On 19 June 2025, the Federal Ministry for the Environment, Climate Action, Nature Conservation and Nuclear Safety (BMUKN) published a draft second Act to Further Develop the Greenhouse Gas Reduction Quota (GHG quota). The Ministry has now substantially revised that draft and further expanded requirements in key areas – requirements already modified by the first Act to Further Develop the Greenhouse Gas Reduction Quota (2021). Of particular note is the increase of the reduction quota to 59% by 2040, intensifying decarbonisation requirements for companies affected. However, the new draft also takes account of industry interests – making it worthwhile for market stakeholders to take an early look at the latest changes to the requirements for meeting the greenhouse gas reduction quota. For a detailed discussion of the changes in the original draft see: Implementing the RED III Directive – German Government drafts second greenhouse gas reduction quota bill | Gleiss Lutz.
Background and objective
The Federal Government had intended to pass the original draft of the Second Greenhouse Gas Reduction Quota Bill 19 June 2025 to transpose the Renewable Energy Directive (“RED III”) (Directive (EU) 2023/2413 of the European Parliament and of the Council of 18 October 2023 amending Directive (EU) 2018/2001, Regulation (EU) 2018/1999 and Directive 98/70/EC as regards the promotion of energy from renewable sources, and repealing Council Directive (EU) 2015/652) into national law. The transposition deadline expired on 21 May 2025 and was extended by the European Commission due to the early elections in Germany.
The revised BMUKN draft was completed on 29 October 2025 and circulated among the other ministries for comment, the outcome of which is pending. While the Federal Government hopes that the Cabinet will agree on the draft in December, it is likely that won’t happen until after 1 January 2026. Even so, market stakeholders should be prepared for the new act to have retroactive effect from the beginning of 2026, as the greenhouse gas reduction quota is calculated based on the annual emissions of the companies subject to it.
The revised draft not only adjusts the amount and structure of the greenhouse gas reduction quota, but also limits its scope to the road transport sector. The draft also implements the requirements of the ReFuelEU Aviation Regulation by introducing further provisions on aviation fuels, the monitoring of aviation fuel suppliers and the imposition of financial penalties in the case of non-compliance.
Significant changes since the draft bill of 19 June 2025
I. Increase in mandatory reductions of greenhouse gases
Under the draft bill of 19 June 2025, the greenhouse gas reduction quota was to be increased step by step to 53% by 2040 (section 37a(4) Federal Emissions Control Act (Bundes-Immissionsgesetz, “BImSchG”). The revised draft bill of 29 October 2025 accelerates the increases from 2027, culminating in a 59% target in 2040. The increased reduction quotas are intended to provide investment and planning certainty to renewable fuel producers and electromobility charging infrastructure operators.
The new section 37a(4) BImSchG contains the following increases from 2027:
- 2027: 16%
- 2028: 18%
- 2031: 28.5%
- 2032: 31.5%
- 2035: 36%
- 2036: 40.5%
- 2037: 45%
- 2038: 49%
- 2039: 54%
- 2040: 59%
Using the RED III calculation method, the increased 59% reduction in greenhouse gases should result in renewable energies making up 62% of the total energy consumption in the transport sector. In contrast, the previous draft had expected this share to exceed 77% with the envisaged 53% reduction in greenhouse gases – a target abandoned in the new draft.
The new draft also extends the triple-counting of renewable fuel when setting the benchmark to be used to determine the reduction in greenhouse gases until 2037 instead of the previous draft’s 2034.
II. Greenhouse gas reduction quota to apply solely to road transport sector
A key change compared to the previous draft version and the current legal situation is that the GHG reduction quota will only apply to road transport fuels placed on the market in accordance with section 37a(1) BImSchG. Under the new draft, the requirement for the aviation sector set out in section 37a(2) BImSchG is to be removed. This means that the European provisions on biofuels for shipping and aviation will need to be implemented independently of the present draft bill, by integrating them into existing regulations such as the Biofuel Sustainability Ordinance (Biokraftstoff-Nachhaltigkeitsverordnung).
The requirement of a minimum share of renewable fuels, known as the power-to-liquid quota (PtL quota), for air transport set out in section 37a(4a) BImSchG is also to be eliminated. This step is intended to shield the aviation sector from overly ambitious and practically unattainable decarbonisation targets, as there are currently hardly any production facilities for green kerosene and a binding quota from 2026 onwards would expose companies to substantial fines.
