The German malting industry is threatened by the new Fuel Emissions Trading Act (BEHG) which came into force on January 1st, 2021.In order to achieve the climate protection goals, the law provides for pricing of fossil fuels according to their CO2 content through a national certificate trade, unless these have already been taken into account by the EU-wide certificate trade.
The German Maltsters Association (DMB) informed now that the new levy will lead to higher costs of malt which threatens the competitiveness of the German malting industry. Based on an average heat requirement of 650 kWh/t, the malt will be burdened by an additional charge of EUR 3.28 per ton for the production and another EUR 0.52 per ton for the transportation of barley and malt for the year 2021. The regulations stipulate that these costs will be increased annually in order to create a further incentive to avoid CO2 emissions.
Thus, the total burden of one ton of malt will be gradually increased from a total of EUR 3.80 for production and transport to EUR 8.32 in 2025.In addition, there are further indirect increases, since the upstream value chain in agriculture is also burdened by increased costs for fertilizer and the operation of agricultural machinery and warehouses.
These additional costs have to be passed on to the customers, specifically the breweries and finally the beer drinkers.
However, this only works where the malt houses are not in competition with companies from other countries which do not have these additional levies. Since the European and also the German malting industry is very export-oriented, this leads to a distortion of competition and thus to a global competitive disadvantage.
Keeping in mind that the profit margin of a malt house is usually only a few euros per ton, it becomes clear that the new levy is threatening the existence of many malt houses.
The German malting industry has been facing tough international competition for decades and has therefore largely exhausted all energy-saving options for years. Michael Lerch, the managing director of the German Maltsters Association therefore does not believe that the steering effect of the levy will generate serious CO2 savings effects fort the affected companies. Rather, he fears that the additional costs, which cannot be passed on to the customers, will force many companies to cease operations.
Since many companies abroad tend to have a poorer energy balance, the new Co2 levy can even have a negative effect, namely that even more Co2 will be produced per ton of malt by relocating production and the need for more transportation.
This effect which does not only affect malting plants, but also many energy-intensive industries, is known as so-called "carbon leakage". To avoid carbon leakage and to maintain cross-border competition the German federal government has therefore decided to introduce a legal regulation to minimize this effect.
It has therefore presented a “bill on measures to avoid carbon leakage through the national fuel emissions trading system” (BECV), which has to be approved by both, the German Bundestag and the European Commission. It is expected that this law will come into effect by the end of June 2021 at the latest.
According to the previous draft, the burden on companies can be relieved if they can be assigned to one of the 61 (sub) sectors that have been eligible for subsidy or to a sector that has been subsequently recognized. Partial compensation will be granted retrospectively for the 2021 accounting year. The benchmark approach from EU emissions trading is used to calculate the amount of aid.
In order to receive the aid, eligible companies must provide evidence in return from accounting year 2023 at the latest
- that they have introduced an energy management system (or alternative efforts, including membership in a registered energy efficiency and climate protection network, for companies with a total energy consumption of fossil fuels of less than 10 GWh) and
- that they have invested in measures to improve their energy efficiency or to free their production processes from carbon (decarbonisation).
A hearing on this law in the Committee for the Environment, Nature Conservation and Nuclear Safety of the German Bundestag took place on Monday. Final changes to the bill are expected after the hearing.
It has to be seen what the final effects of the BEHG will be and how the BECV can at least partly offset those measures.