviation sector as a whole (see also MBM design choice (1)

in section 4.1).

Airlines naturally operate across different airports and across different countries, so if there is any

geographical constraint on the reporting, airlines will find that some of their operations are in and

some are out. Therefore the geographical scope of the reporting purpose has an effect on the level at

which the recording of biojet fuel consumption must be done to ensure that all airlines are accounting

for biojet fuel consumption consistently within the global MBM.

Accounting could be done on an airline level, which would mean keeping track of the biojet fuel use

for an airline as a whole, or at an airport level, which would mean airlines should keep track of the

biojet fuel use from each airport that they fly from (Figure 8)13. Note that there is a difference

between how an airline needs to record (account) their biojet fuel use and how they report it under a

global MBM. Airlines may need to record their fuel use at the flight route level at each airport, to

ensure that they are properly accounting fuel that is within the scope of the system, but they may

only be required to report at an overall airline level.

13 This also implies that any independent verification of an airline report would be done at an airport fuel system level (section 4.3.2)

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In some cases fuel is delivered to more than one airport from a single fuelling system or pipeline, for

example Geneva airport (Switzerland) and Lyon airport (France) share a pipeline. In this case it may

not be possible to distinguish the (biojet) fuel use at an individual airport. For these cases, a further

option of fuel system level accounting might be a more appropriate option, should airline level

reporting not be favoured.

It is assumed that airline reporting under a global MBM system would be subject to some kind of

independent verification (see section 4.3.3). The independent verifier that provides the verification of

the claimed emission reductions resulting from the biojet fuel use will need to check the claim either

at the airline, airport, or fuelling system level, depending on the design choice made.

It would be beneficial to the implementation of the accounting system to have the fuel purchasing

and invoicing structure of the airline claiming the biojet fuel use as the leading argument for

accounting at an airport or fuel system level, to avoid unnecessary changes to airline fuel purchasing

structures and bookkeeping practices. Note, again, that it may be appropriate for the proposed global

MBM to only require reporting at an overall airline level, even if fuel use records are accounted for at

an airport level.

Figure 8 shows the options and implications for the level of biojet fuel accounting.

Figure 8: Accounting system design

1. No geographical constraint, airline level accounting - If the system has no geographical

constraints and the reporting obligation is put on airlines, then it is not necessary to know at

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which airport the biojet fuel was bought, as long as it was bought by the airline claiming the

biojet fuel use. In a system with no geographical constraints the accounting can be done on

an airline level, thus based on fuel purchasing records of a company as a whole.

2. No geographical constraint, airport level accounting – If there are no geographical

constraints it is not necessary to know at which airport the biojet fuel was bought. For other

reasons however, such as the rigour of the verification, accounting and reporting could be

done on an airport level. The accounting should in this case include a check that the amount

of biofuel use claimed from an individual airport does not exceed what could have been used

by the airline from that specific airport (see section 4.3.4).

3. Geographical constraint, airport flight route level accounting - If a system has a

geographical constraint, it is necessary to check whether the claimed biojet fuel use by an

airline does not exceed what could have realistically been used by that airline on routes that

are within the scope of the global MBM from individual airports. This check will have to be

done at the airport flight route or fuelling system flight route level, by matching the fuel use

of an airline for the specific routes from an airport that are in the scope of the reporting

purpose with the biojet fuel bought from those same airports, and checking the feasibility of

the emission reduction claim.

4. Geographical constraint, airline level accounting (not possible) – Accounting biojet

fuel use on an airline level in a geographically constrained system is not possible, as it will

not offer the possibility to check against the operational data of that airline to ensure that all

airlines are only recording the biojet fuel use that is within the geographical scope of the

system.

The EU ETS currently requires airport (aerodrome) level reporting. Similarly, the RED requires mass

balance records to be kept at a site level throughout the supply chain, where site is defined as “a

geographic location with precise boundaries within which products can be mixed” (Appendix A,

section A.2). This would be the equivalent to an airport level, although it could be argued that a

pipeline or a fuelling system still meets this definition.

Note that there is a direct link between the level that biojet fuel is accounted and how verification of

that fuel would have to work (see section 4.3.3). If accounting is at an airline level – and therefore at

a global level – a global biojet fuel registry would be required to ensure that the same fuel is not

claimed by different airlines operating from different airports. This would give maximum flexibility to

airlines. However if biojet fuel is accounted at the more local, airport level, then verification can also

be conducted at an airport level and there would be less need for a global biojet fuel registry.

Recommendation - The global MBM that is under development at ICAO could potentially exempt

smaller and/or less developed countries, and could therefore have a geographical constraint. The

information from which airport or fuel system the fuel was uplifted and for which routes (indeed for

individual flights) is already recorded by many airlines, and could therefore be integrated into a biojet

fuel accounting system. Ecofys recommends that reporting under a proposed global MBM is required

at an airline level and that an accounting system is designed at an airline level as this is likely to be

the most logistically efficient option for airlines and gives maximum flexibility in biojet fuel reporting.

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However if there is any geographical constraint in the global MBM, or if a global fuel registry is not

deemed to be feasible, then the accounting system may need to be designed at the airport level to

ensure the robustness of the system is not compromised.

Box 1: Illustrative example of airline vs airport f light route level accounting

FlyBio - Airline vs airport flight route level accounting

FlyBio operates a daily flight from New York (US) to Amsterdam (NL) and from New York to Dar es

Salam (TZ). Both flights are powered by biojet fuel. Tanzania, as a developing country, is excluded

from the MBM. The result would be:

In an airline level accounting system FlyBio can claim emissions reductions from all their

biojet fuel use.

In an airport flight route level accounting system FlyBio can claim the amount of

emissions reductions that could have been used for the New York to Amsterdam flights

only.

4.3.3 Central registry or verification at the fuel system level

In section 4.2 Ecofys recommends setting up a system in which sustainable biojet fuel certificates are

created by a fuel supplier when a final batch of biojet fuel that meets the technical specifications is

created, i.e. blended. These certificates can then be sold directly to airlines that want to green their

operations, separately from the physical delivery of the biojet fuel. A verification system must be

designed to ensure that 1) the biojet fuel batch (or parts of it) has a unique identification reference

which can only be claimed once 2) no more biojet fuel certificates are sold than biojet fuel was

delivered to the fuel system, and 3) only biojet fuel that meets the sustainability criteria as required

by the aviation industry can generate sustainable biojet fuel certificates.

