#strohklug | RED III in Germany: Fair Play for Biofuels

Claudius Nießen: Hello and welcome to a new episode of our podcast #strohklug. In today`s episode, we are diving into a topic that may sound a little technical at first, but it`s one that sets important directions for climate policy, transportation, and the economy: the implementation of the new EU directive "RED III" into German national law.

To help guide us through this, we have another guest in the studio alongside Mr. Sauter. You already know him from our last episode. Please welcome Stefan Schreiber, President of the Association of German Biofuel Producers, or VDB for short, and fellow board member along with Claus Sauter at Verbio. Hello!

Stefan Schreiber: Hello, I’m glad to be back.

Claudius Nießen: We're happy to have you both here. Welcome, gentlemen. I'm glad you could join us today. And before we get to the really tough stuff, Mr. Sauter, let's start with something a little easier. "RED III" or "R-E-D-III", the "Renewable Energy Directive". What exactly is it? And why do we already need a third edition?

Claus Sauter: Well, it was first implemented back in 2009. At that time, binding guidelines were issued on the basis of decisions made in Brussels on how biofuels should be used across Europe. What we have now is the third revision, and there will likely be a fourth at some point. In the meantime, a lot has changed: overall volumes of biofuel volumes have increased, sustainability requirements have been introduced, and many other things have happened. We now also have fuels that aren`t of biogenic origin, for example hydrogen with CO₂, electromobility solutions, all of which are playing a role in transportation today. The European Renewable Energy Directive defines the rules for this, and the current version now has to be translated into national law, that is what we are dealing with.

I`d say that it is also important that, as part of this implementation, the undesirable developments that we have seen in recent years—I am thinking of all the fraud involving advanced biofuels, questionable environmental projects in China, and so on—can finally be ironed out. 

Claudius Nießen: Mr. Schreiber, if we go into detail, what exactly is in "RED III" and how will is it being implemented here in Germany? Or to be more precise, are there any surprises?

Stefan Schreiber: Well, first of all, "RED III" has actually been around for quite a while. Germany is behind schedule with its implementation. It should have been implemented by May, but then there were new elections, and that's why the draft wasn't ready. It has now been introduced with the new government.

Basically, the overarching goal is always to achieve a certain share of renewable energy in transport. This has now been set at 29 percent by 2030, and on top of that, or alternatively, there is a greenhouse gas reduction target of 14.5 percent in the "RED". If we then look at the German implementation – and it`s important to stress again that this is still just a draft, not a finalized law yet – the target is even higher: a 25 percent GHG quota by 2030, which is significantly above what the "RED" requires. In this respect, it is encouraging that the new federal government is also sticking to the path of ambitious implementation. And then there is another new point: previously, targets have always been defined at 10-year intervals with intermediate steps in between. Now, targets have been set for both 2030 and 2040, with the aim of achieving a GHG quota of 53 percent by 2040.

This is intended to provide planning security. It could do so, if there were no more changes along the way, but experience shows that the pace of change has actually increased rather than slowed down. That was one of the surprises, to come back to your question. Then, as Claus mentioned, certain things that may not have proved very effective were corrected again. One of these is the double-counting that was introduced for advanced biofuels with "RED II." They now want to abolish this again. As a result, the share of advanced fuels, the target value, has been increased to 5.5 percent by 2030. Another surprise was that they want to extend the GHG quota to air and maritime transport. What is also new, and seems to be an attempt to learn from past mistakes – think fraud – is that, contrary to our request, no registration procedure has been introduced or proposed for manufacturers of advanced fuels, but instead auditors are required to obtain accreditation according to a German standard.

On the downside, there is also the issue of cultivated biomass. The upper limit, which was previously 4.4 percent, is proposed to be lowered to 3.5 percent in 2028 and 3 percent by 2030. However, I am hopeful that we can at least bring it back to the previous level, or at least I hope so, within the framework of the parliamentary process.

As I said, it is still just a draft, and as I have already indicated, the draft has already been published. All the feedback has been submitted, which took another four weeks. Now those comments are being processed by the ministry. Then there will be a new draft, which will go to the cabinet. At the moment, we can only guess, but I think it will pass through the cabinet in October and then go to parliament, where it will need a first, second, and third reading. That means, if you stretch the process out...

Claus Sauter: ...we'll be heading fast towards Christmas.

