Waste oils displace palm oil, determine composition of raw materials in Germany’s 2023 GHG-quota year

The 2023 quota year once again confirmed the “excellence” of biodiesel made from waste oils for counting towards Germany’s greenhouse-gas reduction obligation (GHG quota), stated UFOP, with reference to the “Evaluation and Experience Report 2023” published by Germany’s Federal Agency for Agriculture and Food (BLE) at the end of 2024. 

The drivers of this displacement and shifting effect are the GHG reduction efficiency and, in the case of certain waste oils, above all the economically interesting double-counting towards the GHG-reduction obligation.  

As a result of this regulation, the UFOP has observed relocation effects, incomprehensible waste definitions and a temporary drop in the price of GHG quotas to below 100 euros per ton of CO2.  

The fundamentally high attractiveness of the funding opportunities in the German GHG-quota market is having a noticeable effect on the raw-material composition of biodiesel and hydrotreated vegetable oil (HVO), also known as renewable diesel.  

In 2023, biofuels made from palm oil in Germany could no longer be counted towards the GHG-reduction requirement for the first time.  

As a result of better GHG efficiency and the feedstock-dependent option of double-counting, 1.573 million metric tons of biodiesel and 0.383 million tons of HVO from waste oils replaced the biofuel volumes from palm oil and, to some extent, from rapeseed oil, according to the BLE report.  

For the 2024 quota year, UFOP said it expects this effect to intensify.  

Based on data from the Federal Office of Economics and Export Control (BAFA) for the quantities of biodiesel and HVO placed on the market from January to November 2024, UFOP estimates that the amount consumed will decrease again to 2.256 million tons for the 2024 quota year.  

It is noteworthy, UFOP stated, that demand in the diesel market is falling by 365,000 tons despite the increase in the GHG-reduction requirement from 8 percent to 9.35 percent compared to 2023.  

The option of double-counting, which has contributed to the incentive for fraud and the crowding-out effect, therefore remains to be critically evaluated, the organization said.  

“This must in the future be explicitly geared to the objective and condition enshrined in Article 28 (6) of the Renewable Energy Directive (RED II), that biofuels may only be double-counted if an innovative technology is used for their production from residual or waste materials,” UFOP emphasized. “The double counting thus serves to promote technology development and investment with reference to the expected presentation of a draft law to implement the amended RED III into national law after the formation of the new government.”