Germany's greenhouse gas (GHG) emission reduction certificate prices have dropped to a new record low in recent sessions, pressured by a sustained supply glut and thin demand.
The Argus price for 'Other' German GHG credits for 2023 compliance, which are generated by biofuels uncapped by domestic biofuels legislation and from CO2 savings achieved by charging electric vehicles (EVs), slid to €140/t CO2e on 3 November, its lowest since the start of assessments on 25 May 2018.
Demand for GHG certificates that can be used to comply with the German GHG emission reduction quota for the transport sector has been weak in recent months because of an unusually large share of advanced biodiesel imports from Asia in the first half of the year. Advanced biofuels are eligible to count twice towards Germany's GHG reduction target once the advanced sub-target of only 0.3pc of overall energy marketed in 2023 has been met. This meant most obligated companies could benefit from the double-counting rule that eradicated the need for many to purchase additional GHG credits on the ticket market and allowed them to close their books for 2023 compliance by now, unusually early in the year.
Additional certificates generated from electricity used to charge e-cars and sales of biomethane as bio-CNG and bio-LNG by so-called third parties in the market put further pressure on prices. Unlike obligated companies, third parties cannot carry forward any GHG certificates to the following compliance year, which is currently forcing them to significantly reduce their offers. But obligated parties' appetite to buy cheap 2023 certificates for carry over to 2024 compliance remains limited on the back of legislative uncertainty and the rising cost of financing because of higher interest rates.
The knock on effect of low renewable fuel ticket values can be felt across most biofuels markets in Germany and Europe with crop and waste-based biodiesel prices in the Amsterdam-Rotterdam-Antwerp (ARA) hub falling steadily since the start of September and biodiesel premiums dropping to four-year lows. The price of unsubsidised advanced biomethane with German origin and a carbon intensity of minus 100gr CO2e/MJ, which is usually sold into the transport sector, slipped from around €230/MWh at the start of September to around €140/MWh this week.