Stefan Schreiber: Yes, at least. So, that means the goal must also be to ensure rapid implementation, because that is also very important for the industry. However, speed should not come at the expense of thoroughness; we must achieve both.

But a lot of lead time has been allowed, there is a four-week period for submitting feedback, and a lot of time is now being taken again to revise the draft based on those comments, so I at least hope that there won't be too many corrections needed once it reaches parliament. 

Claudius Nießen: Now you have not only listed the facts, but also highlighted some of the surprises for your industry.

Some positive, some a bit negative. Looking at the whole picture, would you say it`s more positive overall, or more negative? 

Stefan Schreiber: Overall, it's more positive, with the downside being the limits on cultivated biomass. However, I must say that you always have to look at this in combination with the "Biofuel Sustainability Regulation”, because some aspects are regulated there, while others fall under the "Federal Immission Control Act" or its ordinances."

For example, one point that is very important to us is regulated in the Biofuel Sustainability Regulation, and only when both are taken into account does it make sense. I am talking about the “protection of legitimate expectations”, which has been very extensive in Germany up to now. I don't know of any country where it is more far-reaching. Ultimately, this is what allowed fraud on such a scale to happen, because no one had to exercise due diligence when selecting their suppliers. The main thing was low cost, and if it turned out to be fake, you could always say, 'Well, I couldn't have known.’ This issue is now addressed in the Biofuel Sustainability Regulation, for which the draft was published in mid-August.

We are curious to see whether this point, the one about reforming, or you could say restricting protection of legitimate expectations, will hold up. It hasn`t been abolished, but it has been limited. This issue is very central to how the other factos in the "RED III" will play out. 

Claudius Nießen: Mr. Sauter, what does "RED III" actually mean for the biofuel industry? Will it give producers a boost? 

Claus Sauter: Yes, definitely. I mean, the details that Stefan just mentioned are important. But the crucial thing is that massive tightening measures have also been introduced: documentation of where the fuel comes from, and, very importantly, the issue of double-counting. The original idea was that advanced biofuels don't exist, they are harder to produce, so to create an incentive, they would be counted twice toward meeting the quota.

And because monitoring and control did not work, it led to this fraud, an oversupply. No value chains were established in Germany or Europe; instead, false certificates were simply issued in Southeast Asia, and we ended up with palm oil here.

So that was a real shot in the foot. The original idea was a good one, though. But if you can't properly regulate it, and we still believe it won`t be possible to regulate it in the future, then it's better to get rid of it. And we are already seeing this with the announcements that double-counting will no longer exist next year, and the quota prices we are talking about for next year are already well over double what they used to be. So, de facto, the effect is the same, only with a simpler crediting system, and the side effect is that controls will be tightened and demand will naturally increase. Everything that was previously classified as fake palm oil biodiesel was even credited twice, which is completely illogical. I see this as very positive. The volumes will increase. 

And as for cultivated biomass , we`re talking about first-generation biofuels here, meaning fuels made from grain or domestic rapeseed oil, and there is a cap on that, which frankly doesn`t make much sense.

We do not have a shortage of food. 

India recently announced that by 2025, they will have 20 percent ethanol in their gasoline. It's all made from sugar. So I wonder what we're doing here in Germany and Europe. The argument is that people in the Third World are starving. And then the Indians come along and say, we'll quickly add 20 percent ethanol to gasoline within five years. So there are still some questions to be answered. But I also think, with reference to the current government, that there is a higher threshold in Europe. Germany has the lowest. Further reducing it makes absolutely no sense. We have to make sure that the competitive disadvantages we face in a European context are addressed. Overall, though, I think we are on the right track. A few things still need to be smoothed out, that's clear. I mean compensation for the fraud we have had to put up with for the last two and a half to three years and which is still going on – there is nothing about that in the draft. So something still needs to be done there, because there are between 6 and 10 million tons of CO₂ savings still on the market in certificates that were frozen on December 31, 2024. They will come back onto the market in 2027, and something needs to be done about that, too. But I am revlieved that the Federal Environment Ministry is finally taking this seriously, and from my perspective, the positives outweigh the negatives. 

Claudius Nießen: If I understand you correctly, you are quite positive that the double-counting of advanced biofuels is now being reviewed. Looking at Verbio, you have biomethane production, but doesn't that also have an impact on exactly that production? 

