Reasoning of legislature and legislative history
Roadmap, industry and projects
As the aviation sector is facing ever-growing political pressure to implement effective decarbonisation measures, the production and use of sustainable aviation fuel (SAF) is at the centre of the legislature's agenda for the coming years – both in the European Union and in EU member states.
The production of SAF generated from biological feedstock or waste oils is picking up speed and these types of fuels – usually blends – are becoming available at an increasing number of airports. More advanced power-to-liquid fuels (P-t-L), where electricity – preferably from renewable sources – is used to generate liquid synthetic fuel from water and carbon dioxide, are still in the research and development phase. The cost of SAF is currently estimated at between two and eight times as expensive as conventional jet fuel, depending on the production method.
So far, a few EU member states have introduced or announced future minimum quota for the use of SAF.(1) The European Union has launched its ReFuelEU Aviation initiative and the European Commission recently published a proposal for a new directive on alternative jet fuels. This article focuses on the current developments in Germany, where the legislature is about to introduce a minimum quota for the quantity of SAF placed on the market from 2026 onwards as part of its greenhouse gas reduction legislation. However, notably, this quota refers only to P-t-L fuels.
Sections 37a(2), 37a(4a) and 37c(2) of the existing Federal Immission Protection Act (Bundes-Immissionsschutzgesetz) will be altered or newly inserted by the Act on the Further Development of the Reduction of Greenhouse Gas Emissions Quota (Gesetz zur Weiterentwicklung der Treibhausgasminderungs-Quote) (the Act).
The proposal for the Act was submitted by the federal government in February 2021 and passed the final parliamentary reading in the Bundestag on 20 May 2021. A final hearing in the Federal Council (Bundesrat) is expected in late Summer 2021 or Autumn 2021, followed by the enactment and proclamation of the Act. The final wording of the Act and its date of effectiveness are yet to be determined.
The obligation to safeguard the minimum quota is targeted at those entities placing jet fuel on the market as further defined in the Energy Tax Act (Energiesteuergesetz). Operators of aircraft fuelling vehicles are exempt; however, the fuel supplier who instructs the fuelling services provider is relevant.
The type of SAF to fulfil the minimum quota is defined as fuel generated from renewable energy of non-biological sources to replace traditional jet fuel. Specifications for such fuel will be laid down in secondary law, presumably one of the Federal Immission Protection Ordinances (Bundesimmissionsschutz-Verordnungen). The legislature is looking only at electrofuels or P-t-L fuels, not SAF generated from biological feedstock or waste oils.
Obligated entities must report to the relevant authority the annual quantities of such fuel that they place on the market.
The minimum quota of such P-t-L SAF for each fuel supplier in relation to its annual overall output is set at:
- 0.5 % from 2026 onwards;
- 1.0% from 2028 onwards; and
- 2.0 % from 2030 onwards
The penalty for shortfalls is set at €70 per gigajoule if the target is not met. This penalty is said to be calculated 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.
Reasoning of legislature and legislative history
The German legislature acknowledges that the aviation industry will continue to rely on liquid fuels. P-t-L fuels are therefore regarded as an important technology to meet decarbonisation goals. The government is convinced that a minimum quota obligation is necessary to establish the use of these fuels and provide an incentive for the establishment of production facilities. The mechanism for aviation fuels is derived from the existing mechanism for automotive fuels to minimise the additional efforts for both economy and administration.
The minimum quota for SAF is seen as one element of the national implementation of the EU Renewable Energy Directive (RED II)(2). The federal government said that it supports the European Union's initiatives and the minimum quota of P-t-L fuels in the European Commission's proposal for a new directive on alternative jet fuels.(3) The government has committed to reassessing the impact of the minimum quota on the German aviation industry if no EU-wide minimum quota for P-t-L aviation fuels is introduced until 2026.
The proposal for the new Act did not include any specific reasoning as to why the quota is aimed only at P-t-L fuels and does not relate to the (already advancing) production of SAF from biological feedstock or waste oils. The opposition's general criticism – namely, that the government's approach should be "technology-neutral" rather than picking single technologies whose future success is hardly foreseeable – was rejected by the governing parties. The Federal Council specifically asked for a deletion of the "non-biological" criterion in the SAF definition. It considered that no ready-to-use technology should be excluded and referred to the national SAF legislation in other EU countries. This quota could damage both aviation and fuel suppliers in the context of international competition. The Federal Council suggested a minimum quota of 2% P-t-L and 3% biologically derived SAF in 2030 and reliable perspectives for the following years. The government rejected these comments and proposals, stating that large amounts of biofuels are already used in the road sector and that the quota for P-t-L SAF is intended to support the development of the P-t- L technology instead of simply using cheaper biofuels.
Roadmap, industry and projects
In April 2021 the government and relevant stakeholders published a P-t-L roadmap for SAF in Germany. The aim of the roadmap is to achieve a minimum annual production of 200,000 tons of P-t-L jet fuel before 2030, which equals 2% of German jet fuel sales in 2019. This aim is linked to the National Hydrogen Strategy. A list of projects showcases:
- numerous studies;
- plans for production and supply facilities at or near airports;
- industry and university research and development projects; and
- innovation hubs.
Many key players in the German aviation industry – including manufacturers, fuel suppliers, research institutes and authorities – are now members of the Aviation Initiative for Renewable Energy in Germany (aireg).
In May 2021 the Federal Ministry of Transport issued a Guideline for Measures Facilitating the Development of Renewable Fuels. The budget amounts to €640 million.
On 18 June 2021 Chancellor Merkel, ministers, presidents of aviation associations and top managers from the industry met at the National Aviation Conference 2021. The joint declaration refers to P-t-L SAF as a milestone on the way to carbon-neutral flying and underlines the fact that Germany is seeking to establish its position as a leading supplier and marketplace for e-fuels.
At Munich Airport, the Skytanking tank farm was certified for SAF. As of June 2021 SAF is now available to airlines operating at Munich Airport. At the end of June 2021, it was announced that SAF is now offered by Neste in collaboration with AFS at Cologne/Bonn Airport as well. Airbus began using SAF for Beluga cargo aircraft flying from its production facility in Hamburg-Finkenwerder in December 2019 and expanded this to delivery flights in July 2020 in collaboration with Neste and Air bp. Lufthansa collaborated with Neste and pioneered in 2011 as the first airline to test SAF in its regular flight operations (from Hamburg to Frankfurt) for about six months. In April 2021 Lufthansa Cargo, in collaboration with DB Schenker, established the first regular cargo route (from Frankfurt to Shanghai) where 100% SAF is used.
For further information on this topic please contact Christine Kranich or Nils Zimmer at Arnecke Sibeth Dabelstein by telephone (+49 403 177 9756) or email ([email protected] or [email protected]). The Arnecke Sibeth Dabelstein website can be accessed at www.asd-law.com.
(1) The Aviation Lawyers Committee of the European Business Aviation Association recently published overviews for France, Italy, Turkey and Germany.
(2) Directive (EU) 2018/2001 on the promotion of the use of energy from renewable sources.
(3) The proposal was signalled but not published at that time. On 14 July 2021 the European Commission published the proposal for a regulation on ensuring a level playing field for sustainable air transport, COM(2021) 561 final, which contains minimum quota for SAF, including a further quota on synthetic SAF.