Obligated Company
An obligated company is a supplier of more than 450,000 litres of fossil fuel per annum.

Non Obligated Company
A non-obligated company is a supplier of less than 450,000 litres per annum of fossil fuel or a biofuels producer. For example, a company that produces only biodiesel is not automatically obligated but is entitled to register.

Adminstrator
The RTFO will be implemented by 'the Administrator'. For the purpose of this explanation, the Administrator is responsible for the issue and redemption of RTFO Certificates and management of the buy-out fund.

For every litre derived from renewable sources, Obligated and Registered Non Obligated Companies will receive 1 Renewable Transport Fuel Certificate (RTFC).

The Obligated Companies must ensure that 2.5% of the fuel they supply is from renewable sources.

An Obligated Company supplying 500,000 litres of fuel must show that 12,500 litres of that fuel is from renewable sources. This is achieved by presenting 12,500 RTFCs to the Administrator.

It could be the case that the Obligated Company does not have enough certificates through supplying too much fossil fuel.

In this example the Obligated Company would only have 2,500 certifcates, leaving a shortfall of 10,000 certificates, and thus has one of two options. Either purchase the additional certificates required from Registered Non Obligated Companies or other Obligated Companies

or pay the buy-out price, currently 15 pence per litre short, for the shortfall of 10,000 certificates to the Administrator. This will go into the buy-out fund.

As a Registered Non Obligated Company producing biodiesel, you can either sell your certificates to the Obligated Companies for a negotiated price

or redeem them with the Administrator not knowing what price you will obtain as it depends on how much is in the buy-out fund.

It is thus preferable to be in a position to offer your certificates to the Obligated Companies for a negotiated price.

Additionally, with the Obligated Companies looking to increase their supplies of biodiesel, there will be increased demand for the biodiesel produced by the Non Obligated Companies

An Obligated Company can either sell their RTFCs to other Obligated Companies

or redeem them with the Administrator not knowing what price you will obtain as it depends on how much is in the buy-out fund.