Hydrotreated Vegetable Oil (HVO) is a form of renewable diesel that can be used as a replacement fuel or blended with fossil based diesel without any technical issues.
Diesel is currently blended with up to 7% FAME (fatty acid methyl esters), which is the maximum amount allowed for diesel to remain within the EN590 fuel standard. As HVO can be deployed as a substitute for diesel or blended with fossil diesel in higher proportions than 7% and still meet the specifications for EN590, it offers great potential for the continuing decarbonisation of diesel fuel. It has several advantages relative to FAME, including reduced NOx, increased storage stability and improved cold flow properties. However, supply of HVO can be limited and demand for the product will continue to be high. Cost is therefore a key consideration when compared to diesel or FAME.
The current Climate Action Plan (2019) has set out an indicative target of a 12% biofuel blend in diesel by 2030 and to achieve this, it will be necessary to deploy HVO as part of the fuel mix. In September 2019, a public consultation was launched on the path for the Biofuels Obligation Scheme over the period of 2021 to 2030. The consultation, which closed in November 2019, has been helping to inform the development of an updated Policy Statement on biofuels and the next iteration of the Climate Action Plan, both of which will set out the planned approach to the use of biofuels and other renewable transport fuels for the coming years. The Policy Statement is well advanced, and I expect that it will be finalised and published in the coming weeks.
The tax treatment of HVO or any other transport fuels is a matter for my colleague, the Minister for Finance.