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Germany Bans Oil Companies From Using Previous Emissions Credits

by Krystal

Germany’s government has approved new reforms that will prevent oil companies from using excess emissions reduction credits from previous years to meet their future targets. This decision is expected to benefit Germany’s biofuel sector, which has struggled with falling carbon prices in recent years.

For years, oil companies operating in Germany have met their emissions goals by selling surplus biodiesel. In 2022, sales reached 3.4 million metric tons, 34% above the companies’ emissions targets. However, under the new rules, companies will no longer be allowed to carry over past greenhouse gas reduction credits for the next two years. The option to use these credits will only be available again in 2027.

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In September, Germany’s Environment Agency took further steps to crack down on emissions credits, rejecting carbon credits for 215,000 tons of CO2 from oil companies. The rejection was linked to concerns over fraudulent activities involving climate projects in China.

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Typically, companies meet their emissions targets through biofuels made from plants or by participating in “upstream emission reduction” (UER) projects. However, doubts about the legitimacy of some of these projects have raised concerns. Some projects may not have met the necessary standards, or in some cases, may not have even existed.

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At the same time, the global push for a greener future faces an additional challenge: rising food prices. As demand for biofuels increases, so does the demand for crops like corn and soybean oil, which are major feedstocks for biofuels. This has contributed to price inflation for a variety of commodities, including vegetable oils such as palm oil, canola oil, and soybean oil.

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The surge in demand for biofuels has contributed to rising prices for corn, oil, copper, and gasoline futures, which have all doubled in price over the past year. Lumber prices have more than tripled. This has led to concerns about inflation in commodity prices, with some experts drawing parallels to the China-driven commodities boom that triggered a global food crisis earlier this century.

In North America, the demand for vegetable oils is growing so quickly that the region could face severe shortages within the next decade, transitioning from a surplus to a deficit. As food prices continue to climb, the world faces mounting pressure to balance the goals of a green energy transition with the economic realities of food security.

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