Claus Sauter: Yes, of course, but we had to react at some point. We are talking about the current situation. It was difficult to continue producing biomethane from straw because the costs are simply higher. That said, the idea of double-counting for advanced biofuels was a good approach. In my opinion, it could be continued, but only for production that actually takes place in Germany.

I would say the idea was good, but it was implemented disastrously badly by the government. It was well thought out, but poorly executed. But before we let that continue in any way, we would rather see it scrapped entirely, no double-counting at all. And then we'll see how things develop. I mean, we have everything in our portfolio. We can then adapt to the market accordingly. But I would say that it will be quite ambitious to fully implement all of these requirements by 2026, at least for those subject to quotas. We have suffered long enough, it`s time for a break.

Claudius Nießen: ...now it's the others' turn to suffer.

Claus Sauter: Well, we’ll see, but in any case, the end of our suffering is now in sight. 

Claudius Nießen: Mr. Schreiber, when we talk about the use of biofuels from food or feed crops, it's always a controversial topic. Earlier, we already discussed the cap on biofuels based on cultivated biomass. What regulations can we expect in the future? 

Stefan Schreiber: Well, first of all, it is mainly controversial in German-speaking countries, perhaps also in the Netherlands and parts of Scandinavia. Otherwise, there is a consensus in the rest of the world that primary agricultural crops can indeed be used for energy purposes, as long as the food and feed supply is not jeopardized, so to speak. This consensus exists everywhere, and people tend to see it as an opportunity and a prospect for agriculture. It`s really only in our region, or within our language area, that it carries this negative connotation, unlike in the rest of the world. So the question is: is that really right, or isn`t it?

Let me say that if we were to talk about this being a problem today, we may not have the lowest prices in history for grain and oilseeds, but they`re not far off, probably somewhere in the mid-range historically. But we are close to rock bottom again for grain, and most farmers who produce grain worldwide will have great difficulty covering their costs. In fact, most will be operating below their cost of production. So, we will really have a problem. Surpluses will occur all over the world, especially in the main growing regions, and in Germany in particular, there will be 4-5 million tons of grain that would actually have to be exported. However, this will then compete with all other sources, which also have surpluses, and we will most likely not be able to compete with them. So where does that leave the farmer? Should we just tell them to not produce as much? At the same time, the agricultural budget will most likely be reduced in the next reform. This means that direct subsidies for agriculture are likely to decrease over the next seven years.

This means that we need a perspective here too. Back to your question: As I said earlier, the current cap is 4.4 percent. I mentioned this at the beginning. And according to the Ministry of the Environment, it is supposed to be lowered to 3 percent by 2030. 

Claudius Nießen: Gradually, for now.

Stefan Schreiber: Gradually, yes. However, "RED III" allows this limit to rise to 5.8 percent. That comes from 4.8 percent effective use in 2020, plus a 1 percent leeway that each member state has been given. And we believe that this leeway should be fully utilized. That`s how we`ve positioned ourselves as an association and as a company. To my knowledge, the Ministry of Agriculture has taken a similar stance, because in reality there is no supply problem – quite the opposite. We have so many surpluses that at some point it can be difficult to manage them, while at the same time maintaining a viable agricultural sector. Not to mention that we are talking today about a sector that is prospering. And this can be one way of achieving that. And if we take a step back from the specific issue and look a little further ahead to 2045 or 2050, when we are all supposed to be climate-neutral. We might ask: Where is this climate neutrality supposed to come from? In many areas, it will rely on cultivated biomass or biomass in general, both agricultural residues and cultivated biomass, because that is the most efficient CO₂ absorber we have. We should therefore look at how we can develop this area sustainably instead of talking it to death and blocking our opportunities for the future.

Claudius Nießen: I think it's important that you emphasized that point again. Now that we have rightly narrowed down the scope of this discussion to Western Europe in particular, I would like to take a broader view. Something that clearly moved you both in the last episode and has been mentioned several times today is the issue of fraud in biodiesel imports from China.

You have both already said that you believe "RED III" is definitely a positive instrument. But do you think it can really curb this fraud, Mr. Schreiber? 

Stefan Schreiber: Well, I would like to return to the issue of implementation in German law.