Two alternatives exist to control the creation and trade in biojet fuel certificates:

1. Verification through a central registry

The central registry option would require ICAO, or another appropriate and independent international

aviation body such as IATA, to set up an international centralised database system in which fuel

suppliers can input batches of biojet fuel when these are “created” at the control point (=blending

point). The database system then creates a number of biojet fuel certificates for the owner of the fuel

at the blending point, which can be transferred to airlines that want to buy biojet fuel. Once the fuel

company transfers its certificates to an airline, its stock of biojet fuel certificates in the database is

depleted by the amount that it has transferred. The advantage of using a central registry is that it is

robust from the perspective of preventing double claiming, and provides a centralised overview of all

biojet fuel consumption worldwide. It could therefore be used alongside airline level accounting,

giving maximum flexibility for airlines (see section 4.3.2). A disadvantage is that the development of

such a system could be costly and there may be data confidentiality issues that would need to be

addressed. The allocation of costs of a central registry would have to be coordinated at an

international level.

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2. Verification at the airport fuel system level.

Another option would be to do independent verification at the airport fuel system level. In this case

the fuel supplier at the airport can generate sustainable biojet fuel certificates without having to

notify a central database of the production of biojet fuel. When a certain volume of biojet fuel enters

the fuel system at the airport fuel system level the certificates for that volume are created and can

be sold to airlines. The fuel system operator at the airport will need to undergo a regular verification

to check whether the accounting rules have been applied in the correct way and that fuel suppliers

have not sold more certificates to airlines than they are entitled to. In addition airline data would

need to be verified to ensure that they are not recording more biojet fuel than they have been

transferred, in line with their fuel purchase records. An advantage of this system is that it is easier to

set up in the early phases of biojet fuel market development where only a few airports will generate

certificates by putting biojet fuel in their systems. It could also be performed in line with existing fuel

quality checks that are performed by fuel suppliers and with verification of fuel and GHG data at

airlines. A disadvantage is that the system is less robust from the perspective of identifying fuel that

is transferred to more than one airline. Simply verifying at the airline level would not identify biojet

fuel that was also transferred to another airline at the same airport, so some verification has to be

performed at the fuel supplier level. Any inconsistencies identified at a fuel supplier level could cause

implications for a number of airlines, which could be challenging to resolve. This option also provides

less of a centralised overview about biojet fuel consumption worldwide than an international central

registry. The costs for verification at an airport fuel system level would likely be paid by the fuel

suppliers and the individual airlines and airports using/supplying biojet fuel.

Recommendation – Ecofys recommends that the option of a global central registry is further

explored to identify the likely costs, the key challenges and their possible solutions. This option would

offer the most robust solution and may save costs in the longer term, but further work is needed to

identify its feasibility.

4.3.4 Limit on percentage of biojet fuel reported

Biojet fuel from HEFA or FT can currently be used up to a 50% blend with fossil jet fuel in civil

aviation, to be ASTM D1655 certified, and DSHC up to a 10% blend with fossil jet fuel. Biojet fuel is

generally sold to airlines today in a blended form. In the future it might be possible to buy only the

biojet fuel component of the blend, and it is also expected that the use of blends above 50% of biojet

fuel might become permitted under ASTM.

When biojet fuel is handled through the existing fuelling infrastructure, the physical volume of biojet

fuel component that is actually put into the aircraft might be different from the contractual or

administrative biojet fuel blend percentage that was bought. As the biojet fuel is mixed with fossil

fuel in the conventional fuelling system, the actual percentage blend physically used by individual

flights will not be known. A design choice has to be made concerning whether there should be a

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maximum blend of biojet fuel that airlines can claim to have used, and if so, how high this limit

should be.

It must be noted that this design choice does not exist in the road transport biofuel sector, as the end

user (vehicle owner) does not have any biofuel reporting obligation. Therefore, in the road transport

sector, it is not relevant to determine how much biofuel was physically or administratively used by

the various end users, although car manufacturers do specify technical limits to the amount of bio

component that can be used in their engines.

For the biojet fuel accounting system, three design options exist:

1. No limit on the percentage of biojet – Airlines are able to claim up to 100% biojet fuel,

although they are (at this moment) technically not allowed to physically use 100% biojet fuel

in the aircraft. Fuel suppliers would still be responsible for ensuring that the physical fuel

used meets the current technical specifications. If fuel purchase records are used as a key

form of evidence to report biojet use, then this option will require a change to the current fuel

purchasing practices so that an airline is able to purchase only the bio-part of a certain batch

of biojet fuel blend. This change in the purchasing practices might be tricky as it currently

acts as a guarantee that the ASTM blending limits are not exceeded. This is unlikely to be a

significant issue in the short term as overall use of biojet fuel is low, so blending limits are

not close to being met. In the longer term though this could create a challenge for fuel

suppliers to ensure that all fuel physically meets the blending limits. However, if this

approach is adopted, no changes would be needed in the future if the fuel quality standards

are amended to allow pure biojet fuel to be used in the aircraft.

This is the most flexible approach, allowing airlines to fully green their operations and

not be limited to a maximum use of biojet fuel. Furthermore, not putting a limit on

the maximum amount of biojet fuel claimed does not create a potential barrier for the

introduction of 100% biojet fuel use in the future.

From a public perception perspective there could be reasons to limit the maximum

biojet fuel claimed to the technical barrier (50% for HEFA and FT and 10% for DSHC)

to avoid a risk of perceived “green washing” if airlines report 100% biojet fuel use,

but it is known that it is only technically allowable to physically fly on a lower blend.

2. Limit on the percentage of biojet in line with the fuel quality specifications – Airlines

are able to claim up to 50% blend of HEFA and FT or a 10% blend of DSHC fuel, in line with

the ASTM 1655 specifications, or a higher percentage in future if the ASTM D1655

specifications are updated. (It would also be possible to set a limit of 50% reporting for all

biojet fuel, meaning that more DSHC could be reported than could physically have been used.

For DSHC, this option would in effect be more like option 1. However we do not see

significant advantages in this sub-option, and it may cause confusion to have a limit for

HEFA/FT which is in line with the technical specifications and a limit for DSHC which is not.)

This option offers reduced flexibility compared to no limit, allowing airlines to replace

at most half of their fossil fuel consumption with biojet fuel consumption.