III. Adjustment of the minimum share of renewable fuels
While the aviation sector will be exempt in future, companies subject to section 37a(1) BImSchG will remain required to comply with the PtL quota or sub-quota – the minimum share of renewable fuels of non-biological origin that obligated parties must place on the market each year. This requirement will be laid down in section 3b(1) 37th Ordinance on the Implementation of the Federal Emissions Control Act (Verordnung zur Durchführung des Bundes-Immissionsschutzgesetzes, “BImSchV”) and provides for an increase from 0.1% in 2026 to 4% in 2040. In the original draft, this minimum share was to increase to 12% in 2040, so the revised draft offers a more industry-friendly solution.
IV. Expansion of exemptions from greenhouse gas reduction quota
While the draft of 19 June 2025 aimed not to exempt any obligated parties in the target group subject to the GHG reduction quota pursuant to section 37a(1) BImSchG – on the grounds that there was no obligation to incorporate biofuels, that fuel storage stability was therefore unproblematic, and that there were numerous ways to comply with the requirements – the new draft makes a complete U-turn. In addition to the existing exemptions, the GHG reduction quota will not apply to the Federal and State police forces, Customs, the Federal Technical Emergency Relief Service, the Federal Criminal Police Office, fire brigades or civil defence and disaster response agencies and services when they place fuels on the market, although it will still apply to their acquisition of fuels. In light of current security concerns, the Federal Government considers it necessary to prioritise both the supply and stockpiling of pure fossil fuels to maintain the Federal Republic of Germany’s resilience in times of crisis. The newly included entities are highly dependent on the reliable supply of pure fossil fuels.
V. Biofuels made from soybean oil no longer excluded
While the previous draft bill provided for a new section 37b(8), no. 2 BImSchG that excluded biofuels made from soybean oil from the crediting system, the new draft allows obligated parties to continue counting such biofuels towards the greenhouse gas reduction quota.
VI. Designation of competent authority
The Frankfurt (Oder) Main Customs Office is to be responsible for monitoring aviation fuel suppliers in accordance with the new section 37m(1) BImSchG in conjunction with section 20(3) 38th BImSchV (Ordinance Laying Down Further Provisions for the Reduction of Greenhouse Gas Emissions from Fuels (Verordnung zur Festlegung weiterer Bestimmungen zur Treibhausgasminderung bei Kraftstoffen)). This will include on-site monitoring and imposing fines in the case of non-compliance. How the monitoring will be organised is currently a bone of contention between the BMUKN and the Federal Ministry of Finance (Bundesfinanzministerium).
VII. Implementation of the ReFuelEU Aviation Regulation
The revised draft second Act introduces sections 37k to 37m BImSchG as part of the special provisions on aviation fuels and to implement the ReFuelEU Aviation Regulation. These new sections deal with the monitoring of aviation fuel suppliers, and specify what their reporting obligations are and what levies they must pay if they fail to comply with the sustainable aviation fuel requirements.
Conclusion and outlook
With the revised draft second Act to Further Develop the Greenhouse Gas Reduction Quota, the Federal Government aims to further accelerate the increase in the GHG reduction quota that it has been pursuing since 2021. The envisaged increase in the quota to 59% by 2040 will give renewable fuel producers and charging infrastructure operators greater investment and planning certainty, and goes hand in hand with the extension of the triple-counting of renewable fuels until 2037. The draft fails to provide a stringent decarbonisation strategy, however, as it reduces the sub-quota for renewable fuels of non-biological origin to just 4% by 2040 and expressly indicates that its final form is subject to political renegotiation.
Exempting central security and disaster response agencies and services from the scope of the GHG reduction quota also emphasises that supply and crisis resilience has priority over the consistent enforcement of decarbonisation obligations. While implementing the ReFuelEU Aviation requirements for monitoring aviation fuel suppliers will for the first time create clearly defined control and sanction mechanisms in the aviation sector, these fall outside the scope of the GHG reduction quota. And what the mechanisms will actually look like in practice is still the subject of interdepartmental wrangling.
It therefore remains to be seen whether the instruments now chosen – a more ambitious greenhouse gas reduction quota, a weaker minimum quota, restriction to the road transport sector and expanded exemptions – will be sufficient to reliably meet the EU’s requirements and the national climate targets in the transport sector as a whole while creating dependable framework conditions for the market stakeholders concerned. In the meantime, implementation of the revised bill continues to be delayed – contrary to Germany’s obligations under European law – and it remains unclear what specific form the bill will ultimately take or when it will come into force.
Forward
