The German cabinet has approved reforms which will limit oil companies from carrying forward excess emissions reduction credits, a move that will boost the country’s biofuels industry which has been hit by a rapid drop in coal prices in recent years years In recent years, oil companies operating in Germany have met emissions targets by selling extra biodiesel; with sales in 3.4 million tons in 2022, 34% above its goal. However, the reforms mean that oil companies will no longer be able to use past greenhouse gas reduction quotas to meet the targets in the next two years, with this option only reopening in 2027.
In September, Germany’s Environment Agency rejected carbon credits for 215,000 tonnes of CO2 emissions from oil companies due to suspected fraud involving climate projects in China.
Companies usually meet these targets by using vegetable biofuels or through “upstream emission reduction” (UER) projects. However, concerns were raised more than a year ago when doubts arose about whether some of these projects meet the required standards or even exist.
As many of the world’s governments continue to push towards a greener future, the energy transition collides with another challenge facing the world as it struggles to emerge from the pandemic: rising food prices.
Many energy companies plan to increase their biofuel capacity by 2030, mainly by using crops such as corn and soybean oil as a major raw material.
But such a move leads to price inflation for a host of commodities and vegetable oils, including palm oil, canola and soybean oil. Meanwhile, the prices of corn, oil, copper and gasoline have all doubled from a year ago while wood has more than tripled. Simply put, the acceleration of demand for renewable biodiesel fuels is directly responsible for the inflation of raw material prices.
Food costs have been pushed to their highest in seven years in a price boom reminiscent of China’s commodity supercycle that helped plunge the world into a food crisis earlier this century. The demand for vegetable oils in North America is growing so fast that the region risks going from a surplus to serious shortages in less than a decade.
By Alex Kimani for Oilprice.com