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The advantage is that this approach will be most compatible with the current fuel

handling practices where the blending of the biojet fuel component is done before the

fuel is purchased by the airline. From a public perception perspective and from a

physical fuel specifications perspective, airlines do not risk claiming more biojet fuel

than could have been used.

3. Typical use limit – Airlines can report up to a typical use limit of biojet fuel from a certain

airport (e.g. 5%). This option is closely linked to the physical consumption of biojet fuel.

This option allows communication that is closest to the physical use of biojet fuel.

However, the option allows the lowest level of flexibility in the claims made and

approaches reporting of the physical fuel use, which is very cumbersome and

therefore not desired by airlines. A typical use limit would also have to be chosen.

There is little basis for this number as the typical use will vary greatly from situation

to situation and is expected to evolve rapidly over the coming years. The number

chosen therefore risks being arbitrary.

The EU ETS currently sets a maximum of 50% biojet fuel reporting. This is not likely to present

problems in the short term as volumes are small. The RED does not set such a limit, although as it

applies to fuel suppliers rather than end users it is less relevant here as fuel suppliers are able to

physically sell pre-blended biofuel.

Recommendation - Ecofys recommends to IATA that the reporting limit of biojet fuel should either

be based on the technical specifications or there should be no limit imposed. A limit on the biojet fuel

claimed in line with the ASTM fuel quality specifications is the ‘less contentious ’ option. It is in line

with current fuel handling practices, reduces the risks of negative public perception and will likely

provide sufficient mitigation potential for airlines for the foreseeable future. On the other hand, the

main accounting barriers identified to allowing reporting of up to 100% biojet fuel use are that fuel

purchase records would need to demonstrate both the physical biojet fuel used and the

administrative biojet fuel purchased to ensure that the blend keeps within the technical limits, and

there could be possible concerns about public perception and communication. If both of these barriers

can be overcome, this option would increase the flexibility for airlines which may help to stimulate

the biojet fuel market. Flexibility was a key wish expressed by airlines we spoke to in the course of

this project. Volumes of biojet fuel used today are also small, so neither of these barriers are likely to

cause significant issues in the short term.

Box 2: Illustrative example of limits on the percentage biojet fuel reported

FlyBio – No limit vs limit based on technical specifications

FlyBio operates a daily flight from New York (US) to Berlin (DE) and from New York to Rio de

Janeiro (BR). Both flights use 50% HEFA biojet fuel.

With no limit on biojet reporting, FlyBio could report 100% biojet fuel use on their flights

to Rio de Janeiro, and no biojet fuel use on the flight from New York to Berlin.

With a limit based on the technical specifications, FlyBio would report 50% biojet fuel

use on both their flights to Berlin and to Rio. Note that for this example, FlyBio could still

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claim to have purchased an equivalent amount of fuel to cover their flights to Rio de

Janeiro.

4.3.5 Treatment of upstream GHG emissions

The upstream emissions of biojet fuel are the GHG emissions that occur from the cultivation and

collection of biomass feedstock (e.g. fertilizer use, diesel use, emissions associated with direct land-

use change etc), from processing of the biomass and production of biofuel and the transport and

distribution of the biofuel.14 The approach to reporting of upstream GHG emissions from biojet fuel in

the reporting obligation will have an effect on the level of detail of the data that an airline purchasing

biojet fuel needs to collect. Different methods in dealing with upstream emissions are applied in the

EU ETS, and the RFS and RED systems that could also be applied to the biojet fuel accounting and

GHG reporting system (see also MBM design choices (2) and (3) in section 4.1).

1. Include upstream emissions through detailed GHG balance of biofuel – All supply

chain stakeholders will need to record and pass on detailed information on energy use and

inputs throughout all steps of the supply chain. This allows all supply routes to deliver highly

detailed information to the airlines on the GHG performance of their products.

Applied as an optional route in the EU RED, allowing the fuel suppliers to claim a

better GHG performance than indicated by the conservative default values in the RED

legislation (see option 2).

The advantage of this option is that it incentivises biojet fuel and supply chains with

better GHG savings and allows airlines to accurately report on the actual emission

reductions achieved with the use of specific batches of biojet fuel.

This method is however highly detailed and could be more costly to the fuel provider,

both to collect the data, to do the calculations and to robustly verify the calculations.

This cost would likely be passed on to airlines in the price of the biojet fuel, although

it is unlikely to be a prohibitive cost, especially once GHG data collection and

calculation systems are set up within the business. Depending on the design of the

global MBM, it could also be possible to claim higher incentives by reporting higher

GHG emission savings. If this is the case, then this additional effort might be offset

by additional incentives.

2. Include upstream emissions through default emission factors – Based on the different

production routes and feedstocks, default GHG emission factors for biojet fuel can be

developed. The default values can always be used or they can be used whenever no detailed

GHG balance of the biofuel (option 1) is available.

Applied in the EU RED and the US RFS system. In the EU RED fuel suppliers are

allowed to report default values based on simply knowing the feedstock that the fuel

14 For further information see Ecofys (2014) Assessment of sustainability standards for biofuel fuel, report to IATA.

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was produced from. The default values are set conservatively to give an incentive for

fuel suppliers to do actual value calculations and so claim a better GHG performance

through doing a detailed GHG balance on their supply chain (option 1). Under the RFS

system the US Environmental Protection Agency (EPA) calculates default values for

different biofuel production chains. These calculations are used to define the list of

which fuels are eligible for counting against the RFS volume target as well as for

support by individual US States and which not. The work of the Alternative Fuels Task

Force (AFTF) of ICAO could be used to determine default emission values for biojet

fuels produced from different feedstocks.

The advantage of this approach is that it takes into account the upstream emissions

in a way which is simple for fuel suppliers to implement. Combining a default value

approach with the option to report more detailed GHG emissions still enables fuel

suppliers with detailed insights into their supply chain to be rewarded.

The disadvantage is that it reduces the incentive for individual supply chains and

producers to improve their GHG emission performance, and there is no insight as to

whether some supply chains actually have worse emissions in practice than the

default value.

3. Exclusion of upstream emissions – If the biojet fuel meets the sustainability criteria for

biojet fuel as required by the reporting scheme, the use of biojet fuel is reported as having no

GHG emissions.

