Transport will be crucial in EU and Germany's greenhouse gas reduction programmes

Out-Law Analysis | 18 Mar 2021 | 4:07 pm | 3 min. read

If Germany and the EU are to meet their targets for reducing emissions of greenhouse gases they will have to make strides towards increasing the use of alternative fuel vehicles in the transport sector. Both a newly created emissions trading system in Germany and EU requirements are intended to accelerate this switch.

EU countries, including Germany, have said that by 2030 they will reduce greenhouse gas emissions by 55% compared to 1990. A 30% reduction in greenhouse gas emissions compared to 2005 was agreed in the sectors not covered by EU emissions trading – the transport sector being one of them.

 

To comply with its climate target Germany has passed a Fuel Emissions Trading Act which requires companies that put heating oil, natural gas, petrol and diesel on the German market to participate in the national emissions trading system from the beginning of 2021. The costs they incur in this way will be passed on by the so-called distributors to their customers, and thus to anyone who uses fossil fuels.

Boldis Alice July_2019

Alice Boldis, LL.M.

Rechtsanwältin, Senior Associate

The use of vehicles with combustion engines will become more expensive and the demand for other forms of propulsion will increase accordingly.

This introduces a CO2 price for heating and transport, which have not been covered by EU emissions trading so far. The number of certificates will be limited in line with the government's climate goals. The use of vehicles with combustion engines will become more expensive and the demand for other forms of propulsion or even other forms of mobility will increase accordingly. The transport sector is particularly important because greenhouse gas emissions in Germany were at the same level in 2018 as they were in 1990. The steady rise has thus been halted, but a reduction has not occurred.

Appt Stephan

Dr. Stephan Appt, LL.M.

Rechtsanwalt, Partner, Head of German TMT

The focus of the climate protection programme is therefore on promoting innovation and creating incentives to increase the use of climate-friendly alternatives.

In terms of Germany's climate protection plan, the transport sector includes domestic road, rail and air transport as well as inland and coastal shipping. The planned reduction of greenhouse gas emissions in this sector by 40% up to 42% by 2030 is difficult because transport demand is growing. The focus of the climate protection programme is therefore on promoting innovation and creating incentives to increase the use of climate-friendly alternatives.

 

The German government's climate protection programme will look at the shift to climate-friendly options such as rail transport, inland waterways and cycling; the use of alternative fuels and the switch to alternative drive systems for passenger cars and commercial vehicles, and options for CO2 reduction through digital networking. The programme involves more than 50 measures to be adopted by 2030.

In the EU, CO2 emissions for passenger cars and light commercial vehicles are regulated by EU Regulation 2019/631: 95% of a car company's new car fleet must now meet the binding target of CO2 emissions of 95g/km, where it had previously been 130g/km. These are so-called fleet limits, which means that the average of all vehicles registered in the EU in one year should not exceed this value. Since January 2021 manufacturers have had to meet this target for their entire fleet. If this value is not met, penalties of €95 per gram of target missed per registered vehicle will be due.

This has created a market in emissions trading within the automotive sector, called emission pooling or CO2 pooling. Car makers with low emissions such as Tesla agree to allow their emissions to be averaged with those of high-emissions cars, for a fee. The average emissions of the vehicle fleets in the pool then count towards the emission limits to be complied with. This means high-emission vehicle makers can comply with regulations and low-emission car makers earn extra profits.

Furthermore, the German cabinet recently approved a draft bill by the Federal Ministry of Transport (only available in German) implement the EU's Clean Vehicles Directive to accelerate the changeover to climate-friendly mobility in the public sector. According to the bill, the public sector will be obliged to ensure that some of the vehicles it purchases are low-emission or zero-emission in the future. This is also to apply to some private organisations, such as postal or parcel services.

This obligation is to apply in principle to all public contracts awarded after 2 August 2021. Only certain road vehicles named in the draft law will be exempted, including road maintenance vehicles, emergency vehicles of the police and fire brigade or coaches without standing room.

This means that by the end of 2025 at least 45% of buses in Germany’s local public transport are to be low-emission or emission-free, and by the end of 2030 at least 65%.

 

This article is part of a series on international emissions trading, innovations to minimise greenhouse gas emissions and the newly introducednational emissions trading in Germany.