A recent report by German media has exposed that a significant number of so-called environmental projects in China, endorsed by reputable German testing institutions, do not actually exist. Despite this, German consumers are obligated to pay for these projects, automatically making payments when refueling at gas stations or purchasing heating oil. The Director of the Federal Environment Agency in Germany has confirmed these allegations.
German companies engaged in climate protection projects in China have been involved in widespread fraudulent activities. According to information from the German Parliament’s news office, Dirk Messner, the Director of the Federal Environment Agency (UBA), confirmed these accusations during a session of the Federal Parliament’s Environmental Committee on June 12th. These allegations specifically involve the so-called Upstream Emissions Reduction (UER) projects.
Since 2020, German companies have been permitted to operate climate protection projects in China to meet their legal climate goals. Most of the projects certified by the Federal Environment Agency are aimed at reducing greenhouse gas emissions in oil production. In return, companies receive certificates that offset their carbon dioxide emissions. Unverified reports suggest that fraud in these projects could lead to losses of up to €4.5 billion, becoming Germany’s largest and potentially most severe fraud case.
As revealed by German television channel ZDF, eco-projects abroad funded by Germany to reduce CO2 emissions may be deceptive, and the testing and certification by German accreditation bodies are falsified. For instance, a climate protection project in the Xinjiang Uyghur Autonomous Region of China, purportedly sponsored by Germany, was found to be nothing more than an abandoned chicken coop, yet Germans are required to pay around €80 million in climate taxes for it.
The German Capital’s Bioenergy Office estimates that over 60 similar incidents have occurred in China, indicating potential energy transition losses in the German transport sector exceeding €4.5 billion. After months of deliberation, the Federal Environment Agency contacted the prosecutor’s office and foreign ministry in May to request administrative assistance from Chinese authorities.
Anja Weisgerber, the spokesperson for the Federal Parliament’s Climate Policy, criticized the inaccurate certification and hasty actions by German authorities. She stated, “The erroneous certification by German authorities not only leads to significant financial losses but also undermines trust in foreign climate protection projects.”
The media emphasizes that the fraudulent core of climate protection demands on oil companies is striking. These companies are obligated to annually reduce greenhouse gas emissions from gasoline and diesel. The government imposes reduction quotas. Merely blending 5% or 10% of biofuels into E5 and E10 fuel types is no longer sufficient; further measures are required to meet these demands.
One option for multinational oil companies is to provide funding for CO2 reduction measures in foreign oil and gas production. For instance, they can capture associated gas produced in oil production processes. Through Upstream Emission Reduction (UER), they can accomplish one-fifth of their greenhouse gas quotas.
Oil companies can also purchase certificates from project sponsors, proving new climate protection investments in refineries or production systems. These costs are passed on to fuel prices at gas stations.
Most drivers are unaware that, in addition to paying carbon dioxide taxes under the Fuel Emissions Trading Act (BEHG) when refueling, they also incur compliance costs for greenhouse gas quotas, including payments for fraudulent projects.
Currently, 75 UER projects have received approval from the Federal Environment Agency (UBA) and the German Emissions Trading Authority (DEHST), nearly all located in China, despite China’s oil production accounting for only 5% globally.
However, this has not raised suspicions from German regulatory authorities. Following cooperation with Chinese investigative agencies, the Bioenergy Company believes that 62 out of the 75 cases involve strong suspicions of fraud. The data’s status in the other 12 cases remains unclear. Sandra Rostek, the Director of the Bioenergy Office, stated, “Among the 75 projects included in Germany’s greenhouse gas quota, we found only one project without suspicion.”
In the future, Germany will have to import substantial amounts of “green” fuels, including hydrogen and electric fuels. It is crucial to inspect products’ climate-neutral manufacturing processes in the exporting countries. This not only affects fuels but also depends on credible certifications for imported goods.
However, independent control seems unfeasible, as Chinese authorities do not permit foreign officials to conduct inspections in their country. Just last year, a scandal involving wrongly labeled biodiesel imported from China made headlines. This new UER fraud case is the second in two years.
Efforts to safeguard European industries from the significant influx of cheap and so-called “green” imports from China are jeopardized by counterfeit certificates, posing a threat to government and EU Commission climate strategies. Detlef Evers from the Small Businesses Waste Fuel Association stated, “Trust in control systems has been greatly diminished. Without confidence in fair competition, investments won’t be made, and then you can forget about the entire energy transition.”
Christian Hirte, a member of the Federal Parliament’s Climate Law Task Force, believes that the Federal Environment Agency and Ministry of Environment have utterly failed. He stated, “UBA Chairman Messner and Minister Lermke have either tacitly accepted these conditions or lacked their own initiative.” If it is proven that “Chairman Messner and Minister Lermke cannot provide complete information, they will have to question their suitability for carrying out this mission.”