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Co-processing SAF faces technical, cost, policy hurdles
Co-processing SAF faces technical, cost, policy hurdles
London, 16 October (Argus) — Co-processing bio feedstocks in conventional oil refineries to make sustainable aviation fuel (SAF) has reached commercial scale, but further growth will be challenging and costly, attendees heard at the IATA World Sustainability Symposium in Brussels this week. Around one third of Europe's oil refineries co-process feedstocks like used cooking oil (UCO) alongside crude to make a fraction of sustainable fuels for European mandates, FuelsEurope fuels executive Sebastian Hirsz said. This reflects modest early SAF demand, and rising mandates strengthen the case for investing in more capacity, he said. Co-processing ratios are capped by fuel standards such as ASTM, but pending more testing these limits could be eased over time, he said. Fragmented policy on feedstocks is a barrier because EU member states have written different co-processing rules into national law, so a feedstock allowed in one country may be blocked elsewhere, Hirsz said. The rules need "tidying up" to unlock further investment, he said. Co-processing also faces technical challenges, said Spanish refiner Moeve's senior vice president for strategy and international growth Rik Sneep. Refineries can typically cope with 5-10pc bio feedstock without problems, but blending higher ratios adds acidity that requires upgrades to the hydrocracker or metallurgy adjustments, he said. The business case varies by refinery. Upgrading older or challenging brownfield sites can see costs spiral to "two, three, or four hundred million," Sneep said. Some refineries will be "really well placed to make upgrades at relatively low cost," but for others it may be more economical to build greenfield biorefineries, he said. Refining bio feedstocks introduce more oxygen in the system and need significantly more hydrogen, which adds costs, Sneep said. Feedstocks like used cooking oil (UCO) are collected from diverse suppliers, meaning they are inherently inconsistent and challenging to work with, he said. Refineries may employ other techniques to trim lifecycle emissions of their fuels, such as co-processing a share of synthetic e-crude made with renewable hydrogen and captured CO2, said FuelsEurope's Hirsz. Using renewable hydrogen in refineries and biorefineries is also a major lever to trim the lifecycle emissions of SAF, he said. This could apply to co-processed SAF or neat biofuel SAF. The EU's SAF mandate works on a volume basis and does little to encourage SAF producers to cut emissions beyond meeting the minimum eligibility. Companies disagree about how best to incentivise renewable hydrogen in SAF. One option is categorising SAF made with renewable hydrogen as synthetic SAF (e-SAF). Refiners have urged the EU to allow this, but pure-play e-SAF companies say it would undermine their projects. The European Commission is analysing this 'e-HEFA route' but has reached no decision, said EU mobility and transport department head of aviation policy Eddy Liegeois. Such a policy would grow the hydrogen industry and help scale e-SAF, and help lower biofuels lifecycle emissions, but commission is wary of jeopardising "genuine" e-SAF projects, he said. By Aidan Lea Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.
Governments urged to unlock carbon market demand
Governments urged to unlock carbon market demand
London, 15 October (Argus) — Governments must move from principles to policy to help unlock the next wave of voluntary carbon credit market demand, with targeted funding, coordinated interventions and clearer market signals needed to support corporate buyers, experts said at the Carbon Forward Expo in London on 14-15 October. The carbon credit market has shown resilience despite weak retirement volumes, Chris Shipley, head of global carbon markets at the UK's Department for Energy Security and Net Zero (DESNZ), said, adding that governments now need to help lower the barriers to participation and channel investment into high-integrity credits. "We see the supply integrity issue as being largely solved. Now it's about governments stepping up, taking action, putting those incentives in place and coordinating those interventions with other governments." International coordination between governments and targeted use of public funding can help de-risk investment and unlock private sector activity, Shipley said. On funding support, Shipley said the UK will soon make available around £800,000 to support four to six host countries in establishing reporting and authorisation procedures needed to unlock supply eligible under the first phase of the Carbon Offsetting and Reduction Scheme for International Aviation (Corsia). The funding will help