The directives come from Brussels. The states have to implement them. The Commission also accredits the so-called "voluntary schemes" – as they are commonly known – which carry out the certification, and the Commission is actually supposed to monitor the schemes and their auditors. It is clear that the Commission is not doing so. That is why we have reached the point where we are saying that Germany must take action here. And that is basically the discussion we have been having with the Ministry of the Environment for a year and a half or two years. First of all, debating Brussels versus Berlin.

We have now landed on Berlin, and proposals have been made on how, as an EU member state, we can ensure better fraud prevention within an otherwise European framework. Until now, it has not been possible for German authorities to take action and carry out checks outside the EU or even outside Germany. This draft has changed that.

As I said, it has not yet been finalized. But I actually see a consensus among all parties involved that this should happen. At the same time, they want to make the exchange of information mandatory. This has also been a problem in the past. This means that the German authorities were unable to determine that fraud had taken place because they often simply did not have the data to do so, as it was not made available to them. They want to regulate this by making it mandatory to provide them with this data and, if there is suspicion, to be able to go to the site and investigate. That’s how the system works. At the same time, however, it must also be said that we cannot chase after every truck with an inspector. That would be unrealistic and bureaucratic madness. That is why the protection of trust that I mentioned earlier is so important, because it ensures that there is an economic self-interest in the supply chain, which, incidentally, is not only the responsibility of those subject to quotas, but of everyone, including us, when we purchase raw materials or finished products on the market and resell them. We have to look at who we buy from. Do we trust them to deliver what`s on the paperwork? And if we do that, the system works. Because we run the risk that if fraud is discovered, these quantities will be disallowed. But it's a bit like if you enter a country with ten Rolex watches that you bought for very little money and you want to resell them, then someone discovers that they are fake and you didn't even know it. Then they take them away from you and you suffer the entire loss. The same principle should apply here until a certain point in time. That is, until the quota holder has submitted their quota declaration for the fiscal year, after which they are safe, so to speak.  Fraud must be detected before that point; otherwise they remain protected. And we think this is the right approach, because without this economic incentive to comply with the rules, there won`t be any real improvement. 

Claus Sauter: And to stick with the example, I think the Rolex one is great. That's exactly what happened. Even the person who bought them as a dealer after they entered the country knew they were fake. But then they were sold to consumers at gas stations. Everyone knew they were fake. Except for the consumer, who had no way of knowing. The consumer bought them in good faith at full price. So now we know it was fraud. But the consumer isn't going anywhere to say, "I want my money back," and that's why this issue needs to be resolved. And that's exactly what happened. 

Claudius Nießen: Mr. Sauter, looking ahead to 2030, what could the transport sector look like if "RED III" is consistently implemented? 

Claus Sauter: Well, perhaps in the whole discussion about the food vs. fuel debate, and all these issues, we have been far too quiet in the past. And it simply has to be said quite clearly. As Stefan mentioned, the question of using food raw materials is not a debate at all on a global scale; everone understands that they must be used.

Claudius Nießen: So for you it's a sham debate, clearly nothing more than that.

Claus Sauter: Exactly, and up to now, we didn't really care about that, but now it's taking on such proportions that you just have to speak up. Using waste materials is a good thing, but that doesn't make the other option any less valid.

So, now to the topic of 2030 and what transportation will look like? We have a clear opinion on that as well. Passenger car transportation will increasingly be electric. But in 2030, 80 to 85 percent of the cars on the road will still have combustion engines. They need fuel. The same is clearly true for heavy-duty transport. I'm not referring to high-volume loads – but to trucks that carry real weight and require payload capacity. They can't haul around massive batteries, and that's why they will continue to be powered by fuel.

There is a very interesting development in China at the moment. Over 40 percent of new registrations for heavy-duty trucks are now LNG vehicles, meaning trucks that run on liquefied natural gas. That can easily be replaced with biomethane. And that is exactly what we are doing. It is a very clear trend, and I think it is something worth paying close attention to.

This is a development that also makes sense economically and offers the opportunity to quickly switch to a different fuel here as well. Then it will continue in shipping, where we also see great opportunities. There has been a debate about whether ammonia or biomethanol should be used as fuels. Frankly, I`ve asked myself what that is really about – both are incredibly expensive. Most ships today still run on heavy fuel oil, because it is still permitted and remains the cheapest fuel. But all those that don't run on heavy fuel oil typically operate on LNG. So, at a time when exhaust gases are becoming an issue, and there are now many initiatives in that direction, bio-LNG will be the solution, and we are now seeing this becoming increasingly prevalent, which is a global development. While Europe is lagging behind in this area, the IMO – the International Maritime Organization – has set targets and issued guidelines. So there is now real momentum, especially outside Germany, Europe, or those parts of Europe where biofuels are weighed down by ideological debates. We view this positively, and I think we need to reposition ourselves, especially here in Germany. Many of the political proposals that have been put forward simply do not make sense.

