German draft bill boosts green hydrogen for aviation, industry

Germany's federal cabinet adopted a draft bill that would incentivize the sale of green hydrogen for industry and aviation if it receives the approval of both the country's legislative chambers, the Environment Ministry announced on 3 February.

The legislative proposal now moves to the Committee on the Environment in the Bundestag for possible discussion on 21 April, before it can be approved by the entire Bundestag and the Bundesrat.

Germany's Federal Immission Control Act (FIPA) implements the European Union's Renewable Energy Directive (RED II), and the amendment would increase the need for suppliers to sell fuels that cut greenhouse gas (GHG) emissions, for example, by blending with biofuel or hydrogen. Under the existing FIPA, transportation fuel suppliers currently have to cut GHG emissions by at least 6%, but the proposals increase this to 10% by 2026, 14.5% by 2028, and 22% by 2030.

The bill sets emissions reduction quotas for fuel suppliers, comparing the GHG content of fuels they market to the emissions they would have caused if all fuels marketed had been fossil fuel-based.

The amendment aims to encourage refineries to market green hydrogen, but it will prioritize sales to hard-to-electrify sectors such as industry and aviation, given that its production requires large supplies of renewable energy.

In aviation, the target for power-to-liquids (PtLs) to blend into fuel would increase from 0.5% by 2026 to 2% by 2030. Green hydrogen and Power-to-X (PtX) fuels will also count double toward transportation supplier GHG quotas if the bill passes. PtX involves electrolysis of gases other than hydrogen.

Fossil fuel suppliers that also supply electric vehicle charging stations could benefit from triple-counting of the GHGs reduced through electric vehicle supply, even if the electricity comes from the grid rather than renewables directly.

One reason for this is the substantial share renewable energy holds in the German electricity mix. Renewables made up 46.2% of net electricity generation in 2020. The GHG reductions are calculated using the carbon dioxide emissions per energy unit of the average German electricity mix and a factor representing drive efficiency, a spokesperson for Germany's environment ministry told IHS Markit.

The proposal includes a mechanism to prevent electricity from displacing biofuels and green hydrogen in the vehicle market.

Through the amendments, Germany would not only fulfill transportation energy greening targets under RED II, it would set its national targets twice as high. The EU requires 14% of the energy consumed in road and rail transportation to be renewable by 2030, but the proposal would require 28% to be renewable by 2030.

Encouraging the production of greener biofuels is another aim of the German proposals. "We don't want to merely pump more alternative fuels into the tank. What replaces crude oil must not simultaneously destroy the rainforest. I want to promote fuels that are efficient, affordable, and protect the climate, without wrecking nature," Federal Minister for the Environment Svenja Schulze said in the statement.

The required share of advanced biofuels, like fuels obtained from straw and manure, would rise from zero to 2.6% by 2030, counting twofold toward the GHG reduction quota. Fuels derived from used cooking oil or animal fats would also count toward the quota.

The cap on biofuels from food and feed products would be frozen at 4.4%, aiming to protect forests and other natural reserves. Fuel made from palm oil would be banned by 2026 to prevent deforestation in supplier countries such as Indonesia and Malaysia.

Posted 11 February 2021 by Cristina Brooks, Senior Journalist, Climate & Sustainability, IHS Markit