This method is applied in the EU ETS. When the biojet fuel meets the sustainability

criteria of the RED, the biojet fuel use can be counted as causing no emissions.

This is a relatively simple approach, while still ensuring the sustainability of the

biofuel. Upstream emissions of fossil fuels are also typically not taken into account for

GHG reporting thereby making a fairer comparison to fossil fuels.

However the disadvantage is that it does not include upstream emissions, which gives

no benefit to the better performing biojet fuel supply chains and might lead to a risk

of negative public perception.

Note that under a global MBM a distinction could be made between the GHG emissions from biojet

fuel reported by airlines and the number of allowances or tradable units that airlines can claim due to

that biojet fuel use. For example in the EU ETS, biofuels are allowed to be counted as zero emissions

for the purposes of GHG allowances, as long as they first demonstrate that they meet the minimum

GHG threshold under the RED. This approach ensures that biofuels achieve at least a minimum GHG

saving without the added complexity of reporting and the number of allowances being based on the

actual calculated GHG emissions. Airlines recognise that not counting the upstream emissions of

biofuels under the EU ETS gives an extra incentive to drive forward the use of biofuels in the sho rt

term. The current low price of allowances, however, results in the EU ETS alone providing a relatively

low driver for biofuel currently.

In another example, the UK Renewable Transport Fuel Obligation (RTFO) is a volume-based biofuel

obligation where one Renewable Transport Fuel Certificate is awarded for every one litre of biofuel

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placed on the market. However fuel suppliers are able to report the actual GHG saving associated

with the volume of biofuel.

Recommendation - Ecofys advises fuel suppliers and airlines to track information on at least the

origin, the feedstock, and the biofuel conversion process of all biojet fuel used to enable at least basic

GHG calculations or default values to be used. Ecofys recommends that an approach based on

conservative default values is developed as a basis for airline GHG accounting, with the opportunity

to substitute these with actual GHG calculations, to incentivise biojet fuel producers to produce biojet

fuels with higher GHG savings.

4.3.6 Timeframe

There are several distinct elements of the accounting system for which defining rules on an

appropriate timeframe is relevant.

Timeframe of the mass balance system (before the control point)

The core principle of a mass balance system is that over time the sum of the outputs from a point in

the supply chain has to have the same characteristics as the sum of the inputs for that point in the

supply chain. Within the mass balance part of the system, it is helpful to define consistent rules on,

for example: the timeframe over which the mass balance input and output records need to be

balanced, whether or not any deficit in the amount of biojet fuel is allowed during that time period,

and whether ‘banking’ or ‘borrowing’ are allowed between periods. In other words, to what extent

does the physical stock of biojet fuel need to relate to the administrative stock of biojet fuel over

time.

The European Commission guidance for the RED allows either a continuous or fixed period of time.

The Commission Communication states15: “The balance in the system can be continuous in time, in

which case a ‘deficit’, i.e. that at any point in time more sustainable material has been withdrawn

than has been added, is required not to occur. Alternatively the balance could be achieved over an

appropriate period of time and regularly verified. In both cases it is necessary for appropriate

arrangements to be in place to ensure that the balance is respected.”

In practice therefore voluntary schemes recognised by the EC operate a variety of approaches,

although the most widely used schemes opt for requiring that the balance is maintained as a

minimum every 3 months to ensure that deficits are not allowed to build up over a whole year.

Continuous monitoring of a mass balance can be burdensome, and can be difficult for certain parts of

the supply chain, especially farmers who find it hard to keep detailed up-to-the-minute records

during harvest periods. However a continuous mass balance ensures that biojet fuel can only be sold

15 C OM 2010/C 160/01 Communication on voluntary schemes and default values in the EU biofuels and bioliquids sustainability scheme,

section 2.2.3: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:C:2010:160:FULL&from=EN

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administratively once it is received, and avoids any risk of over selling of biojet fuel or of the

associated sustainability information.

A discrete timeframe for the mass balance allows more flexibility. Within this, longer periods of time

allow even more flexibility, but they can make it more difficult for verifiers to reconcile different mass

balance systems in the supply chain, for example if different supply chain parties are operating over

different time frames. In practice many businesses will have the capacity to operate monthly mass

balances, in line with their financial accounting.

Recommendation – If a hybrid chain of custody approach is taken (see section 4.2), then the mass

balance part of the chain is the responsibility of fuel suppliers . Much of this part of the supply chain

might be expected to be certified to existing voluntary schemes. It is recommended that the airline

industry defines flexible rules that are as much as possible in line with the current supply chain

operation and current voluntary schemes. In this case it may mean allowing any mass balance

approach used under an EC-recognised voluntary scheme.

Timeframe for the validity of the biojet fuel certificate (after the control point)

A sustainable biojet fuel certificate is generated when a batch of ASTM D1655 certified biojet fuel

blend is produced. The physical batch may be stored for a period of time, before being used, but the

assumption is that eventually the batch will be used in aviation and will therefore lead to a GHG

emission reduction compared to using fossil fuel. It will need to be decided whether there should be a

maximum timeframe within which a fuel supplier needs to transfer their biojet fuel certificates to

airlines (red box in Figure 7).

If the biojet fuel blend is physically stored for a very long time, but the biojet fuel certificate is

already transferred to an airline, a discrepancy could come to exist between the moment when the

emission reduction is claimed and the moment when the biojet fuel is actually used. Similarly, a

sustainable biojet fuel certificate might be created when a batch of biojet fuel is produced and used

and only bought by an airline a number of years after it was created. In this case the emission

reduction could be claimed years after the biojet fuel was uplifted into a plane. Both of these

situations could result in a strange situation from a public perception perspective. However, they

should not cause an issue for the robustness of the accounting system, as long as the control point is

set at a point at which it is certain that the fuel passing this point will be used in commercial aviation

(see section 4.3.1), and as long as the verification of the system is robust (see section 4.3.3).

The main reason to set a maximum validity of biojet fuel certificates would be to identify when the

biojet fuel was produced. This might be useful if, for example, there were policy changes in the global

MBM that affected the future treatment of biojet fuel, which required the system to be able to identify

biojet fuel that was produced and supplied at different points in time. However these changes could

equally be applied to when the certificates are redeemed, rather than when they are generated. If a

maximum validity for such certificates is set, there is a potential risk of causing fluctuations in the

price associated with those certificates as their expiry date approaches.

