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Germany Blocks Oil Companies From Using Past Emissions Credits
The German cabinet has approved reforms that will restrict oil companies from carrying excess emissions reduction credits forward, a move that will boost the country’s biofuel industry which has been impacted by a rapid drop in carbon prices in recent years. In recent years, oil companies operating in Germany have met emissions goals by selling extra biodiesel; with sales clocking in at 3.4 million metric tons in 2022, 34% above their target. However, the reforms mean that oil companies will no longer be able to use past greenhouse gas reduction quotas to meet targets in the coming two years, with this option only reopening again in 2027.
Back in September, Germany’s Environment Agency rejected carbon credits for 215,000 tons of CO2 emissions from oil companies due to suspected fraud involving climate projects in China.
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Companies usually meet these targets by using plant-based biofuels or through “upstream emission reduction” (UER) projects. However, concerns arose over a year ago when doubts arose about whether some of these projects met the required standards or even existed
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As many of the world’s governments continue pushing to a greener future, the energy transition is colliding with another challenge facing the world as it struggles to emerge from the pandemic: skyrocketing food prices.
Many energy companies plan to increase their biofuel capacity by 2030, mainly using crops like corn and soybean oil as a major feedstock.
But such a move is driving price inflation for a host of commodities and vegetable oils, including palm oil, canola and soybean oil. Meanwhile, corn, oil, copper, and gasoline futures prices have all doubled from a year ago while lumber has more than tripled. Simply put, accelerating demand for renewable biodiesel fuels is directly responsible for worrying commodity price inflation.
Food costs have been pushed to their highest in seven years in a price boom reminiscent of the China-led commodities supercycle which helped precipitate the world into a food crisis earlier this century. Demand for vegetable oils in North America is growing so fast that the region risks going from a surplus to serious shortfalls in less than a decade.
By Alex Kimani for Oilprice.com
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