Europe Must End Double Counting to Achieve True Transport Decarbonization

After reviewing the latest market developments and Q1 company results — particularly the deeply concerning earnings from Neste — it is clear that the renewable fuel sector is undergoing a major structural shift. Neste reported a 70% year-on-year collapse in renewable EBITDA for Q1 2025, down to just EUR 72 million, despite a modest recovery from Q4’s near-break-even. Their average renewable margin was only USD 310/ton, still well below the 2024 average of 377, and far off the USD 562/ton achieved in Q1 last year. Neste openly cited global overcapacity, stubbornly high feedstock costs, and the expiration of the U.S. Blender’s Tax Credit (BTC) as key margin pressures — further worsened by regulatory uncertainty around the new U.S. Clean Fuel Production Credit (45Z).

Today’s market tone reflects this evolving dynamic. Soybean oil, which had stubbornly resisted the reality of oversupply, is finally softening — but not collapsing. The BOGO spread dropped a full standard deviation to around +459, signaling that the market is waking up to the overhang, though soybean oil remains relatively resilient. In the biodiesel space, FAME0 and UCOME premiums over gasoil firmed, and although U.S. D4 RINs softened to 1.14 USD/RIN, biodiesel crush margins improved — now less negative — primarily due to easing feedstock costs.But market fluctuations are merely the surface. The real dysfunction lies in Europe’s regulatory framework.

Under RED II and RED III, double counting of waste-based fuels (like UCO, tallow) allows member states to inflate compliance without increasing physical renewable fuel blending. This creates the illusion of decarbonization — while fossil diesel remains dominant. As a result, real greenhouse gas reductions in transport barely reach 2% per year, despite growing "renewable shares" on paper. Contrast this with California’s LCFS, where no double counting is allowed. Every credit must be earned by real physical blending of low-CI fuels. This system has consistently driven 7–8% annual GHG reductions in California’s transport sector.

Here’s a visual comparison:

Ending double counting in Europe would: – Force true renewable molecule substitution – Stabilize collapsing producer margins like Neste’s – Align climate results with stated ambitions – Support investor confidence in SAF, HVO, and advanced FAME. The warning signs are here: Neste’s financial pain, soybean oil’s long-delayed price shift, and quietly widening biodiesel spreads. If policymakers do not act, Europe’s renewable fuel system will remain a house of cards — structurally out of sync with its climate goals.

For readers wanting deeper context, I recommend the latest German-language monitoring report from DBFZ:

https://www.dbfz.de/en/press-media-library/press/press-releases/dbfz-publishes-comprehensive-monitoring-of-renewable-energies-in-transport