RTFC trading slows as market fears price collapse on government delay

Trading in the UK’s Renewable Transport Fuel Certificates has slowed as market participants grow increasingly concerned about delays to the introduction of the government’s proposed changes to the Renewable Transport Fuel Obligation, the scheme underpinning the UK’s renewable transport fuel.

Any delay to the legislation may spark a fall in RTFC prices, as certificate values had rallied when the changes were announced in September. 

The proposal is set to cap the contribution of crop-based biofuels at 4% in 2018, and then reduce it to 2% by 2032 and is expected to be in place as of April 1, 2018.

While at the same time the obligation is set to rise from 4.75% this year to 7.25% in 2018 and 12.4% by 2032.

However, with parliament just days away from entering its Christmas recess, an informal expectation that legislation would be tabled before the end of the 2017 looks increasingly unlikely to be fulfilled.

“There is a certain nervousness, because the government’s new biofuel quota is expected to start in April. A lot of people are holding back [from trading] and any delay could make the RTFC prices collapse,” one market source said Friday.

RTFC prices have fallen in recent weeks, as cold weather has seen market participants blending biofuels rather than meeting their obligations via the purchase of certificates.

Alongside that, with thin trading activity seen, market jitters have seen pressure brought to prices as supply currently outweighs demand.

Year 10 RTFCs were assessed at 21.75p on November 3, but have since fallen to 20.7p with trades heard at levels around 20.5p earlier in the week.

A spokesperson at the Department for Transport, the government agency that is responsible for overseeing the RTFO, said that they still aim to pass the legislation in time for the April deadline along with parallel changes to the Greenhouse Gas Reporting Regulations.

“We are on track to make changes to the Renewable Transport Fuel Obligation (RTFO)… we aim to make changes to both pieces of legislation for April 2018,” the department told Census via email.