Frontier Economics has been commissioned by Neste to study the functionality and benefits of a renewable fuel crediting system that would allow car manufacturers (OEMs) to voluntarily finance additional renewable fuel (on top of the quantities specified in RED II) and count the corresponding emission reductions towards their fleet targets.

The background to the study is that the “tank-to-wheel” approach in the EU regulatory framework for fleet targets for new road vehicles on tailpipe emissions does not distinguish between fossil and renewable fuels. OEMs can basically only reduce their fleet emissions by bringing more electric vehicles to market. If they fail to do so – as is currently the case, with OEMs missing the required share of electric vehicles by more than 40% on average in the first half of 2020 – they face significant penalties.

The system studied by Frontier Economics avoids double counting the efforts of OEMs and fuel suppliers, provides the necessary coordination along the value chain, and thus induces additional GHG emission reductions by converting penalty payments without any environmental benefit into higher emission reductions.

The study developed potential scenarios for the road transport sector following the implementation of such a renewable fuel crediting system and explained how such a crediting system would affect different stakeholders and the environment. It shows significant benefits for consumers, OEMs, and fuel suppliers. At the same time, the system would enable additional, effective, and faster emissions reductions.

Show Study