German GHG compliance costs drop to 2023 level

Market: Biofuels, Emissions, Oil products
30/01/24

Costs to meet the German greenhouse gas (GHG) emission reduction target have fallen to levels last seen in December, according to Argus calculation, as low demand for physical biofuels and GHG certificates in particular is weighing on prices. Only the introduction of anti-dumping duties on Chinese biofuels could increase prices, traders said.

To fulfill the domestic GHG quota using a diesel blend, obligated companies — those who bring fuel into circulation for the first time — had to pay €4.59/100l on 29 January, according to Argus calculations. This means that costs have fallen to levels last seen in December 2023 (see graph).

Weak demand for GHG certificates and low biofuel prices in January contributed to compliance costs in 2024 being almost at parity with those in 2023, despite a significant increase in the GHG quota at the turn of the year from 8pc to expected 9.35pc.

Market participants were able to accumulate a surplus of GHG certificates in 2023 that can be carried over into the current compliance year. This was mainly possible because of imported biofuels, which were labelled as advanced and can therefore be counted twice towards the GHG quota in Germany. This means the purchase of further tickets in 2024 is currently not attractive and would only be worthwhile if prices continue to fall, according to traders.

The low ticket prices are also dampening demand for physical biofuels as a compliance alternative, which is keeping biofuel prices at a low level. The Argus prompt assessment for waste-based biodiesel Ucome fob ARA range dropped to $1,248/t on 29 January — falling back to levels last seen in November 2023.

Some market participants said they are stocking up on imported product before possible duties are imposed as a result of the EU's anti-dumping investigations on Chinese biofuels keeping the market well-supplied. Traders do not expect for prices to significanlty rise until the EU implements duties on certain biofuels imports. But the anti-dumping investigation could take up to 14 months from 20 December 2023.

Basis of calculation

The GHG quota of 8pc is taken into account for 2023. Fame and Ucome's energy share in the blend are assumed at 4.4pc and 1.8pc, respectively. The sub-quota of advanced biofuels of 0.3pc was applied. The remaining necessary emission savings were achieved taking into account the "Other" GHG certificates fulfilment year 2023.

The GHG quota of 9.35pc is taken into account for 2024. Fame and Ucome's energy share in the blend are assumed at 4.4pc and 1.8pc, respectively and the sub-quota of advanced biofuels of 0.4pc was applied. The remaining, necessary emission savings were achieved taking into account the "Other" GHG certificates fulfilment 2024.

By Nik Pais dos Santos

German GHG compliance and certificate costs €/tCO2e

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German GHG compliance costs drop to 2023 level

Basis of calculation

Related news posts

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