Key message: Germany’s planned renewable fuels law is expected to increase demand for physically available, traceable and compliant biofuel components. For European fuel suppliers, refiners and traders, this may strengthen the role of FAME, UCOME, RME and related feedstocks in the road fuel mix.
Germany is moving closer to adopting new renewable fuel targets as part of the national implementation of RED III. According to recent industry reports, parliamentarians in the governing coalition have reached an agreement on the draft law ahead of the next legislative window in May 2026.
If adopted, the new framework is expected to apply key provisions retroactively from 1 January 2026. This is an important point for the market, because companies may need to manage 2026 compliance obligations under rules that are still moving through the legislative process.
The draft law is focused on the further development of the German greenhouse gas reduction quota, known as the THG-Quote. Official Bundestag materials describe the THG-Quote as the central instrument for reducing greenhouse gas emissions from fuels in Germany. The planned quota path would rise gradually to 59% by 2040, equivalent to around 62% renewable energy in transport under the RED III calculation method.
Stronger Demand for Physical Biofuel Components
The most relevant change for the biofuels market is the planned end of double counting for advanced biofuels.
Under the previous system, certain advanced biofuels could count more than their physical energy content towards compliance. Removing this mechanism means that obligated parties will need more actual renewable fuel volume to achieve the same compliance effect.
This should increase the importance of physical supply, especially for:
- FAME — fatty acid methyl ester used as a biodiesel component;
- UCOME — used cooking oil methyl ester, produced from waste-based feedstock;
- RME — rapeseed methyl ester, an established European biodiesel component;
- other eligible waste- and residue-based feedstocks;
- renewable hydrogen, e-fuels and other RED III-compliant options where available.
The German environment ministry has stated that the quota for advanced biofuels is planned to double from 1% to 2% in 2026 and then rise gradually to 9% by 2040. The same communication confirms that double counting is intended to end from the 2026 compliance year.
For the European market, this is significant. Germany is one of the largest road fuel markets in the EU. A tighter German compliance regime can influence feedstock flows, biodiesel blending economics and the value of eligible bio-components across the wider region.
Feedstock Availability Becomes a Strategic Issue
The proposed law also strengthens the focus on verification and fraud prevention. The government draft refers to stricter requirements, including the ability to conduct on-site controls at production sites and the end of crediting biofuels made from palm oil production residues.
This points to a clear market direction: compliance value will increasingly depend not only on price, but also on documentation, origin, certification, auditability and contractual reliability.
For feedstock and bio-component buyers, the practical questions are becoming more complex:
- Is the feedstock eligible under RED III and German THG rules?
- Is the supply chain sufficiently documented?
- Can the material be accepted by the buyer’s certification and compliance process?
- Is the origin transparent and auditable?
- Can the supplier deliver consistently in a tighter market?
These questions are especially relevant for waste- and residue-based feedstocks, where physical availability is structurally limited. Higher targets and the removal of double counting may increase competition for eligible material, particularly for UCO-based and advanced biodiesel pathways.
Recent market reporting has already shown firm values for European used cooking oil, with European-origin UCO trades reported around €1,040–1,060 per tonne in Northwest Europe in late March 2026. Biodiesel market reports in April also indicated active pricing across UCOME, RME and FAME markets, reflecting continued volatility in the European biodiesel complex.
Traditional Fuel Prices Add Pressure to Compliance Decisions
The regulatory changes come at a sensitive time for the conventional fuel market.
Diesel and gasoline prices in Germany rose sharply during March and early April 2026. ADAC reported that Super E10 reached €2.192/litre on 6 April, close to its historic peak, while diesel had recently traded at very elevated levels. By 19 April, prices had eased, but remained high: diesel averaged €2.152/litre and Super E10 €2.059/litre nationwide.
This does not change the legal obligation under the THG-Quote. However, it makes compliance cost management more important. Fuel suppliers are facing two pressures at the same time: volatile fossil fuel prices and a renewable fuel mandate that is becoming more demanding.
In this environment, reliable access to eligible bio-components and feedstocks becomes a commercial advantage. Buyers may need to secure supply earlier, diversify sourcing channels and pay closer attention to the compliance quality of each transaction.
Can Carbon Credits Replace Bio-Components in the Fuel Mix?
In general, no.
The German THG-Quote is a regulated compliance system. It is not the same as the voluntary carbon credit market. Generic voluntary carbon credits cannot normally be used as a direct substitute for bio-components in the fuel mix.
German authorities describe the THG-Quote as a system that obliges fuel suppliers to reduce emissions by using renewable energy options such as sustainable biofuels, green hydrogen, e-fuels and electricity for electric vehicles. The environment ministry’s FAQ also confirms that fuel suppliers can use different market-based compliance options, including sustainable biofuels, green hydrogen, e-fuels and electricity for electric vehicles.
This means that certificates and quota transfers remain relevant, but only where they are linked to eligible compliance pathways. A certificate backed by recognized renewable fuel or another accepted THG option can have compliance value. A general offset credit without recognition under the THG framework does not replace the obligation to meet fuel-specific rules.
The policy direction is therefore more physical and more verifiable, not less. The end of double counting, stricter fraud prevention and tighter feedstock eligibility rules all point towards stronger demand for real, documented renewable fuel volumes.
Prime Elements’ Role in the Biofuels Supply Chain
Prime Elements actively supplies raw materials for the production of fuel bio-components, including supply chains linked to FAME, UCOME and RME.
The company works with institutional counterparties in physical commodity markets and supports buyers that require reliable access to feedstocks used in biodiesel and renewable fuel production. In the current regulatory environment, Prime Elements focuses on practical execution, documentation discipline and supply reliability.
For refiners, fuel suppliers, traders and industrial buyers, the key requirement is not only to source material, but to source material that can be accepted within a compliance-sensitive supply chain.
Prime Elements supports this requirement through:
- physical commodity sourcing;
- feedstock supply for bio-component production;
- logistics coordination;
- transaction documentation;
- market-oriented supply structures for European counterparties.
As renewable fuel mandates become more demanding, the quality of sourcing decisions becomes more important. Buyers need commercially viable volumes, but they also need clarity on origin, documentation and regulatory acceptance.
Market Outlook
If Germany’s revised renewable fuels law is adopted in its current direction, the European biofuels market is likely to become tighter and more selective.
The main expected effects are:
- stronger demand for eligible physical biofuel components;
- higher importance of FAME, UCOME, RME and advanced biodiesel pathways;
- stronger premiums for traceable and compliant feedstocks;
- reduced reliance on accounting multipliers;
- more scrutiny of origin, documentation and certification;
- continued relevance of THG quota certificates where backed by eligible compliance options;
- greater pressure on fuel suppliers to balance cost, availability and regulatory risk.
For market participants, the message is clear. Renewable fuel compliance in Europe is moving towards higher targets, stricter verification and stronger demand for real supply. In this environment, secure access to biofuel feedstocks and reliable counterparties will remain central to fuel market strategy.
Prime Elements continues to support the European renewable fuels market by supplying raw materials for the production of FAME, UCOME and RME, with a focus on reliable execution and compliance-sensitive trade flows.
