Supplementary written evidence submitted by Fuels Industry UK (MAN0064)

Regulatory burden, gold-plating and barriers to fuel production in the UK fuels sector

1.         Introduction

This paper supplements the written and oral evidence Fuels Industry UK has submitted to the Committee’s inquiry into “Managing the Future of UK Oil and Gas”. It shares some examples - specific to lower carbon fuels - where overlapping, inconsistent and overly prescriptive regulation is creating barriers to investment, innovation and decarbonisation in the UK fuels sector. Unnecessary cost and complexity in the regulatory environment makes the UK a less attractive place to do business.

This is not about deregulation, but about smarter regulation that achieves environmental goals without unnecessary duplication – Government and senior figures in the UK’s regulators speak about wanting to deliver these same ambitions.

2.         Case Study: Environment Agency regulation of Tyre Pyrolysis Oils

An ongoing example is the Environment Agency’s (EA) emerging approach to resource frameworks for waste‑derived feedstocks, particularly Tyre Pyrolysis Oil (TPO), which is shared as a case study and illustrates how well‑intentioned regulation can become gold‑plated, impose disproportionate burdens, and undermine decarbonisation pathways. This case study is included because it illustrates a wider pattern, not because TPO is unique.

TPO is a lower‑carbon feedstock that could be used more widely if regulations were clearer and proportionate. This is a wider issue: at present, many of the potential feedstocks listed in the Renewable Transport Fuel Obligation (RTFO) for development fuels are considered wastes, while all qualifying UK Sustainable Aviation Fuel is derived from waste (although TPO is not an approved option for SAF at present) – we must get their regulation right to deliver on the policies’ aims.

EA proposed using a resource framework to classify TPO as End of Waste. The EA had proposed to use the same “one size fits all” resource framework for all refineries, but each refinery operates differently and therefore the same resource framework cannot be successfully used at more than one refinery. This situation has already created delays, uncertainty and unnecessary cost for UK producers which are a barrier to investment.

The proposal that each refinery develop a resource framework for each material listed in the RTFO would come at a very significant cost.  This would create a large administrative burden without improving environmental outcomes.

An approach is instead needed that will remove the waste requirements for these feedstocks, which would align the UK with international practice and support investment in lower‑carbon fuels. The association has raised the issue to EA and DEFRA highlighting the following principles which we believe could help deliver a strong regulatory framework while encouraging the use of new lower carbon feedstocks:

• EA should treat TPO and other products derived from RTFO feedstocks as recovered products, so waste regulations don’t apply and instead it is managed under environmental permitting, product labelling and REACH regulations;
• Operators should manage the risks associated with feedstock selection through due diligence;
• Any decision should reflect the different operational conditions across the UK refineries.

3.         Examples of unnecessary regulatory burdens

The examples shared below are specific regulations and implementation concerns that are adding to the overall regulatory burden for fuels suppliers. The examples given are in policy areas that are vital to the ongoing obligations on fuel suppliers to report into government e.g. under the RTFO as well as to innovations the sector continuously needs to make to maintain and grow their business and help contribute to Government’s net zero goal. In both areas, we see additional and in some cases unnecessary costs or information requirements placed on businesses

3.1.    Reporting and verification of renewable fuel volumes:

Under the RTFO there is opportunity for rationalising verification of obligated fossil fuel volumes. These volumes are currently billions of litres in any calendar year for fuel suppliers but highly detailed verification to DfT is required precisely to the litre. Reporting into DESNZ (for their statistics publications and calculating the compulsory stockholding obligation) is only required at the tonne level rather than the litre, which given that billions of litres (millions of tonnes) are delivered annually, would appear to be proportionate. Similarly, RTFO administrative burdens arise from revocation and resubmission requirements for minor errors (including typos) that do not materially affect sustainability reporting but still trigger full correction processes.

3.2.    Development fuels obligations under the RTFO

This policy was intended to stimulate innovation, but unclear and restrictive approvals have limited its impact. Companies have submitted proposals for development fuels, but many have been rejected due to feedstock definitions or minimum blend thresholds (typically 25%).

The lack of clarity on qualifying fuels has led to wasted development effort and reduced investment. A stable, inclusive policy framework is essential to unlock further investment in low-carbon fuels. This example also serves as one which results in higher consumer costs as the lack of available development fuels means that companies must purchase buy-out of their obligation.

Given the lack of clarity and lengthy approval times for development fuels, a policy review to incorporate learnings and clear updates to the RTFO guidance to broaden definitions and streamlines approvals could remove barriers to more development fuels coming forward and being invested in. This review was intended to be part of the spring 2026 RTFO Call for Evidence which has now been deferred until later in the year, delaying any clarity on this topic

3.3.    Bio feedstock trials and permits under Environmental Permitting Regulations

Proposals to run trials where bio feedstocks would be co-processed alongside fossil fuels by one refinery were delayed by insufficient regulator resource to efficiently process applications. This would have helped increase lower carbon fuel production to meet government goals, but the potential for innovation was restricted and delayed due to heavy regulation of trials.

While the EA have been supportive in allowing industrial trials of Development Fuels at refineries where the permit allows for some processing (notwithstanding the issues on TPO noted in the case study), issues have arisen when companies look to increase the volumes and the ways in which feedstocks are processed. Permit variation application is very challenging when looking to expand the types of feedstocks available to process.

4.         Examples of reporting burdens

The fuels sector also has 40 separate reporting requirements which contain overlap and duplications of reporting. For example, areas such as company data, inventories, supply, production, governance and infrastructure are reported into at least 10 different points. Rationalisation would free up resources for decarbonisation and operational resilience.

July 2026

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