Germany may miss target start date for implementation of EU’s Renewable Energy Directive III

Germany may miss implementing the EU's Renewable Energy Directive III by Jan. 1, 2026, with the available time frame for the legislation to undergo necessary parliamentary procedures getting too tight to secure full legal assent.

For the RED III legislation to be enshrined in German law, it must pass through both the lower and upper houses of the parliament, known as the Bundestag and Bundesrat, respectively.

Before the draft legislation can enter the Bundestag, however, it will first need to be discussed by the executive arm of the government -- Bundeskabinett.

The bill was due to be discussed in the Bundeskabinett in the first week of October but has since been postponed amid a lack of consensus among the key ministries involved in drafting it.

This has left market participants uncertain about the outlook for German biofuel blending mandates in 2026.

"Stakeholders are waiting for news out of Germany, anticipating RED III announcements," a UK-based biofuels trader said.

"These delays have created volatility -- it's challenging to provide customers with firm prices, as quotes are often quickly outdated by subsequent market developments."

Since October, sources have continuously discussed the potential parameters of Germany's biofuel blending mandates for 2026, and whether they will be implemented to take effect from the new year.

Administrative roadblocks

The Bundeskabinett meets weekly on a Wednesday to discuss policy proposals and according to a source close to the German government, the RED III bill was not on the Cabinet's agenda for the week ending Dec. 6, nor is it expected to be discussed the week after. Given that there are now less than four weeks until the end of the year, it will not be possible for Germany to complete the necessary parliamentary procedures and ensure that RED III takes effect from Jan. 1, 2026.

"[RED III] is not on the [Bundeskabinett] agenda for the next two weeks," a German policy consultant told Platts, part of S&P Global Energy, Nov. 28.

"We will almost certainly see a retroactive implementation," the policy consultant added. "It's a catastrophe for the whole market."

The Bundeskabinett does not publish its agenda via any official sites, however, the agenda for its weekly meeting is decided on the preceding Friday of each week and circulated in turn around key stakeholders.

Once the Bundeskabinett has reached a decision on RED III, the bill will be required to pass the Bundestag -- a process which, according to sources, could require two or three separate readings.

"We have a strong belief that the bill will go to the Cabinet in December, which means the Bundestag won't be able to complete a third reading until at least January," the consultant added.

Once the Bundestag has voted to implement the EU directive, it will still need to be stamped with full legal authority by the upper house, the Bundesrat.

According to the Bundesrat's online agenda, the house will only sit once more before the end of the year, with a Plenary meeting scheduled for Dec. 19. For RED III to be fully transposed into German law ahead of Jan. 1, 2026, the bill will need approval in this session.

As such, a delayed or retroactive implementation has now become the most likely outcome, although sources have already expressed their uncertainty at what that could mean for markets in the near term.

Possible amendments

As the market adjusts to this reality, participants have questioned what the regulatory landscape in 2026 will look like.

Traders have been hesitant to build positions in the market owing to a lack of clarity.

A draft of Germany's bill, dated Oct. 31, was leaked in mid-November, detailing several reversals of expected policies, although according to sources, further amendments remain a real possibility.

A crucial element will be the status of double-counting incentives on advanced biofuels, a policy which was due to expire at the end of the year under the new legislation, prompting bullish expectations for advanced volumes in 2026.

"In the beginning, these delays were just annoying, but now it's getting serious," a Germany-based biofuels trader said.

"If I use double-counting volumes in January 2026 [before this legislation takes effect], will they take my compliance tickets away?" the source said.

The reality of a delayed transposition in Germany has also prompted competitiveness concerns for participants in the Dutch market, where the legislation is widely expected to take effect from Jan. 1.