Let me put it this way: using hydrogen in the transport sector is, frankly, a complete disaster. It's not going to happen. I'll say that quite clearly. And the impact that hydrogen will have is totally exaggerated, totally overestimated, and this stuff is just far too expensive. That's why biofuels will clearly be used in heavy-duty transport, and in passenger car transport for at least the next ten years.

Other areas, as I said, include shipping. What I haven't mentioned yet is aviation. But we are staying out of that because, from both a business and an economic perspective, we believe that as long as cars, trucks, and ships are still powered by fossil fuels, there is no need for sustainable aviation fuel. Let's pick the low-hanging fruit first and then see what happens with aviation.

But politics is taking a different approach. We are not involved in this from a business perspective. Over the last four or five years, there have been numerous investments worldwide in this area. At the moment, they are all struggling because it is not happening to the extent that was hoped for. The idea behind the policy was that people who fly are not as cost-conscious as those who drive cars or use other modes of transport. But that's nonsense too. I mean, if a ticket now costs 100 euros more, no matter where you're flying to, or 200 euros if you're flying on vacation with a family of four, then you're out 1,000 euros or 800, whatever. Of course people are price-sensitive. They might just drive to Italy instead of flying. You can see changes like this, and that is our clear perspective. We are seeing a revival of first-generation biofuels, and I am very glad that we have diversified as a company and are no longer so dependent on the German market, although that still plays a major role, of course. But under Trump, the U.S. biofuels sector is developing excellently.

Claudius Nießen: Before we turn our attention to the U.S., Mr. Sauter, I have one more question, because you just mentioned hydrogen again. I have the feeling that in Germany, or Germany as a whole, there is a bit of a fascination with hydrogen when it comes to fuels. I mean, there was this fuel cell with Daimler—that was a long time ago. Why does this topic keep coming up? After all the hype recently, there have already been a few hard setbacks with this topic. 

Claus Sauter: I have a clear opinion on this. We have solutions on the market that work, but then someone stands up and criticizes them and discredits them. And instead of just looking at the facts, some politicians jump on the bandwagon and then look for something new. Then a new topic opens up. After two, three, four, five years and billions in subsidies have been spent, the conclusion is: Well, this doesn’t work either. But by then you've gained a few more years. And I would say that those days are now clearly over. We have sensible solutions that are being implemented globally. And that's where we need to go. And in Central Europe, hydrogen is simply not a solution for the transport sector.

Claudius Nießen: Let's move on to the U.S., Mr. Sauter. You were just there again recently. Verbio has clearly focused on the American market. How is the biofuel market developing under Trump? 

Claus Sauter: Yes, very well. 

Claudius Nießen: No problem with tariffs? 

Claus Sauter: Quite the contrary. I would say that the Americans are strong in four areas: defense, digitalization with their tech companies, energy, as the world's largest producer of crude oil and natural gas, and agricultural products.

If we look at the first deal that was made, it was with England. In May, the first point highlighted in the press release was that England is opening its market to U.S. ethanol. For British ethanol producers, this was a complete disaster. But I just want to show where the significance lies. Then last week came the news that Vietnam is opening up. So Trump is our best salesman at the moment, and the Americans produce the cheapest and most sustainable ethanol in the world. It is cheaper than gasoline, even at $65 per barrel of oil, and he is opening up the markets. That is the first point. So we are already seeing an upturn in exports.

The second point is that under Biden, all these initiatives to improve greenhouse gas values in the U.S. are called "CI," "carbon intensity," meaning lower carbon intensity. There is an extensive subsidy program that clearly promotes this, and we now have the detailed regulations. This was confirmed under Trump and even expanded, so the use of this subsidy will continue for even longer, and we are currently seeing this in the U.S. ethanol industry, where investments are now being made. They usually obtain the energy they need to operate their plants from coal. Now, everything is being converted, coal is being phased out, and the next step is to install natural gas boilers. And, of course, our approach fits in perfectly with this development: Namely, not to copy the energy-intensive ethanol producers in the USA, who produce this feed as a co-product, but to apply our European and German mindset and our technology, which means we simply consume much less energy than the traditional ethanol producer. And secondly, instead of producing this complex, expensive feed, we have the opportunity to produce biomethane from it, which we inject into the gas grid.