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Recommendation – There is no strong accounting reason to set a maximum timeframe within which

fuel suppliers have to transfer their biojet fuel certificates, as long as the control point and

verification of the system is robust. However, situations should be avoided where the physical fuel

use and the emissions claim are many years apart. Ecofys therefore recommends that as a minimum

biojet fuel certificates are marked with the date (at least the year) that they are created, to track

whether unexpected situations are occurring in the market.

Timeframe for the airline to ‘redeem’ the biojet fuel certificate for emissions reporting

For the book and claim part of the system, once a batch of biojet fuel reaches the control point, a

sustainable biojet fuel certificate would be generated. These certificates will be transferred to airlines

when they purchase biojet fuel. It will need to be decided whether there should be a time limit for

airlines to redeem those certificates for their emissions reporting. This will also be impacted by the

previous decision, as to whether biojet fuel certificates should have a ‘vintage’.

Unlike for fuel suppliers who may store the biojet fuel after it has been produced, it is assumed that

once an airline has been transferred biojet fuel certificates they would want to use them towards their

emissions reporting in the current reporting period.

The relevant timeframe for airlines to monitor, report and verify their biojet fuel consumption and

emissions should be in line with what is required by any reporting obligations. Rules on any potential

trading of emissions certificates are expected to be defined under the proposed global MBM.

For the proposed global MBM the reporting and verification period may potentially be annual. Data on

biojet fuel use will need to be monitored on an ongoing basis and ideally be integrated into the

existing fuel purchasing and monitoring systems. If the global MBM sets a limit on the maximum

biojet fuel that can be claimed and/or on the geographical scope of which biojet fuel can be claimed,

then this data will need to be monitored on an ongoing basis and regularly checked by the internal

systems at the airline. These checks will see if the reported biojet fuel consumption matches the

activities of the airline. Formal independent verification of the data is likely to only be required on an

annual basis, in line with annual reporting.

Recommendation - The time limit on airlines using a certificate that proves the purchase of biojet

fuel should be chosen at an appropriate level, in line with the proposed global MBM reporting

period. Lessons should be learnt from existing biofuel and carbon markets. It is likely that once

airlines purchase biojet fuel, they will want to redeem it within the current period of the global MBM,

so a certificate for the use of biojet fuel in year 20xx could thus be used for the emissions reporting

of the airline in that same year. To provide some flexibility for airlines, rules could be defined on the

number or proportion of certificates that can be carried forward to count towards emission reduction

targets in future years, depending on the design of the global MBM.

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5 Policy recommendations and next steps

This chapter brings together the key recommendations on the design of the accounting method and

sets out next steps that IATA could take to develop a widely accepted accounting system.

In chapter 4 the accounting choices for the biojet fuel accounting system have been described in

detail. For some of the accounting system design features the final choice will depend on the design

and successful implementation of the proposed global MBM, while for other features the design of the

MBM is not likely to have a significant impact. Table 4 provides an overview of the accounting system

design choices described in chapter 4 and the recommendation of Ecofys.

Table 4: Overview of biojet fuel accounting system design choices

Topic Design options Ecofys recommendation

Chain of custody approach

Book and claim Mass balance

(Hybrid system) Mass balance from the start of the

supply chain to the control point Book and claim, using sustainable

biojet fuel certificates, from the control point to the airline

Control point Defined point in the biojet fuel supply chain

Blending and certification point

Airport or airline level accounting

Airline level accounting Airport (or fuel system) level

accounting

Airline level reporting to ICAO Airline level accounting if a central

registry is feasible, otherwise airport (or fuel system) level accounting

Central registry or verification at the fuel system level

Central registry Verification at the airport / fuel

system level

Option of a global central registry should be further explored and costs and benefits compared to verification

Limit on the percentage of biojet fuel reported

No limit Limit on the % biojet in line with the

fuel quality specifications Typical use limit

Limit based on fuel quality specifications, but barriers to no limit should be further explored if flexibility is the main objective

Treatment of upstream GHG emissions

Include upstream emissions through detailed GHG balance of biofuel

Include upstream emissions through default emission factors

Exclusion of upstream emissions

Mandatory inclusion of upstream emissions through default emission factors (with option for more detailed GHG calculations for those airlines who wish to)

Timeframe for different levels of the accounting system Mass balance

system Validity of the

biojet fuel certificate

Validity of the emission reduction claim

Any timeframe is possible for all levels of the accounting system

Mass balance – apply flexible rules as much as possible in line with the current supply chain operation and current voluntary schemes

Validity of the biojet fuel certificate for the fuel supplier - from an accounting perspective there is no need for a maximum timeframe, from a public perception perspective there might be a reason to set a maximum timeframe for the validity

Validity of the emission reduction claim for the airline - timeframe in

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Topic Design options Ecofys recommendation

line with global MBM accounting period

During the next steps of the design of the accounting methodology, there will be a number of key

stakeholders who should be involved and engaged. Important government stakeholders who would

have a key role in steering and agreeing on the accounting approach include:

ICAO Committee on Aviation Environmental Protection (CAEP) would play a crucial role,

especially in relation to the relationships to the global MBM;

European Commission16 and key Member States with a special interest in aviation such as the

Netherlands. The European Commission especially has experience in developing the

monitoring, reporting and verification guidelines for the EU ETS. The Commission already

publishes detailed guidance relating to aviation. Key points within this guidance will need to

be further elaborated as experience is gained from the inclusion of aviation in the scheme and

especially now that only the intra-European flights are included within the scope. The

European Commission also has experience in setting up and running the central registry

system for the EU ETS, from which key lessons could be learned;

US Environmental Protection Agency, with experience on the development of the RFS2;

Standardisation bodies may also have a role to play in international standard setting. In

particular ASTM should be consulted in relation to its existing chain of custody rules.

Other key stakeholders from industry would include airlines, airports and airport fuel system

operators and pipeline operators, and fossil and biojet fuel suppliers, especially those actively

developing and trialling the use of biojet fuel.

It will also be important to engage sustainability certification schemes and take on board any

practical lessons from operating chain of custody systems, especially RSB, RSPO, Bonsucro and RTRS

on the development and operation of book and claim systems.

NGOs will also have an interest in the progress of the accounting methodology, especially in the

claims that can be made under the different chain of custody approaches. They should be kept

informed; however the detailed methodology may be more for airline fuelling and fuel purchasing

experts to focus on. NGOs will wish to ensure that any system developed is implemented in a robust

and practical way.