countries establish reporting and authorisation frameworks, supporting both immediate Corsia compliance needs and longer-term market participation, while helping airlines access eligible supply, he said. The UK government plans to respond to its voluntary carbon market consultation around Cop31 in November. Proposed measures include recognising a minimum quality threshold, clarifying the balance between value-chain emissions cuts and credit use, and drawing on a policy playbook to be announced by the Coalition to Grow Carbon Markets. The response will also draw on some of the work being done by the International Emissions Trading Association (Ieta) on "safe harbour" measures, that is, reputational and legal protections that could help companies that want to do the right thing by buying carbon credits, Shipley said. Experts agreed that restoring demand will depend on combining stronger policy support with greater confidence in credit quality. Shipley noted buyers were increasingly favouring credits carrying the Integrity Council for the Voluntary Carbon Market's (ICVCM) high-integrity Core Carbon Principles (CCP) and stronger third-party ratings, with premiums for such credits continuing to widen. The carbon credit market is witnessing an increasing premium for highly-rated, high-integrity credits, but long-term supply of such credits remains scarce, Mo Safdar, head of origination at Climate Impact Partners, noted. Safdar said 70pc of the money spent in the voluntary carbon market is on credits rated "BBB" and above, adding that corporate buyers are increasingly seeking long-term access to limited pools of high-quality supply. Future growth will require more buyers willing to commit to multi-year purchasing agreements rather than relying on spot transactions, allowing developers to secure financing and scale projects. Companies that have made such commitments increasingly view carbon procurement as part of longer-term capital allocation and value-chain planning rather than a standalone sustainability expense, Safdar said. A growing pipeline of higher-quality projects developed over the past several years should begin entering the market in the next couple of years, Tommy Ricketts, chief executive of ratings agency BeZero, said. This will help rebuild confidence in the market and support future demand, he added. By Shribalaji Shenbagaraj and Erisa Senerdem Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.
Solar, Bess tax breaks clear Mexico's lower house
Solar, Bess tax breaks clear Mexico's lower house
Mexico City, 14 October (Argus) — Legislation to accelerate recovery of start-up capital for solar power and battery energy storage passed Mexico's lower house on Wednesday, clearing a final article-by-article review in a 322-115 floor vote. The clean energy incentives — structured as accelerated depreciation rules under the federal income tax law (Lisr) — advance as a core element of the 2027 revenue package. The initiative now heads to the senate for ratification, which is expected to conclude well before the chamber's 31 October legal deadline to pass the revenue side of next year's budget. If approved, the new rules will take effect on 1 January 2027. The tax reform proposal specifically aims to modify the federal income tax law, as part of an overhaul to Mexico's simplified tax framework (Resico). It establishes that eligible companies may double their annual tax depreciation rate on physical equipment and infrastructure to 40pc from 20pc. The provision could cut capex recovery times in half, typically to 2.5 years from 5 years, for small- and mid-sized solar and backup energy developers. However, industry analysts point out a significant trade-off that limits the reform's broader impact. As the incentive is strictly tethered to the Resico framework, it is bound by the regime's updated annual gross revenue cap of Ps50mn ($2.6mn). Renewable energy advocates argue the cap is too low and sets up a mixed outcome for the industry . While it stimulates small-scale distributed generation and commercial rooftop installations, utility-scale developers are largely excluded from the tax break. Under the new Lisr, amortization is now limited to 50pc of taxable profit for these companies, a limit analysts argue creates a baseline annual tax cash drain regardless of cumulative development capex. Furthermore, companies exceeding the revenue cap will now be restricted from fully utilizing the standalone 100pc immediate renewable asset deduction established under article 34 of the income tax statute. Financing costs for capital-intensive generation networks also face adjustment, as the legislation lowers the threshold for net-interest deductions on corporate project debt to 20pc from 30pc of adjusted taxable income. By James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.
