France, Germany are set to halt double-counting on biofuels; bullish impact seen on RD, THG

France and Germany are anticipated to halt double counting incentives in 2026, supporting sentiment in the biofuels market, according to market sources.

Both countries could halt the double counting of advanced biofuels in 2026 under their revised proposals for the implementation of the Renewable Energy Directive, also known as RED III.

Although nothing official has been released by the German government, sources told Platts that preliminary consultations for a RED III transposition proposal began on June 3, with a draft expected to be released in the coming week.

Meanwhile, France released an initial draft proposal on May 12, open to public consultation until June 10. The draft specifically mentions the French government's intention to transition its biofuels mandate to a GHG reduction model. It also proposes a 1.95% target for advanced biofuels by 2030 "without the application of double counting."

While neither country has officially finalised its RED III transposition proposal, traders widely believe that these two EU member states will cease to apply double counting to advanced biofuels from next year onward.

"There is no official position on that yet, [but] market consensus is that there will be no double counting next year," a Switzerland-based RD trader told Platts.

Most EU member states currently allow for double counting on biofuels derived from feedstocks listed in Annex IXA or Annex IXB of RED, but it is at the discretion of each country to set limits and targets on these incentives. Notably, in Germany, Annex IXA-derived fuels are currently double-counted, with the exception of POME-based fuels, whilst Annex IXB fuels are not.

"I've heard that there will be a halt to all double counting for biofuels [in Germany] next year," a Germany-based RD trader said.

"This would have a massive impact on Germany -- if you compare consumption of advanced double-counted material against FAME, the difference is big," a source continued.

This comes as market sources have noted a recent bullish trend resulting from various factors, namely, recent suspensions handed down by the ISCC. But many have also been weighing the market impact of ongoing speculation about the future of double-counting incentives in EU member states.

In the week beginning June 9, prices across the biofuels complex saw gains in notable biodiesel, renewable diesel,and renewable tickets markets.

Platts, part of S&P Global Energy, last assessed the RD-A outright price at $2,058.25/mt on June 11, up by 5.48% or $107/mt week over week. Likewise, the RD-B outright price was assessed at $2,045.50/mt, also 5.52% higher on the week.

Fraud prevention mechanism

Several sources suggested that the removal of double-counting incentives in European member states is likely a response to ongoing fraud concerns, positing that it would temper the export of mislabelled material to the European market.

"Most stakeholders now advocate for the abolishment of double counting, so it may disappear -- had there been sound auditing, double counting wouldn't have been a problem," one industry advocate said.

Other sources suggested the decision might stimulate renewed demand for first-generation fuels.

"The effect of removing double counting would really correct things in terms of demand," a Germany-based biodiesel producer said, pointing to the potential for demand on fuels that are not currently double counted, but that have high GHG savings.

"Right now, everyone jumps for advanced double-counted material to meet their 2025 [GHG reduction] mandates ... but a good quality RME has 75%-85% GHG savings, UCOME can be up to 92% savings -- this is good long-term for the market," a source continued.

"It's a correct move to cancel double-counting as it's where all the fraud has come from," another source said, adding that companies will start looking at UCOME/RME as compared to quota if the double-counting initiative is removed.

Meanwhile, a Germany-based source said biomethane may be exempt from this, and that it may still be eligible for double counting. As biomethane is produced within Europe, fraud concerns are not as prevalent as with imported biofuels.

Bullish view for THG market

As the industry awaits the RED III draft, brokers have been taking long positions on double-counting material and UCO, which might explain firmness in the RD and THG markets, one German-based source said.

Sources stated that the THG market could turn bullish due to the removal of the double-counting initiative, as THG prices do not currently reflect HVO values.

"If they cancel double counting, we will definitely have a bullish move on [THG] prices; in 2025, it's a big question, but for future years, prices will be up," one source said. "Even if they don't change the [GHG] target, THG will need to move up drastically."

"Even before HVO prices increased, it didn't make sense to blend HVO as quota levels were too cheap. The new levels make even less sense to generate German tickets," he added.

Expectations of higher GHG obligations in 2027, combined with the removal of double-counting incentives, could lead to bullishness for the THG market, a second source said.

"There's quite a lot of volume traded in double counting, so this volume will be missed and there will be a price increase for 2026."

Platts last assessed current-year THG-Other and THG-Advanced double counting at Eur129.75/mtCO2e and Eur265/mtCO2e, respectively, on June 11.