GHG quota reform: How should the coalition’s compromise be assessed?

On 23 April the German government passed an act to reform the country’s GHG reduction quota. The act represents a missed opportunity to support the ramp-up of electric mobility in road transport and encourage the deployment of e-fuels in aviation and maritime transport. The reform focuses primarily on alternative fuels for road transport. However, there is an indispensable need for alternative fuels in the transport sector, and this demand can only be met if electric mobility grows rapidly in the subsectors where it has a clear advantage.

To provide more context: The GHG quota is an important tool for increasing the share of renewables in the transport sector. It requires fuel suppliers – primarily oil companies – to reduce their CO₂ emissions by supplying or utilising: (1) renewable electricity for charging electric vehicles; (2) conventional biofuels such as biodiesel; (3) advanced biofuels from biogenic residues and waste materials; and (4) renewable fuels of non-biological origin (RFNBO) such as green hydrogen and e-fuels 

The reform has three major shortcomings:

• The overall GHG quota has been increased, but without sufficient emphasis on electric mobility. Specifically, the law now requires a 26.5 per cent reduction in CO₂ emissions by 2030 (draft bill: 25 per cent) and a 65 per cent reduction by 2040 (draft bill: 59 per cent). Unless additional measures are taken to boost the uptake of electric vehicles, the GHG quota will have to be met by a sharp increase in the share of advanced biofuels in road transport. However, these fuels are in limited supply and are needed for air and sea transport.
• The upper limit for conventional biofuels will increase from its current level of 4.4 per cent to the maximum level permitted under European law (5.8 per cent) in 2033. Conventional biofuels compete with food and feed crops. 
• The sub-quota for RFNBOs has been increased: The 2030 minimum is now 1.5 per cent (up from of 1.2 per cent), and the 2040 minimum is now 10 per cent (up from 8 per cent). To meet this sub-quota, green hydrogen is likely to be used in refineries initially. As fuel-cell vehicles are virtually non-existent, the shortfall will therefore have to be made up by an increasing share of e-fuels in road transport. These e-fuel quantities will then be missing in air and sea transport.

However, the compromise also has positive aspects. Specifically, it:

• extends the multiple counting of charging electricity until 2035;
• allows higher multiple counting of charging electricity for heavy-duty trucks and buses;
• abolishes double counting for advanced biofuels when the sub-quota has been exceeded;
• includes measures to prevent fraud in biofuel imports;
• excludes particularly critical raw materials from palm oil production; and
• disallows crediting of biogenic hydrogen in refineries.

Additional important aspects that are missing:

• an increase in the multiple counting of charging electricity;
• the introduction of a separate RFNBO sub-quota for maritime transport; and
• inclusion of eligibility for RFNBOs (green hydrogen and e-SAF) placed on the market voluntarily (“opt-in”) under the ReFuelEU Aviation Quota.

On 8 May, Germany’s upper house, the Bundesrat, approved the draft bill. It can now enter into force.

Ahead of the vote, Agora Verkehrswende published a blog post on the draft of the bill. You can read the post, which is titled ‘GHG quota reform: Biogenic hydrogen should not count towards reduction targets for oil refineries’, here.