Europe Battles Flood of Green Fuel Suspected to Be Fraudulent

Europe’s push for more green fuel has helped build an industry in China that collects, recycles and ships waste such as used cooking oil. But a flood of biofuel is now threatening European producers and sparking fears about fraudulent exports.

(Bloomberg) — Europe’s push for more green fuel has helped build an industry in China that collects, recycles and ships waste such as used cooking oil. But a flood of biofuel is now threatening European producers and sparking fears about fraudulent exports.

Producers in the European Union are worried they’re being undercut by companies in Asia that are mixing fuels with cheaper feedstocks and mislabeling them in order to qualify for incentives outlined by the bloc’s renewable energy targets. For example, a premium waste-based product could be mixed with other ingredients that is then passed off as being more sustainable than what it actually is.

Those concerns have been underscored by a surge in Chinese biodiesel exports to the EU. They’ve been accompanied by China importing volumes of palm wastes from Indonesia and Malaysia that some in the industry say are too large, spurring worries the cargoes include other ingredients. The flows to the EU are hurting biodiesel prices and margins for local producers, forcing some to halt output.

Selling biofuels in the EU is attractive because of incentives there, with fuels made from waste products fetching higher prices than those made directly from crops, as it’s more sustainable. The problem is that it’s hard to check what’s blended into biodiesel.

With “an already refined product that’s been chemically transformed into biodiesel, it’s hardly possible to know what feedstock was used,” European Biodiesel Board Secretary-General Xavier Noyon said. “You have a massive inflow of premium products arriving on the EU market at a very low price. Probably also partly because it is not based on the real feedstock. At least that is what we strongly suspect.”

The EBB represents about 70% of the market and members include Cargill Inc., Bunge Ltd. and Neste Oyj. The group is among those concerned about the surge in imports into Europe.

The supply pressure in Europe means some biofuel plants have partially or totally halted output, and there’s even the threat of bankruptcies, according to the European Waste-Based & Advanced Biofuels Association, known as EWABA. 

“Large or small players are equally suffering,” EWABA Secretary-General Angel Alvarez Alberdi said. “Markets always have ups and downs, but this is particularly unprecedented.”

Global incentives to cut fossil-fuel usage have boosted demand for biofuels to power vehicles and planes. That’s creating opportunities and challenges across an emerging supply chain, while intensifying a debate over food versus fuel. There aren’t enough feedstocks — like vegetable oils, animal fats and waste products — to speed up output.

“When the demand is exponential in such a way, I’m afraid there will be the problem of not only can we supply, but also the incentive for all kinds of fraud in the supply chain,” Vasu R. Vasuthewan of the International Sustainability & Carbon Certification said at a conference this week.

The ISCC provides certification for materials and fuels, including what’s needed to comply with EU rules. The pandemic limited on-site testing in recent years, and with more demand for tests following the end of restrictions, audit resources are constrained, Vasuthewan said.

Flows to Europe

Scrutiny over biodiesel supplies increased as Chinese exports to the EU spiked since late 2022. Many in the industry suspect there is a link to shipments from Indonesia and Malaysia, where vessels bound for China carry large amounts of palm oil mill effluent, a wastewater from palm-oil refining. 

The bigger flows have drawn attention as the supply of such wastes would have been capped by stagnating palm-oil production growth, raising questions of whether they are being blended with something else.

China has a huge industry producing or shipping biofuels to meet EU demand. The biodiesel from China is classed as being made from waste or advanced feedstock, receives a sustainability certification and is sent to Europe.

In response to concerns over suspected mislabeling, the ISCC this month said that indications point to “a potentially dubious or fraudulent origin of these trade flows.” It’s implementing measures including unannounced integrity audits at processing units in China and Singapore and expanded auditor capacity in Asia.

The EBB also said dialog with the ISCC is happening, but the implementation of European legislation needs to be reinforced. The EWABA’s Alvarez Alberdi said that authorities need to take immediate action.

“The threat is really existential for certain companies,” the EBB’s Noyon said. 

–With assistance from Kim Chipman and Alfred Cang.

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