Raised cap on GHG emissions strengthens demand for biodiesel in Germany

Use of biodiesel and hydrotreated vegetable oil (HVO) increased substantially month-on-month in Germany this August.

At 233,000 metric tons, the amount of biodiesel blended in diesel fuel was not just around 2.5 percent larger in August 2023 than the previous month, but also the biggest volume since March.

According to preliminary information published by the Federal Office for Economic Affairs and Export Control (BAFA), a total of 1.733 million tons of biodiesel and HVO, also known as renewable diesel, was blended in diesel fuel in the period January to August.

Based on previous months’ figures, the Union zur Förderung von Oel- und Proteinpflanzen e. V. (UFOP) has estimated total consumption in 2023 at approximately 2.552 million tons.

The association has pointed out that raising the greenhouse-gas (GHG) quota obligation from 7 percent to 8 percent on the previous year has helped stabilize demand for biodiesel, although at the expense of the German biodiesel commodity chain.

The UFOP has drawn attention to biodiesel imports from China, which continue to be under suspicion of fraud.

The association fears that the pressure on supply and prices for rapeseed oil-based biodiesel will continue in 2024 due to the leverage of double counting, although the GHG quota obligation will increase to 9.25 percent.

This effect also compensates the fact that palm oil-based biodiesel or HVO can no longer be credited since the beginning of 2023.

Due to triple counting, other compliance options such as e-mobility in the private, commercial and municipal sectors, which is subsidized with substantial amounts of tax money, significantly enhance the displacement effect and thus the plunge in prices in GHG-quota trading.

The UFOP has urged the German government to review GHG-quota levels for the coming years and raise them reasonably at an earlier stage by virtue of the power to issue statutory instruments provided in section 37(h) of the Federal Control of Pollution Act (BImSchG).

According to the association, trading in GHG-reduction quotas has become a major market-based incentive for all players to drive the energy transition in the vehicle tanks of the existing fleets or switch to electric drives.

The UFOP has emphasized that the increases to 9.25 percent scheduled for 2024 and higher in the following years as provided in the law will not be high enough to meet the climate-mitigation targets in the transport sector set for 2030.

Referring to the more than 3-million-ton share of biodiesel in the diesel market that was reached without quota trading in 2020, the UFOP has emphasized that the share of biodiesel in diesel fuel should be raised from 7 percent to 10 percent by volume at public petrol stations as soon as possible in accordance with the amended regulation on fuel quality (10th Ordinance on the Implementation of the Federal Control of Pollution Act).

According to UFOP, this would be the fastest possible and also most cost-effective contribution towards meeting GHG-quota obligations.

In this context, UFOP has called attention to the fact that German biodiesel producers and traders exported approximately 823,000 tons of biodiesel in the first half of 2023 alone.

The share of HVO has remained comparatively low and is still not recorded separately by the Federal Office for Economic Affairs and Export Control (BAFA).

UFOP has underlined that what applies to all biofuel options is that proof of sustainability is the passport to market access, crediting and product confidence.