The introduction of increasingly stringent rules aimed at reducing CO2 emissions in Germany has opened a tax loophole that creates scope for and may have already given rise to fraud, according to market participants.
The country has led the way in Europe's drive to cut emissions: it has both a greenhouse gas (GHG) reduction quota and a CO2 levy, which combined add up to levies worth some €250/t for diesel in 2025, and which could reach €415/t or more in 2026, Argus calculates.
The CO2 levy was €25/t CO2e in 2021, when it was first imposed. In 2025 it was €55/t CO2e, while in 2026 the obligation will be auctioned between €55/t CO2e and €65/t CO2e with a fallback non-auction price of €68/t CO2e. The GHG reduction obligation, meanwhile, was at 10.6pc of emissions in 2025 and has risen to 12pc this year. Under Germany's implementation of the EU's latest Renewable Energy Directive (RED III), the obligation will rise to 59pc by 2040, with increases every year.
Most fuel suppliers build these costs into their prices at source. But the rules for payment of the levies do not make it compulsory to do so. The GHG and CO2 duties apply to sales of fossil diesel and gasoline within each calendar year, but do not have to be paid immediately — proof of GHG compliance was due on 15 July in previous years and is now due by 1 June of the year following actual fuel sales, while CO2 emissions certificates must be submitted by 30 September. In addition, it is not clear how quickly the authorities would take legal enforcement action should these deadlines be missed.
The current regulatory framework creates, at minimum, a timing gap with regard to compliance obligations and, at worst, a serious loophole — a window of opportunity allowing businesses to sell discounted diesel with no GHG compliance or CO2 duties factored into the price, and exit the market ahead of compliance deadlines and ensuing legal enforcement.
Clearly, the higher the renewable tax burden, the larger the financial value of exploiting the loophole becomes.
The emergence of new suppliers in 2025 offering diesel at steep discounts to prevailing market prices is therefore raising questions.
Since the start of 2025, established market players say a handful of new suppliers have regularly offered and sold diesel delivered by rail and for truck loading at specific import locations at discounts of up to €60/t (for truck loading), subtracted from the previous day's inland price assessments for finished-grade product. This equates at times to discounts of about 4pc to prevailing market levels, which have ranged on average from around €1,345/t to €1,549/t over the year. The actual volume of diesel sold at such discounts last year is around 30,000t, Argus estimates — the equivalent of about 1,000 truckloads of fuel. That is less than 0.1 pc of total German deliveries for the period, but because the sales occur only in specific regions they have had a disproportionate impact in local markets.
Traders say it is difficult to see how such large discounts could be the result of factors other than delayed payment of greenhouse levies. Regular energy taxes must be paid monthly, and the only other variables in the price are the actual import cost of the fuel, and logistical expenses — storage and transportation.
Some wholesalers and retailers say they are now declining to buy from suppliers who consistently offer steep discounts because of concerns about potential legal repercussions — fearing they might be held accountable if their supplier does not ultimately pay the CO2 duties and/or GHG compliance costs, or even concerned they might be regarded as accessories to fraud.
A number of established players in the domestic diesel market have called on German customs authorities to be more vigilant and thoroughly audit new suppliers to prevent any possible CO2 tax or GHG compliance-related fraud. The authorities could also order obligated fuel suppliers to provide a bank assurance for the payment of CO2 tax and the GHG quota, some companies suggest.
Officials with German customs authorities have told Argus that they are aware of the concerns but declined to comment on what steps they are taking or might take in response. Non-payment of CO2 levies on 30,000t of diesel would have cost the government about €5.2mn in 2025, Argus calculates, while the non-compliance with GHG savings targets would reduce GHG savings demand by 14,000t of CO2e, worth around €2.2mn, reducing biofuels demand and undermining Germany's energy transition goals.
Cases of proven fraud involving diesel have been reported in a number European countries in recent years, including Italy, Spain, Portugal and Romania as well as Germany, often involving designer fuels schemes or VAT fraud. Widespread fraud relating to non-compliant biofuels with faked credentials has also been of concern.
But the rise in Germany's CO2 taxes and GHG obligations since 2021, and the way the government has framed the rules, may well have created a whole new set of problems. These problems may replicate themselves in other EU countries, as governments in the Netherlands and elsewhere move to emulate Germany's lead in setting emissions reductions targets.
