In November 2005, the UK Government announced a Renewable Transport Fuels Obligation (RTFO) . This means that by 2010, 5 per cent of all road fuel sold on UK forecourts must come from renewable sources. Budget 2006 announced that an RTFO would intially be introduced in 2008 and would require 2.5 per cent of road fuels to come from renewable sources. Budget 2007 announced that the RTFO is to rise above 5 per cent after 2010/11 provided 3 factors are met: there need to be robust sustainability and carbon standards: new fuel quality standards at EU level to ensure that existing and new vehicles can run on biofuel blends higher than 5 per cent; costs being acceptable to the consumer and wider economy.

Following publication of the Gallagher Review on the impacts of biodiesel production and a subsequent consultation, the government announced a slowing of the rate of increase in the RTFO, setting it at 3.25 per cent in 2009/10, rising to 5 per cent by 2013/14 - a delay of three years.

To encourage suppliers to source the most environmentally friendly biofuels, companies are required to report to the Renewable Fuels Agency on the sustainability and greenhouse gas benefits of the biofuels they sell. This is seen as a stepping stone to a mandatory assurance scheme. The government has signalled that from April 2010 it aims to reward biofuels under the RTFO according to their carbon savings and from April 2011 they will only reward biofuels made from feedstocks which meet appropriate sustainability standards.

Under the RTFO, Argent Energy’s biodiesel which is made from tallow and used cooking oil, rates very highly on greenhouse gas saving. And since its raw materials are by-products, it meets the highest sustainability criteria and is exempt from that part of the reporting requirement.

Since July 2002 the duty on biodiesel has been 20 pence per litre lower than the duty on fossil road fuel. This made it economically viable for Argent to invest in building its plant. The Budget in 2007 indicated that this incentive would remain until 2009/10. Then a buy out price -the price paid by fuel suppliers who failed to meet their obligation - will be introduced at 15 pence per litre. The Budget in 2008 announced that the duty differential will cease in 2010 and the RTFO buy-out price will be set at 30 pence per litre.

The UK is subject to the EU Renewable Energy Directive agreed in December 2008 and expected to be formally adopted before May 2009. This establishes a 10 per cent binding minimum target for biofuels in transport to be achieved by each member state by 2020. Linked to this is the EU Fuel Quality Directive which requires that fuel supplied to meet the Renewable Energy Directive must achieve measurable greenhouse gas savings and must be made from material which meets appropriate sustainability criteria.