Verifying Sustainable Fuels: The Imperative of Physical Authentication

Carbon Intensity

Achieving environmental goals for emissions is not simply about utilizing low-carbon fuels. The production processes of these fuels significantly influence the carbon intensity of the end product. To effectively classify the various production techniques and their related greenhouse gas (GHG) emissions, color-coding schemes have been introduced. Colors such as grey, blue, green, and others are used to depict the total carbon footprint of a fuel. However, the current terminology for describing low-emission fuels is inconsistent among different stakeholders and countries, and there is no globally accepted method for calculating emission intensity at present.i The absence of a consistent system for calculating the overall carbon footprint could potentially distort the perceived environmental advantages of utilizing low-carbon fuels.

For instance, a study by the Rocky Mountain Institute (RMI) contrasted the carbon intensity of a “green” labeled hydrogen fuel, expected to have the smallest carbon footprint, with that of “grey” hydrogen fuel, anticipated to have a significantly larger carbon footprint. The study discovered that, despite labeling, the “green” hydrogen, if produced from electricity generated by fossil fuels, would have an average yearly carbon intensity nearly twice that of “grey” hydrogen, which is produced directly from natural gas without any emission abatement.ii

Owing to the vague methods of classifying low-carbon fuels with basic labels, many global organizations and governments are striving to establish certification schemes that accurately compute the carbon intensity score of low-carbon fuels and set standards for these classifications. These schemes are intended to provide transparency to the end consumer about the fuel they purchase, which is usually purchased at a premium. However, the various methods for calculating the GHG product footprint lack standardization. Without a globally recognized standard or mutually recognized standards, the landscape remains unclear and perplexing for producers and consumers. The European Court of Auditors has identified that deficiencies in the certification systems for sustainable biofuels could jeopardize the EU’s goals for renewable energy in the transportation sector.iii

Sustainable Fuel Tracking Methods

Several strategies can be used to maintain the integrity and identity of products throughout multiple custody transfers. These strategies, or chain of custody models, aim to offer transparent bookkeeping of the product’s attributes as it moves from point-to-point through the supply chain. These sustainable fuel verification tools include:

1. Identity Preservation. This method refers to the process where a product with a unique identity is isolated and tracked, preventing it from being mixed with other products. An example of this would be green hydrogen sourced from a single origin and delivered directly to the end user.
2. Product Segregation. This often involves the mixing of verified products from multiple sources that share similar characteristics. For instance, green hydrogen from various sources might be combined in a pipeline for delivery to the end user.
3. Mass Balance. This is a method designed to monitor the total mass of a product with specific attributes throughout the distribution network. This method is meant to ensure the correct allocation of the beneficial attributes of a low-carbon fuel to the final product delivered based on auditable record-keeping. This method is typically used when the infrastructure for storage and shipping does not permit segregation. For example, a certain quantity of green hydrogen is produced, and this product is mixed with blue and grey hydrogen during transport and storage. The allocation of this green hydrogen is recorded and the final product mirrors that percentage allocation, facilitating the advantages of low-carbon production without complete product segregation.
4. Book & Claim. This approach separates the tangible, certified product from the certificates or carbon credits linked to it. Thus, the low-carbon product can be mixed with any other products without the need for separation or monitoring of the mass input into the system. This is advantageous when production is distinct from consumption and the transportation of the low-carbon product is not feasible. Certificates or credits can be purchased and sold to ‘exchange’ the benefits of low-carbon fuel production with end users who cannot acquire low-carbon fuel.

In the Book & Claim model, where a renewable product of high value is rapidly separated from its corresponding carbon credits, the chances for fraudulent misrepresentation are reduced. However, establishing an international Book & Claim system with a unified carbon market or harmonizing diverse markets to allow products to flow smoothly through the global supply chain presents numerous challenges. Consequently, the Mass Balance model is more prevalent and simpler to implement due to these complexities. Here, and also with the segregation and identity preservation models, renewable product has a period of isolation from non-renewable products and the risk of misrepresentation and fraud rise significantly. However, even with the Mass Balance model, there are stakeholders that are concerned that the “existing rules on Mass Balance bookkeeping are not aligned with the realities of marine fuel logistics,” where floating storage, bunker barge last point before consumption exists and fuel production is often far from ports.ix

If low-carbon fuels possess a distinct, permanent fingerprint that consistently marks them as the initially certified substance, then genuine product assurance and verification can be achieved, no matter what chain of custody procedure is used. However, as discussed earlier, there is no inherent signature of a fuel produced by low carbon methods versus that produced by high emitting methods when the final molecules are identical.

Sustainable Fuel Authentication Required to Assure Low-Carbon Compliance

Figure 2: Two scenarios of supplying low-carbon, green fuel to a bunkering container ship