IATA should continue to proactively engage with ICAO on the design of the global MBM and present

and discuss the recommendations presented in this report with the members of the GMTF and the

AFTF. Other more specific next steps include:

16 C urrently DG CLIMA leads on the EU ETS, DG MOVE on aviation and DG ENER on biofuels, including biojet fuels for aviation. However a

new C ommission is being formed at the time of writing. The DGs, their responsibilities and the Commissioners responsible may change

under this new Commission that is currently being put in place.

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Engaging with the European Commission as the monitoring, reporting and verification

guidance is further developed for aviation in the EU ETS. Several key accounting choices will

need to be thought through in the context of the EU ETS.

Engaging with biojet fuel pilots and tests to put the accounting methodology and options into

practice to see how well it works and what issues arise. In Europe, SkyNRG, through the

ongoing ITAKA project plans to use the hydrant system for the first time to supply biojet fuel

at Schiphol Airport. United Airlines are also actively planning to supply biojet fuel through the

existing infrastructure at Los Angeles airport in the US.

Engaging with pipeline and fuelling system owners and operators to understand the key

challenges they foresee of integrating biojet fuel into the existing infrastructure and fuel

inventory accounting systems.

Engaging with ICAO alternative fuels task force to determine default GHG emission factor for

biojet fuels from different feedstocks.

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Appendix A: Characteristics of selected legislative

accounting methods

This appendix describes key details of the accounting systems already in place in the EU and the US

which both have detailed legislation in place to promote the use of biofuels. The EU ETS is unique in

the sense that it is the only legislation of its kind implemented today which applies specifically to

airlines, the end users of biojet fuel. The EU RED and the US RFS2 both incentivise biofuel, but from

the perspective of fuel suppliers.

A.1 EU Emissions Trading Scheme

From January 2012 the aviation sector is included in the EU ETS. Intra-EU flights are now included in

the scheme and airlines have to monitor and verify their annual emissions associated with intra -

European flights to enable them to surrender sufficient European Union Allowances (EUAs) to cover

their emissions.

Two guidance documents are of relevance to biojet fuel use within the EU ETS:

1. Guidance on Monitoring and Reporting Regulation – General guidance for Aircraft Operators,

MRR guidance document no. 2, version 16 July 2012; and

2. Guidance on Biomass issues in the EU ETS, MRR Guidance document no. 3, version 17

October 2012.

The guidance documents were drafted by the Directorate-General for Climate Action (DG CLIMA) of

the EU. Key concerns in developing the guidance were prevention of fraud and double claiming of

emissions reductions, and how to deal with the situation that one airline buys fuel and sells it onto

other airlines.

Biofuels used within the EU ETS count as zero GHG emissions, but in order to be zero-rated it must

first be demonstrated that they comply with the GHG and sustainability requirements of the RED.

Note that this means that all biofuels are zero-rated as long as they achieve at least the RED

minimum GHG saving threshold of 35% GHG saving compared to fossil fuel, even if in reality it can

be demonstrated that different biofuel streams have different GHG savings.

Flights to or from outside the EU: In November 2012 the international sector’s inclusion in the EU ETS

was put on hold for one year for flights to and from outside the EU. The so-called “Stop the Clock”

amendment is intended to give ICAO an opportunity to reach an internationally accepted solution to

deal with carbon emissions from aviation. Following ICAO’s commitment in October 2013 to develop a

global MBM for the aviation sector, stop the clock has been extended to 2016, meaning that until that

time only intra-EU flights continue to have to surrender allowances under the EU ETS.

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Table 5: Key characteristics EU ETS accounting method

Requirement Explanation

Preferred accounting

methodology

Mass balance approach (or stricter, i.e. physical segregation or

identity preservation would be permitted, but book and claim is

not)

Data detail Emissions are determined by the amount of fuel consumed

(tonne of fuel) and the corresponding emission factor. i.e. biojet

fuel meeting the RED sustainability criteria counts as zero GHG

emissions, biojet fuel that does not meet the criteria should be

regarded as fossil fuel.

Per flight approach: Emissions should be calculated for each

individual flight (but reported in aggregated form by aircraft

operator and per annum). The aircraft operator is also coupled

to an administering Member State (see geographic

requirements).

o Attribution of biofuels to flights occurs by assigning fuel

uplift always to the flight following that uplift and by

assuming that the fuel remaining in the tank is fossil fuel.

o For mixed biofuels, the emission factor is determined by the

biomass fraction. The biomass fraction is to be determined

by laboratory analysis or if this leads to unreasonably high

costs by a purchase records based system, to be approved

by the competent authority.

Simplified approach: Emissions are calculated using an

estimated amount of biomass content based on purchase

records.17

o This approach can only be applied if an aircraft operator can

obtain reasonable assurance that the biofuel purchased can

be traced back to its origin. Criteria must be met for the

transparency and verifiability as laid down in either:

a voluntary sustainability scheme approved by the

Commission under the RED, or

ensured by appropriate national systems, or

by other appropriate evidence18 provided by the fuel

supplier(s) to the aircraft operator.

Aircraft operators are responsible to set up an appropriate data

flow and control procedure which ensures that only quantities of

17 A detailed explanation of this approach is provided by Guidance Document ‘Biomass issues in the EU ETS’, MRR G uidance document No. 3,

final version of 17 October 2012, section 6 .2. Online available at:

http://ec.europa.eu/clima/policies/ets/monitoring/docs/gd3_biomass_issues_en.pdf 18 This evidence includes: 1) evidence on meeting the RED sustainability criteria for each consignment of biofuel, provided by t he fuel

supplier; 2) evidence that the total amount of biomass sold does not exceed the amount of biomass purchased; 3) joint record keeping

between several supplier sharing facilities; 4) a transparent record system for the accounting of biofuels, ensuring that no double counting

occurs; 5) centralized verification of the supplier (or even the suppliers, in case of shared facilities)

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Requirement Explanation

biofuels used for EU ETS flights are taken into account. It shall

ensure:

o Only biofuels meeting the RED sustainability criteria are

taken into account;

o Traceable and verifiable evidence about physical sales of

biofuels to third parties;

o No double counting.