This development is now underway. As I said, the laws were already made under Biden. But when Trump came in, he first imposed a 90-day moratorium. That period is now over. Things have been confirmed and we are now seeing increasing momentum. So as far as ethanol is concerned, things are looking pretty good. And the same applies here, as Stefan just said. The American farmers – I was over there for two weeks and we had various meetings – have a problem at the moment because we are expecting another bumper harvest. And corn currently costs 40 percent less than it does here in Europe. That means they can't cover their costs. So there is too much corn, prices are low, which is why Mr. Trump ‘s actions in this area are so important. Simply by bringing the issue up in the trade negotiations makes a difference. And I believe it would also be an opportunity for Europe, not in the way the UK has handled it, of course, but for years we have had too few greenhouse gas reduction in the transport sector, which has always been the weak spot. Yes, let’s follow India’s example. If India can implement ‘E20’, we should adopt ‘E20’ in Europe as well. This would open up a market for U.S. ethanol. A separate quota would be created for this. Cars can handle it. The product is there. And I think that would be a win-win-win situation. German consumers would benefit because it`s cheap. The transport sector and CO_2-emissions would benefit. And at the end of the day, you have something to offer Mr. Trump that will bring him more political gain than any tariff concessions or anything else. Let's be clear: he enjoys tremendous support in the U.S. Midwest. They think everything he does is great, and he is putting these agricultural issues, or all the issues where Americans are strong, at the forefront. Of course, he could improve his communication a little, but he is clearly pursuing American interests here and, in this case, of course, as a U.S. ethanol producer, our interests as well. We can really learn a lot from the Americans in this regard. But we have to free ourselves from certain ideological constraints that cannot be substantiated. And we have to focus on using the most cost-effective option.

Take, for example, renewable hydrogen in the refinery process. Refineries today use large quantities of hydrogen. This hydrogen is currently obtained from natural gas, but it could easily be replaced with biomethane. However, the old law states that the hydrogen must be of non-biogenic origin. Non-biogenic origin means that hydrogen made from our biomethane is ruled out and cannot be used for this purpose. And the reasoning at the time was: it's too cheap. The hydrogen that comes out of it is too cheap because politicians wanted hydrogen obtained from renewable electricity from water.

Okay, that was in the last "RED II" implementation. That was the argument, that was the reasoning. The result is that nothing happened. This means that refineries have continued to use their fossil hydrogen for the last three years and have done nothing. We have to put a stop to things like this. These are low-hanging fruits. Refineries will switch to green hydrogen tomorrow, but it has to be made from biomethane. The facilities are all there, no investment is needed. Whether they use biomethane instead of natural gas is irrelevant to them. They do it because it is economically attractive and they don't need to invest anything.

The political idea of ruling out the cheap option so that refineries invest in expensive electrolyzers and use renewable electricity that doesn't even exist, simply has not worked out. 

Claudius Nießen: Will that change with "RED III"? So can you act on this, or will it stay the same?

Stefan Schreiber: Incidentally, the current draft contains the same reasoning as in "RED II". Biogenic hydrogen – that is, hydrogen produced from biomass – is excluded. And that is one of the other points of criticism, if you will, that needs to be addressed again. We have also addressed this in our statements. We will see to what extent this is taken into account. There is no revised draft yet. And we will see what happens in the parliamentary process.

Refineries have invested in hydrogen – at least one has – but the quantities involved, are, from a macroeconomic perspective, less than a drop in the sea. So, if we want to take a step forward – hydrogen has advantages when we think about steel production, for example – we need to release the handbrake and do what is feasibe. After all, 2045, 2050 is just around the corner. That means we're actually already too late to start building something, because it always takes a while for it to be realized in the market.

So that would be one point of criticism. I forgot to mention that earlier, alongside the agricultural biomass issue. And we should certainly think about that again and ask ourselves what we want. Do we want to go down in style, or do we want a solution that works, is cost-effective, and actually achieves greenhouse gas savings?

Claus Sauter: And am I capable of learning?

