Biofuels are in the news again. The latest chapter in the ongoing saga is about passing off palm oil as POME (palm oil mill effluent), to take advantage of generous EU incentives for waste-based biofuels. The claims about ‘fake’ POME have been analysed and largely refuted by the independent Renewable Fuels Platform in the Netherlands. But producers want to blame someone for the wider problems of the industry. They are criticising sustainability schemes, whose auditors are responsible for checking that the raw materials are what they say they are, and who have the power to withdraw sustainability certificates and recognition. But blame actually lies more with EU policy.
Europe strongly incentivises the use of waste materials as feedstocks, for road transport fuels, to save greenhouse gas emissions. Biofuels made from these materials, for example used cooking oil, can count double towards targets for renewable fuels, which means they command a high price in the market.
Over the years the EU has gone even further in pursuit of this waste-centric policy. It has clamped down on quantities of virgin oils, particularly palm oil, that can be used in fuels, in response to the food v fuel argument. To make the problem worse, the same biofuels are also being promoted for maritime and aviation sectors. So, this policy, which provides strong financial incentives for one type of biofuel and then seeks to phase out all other types, is bound to increase the risk of malpractice.
There are other factors at play, which are aggravating the problems of European biofuel producers. Firstly, unfair trade practices in China are leading to subsidised imports of biodiesel. After a protracted investigation, anti-dumping duties were eventually imposed on China, but the industry had suffered in the meantime.
Secondly there is a lot of palm oil in the world and so a lot of palm oil processing residues like POME that are compliant with the Renewable Energy Directive. These cheap wastes are in competition with expensive-to-collect European used cooking oil, which is a headache for some producers.
But change is underway. It is becoming clear that the list of raw materials qualifying for double counting, must be tightened, and Member States have the power to act. At the time the policy was launched, it was reasonable to incentivise waste-based materials because they are harder to process than virgin feedstocks. And it costs money to set up waste collection networks. But now the policy is creating market distortions and inducements for fraud, so change is needed
The pool of approved feedstocks is also being widened. Last year the European Commission reversed its opposition to certain crops, to allow biofuels made from intermediate crops and those grown on degraded land, to count against EU countries’ targets for renewable energy. This should increase supply to the aviation and road transport sectors as oil seed crops such as carinata and camelina are suitable candidates.
The sustainability schemes are not perfect, and fraud will sometimes remain undetected. But they have already responded to calls from industry for increased surveillance of high risk operators in China and Southeast Asia. The European Commission is reinforcing their efforts by introducing the Union Database (UDB) to record all waste base biofuels transactions to deter any fraudulent declaration.
The European Commission is also learning that enforcing sustainability regulations is easier said than done. The EU Deforestation Regulation (EUDR), which is designed to keep all palm, soy and other high risk commodities from recently deforested land out of Europe, relies on companies themselves to oversee their supply chain and trace back commodities to the land involved in their production. The EUDR has already been delayed due to problems with implementation and is beset with accusations of unworkability. It risks being watered down.
But the outlook for biofuels is positive. With changes to policy, some already underway and others that need to be accelerated, a better functioning market with reinforced sustainability certification is in sight. Other sectors that are embarking on their own journey towards a circular economy and encouraging the use of waste, should take care not to make similar mistakes.
Published: 2 May 25
