Analysis of the operation of the mass balance system and alternatives

Summary The EU Renewable Energy Directive (RED) requires the European Commission to report to the European Parliament and the Council in 2010 and 201 2 on the operation of the mass balance and on the potential for allowing for other chain of custody approaches. The RED introduces the world’s first legislative mandatory criteria for carbon and sustainability. The Commission's 2010 report on mass balance was prepared at a time when there was little practical experience as yet with the implementation of the mass balance system. This report provides input to the European Commission for their second report, specifically addressing the following aspects:

• An inventory of experiences with the operation of t he mass balance since the transposition of the RED and an evaluation of the operation of the current mass balance approach;
• An evaluation of the advantages and disadvantages of allowing alternative chain of custody approaches, focusing on book and claim (also refer red to as a tradable certificate system) and physical segregation.

The findings in this report are based on interviews with market parties and an expert workshop in which individual findings could be validated and de bated. The main issues with current mass balance system identified during this project are:

1. Differences in Member State implementation;
2. Differences between mass balance systems of Voluntary Schemes;
3. Flexible feedstock reporting;
4. Potential threats to the integrity of the chain of custody.

Regarding allowing alternative chain of custody app roaches, overall stakeholders contacted during the interviews and expert workshop indicated a preference to maintain the current mass balance system. Their specific reasons vary, but include:

• Prevention of confusion in the market;
• No fundamental complaints with mass balance;
• Considered a fair compromise between administrative burden and effectiveness;
• Investment to establish mass balance system already made and perceived high costs of switching;
• Moving to book and claim would risk removing impact of EU legislation. The Commission's effort should be focused on ensuring a common understanding between all Member States and market actors of what is required in the current mass balance system and on smoothing out any issues with the operation of the current mass balance system

Key recommendations, described in more detail in this report are:

1. Harmonise system boundaries and the level at which the mass balance system should operate in Member States;
2. Harmonise rules on measurements and reporting on biofuels to reduce administrative burden for economic operators with activities in more than one EU Member State;
3. All Member States should require the same informati on to be reported;
4. Monitor different rules in different voluntary sche mes and encourage cooperation;
5. Clarify and strengthen rules on chain of custody auditing;
6. Require proportionate feedstock reporting when commodities are traded as single feedstocks;
7. Investigate and monitor concerns about integrity;
8. Investigate possibility of a hybrid chain of custody approach.