On 5 November 2025, the EU Environment Council effectively delayed the start of the ETS 2. The decision to delay introduces uncertainty for all stakeholders, including the road transport sector. However, impacts on biofuels are expected to be minimal.
Note: aviation and maritime fuel emissions are covered by ETS 1 rather than ETS 2, so will not be directly affected by the delayed start of the latter. We focus on road transport usage below.
Biofuels currently receive a benefit (over fossil fuels) due to RED road transport mandates, which penalise insufficient renewable fuel uptake. ETS 2 will introduce an additional benefit with regards to emission avoidance, where the biogenic emissions associated with biofuel usage effectively reduce ETS 2 obligation. Delaying such a benefit an additional year is short term bearish for biofuels.
However, many Member States already implement some form of tax/quota obligation on emissions for non-ETS 1 obligated sectors – those national schemes associated with road transport fuels are expected to be phased out only when ETS 2 is introduced. This will reduce the impact of a delayed ETS2 start, as biofuels in these markets will still benefit from some form of carbon price. Where national prices are particularly high (e.g. Sweden has a tax of EUR 134/tonne CO2), the delay will allow biofuels to continue to receive a high emissions avoidance benefit.
Additionally, the delayed start is expected to increase EUA 2 prices in the first year of operation, further offsetting the potential loss of revenue due to the delayed start.
(see also main article on forecast)
Furthermore, the RED compliance benefit is typically higher than that associated with emissions avoidance value, particularly in the case of advanced biofuels which many schemes allow to be counted towards RED targets at twice their energy content. This will further dampen the impact of an ETS 2 delay on the biofuel sector.
In Germany the nEHS, an emissions quota system, places an obligation on the road transport sector. The carbon price was fixed at EUR 55/tonne for 2025, with 2026 introducing an auction system where the price corridor would be set at EUR 55-65/tonne. The expectation was for the nEHS system to be superseded by ETS 2 in 2027.
Considering the ETS 2 delay, the German government is expected to extend the price corridor to 2027, with the nEHS phase out occurring a year later. The ETS 2 price, once the scheme begins, is expected to be similar to the corridor price, if not lower so this is expected to have minimal impact. Thus the introduction of ETS 2, whether in 2027 or 2028, is projected to give negligible impact on the compliance value for biofuels in Germany.
Further, benefit derived via nEHS/ETS 2 accounts for just a small portion of the total compliance value of biofuels in the German road transport. Comparing the two components – Germany’s RED obligation (BImSchG – GHG quota) and the nEHS schemes – illustrates this. The GHG quota penalty price is set at EUR 600/tonne, compared to the nEHS carbon price around EUR 60/tonne, which suggests that the compliance value in the emissions market only comprises approximately 9% of the compliance value of a biofuel.
However, the treatment of emissions in both schemes is different – the nEHS assumes compliant biofuels have zero emissions (this will also be the case for ETS 2), whereas the GHG quota considers the GHG intensity of the biofuel and compares it to a reference fossil fuel (94 gCO2/MJ).
For the scenario where a bioCNG from waste feedstock (with GHG intensity 10 gCO2/MJ) replaces transport CNG, this leads to a quota penalty avoidance value of EUR 98/MWh, while the emissions avoidance value is EUR 12/MWh (for a nEHS price of EUR 60/tonne). Thus only 11% of the total compliance value is expected to come from a reduction in nEHS obligation. This contribution would be further reduced for manure bioCNG, which has a negative GHG intensity (often -100 gCO2/MJ) resulting in a higher quota value.
Thus, the impacts of a delay are expected to be minimal for the biofuel markets:
Biofuels already receive some benefits for emissions avoidance, as part of national emissions schemes, particularly in the larger Member States markets;
Emissions prices are expected to be higher in the first year of ETS 2 implementation, which would claw back some of the losses associated with a delay; and
Biofuel premiums are more strongly influenced by RED transport target mandates, which make up a larger proportion of the compliance value.
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