Germany prohibits oil companies from using previous emission credits to support the biofuel industry

German cabinet approved Wednesday reforms that will prevent oil companies from transferring excess credits for emissions reductions. This is a move to boost the biofuels industry, which has been hit hard by the rapid drop in carbon prices over recent years.

According to the current law, oil companies are required to reduce their carbon footprint of their fuels gradually, with an aim of reaching a reduction of 25% by 2030 from 9,35% currently.

These goals can be met by companies using green hydrogen, advanced biofuels and synthetic fuels.

Data from the Environment Ministry showed that oil companies met their emissions targets by selling more biodiesel. In 2022, alone, the company exceeded the target by 24 percent, or 3.4 millions metric tons.

The reforms stipulate that oil companies cannot use previous greenhouse gas reduction targets to achieve their goals in the next two years. This option will only be available in 2027. This rule will be implemented immediately, as it does not need parliamentary approval.

The move, said Environment Minister Steffi lemke, will protect carbon reduction goals, improve the outlook for green hydrogen suppliers and electric vehicle charging providers, as well as biofuel producers.

She added that as demand for cleaner fuels increases, long-term climate actions in transportation will be strengthened.

Last week, Germany's biofuel sector issued an urgent plea to the government. It cited severe fraud on the greenhouse gas reduction market, which has caused prices to fall sharply, and threatens the stability of the sector.

In a letter to the Environment Minister, the biofuel industry, along with companies that were involved in the greenhouse reduction quota, said the falling quota price forced them into bankruptcy and stopped investment in alternative clean energy sources such as advanced biofuels and green hydrogen.

The German Environment Agency announced in September that it had rejected carbon credit claims for 215,000 tons of CO2 from oil companies because they suspected fraud with climate projects in China. Reporting by Markus Wacket and Riham Alkousaa; editing by Jonathan Oatis.

(source: Reuters)