The Greenhouse Gas Reduction Quota, or GHG Quota for short , is a market-based climate protection instrument that was introduced in Germany in 2015. It aims to increase the share of renewable energy in the transportation sector and thereby reduce greenhouse gas emissions. The GHG quota replaced the biofuel quota, which was in effect until the end of 2014, and represents an important mechanism for achieving national and European climate protection goals.
The legal basis for the GHG quota is provided by the Federal Immission Control Act (BImSchG) and the associated federal regulations. These regulations transpose the EU’s Renewable Energy Directive II (RED II) into national law.
How It Works
Companies that place at least 5,000 liters of fossil fuel on the market annually are required to offset a specified percentage of their CO₂ emissions. This percentage increases each year and is set to reach 25% by 2030. The Main Customs Office monitors compliance with these quotas and may impose fines of several hundred euros per metric ton of CO₂ equivalent in the event of noncompliance.
This obligation may be fulfilled through various measures:
- Blending of Biofuels
- Use of Electric Vehicles
- Since 2024: Use of renewable hydrogen (as defined by RED II/III) and its derivatives (RFNBO—Renewable Fuels of Non-Biological Origin).
Alternatively, they can purchase GHG credits from other market participants who have generated excess CO₂ reductions. This trading of GHG credits is also referred to as “GHG emissions trading.”
GHG Emissions Trading
Trading in GHG credits operates as a bilateral market between entities subject to emission quotas and service providers: Electric vehicle owners or producers of green hydrogen can monetize their CO₂ savings by selling them in the form of credits to companies subject to emission quotas. First, the CO₂ savings must be certified by recognized bodies and registered with the Federal Environment Agency.
Prices for GHG allowances are subject to significant fluctuations in some cases. Various factors, such as the general economic situation, commodity prices, and regulatory changes, influence the market. According to estimates, however, H2 producers could earn up to €3.50 per kilogram of hydrogen through emissions trading. In order for hydrogen producers to participate in GHG emissions trading, they must have their production facilities certified as compliant with the RFNBO. This is carried out through certification systems recognized by the European Commission.
Our interview with Greentrax co-founder David Pflegler offers an easy-to-understand introduction to this complex topic.
Illustration of greenhouse gas emissions trading (© Emcel)
