Germany’s renewable fuels sector calls for greater certainty amid government splits

John McGarrity reports from the latest Fuels of the Future conference in Berlin

Uncertainty about how Germany will revise its renewable fuels laws is likely to harm investment and mean the country’s decarbonization targets for transport are missed, various companies and analysts have warned at a conference in Berlin.

The discussions come against the backdrop of the country’s federal coalition government trying to find compromise on changes initially proposed by the environment ministry last year.

Germany is Europe’s biggest producer and consumer of biofuels, but the country’s ‘traffic light’ coalition is divided on the extent that biofuels based on edible crops should be substituted for higher shares of renewable electricity for electric vehicles, as well as changes to the country’s GHG quota system - with the issue understood to have been discussed at a cabinet meeting on Monday, January 23.

The opening day of the Fuels of the Future conference heard from a range of voices, including producers of crop-based and waste biodiesel such as Verbio, renewable fuels producer Neste and companies developing electrofuels (e-fuels) that greater policy clarity is needed following around nine months of doubt surrounding how much the current government will change existing renewable fuels laws that were drawn up by the previous government.

“For instance, we have a (0.5%) e-fuels sub-target in aviation that is binding from 2026, but based on current policies and incentives, where is the volume going to come from?… We need proper signals,” said Christian Kuchen, director general of the Berlin-based Fuels and Energy Business Association.

Oliver Luksic, an MP for the Free Democratic Party, part of the governing coalition along with Social Democrats and the Greens, told the conference that advanced biofuels from residues and hydrogen should have a stronger emphasis as the country attempts to deliver on highly-challenging decarbonization targets and climate laws.

Electromobility alone cannot answer all questions

“In order to achieve our climate goals in transport, we must make use of all available climate-friendly technologies. This is enormously important because not every application in transport can be electrified or otherwise efficiently made climate neutral,” said Luksic, who is a senior figure in the ministry.

“For us at the BMDV [transport ministry], renewable fuels are an important part of the technology mix of the future...we are therefore promoting the further development and market ramp-up of advanced biofuels and e-fuels,” Luksic continued.

The FDP’s position that electromobility cannot do all the heavy lifting to meet the country’s decarbonization targets was echoed by Franziska Müller-Langer from the German Biomass Research Center, who noted that for Germany to meet its targets, final energy demand in road transport would need to be significantly reduced, and all existing and obvious options for reducing emissions are used.

“Opportunities for reducing GHG emissions from existing powertrains to be considered much more strongly,” Müller-Langer said.

Under Germany’s current renewable transport laws, the sector is required to make an 8% reduction in the 2023 calendar year; 9.25% in 2024; and 10.25% from 2025, with a 25% reduction required by 2030.

But measures first circulated last May by the environment ministry (BMUV) and again this week proposed a drastic reduction of Germany’s use of crop-based biofuels sector to 2.5% in 2023, down from a share of 4.4% expected for this year - as well proposals that electromobility should fill most of the gap left by lower use of crop-based biofuels.

Not surprisingly, BMUV’s plan is strongly rejected by biofuel lobbies and viewed as problematic by the transport ministry, which doubts that the use of electric vehicles can be scaled up sufficiently later in the decade to meet climate targets and other legislation.

The challenges for the transport sector

Through Germany’s national climate law, if targets in sectors such as transport are missed, then the difference must be spread out evenly over the remaining annual emissions budgets of the sector until 2030 and beyond while Germany’s climate law also states that new emission budgets for the years after 2030 will be set in 2024 and that these must be in line with the goals of the law and the requirements of the EU – climate neutrality by 2050.

Transport accounted for 19% of Germany’s greenhouse emissions in 2021, according to data published by Germany’s Environment Agency in March last year, and has been the slowest sector to cut emissions.

A climate expert council that advises the government warned last November that annual carbon reductions in the transport sector would need to rise 14-fold to meet wider climate targets.

The German Institute for Economic Research reported earlier this month that one million purely battery electric vehicles (BEVs) are on the country’s roads, which compares with an overall passenger car vehicle pool of 48.5 million, a relatively high share by European standards.

A report from consultancy Prognos in 2021 commissioned by NGO Transport and Environment estimated that for Germany to cut emissions from transport by the official target of 48%, or almost 80 million tonnes, is “extremely ambitious and will only succeed with a strong electrification of transport.”

Therefore electric cars would need to constitute more than 60% of new registrations by 2025 and 92% by 2030, that same report stated.

BEV barriers

But the affordability of EVs and sufficient charging infrastructure are major barriers to future compound growth in EVs in Germany, carmakers and other lobbies warned last year.

Protestations that the lack of consensus within the cabinet is acting as a major brake on investment were challenged by some speakers, one of whom said that the country’s fuel producers and energy sector entrepreneurs shouldn’t use potential changes to national policy as an excuse to delay or procrastinate on investments, given that there is a broader picture taking shape at EU policy level as Fit for 55 policy files are refined through the ‘trilogue’ co-decision process.

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