Germany's Cabinet has approved draft legislation aimed at further reducing greenhouse gas emissions from transport fuels, Environment Minister Carsten Schneider said on Wednesday.

The bill updates the Greenhouse Gas Reduction Quota, or GHG, and is intended to implement EU requirements. Germany is falling short of its climate targets in the transport sector.

Under the Federal Immission Control Act, fuel suppliers are required to reduce the carbon emissions of their fuels by a specified percentage under the GHG quota.

Companies can meet the requirement by blending in sustainable biofuels, using "green" hydrogen in refineries, or by supplying electricity for electric vehicles.

"The future of mobility is electric," said Schneider. "But we also want to make progress for the large existing fleet."

Hydrogen is a key processing input at oil refineries. The legislation would require companies to use green hydrogen produced from wind and solar power, with the aim of creating guaranteed demand to support the expansion of hydrogen infrastructure.

Conventional biofuels made from food and feed crops would remain capped to avoid negative impacts on global food supplies or rainforests, Schneider said.

At the same time, the use of advanced biofuels made from waste materials – such as straw, manure or algae biomass – would be made more attractive, with quotas for these fuels set to rise gradually.

To give companies planning certainty for investments, the government plans to extend the national GHG quota framework through 2040, with the reduction target gradually increasing to 59%. The quota currently stands at 10.6%.