"We need a reform of the GHG quota"

Germany wants to be climate neutral by 2045. The automotive industry backs up this goal firmly. We are convinced that innovation and investment are key to achieving this goal and are therefore investing around €280bn in research and development between 2024 and 2028 alone.

We need every technology to achieve the climate goals we have set. The ramp-up of electromobility will certainly make a decisive contribution to this - but renewable fuels and hydrogen are other interesting options. In addition, especially for the defossilization of the vehicle fleet: With renewable fuels, the existing fleet can be operated in a largely climate-neutral manner.

In order for this lever to be used, the right decisions must now be made and incentives set. A key lever for climate protection in the transport sector is the greenhouse gas reduction quota (GHG quota). If designed correctly, it can trigger billions in investments in renewable energy sources for the transport sector. In its current form, however, it is not ambitious enough and is therefore now having an inhibiting effect on investment.

To understand this, it is worth taking a look at how it works: The GHG quota sets annual CO₂ savings targets for the petrol industry. CO₂ emissions must be reduced by 9.25% this year; by 2030, the figure will rise to 25.1%. The targets can be achieved by bringing charging electricity, biofuels, hydrogen and e-fuels onto the market.

Alternatively, obligated companies can achieve the targets through third parties using certificates in the GHG quota trading system. These certificates are generated by service providers from owners of electric cars, electric trucks and electric buses and sold to the mineral oil industry. This creates investment leverage with regard to the charging station infrastructure and for the production of biofuels, hydrogen and e-fuels.

The GHG quota price is freely determined on the market - the influencing factors are supply and demand for renewable energy sources in the transport sector, the level of the GHG quota and its possible overfulfillment. In principle, therefore, especially in times of the current strained budget situation, the GHG quota is a suitable instrument for reducing CO₂, as it does not require financial subsidies or tax money.

But what does the size of the GHG quota have to do with it? The fact that the GHG quota was recently exceeded is only partly due to sufficient renewable energy sources. Certain energy sources are counted multiple times when they are placed on the market - charging current, hydrogen and e-fuels are even counted three times. In plain language: one kilowatt hour of electricity, one kilogram of hydrogen and one liter of e-fuel each count as three. On paper, climate protection is therefore significantly greater than in reality.

This principle makes sense for the market ramp-up phase because it encourages investment in the respective technologies. However, as the amount of renewable energy sources increases, the gap between real and optimistic climate protection continues to widen. However, the fact is that the Climate Protection Act stipulates real net greenhouse gas neutrality for 2045! The long-term use of multiple counting is therefore not effective; on the contrary, investments in real climate protection are needed now.

If there is too much availability of renewable energy sources in the transport sector, the GHG quota acts like a cap that slows down investments and causes the GHG quota price to fall. Once the targets have been met, there is no longer any incentive to invest beyond that. Multiple credits reinforce this effect because they accelerate the achievement of targets without any substance. If the number of available certificates exceeds market demand, the quota price falls. This is problematic in two respects: Firstly, the placing of fossil energy sources on the market can be offset in the balance sheet by purchasing additional certificates. This keeps the fossil fuel business alive.

On the other hand, a quota price that is too low hinders the ramp-up of zero-emission vehicles, such as fuel cell trucks. These are currently more expensive than vehicles with combustion engines. Zero-emission vehicles can participate in the GHG quota trade. The GHG quota prices are currently around €100 for cars, €1,100 for commercial vehicles and €2,400 for buses. Last year, the GHG quota prices were about three times as high. The reason for the price drop is that the GHG quota is being overfulfilled. By participating in the GHG quota trade, a significant part of the additional costs can be compensated over the life of the vehicles. This means that clean vehicles are financed through the income from the GHG quota.

Three conclusions can be drawn from these mechanisms: First, the GHG quota must be more ambitious. High targets mobilize long-term investment in renewable energy sources. Taking multiple counting into account, the GHG quota must also increase accordingly in order to stimulate the real share of renewable energy sources. The current GHG quota will rise to 25.1% by 2030; the EU plans to reduce CO₂ by 90% by 2040, Germany by 100% by 2045. The jump from 25% in 2030 to 90% in 2040 is hardly achievable if we do not invest now.

Secondly, the GHG quota must be dynamic upwards. If the quota is exceeded, it must increase automatically through a defined mechanism in order to maintain investment incentives in renewable energy sources. Otherwise, if there are unexpectedly large quantities of renewable energy sources, the GHG quota will act like a cap that slows down investment and causes the GHG quota price to fall. The fulfillment of the GHG quota in recent years has shown that the available energy quantities, for example for charging current and advanced biofuels, were significantly underestimated.

Third, multiple counting must be gradually reduced. This will reduce the discrepancy between real and virtual climate protection. Climate protection can no longer only take place on paper. The planned 2027 review would be a good time to gradually reduce multiple counting in order to close the gap between virtual and real climate protection, ideally by 2030. An exception should apply to hydrogen, which is actually still in the market ramp-up phase. Since there will still be no significant quantities of green hydrogen in the transport sector in 2030, multiple counting should be phased out here by the end of the 2030s.

However, one thing is also clear: quotas alone do not encourage the ramp-up of renewable energy sources. In addition, accompanying measures are needed, such as a reform of the energy tax directive and a long-term target path up to 2045.

As a market-based instrument, the GHG quota does not require a single cent of tax money. With the appropriate level of ambition and dynamism in fulfilling it, it will trigger billions in investments in renewable energy sources. When redesigning the GHG quota, it is crucial to create investment incentives for the ramp-up of renewable energy sources in the transport sector - and to ensure the ramp-up of zero-emission vehicles.