Introduction
SAF in Germany
ReFuelEU Aviation initiative
Comparison of SAF minimum quota
Comment
The Paris Agreement was adopted by 196 states, including Germany, to combat climate change. In line with the Paris Agreement, the European Commission concluded that the European Union must increase its ambition for the coming decade and update its climate and energy policy framework. On 11 December 2019, the Commission announced the European Green Deal, which sets the goal of making Europe the first climate-neutral continent by 2050 and the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, compared with 1990 levels.
This objective was communicated to the United Nations Framework Convention on Climate Change and became binding law under the European Climate Law.(1) On 14 July 2021, the Commission presented certain policy measures to enable the European Union to reduce its net greenhouse gas emissions by at least 55% by 2030 (known as "Fit for 55").
Proposals for measures under Fit for 55 that relate to aviation include:
- amendments to the EU Emissions Trading System (EU-ETS) and the implementation of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA);
- the revision of the Energy Taxation Directive;(2) and
- the enactment of a new regulation on minimum quota for the supply of sustainable aviation fuel (SAF).
The planned revision of the Energy Taxation Directive would lead to a tax on conventional jet fuel and, in addition, airlines would need to buy certificates under the EU-ETS and offset carbon emissions under CORSIA for the use of conventional jet fuel. On the other hand, if air operators use SAF instead of conventional jet fuel, they would be relieved of such additional financial burdens. However, SAF is not yet available at many airports and is much more expensive than conventional jet fuel. Therefore, legal requirements have been introduced in order to support the use of SAF.
Germany has enacted a law to make it mandatory for fuel suppliers to supply a certain minimum quota of SAF – namely, the Act on the Further Development of the Reduction of Greenhouse Gas Emissions Quota.(3) The Act entered into force on 1 October 2021 and amended sections 37a- 37d and 37g and 37h of the existing Federal Emission Protection Act. Operators of aircraft fueling vehicles are exempt; however, the fuel supplier that instructs the fueling services provider is obligated under the new law.
The type of SAF to fulfil the minimum quota is defined as fuel generated from renewable energy of non-biological sources (known as "power-to-liquid" (p-t-l)). Specifications for such fuel are laid down in secondary law (ie, the 10th Federal Emission Protection Ordinance).
Obligated entities must report how much of such fuel they place on the market each year to the relevant authority.
The penalty for shortfalls is set at €70 per gigajoule if the target is not met. Such penalty will be based on the marginal cost (ie, the change in the total cost that arises when the quantity produced is incremented by one unit) of such fuels (section 37c of the Federal Emission Protection Act).
As Germany is a member of the European Union, the German legal perspective must include the European legislation as EU regulations are directly applicable in Germany.
In the Fit for 55 package, the Commission proposed a draft regulation(4) that obligates aviation fuel suppliers in its article 4 to ensure that all aviation fuel made available to aircraft operators at each EU airport contains a minimum share of SAF in accordance with a timetable set out in annex I of that proposed regulation.
SAF is defined in the draft regulation as "drop-in" aviation fuels (ie, fuels substitutable for conventional aviation fuel) that are:
- synthetic aviation fuels;
- advanced biofuels produced from feedstock (eg, agricultural or forestry residues);
- algae and bio-waste; or
- biofuels produced from certain other feedstock with "high sustainability potential" (eg, used cooking oil or certain animal fats) that comply with the sustainability and greenhouse gas emissions criteria.
The Commission lists limited scalability potential and sustainability concerns as reasons for excluding feed and food crop-based fuels.
The minimum quota stated in annex I, which increase over the years, include a sub-provision for a minimum share of synthetic SAF (which is the only SAF allowed under the German Act).
A transition period until the end of 2029 is envisaged in which fuel suppliers may supply the minimum share of SAF as an average over all the aviation fuel they have supplied across EU airports for that reporting period (article 13).
Moreover, in order to avoid so-called "fuel tankering", article 5 of the draft regulation obliges aircraft operators to uplift their fuel needed at EU airports (ie, the yearly quantity of aviation fuel uplifted by a given aircraft operator at a given EU airport shall be at least a certain percentage of the yearly aviation fuel required). However, this obligation applies only to operators that operate a certain minimum of flights to and from the European Union.
Furthermore, the draft regulation sets reporting obligations for both aircraft operators (article 7) and fuel suppliers (article 9), and lays down financial penalties for them if they fail to comply with the obligations (article 11).
Comparison of SAF minimum quota
Under the proposed EU regulation, the minimum quota are as follows.
2025 | 2030 | 2035 | 2040 | 2045 | 2050 | |
SAF | 2% | 5% | 20% | 32% | 38% | 63% |
p-t-l | 0.7% | 5% | 11% | 11% | 28% |
Under the German Act, the minimum quota are as follows.
2026 | 2028 | 2030 | |
p-t-l | 0.5% | 1% | 2% |
The obligations under the German Act relate only to p-t-l, whereas the proposed EU regulation also covers certain biofuels. The obligations under the German Act commence in 2026, while the obligations under the proposed EU regulation shall start in 2025 (but the quota for p-t-l only commences in 2030). The sub-quota of p-t-l in 2030 under the EU regulation is 0.7%, while the quota of p-t-l under the German Act is 2% in 2030.
However, it should be noted that a quota of 2% p-t-l will lead only to a minimum annual production of 200,000 tons in 2030, which equals 2% of the German jet fuel sales in 2019.
Today, Neste, a Finnish company that is the world's leading producer of SAF, produces 100,000 tons of SAF and states that production will increase to 1.5 million tons (around 1.875 billion litres) annually by the end of 2023. At the same time, Neste is entering into partnership agreements with airlines to increase the global availability of SAF. Such agreements seem to be the way forward to ensure that airlines can adapt to the new regulations on sustainability in a timely manner.
For further information on this topic please contact Christine Kranich or Liliana Rodrigues-Kaps at Arnecke Sibeth Dabelstein by telephone (+49 40 317797 56) or email ([email protected] or [email protected]). The Arnecke Sibeth Dabelstein website can be accessed at www.asd-law.com.
Endnotes
(1) Regulation (EU) 2021/119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving climate neutrality and amending Regulation (EU) 2018/1999.
(3) Federal Law Gazette, 29 September 2021, Part I No. 69.
(4) Proposal for a Regulation of the European Parliament and of the Council on ensuring a level playing field for sustainable air transport, COM/2021/561.