Next to the annual emissions report aircraft operators provide a

corroborated calculation with specific checks on the prevention

of double counting or double claiming.

All relevant purchase records are kept in a transparent and

traceable system (database) for at least 10 years.

Timing Data records are related to purchasing records

Emissions are reported to competent authorities annually

Geographic requirements Currently only intra-European flights are covered by the EU ETS.

Accounting is done per aircraft operator to a single,

administering Member State. E.g. KLM reports to the Dutch

Emissions Authority for all its flights covered by the EU ETS, also

for European flights not taking off or landing in the Netherlands.

Monitoring and reporting has to be on a per airport basis for

each airline.

There is no guidance on how to deal with the European regional

airspace approach, as this approach is not yet legislatively

binding. [Note any such guidance on this topic will be important

for IATA to note as it may provide precedent in relation to how

to deal with a geographically restricted scheme. The pipeline

which is shared between Geneva and Lyon airports provides an

existing example of a pipeline which serves an airport within the

scope of the EU ETS and an airport outside the EU ETS.]

Sustainability Sustainability criteria established by the RED are to be applied to

biofuels (see section A.2).

Biofuels meeting the RED sustainability criteria are zero-rated

(i.e. no life-cycle emissions are taken into account). Otherwise

they are assumed as a fossil source stream.

Evidence of compliance of the consumed biofuels with the RED

sustainability criteria should be based on either 1) voluntary

sustainability schemes recognised by the EC (preferred

approach), or 2) Member States’ national systems for

implementing the RED, or 3) appropriate evidence provided by

the fuel supplier.

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Requirement Explanation

Data transfer Administering Member States determine from whom the aircraft

operator can obtain evidence of compliance with the

sustainability criteria (i.e. the producer, supplier or user).

Burden of proof is by default on the user of the biojet fuel, but

the aircraft operator will usually have to rely on data provided by

third parties.

Data is reported to competent authorities in the form of an

annual emissions report, including corroborating calculations

showing that no double counting occurs.

‘Control point’ The requirement to report is with the aircraft operator.

Enforcement/validation Verification of the reported biojet fuel is required for the aircraft

operator in order to submit the annual emissions report.

o Verification is done at “reasonable level of assurance”, which

means a high but not absolute level of assurance, expressed

positively in the verification opinion.

o Data quality is tier 2: the maximum uncertainty permitted in

relation to data is =< 2.5%

Centralised “up-stream” verification is possible: The biofuel

supplier (or the suppliers sharing facilities) should ensure

verification of their records at least once per year by an

accredited verifier.

Competent authorities perform spot checks and cross-checks on

the already verified emissions reports.

Verifiers must be accredited EU ETS verifiers according to the

Accreditation and Verification Regulation.

Other Tradable emissions units are called European Union Allowances

(EUAs) and are traded via a centralised ‘European Union

Transaction Log’ (formerly called CITL)

A.2 EU Renewable Energy Directive

The EU Renewable Energy Directive (RED) came into force in 2010. It sets a target across the EU as

a whole of 20% renewable energy (including the electricity, heat and transport sectors) in 2020. The

overall target is differentiated by Member State, but all EU Member States have a minimum target of

10% renewable energy in the transport sector. Any biofuel counting towards the target must meet

mandatory GHG and sustainability criteria.

The 10% renewable transport target is defined as a percentage of road fuel in the EU. Jet fuel is

therefore not included in the calculation of the 10% target, but biojet fuel that meets the mandatory

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sustainability criteria can count towards the achievement of the target. At present, however, this has

only been implemented in the Netherlands.

In general, detailed implementation of the RED is at Member State level.

Table 6: Key characteristics RED accounting method

Requirement Explanation

Preferred accounting

methodology

Mass balance approach (or stricter)

Data detail Data reported per consignment varies per Member State and by

voluntary scheme. In general, the following information is

requested per consignment:

o Biofuel type

o Feedstock

o GHG performance

o Country of feedstock origin

o Name of any voluntary scheme used

Information on feedstock and in some cases origin is required to

be able to report a default GHG value. Reporting actual GHG

calculations requires either detailed information on all inputs

throughout the supply chain to be tracked or it requires

individual supply chain parties to calculate the cumulative GHG

intensity of the fuel to their point in the chain.

Timing Rules vary between individual Member States and voluntary

schemes. Typically the mass balance period has to be balanced

as a minimum every three months.

Data reporting to Member State authorities is annually as a

minimum, although some allow or require reporting more often.

Geographic requirements Sustainability requirements apply to all biofuels consumed in the

EU, regardless of where they are produced.

The mass balance accounting system requires individual parties

to balance their outputs and inputs at the level of a ‘site’. Site is

defined as “a geographic location with precise boundaries within

which products can be mixed.”

Sustainability Minimum sustainability requirements are include in Article 17 of

the RED and relate to direct land-use and a minimum GHG

saving:

o Biofuels may not be made from materials cultivated on land

that, on (or after in the case of biodiversity) 1 January 2008,

was highly biodiverse (primary forest, protected area or

highly biodiverse grassland), high carbon stock (wetlands,

two categories of forest) or peatlands.

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Requirement Explanation

o Biofuels must meet a minimum GHG saving of 35%

compared to the fossil equivalent. This threshold increases

to 50% from 2017 and 60% from 2018 for biofuel

installations that started production on or after 1 January

2017. Any emissions associated with a permitted direct land-

use change must be included.

Lifecycle GHG emissions can be reported as either ‘default’ or

‘actual’ values. Default emissions saving values are provided for

a range of common biofuel supply chains and can be reported

under certain conditions. Biojet fuel is, however, not one of the

example chains. Default values are set at a conservative level to

provide an incentive to report actual values. Actual values can

always be calculated (even if a default value is given) using the

methodology provided in Annex V of the RED.

Emissions associated with indirect land-use change (ILUC) are

not currently included in the calculation methodology. The

possible inclusion of methods to tackle ILUC is currently under

discussion at the EU level. Various options are being discussed

such as capping first generation, land-using biofuels, or

including ILUC emission factors.

Evidence of compliance with the RED sustainability criteria

should be based on either

1) Voluntary sustainability scheme recognised by the EC, or

2) Compliance with a Member States national system for

implementing the RED, or

3) Supply in accordance with a bilateral agreement concluded

between the EC and a third country (no such agreements

have been concluded to date).

