The German federal environment ministry (BMUV) has told Argus that it is aware of falsely certified biofuels circulating domestically and is working to address it.
This follows complaints from European biodiesel producers that biodiesel imported into the EU from China has been falsely certified as ‘advanced' — with such volumes arriving in large quantities since the fourth quarter of 2022.
The 'advanced' label means they are eligible to count twice towards Germany's greenhouse gas (GHG) reduction target for transport fuels once a baseline target has been met.
The proof of sustainability (PoS) accompanying such imports complies with the German Biofuel Sustainability Regulation (Biokraft-NachV). Biofuels are considered advanced if they are produced from raw materials listed in Annex IX Part A of the EU Renewable Energy Directive (RED II) as outlined in Annex 1 of the 38th Federal Emission Control Ordinance.
The BMUV said this year it planned to submit a draft law to ban the use of biofuels from crop and feed in a move that would increase reliance on biofuels produced from non-crop sources including advanced feedstocks.
German companies engaged in the biofuels supply chain told Argus that they now expect any draft to address the problem of falsely certified import products as well. There is also a possibility of additional duties on imports of biodiesel from China by the European Commission, they said.
This would reduce the incentive to ship goods to Europe and thus reduce the pressure on volumes. The EU has previously placed anti-dumping and subsidy duties on biodiesel imports from countries such as Indonesia and Argentina given the resulting pressures of such imports on domestic industry.
In 2023, the overall GHG savings quota is 8pc, rising to 9.25pc next year. In 2023, distributors will have to meet a sub-quota of 0.3pc of advanced fuels, and 0.4pc in 2024.
Hike in Chinese biodiesel trade
Imported volumes of biodiesel from China of 455,000t in January-February 2023 were more than double the same period last year, with the Netherlands taking 395,000t, Belgium 33,000t and Spain 16,000t.
China also imported significantly more biodiesel over January-February at 70,000t compared with a year earlier. Southeast Asia was the main source, with 52,000t from Indonesia.
One European producer suggested to Argus that palm-based biodiesel not certified for use under RED II and imported into the Chinese port of Yangpu was concerning given high volumes of advanced biodiesel exports from the same location despite a lack of production assets on the island.
The producer also showed Argus offers for 30,000t/month of biodiesel produced from soap stock (SSME) as one example of several sources of Chinese supply of advanced biodiesel it saw in the market.
The sheer volume of imports of advanced biodiesel — wrongly labelled or otherwise — is assisting in more easily meeting the domestic GHG reduction quota for transport fuels, weighing significantly on prices of other biofuels traditionally blended into the local road fuel mix.
European benchmark biodiesel prices are now trading at multi-year lows on the spot market. Prompt physical assessments for waste-based Ucome fob ARA range hit a 29-month low of $1,176/t in the second half of March, while prices of rapeseed oil-based biodiesel (RME) — which is generally produced domestically — were at lows spanning a similar time period of $1,073/t as of 12 April.
No retrospective measures expected
PoS is generated by companies certified by a European Commission-approved auditing body that would usually check annually that raw materials at the point of origin are in accordance with RED II legislation. If companies are shown to have submitted false information on sustainability and origin, the auditor would withdraw certification.
Without the certificate, those companies cannot manufacture or market products in accordance with RED II.
If a PoS is created from product originating from a certified company that later is found to have submitted false information — and subsequently has its certification removed — the existing PoS maintains its validity, meaning buyers further down the supply chain unaware of mislabelling would not face retrospective measures.
This de facto protection of trust is defined by Biokraft-NachV. But if the buyer had prior knowledge that the PoS was illegitimate, it would constitute an unjustified tax advantage and be punished as tax evasion.