Q&A: EU ethanol seeks bigger role in RED revision
Q&A: EU ethanol seeks bigger role in RED revision
Brussels, 14 October (Argus) — The EU should preserve renewable energy targets for road transport and give European-produced ethanol a greater role in cutting transport emissions and import dependency when revising its renewable energy directive (RED), according to Laurent Donceel, the new secretary general of European renewable ethanol association ePURE. Is ethanol use increasing for European producers? Ethanol and biodiesel remain the leading renewable transport fuels in the EU, representing between 6-7pc of all road transport fuel consumed. More than 80pc of that volume is produced in Europe. The broader debate about energy security and "made in Europe" has put wind back in our sails. Is this thinking being picked up in the forthcoming revision of the renewables directive? We are somewhat concerned that the European Commission will oversimplify the framework and remove the specific renewable energy target for road transport. That target has existed since the first RED was adopted in 2009. It has been a key driver of investment and has provided the business case for Europe's bioethanol and biorefining industry. If those targets disappear, an important question arises: will Europe's roughly 50 biorefineries continue investing in renewable fuels? The EU-US trade agreement made no commitments on market access for US ethanol. Why such a surge in imports? Agriculture and ethanol were considered a strategic industry under the EU-US deal. That is very different from the UK's approach, which granted duty-free access to US ethanol and effectively undermined its domestic industry. The US is the largest exporter of ethanol to Europe, and the sector there benefits from a red carpet of tax credits and production incentives. Compare that with Europe, where producers get red tape and increasing regulatory constraints for both conventional and advanced biofuels, including restrictions in sectors such as aviation and maritime. This creates a clear distortion in global competitiveness. The commission just last month decided to prolong until 2029 its surveillance of fuel ethanol imports into the EU acknowledging the potential for a surge that could threaten the European ethanol industry. Do you see trade distortion? Clearly, there has been a major surge in imports. Trade distortions have occurred in the past. Last year, the commission decided to halt duty-free ethanol imports from certain developing countries, including Pakistan, under the bloc's Generalised System of Preferences (GSP) framework. We also have concerns regarding imports from Mercosur countries, notably Brazil. But those volumes remain quite limited compared with imports from the US. Is the EU prepared to go against the US? Aren't other trade and geopolitical issues more important in the grand scheme of things? Ultimately, that is a decision for EU member states and the European Parliament. But Europe is currently experiencing its third energy crisis in five years. For the last crisis, Europe shifted heavily towards LNG imports. That didn't take us very far with the strait of Hormuz blocked. Recent geopolitical events such as the closure of the strait have once again demonstrated Europe's vulnerability. Do we really want to swap one dependency for another or do we want to strengthen domestic supply chains? Do you see Europe rethinking limitations on eligible biofuel feedstocks, notably food and feed crops? Recent discussions are encouraging. One of the RED delegated acts, proposed by the commission but rejected in the EU parliament in July, acknowledged that indirect land-use change (ILUC) is not an issue for European ethanol production. Globally, there are 10 countries identified as having a high ILUC risk. None of them are in Europe. That provides a solid basis for future RED to incentivise home-grown fuels, including both conventional and advanced biofuels. We are also seeing discussions about harmonising the current 7pc cap on food and feed-crop-based biofuels. For many member states, that could represent an increase compared with existing national limits. We also have good hopes that future discussions about RED in hard-to-electrify sectors will align on feedstocks, enabling ethanol-based biofuels to contribute to the energy transition of maritime and aviation. Could changes to RED or shipping fuel mandates boost the use of biofuels? Absolutely. Currently under certain EU laws, first-generation ethanol, like other biofuels, is given a grade equivalent to fossil fuels. As a result there is little incentive to use it because it does not contribute towards compliance targets. As for Sustainable Aviation Fuels (SAFs), the definition excludes crop-based biofuels. We need to reconsider how you pivot hard-to-electrify sectors. Upcoming legislative proposals affecting maritime and aviation are now expected in 2028. Those new proposals should recognise renewable ethanol's potential to cut import dependency and greenhouse gas emissions. Could revisions to the bloc's 2035 phase-out of the internal combustion engine (ICE) also allow for continued use of biofuels in new vehicles? The commission's original proposal to amend the CO2 standards for cars gave no continued role to first and second-generation biofuels. Since then, voices in the EU parliament have increasingly argued that biofuels should play a more significant role in the future framework. Even with increasing demand for electric vehicles (EVs), by 2035 around 50pc of the cars on European roads will not be fully electrified. Our position is straightforward: Instead of lowering the climate ambition, broaden feedstock eligibility so that we can achieve the same level of ambition using more European-produced renewable fuels. by Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.
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