Voluntary schemes are emerging as the preferred approach by

economic operators and some Member States in fact only

currently allow the use of voluntary schemes. At the time of

writing, 17 voluntary schemes have been recognised by the

EC19.

Data transfer Data is reported to individual Member States.

Member States define the format that data must be submitted.

The German government developed the ‘NABISY’ database.

Although its use is only mandatory for biofuels consumed in

Germany, many economic operators are using the system.

19 http://ec.europa.eu/energy/renewables/biofuels/sustainability_schemes_en.htm. For further details see Ecofys report to IATA

“A ssessment of sustainability s tandards for biojet fuel”.

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Requirement Explanation

‘Control point’ The requirement to report compliance with the sustainability

criteria is recommended by the Commission to be at the fuel

duty point (for road biofuel). In practice therefore this obligation

is with the fossil fuel supplier (although the duty point varies

slightly between some Member States, so can also be with a

refiner, blender, or importer for example).

Enforcement/validation Under Article 18(3) of the RED Member States must ensure that

economic operators “submit reliable information” and “arrange

for an adequate standard of independent auditing of the

information submitted”

It is recommended that Member States require information to be

reported at least annually and to have it independently verified

to a limited assurance level, according to ISAE 3000.

The verification requirements set by voluntary sustainability

schemes are assessed by the EC before a scheme is recognised.

Key EC requirements for a voluntary scheme to be recognised

include:

An independent audit before a participant can make any

claims under the scheme;

Annual retrospective auditing of a sample of claims made

under the scheme;

Auditors must be independent of the activity being audited,

free from conflict of interest, and have relevant and specific

qualifications and experience;

Audits must be conducted to a limited assurance level,

according to ISAE 3000.

A.3 US Renewable Identification Number (RIN) system

The Renewable Identification Number (RIN) system was developed by the US Environmental

Protection Agency (EPA) to facilitate compliance with the RFS. A RIN is a 38-character numeric code

that corresponds to a volume of renewable fuel produced in or imported into the US.20 RINs remain

with the renewable fuel through the distribution system and ownership changes. RIN transaction data

is registered in the EPA Moderated Transaction System (EMTS).

Obligated parties are required to meet their prorated share of the RFS mandates by accumulating

RINs, either through fuel blending or by purchasing RINs from others.

20 The code refers to aspects such as year batch was produced, company ID, facility ID, equivalence value for fuel and renewable type code.

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Foreign producers who plan to generate RINs must register and conduct a third-party engineering

review pursuant to section 80.1450. Additionally, such foreign producers must meet the requirements

in section 80.1466 prior to generating any RINs for their fuel. The requirements in section 80.1466

include requirements such as posting a bond, committing to allow EPA inspections of the foreign

production facility, and segregating the renewable fuel for which RINs are generated from non-

renewable fuel and other renewable fuel that is not being imported into the US.21

Jet fuel production or importation is not subject to the Renewable Fuel Standards. However,

producers or importers of renewable jet fuel can generate RINs equivalent to the volume of biojet

fuel supplied if their fuel meets the definition of eligible renewable fuel. Airlines themselves would not

see the RIN certificates as these are claimed by the fuel producer, but airlines could benefit from the

value of the RINs. The only traceability in the USA that an airline has is their order of jet fuel.

Table 7: Key characteristics RIN accounting method under the RFS2

Requirement Explanation

Preferred accounting

methodology

A mass balance type approach is accepted within the US, but

physical segregation is required for fuels when they are outside

US borders:

o The RFS2 places no restrictions on the mixing of

biofuel produced in different facilities, w ith different

feedstocks, or through different processes, provided

that the origin is within the US.

o Imported batches of biofuel, however, need to be

kept physically segregated from fossil batches until

they are imported in to the US in order to comply

with the RFS2 and receive RINs. Once the RINs have

been generated then mixing of biofuel can occur.

o Note that in practice segregating RFS and non-RFS

fuel may not be as difficult as it sounds as it is

simply a requirement to segregate RFS-compliant

fuel from non-RFS-compliant fuel and fossil fuel. Fuel

qualifies as RFS-compliant if it is made from one of

the feedstocks on the list, so there is no need to

segregate different types of RFS fuel (e.g. different

feedstocks). In practice RINs are generated by the

producer or importer, which is quite early in the

chain, so fuel would tend to be in reasonably

homogeneous streams until that point. From that

point, fuel can be blended and RINs trade is

decoupled from the physical fuel.

21 http://fuelsprograms.supportportal.com/link/portal/23002/23005/Article/21410/What-are-the-requirements-for-a-foreign-producer-who-

wishes-to-generate-RINs-for-the-renewable-fuel-they-produce

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Requirement Explanation

Data detail Three main types of report are required:

o Annual compliance report for RVO (Renewable

Volume Obligation – i.e. obligated parties, Refiners

and Importers).

o Annual Production Outlook report for all producers

(including outside US). Covers expected fuel

production for following year.

o Quarterly report for all RIN generators.

Timing RFS year is a calendar year. Both annual and quarterly reports

are required (see above)

Geographic requirements Different record keeping requirements are in place for fuel

produced in the US (and Canada) and fuel produced outside (see

below).

Sustainability A number of options are available under the RFS2, the most

relevant one being the “aggregate compliance approach”. This

provides a record keeping exemption for biofuel produced from

planted crop or crop residue from existing US agricultural land,

provided that the 2007 baseline amount of US agricultural land

has not been exceeded.

The approach is also open to countries outside of the US, and in

March 2011 the EPA approved the use of this approach in

Canada.

Other compliance options primarily rely on record keeping and

reporting to the EPA to demonstrate that the land from which

the feedstock was obtained was cleared prior to 19 December

2007 and that the land was actively managed on that date.

Voluntary schemes (termed “agricultural product certification

programs”) could potentially be used to demonstrate compliance

under the RFS2, although to date no schemes have been

assessed by the EPA.

Data transfer Compliance with the RFS2 is reported to the EPA

Data is reported in the form of an electronic self-declaration

made via the MTS (moderator transaction system) online

system.

‘Control point’ Producers or importers of renewable jet fuel generate RINs to

represent that their fuel meets the definition of eligible

renewable fuel.

Enforcement/validation Independent verification is required for two aspects: fuel

segregation and attest engagements (including engineering

review). No list of approved auditors, but auditors have to be

independent from the company.

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