Claudius Nießen: That brings us back to Mr. Sauter's pragmatism. Mr. Sauter, when you say "learn," what specific opportunities do you see for Verbio as a result of "RED III"? 

Claus Sauter: Well, the opportunities were already there with "RED II". And we had the right approach, the right ideas, and so on.

But we were betrayed. We make great, but expensive Rolexes, and we were caught off guard by the fake Rolexes from Southeast Asia. That has to be stopped, that's number one. And then we're back in the race when it comes to Germany and Europe.

I mean, also the cap on cultivated biomass as feedstock that Stefan mentioned. That's why we will continue to use grain and rapeseed oil, but then it won't be consumed here in Germany, but will go to France, Spain, Poland, Czech Republic, Slovakia, and Hungary. The markets still don't have a maximum of 4.4 percent, but rather 7 percent, so they are working more pragmatically. And that's why the number one priority was to put a stop to this fraud, and now the keyword is "USA," so that we can make progress there – and we are already doing so – and that this second pillar we have created will also hold up in the future. Until now, it has not been reliable; it has actually cost money to support it.  

And then there's something we haven't talked about at all, which wasn't important in the past either: India. I've just been discussing this issue with regard to shipping: the Indians are one of the largest importers of LNG. They have neither crude oil nor natural gas reserves, nor do they have a pipeline connection to Russia, which means that most of their energy has to come in as LNG. And we are talking with the largest natural gas supplier in India, a state-owned company that has seven or eight LNG ships of its own and will have to operate these LNG ships in a climate-neutral manner in the future, and of course it will now use our biomethane. So there are positive developments there too; I would say we can actually look to the future with confidence, but the fraud with the fake Rolexes has to stop. And it needs to happen quickly. Another point is that if the fraud continues, which cannot be ruled out, then of course those who buy the fake Rolexes will now run the risk of having to bear the damage in the future, which they did not have to do today. But secondly, I would of course also like to see this finally prosecuted.

Even just the attempt to do something like this, and if it is then uncovered, must have criminal consequences. In the U.S., there was also fraud involving biofuels in the 2000s. The people involved were imprisoned for decades. The Americans are actually quite strict in this regard. Anyone who commits fraud or economic fraud could go to prison for five to ten years.

And something similar in the environmental sector, as was the case with the diesel scandal, is still considered a minor offense here in Germany and in Europe. No damage was done. So a few more tons of CO₂ were emitted, or nitrogen oxides in the case of the diesel scandal. But there were no criminal consequences anywhere. And that has to change, too, because otherwise people will continue to be willing to do it. From an economic point of view, cheating can be very attractive, and one might just give it a try. If they catch me, okay, no big deal. But if they don't, then we're talking about tens of millions of dollars every time I run a shipment. So it's definitely worth it. One lucky punch like that, and you're set for life. And that has to stop, too. We need criminal prosecution for that as well. I remember, we talked about this once, I explained how it works two and a half years ago. There was also a complaint filed with the public prosecutor's office in Bonn, and the case was dismissed at the time on the grounds that, well, biofuel wasn`t technically “advanced”, but it was still used as biofuel, as biodiesel. So no real damage was done. That was the official explanation from the public prosecutor's office in Bonn. And I think that says it all. So there are a few things now, regardless of the literal implementation of "RED III," that need to be corrected here in Germany. We've covered all of it in this podcast, and now let's see if people are actually capable of learning from it.

And we also give our two cents, especially Stefan, and me too. If anyone asks us, we have pragmatic, sensible, and cost-effective solutions. Now we'll just wait and see what comes out of the "RED III" implementation, and we are actually quite optimistic. 

Claudius Nießen: Things remain exciting here at #strohklug.

I feel like we've had something like true crime sprinkled in here and there in the last few episodes. I find it really, really interesting, especially the background to this fraud, which clearly moves you a lot. Once again, thank you very much, Mr. Sauter, and thank you very much, Mr. Schreiber, for the interview.

And now, I think we can all look forward to the end of the year with great anticipation and hope for the implementation of "RED III," and I'm sure this will continue to be a topic in the next episodes as well. Thank you very much for the conversation.

Stefan Schreiber: You're very welcome, thank you.

Claus Sauter: Thank you as well.

Claudius Nießen: And many thanks also to our listeners. Until next time, for a new episode of #strohklug.

Available on Apple Podcast, Deezer, Google Podcast, Spotify, and of course on the web at strohklug.de.