Fuel fraud – the risk with biofuels

Decarbonising transport is a complex task due to the hefty costs associated with moving to renewable alternatives like electric or gas vehicles.

As such, biofuels, which can typically be used in existing vehicles, have long been part of the solution and are expected to play an even greater role over the coming decades.

In June, Minister Eamon Ryan announced new measures to increase the amount of biofuel in Irish petrol and diesel from 17% today to 25% at the beginning of 2025, equating to around 400m litres of biofuel.

However, concerns have been raised about the lack of action to prevent large-scale fraud in the sector. Known cases of fraud includes palm oil labelled as “used cooking oil” used in biodiesel production.

As biodiesel carries a premium, fraud of this nature is nothing new, with multiple scams involving fake biofuels being uncovered in Europe in recent years.

Risk of fraud

Soy and palm oil were once widely-used feedstocks of biodiesel, but this practice is now mostly frowned upon, as it can encourage deforestation.

Over the last decade, we’ve seen a huge rise in the use of used cooking oil (UCO) as an alternative feedstock to make biodiesel. Materials like chip fat and other waste oils have become key ingredients for biodiesel, kickstarting an industry across Europe for gathering and processing these materials.

However, in recent years, biodiesel derived from UCO has come under increased scrutiny. Environmental campaigners argue that palm oil is fraudulently making its way into European biodiesel.

Concerns have emerged that a proportion of UCO, in particular UCO imported from Asia, may actually be palm oil or a palm oil blend.

In 2019, approximately 1.5m tonnes of the 2.8m tonnes of UCO refined in the EU were imported from Asia. Indonesia is the world’s largest producer of palm oil followed by Malaysia. China is also a key UCO exporter.

In 2020, approximately 62% of Irish UCO was sourced from Asia, 27% from Europe, 8% from North and South America, and the reminder (2%) from the Middle East, Africa and Oceania. Our single largest source was China (39%).

In their recent report, the National Oil Reserves Agency reported that there is evidence to show that there is an increased risk of fraud in the UCO supply chain, and that it is difficult to argue that the UCO market is fraud-risk free.

EU response

In 2018, in response to these concerns, the EU renewable energy directive, REDII, imposed a cap of 1.7% on the quantity of UCO biofuel that a member state could use in its transport sector. This cap was intended to curtail the extent of fraud, a cap which Ireland subsequently breached.

The new REDIII, which is in the final stages of EU approval, places anti-fraud responsibility fully in the hands of national governments, from when the directive is transposed into national law.

Speaking to the Irish Farmers Journal, James Cogan, Industry & Policy Analyst at Ethanol Europe said that UCO biofuel is an extremely low carbon form of renewable energy but when palm oil is the raw material, the climate effect is worse than fossil diesel, due to deforestation and loss of biodiversity.

“At some stage, Ireland will have to acknowledge the damage it is doing by turning a blind eye to palm oil fraud, and seek verifiably sustainable biofuels from Ireland and the EU,” he said.

Minister Ryan himself expressed concerns about UCO fraud in the Renewable Transport Fuel Policy consultation, highlighting significant fraud through the Biofuels Obligation Scheme in Ireland, UK, and the Netherlands.

He also discussed this in a 2019 Oireachtas Committee hearing, pointing out that “widespread fraud seems to have been uncovered in the registration of palm oil as used cooking oil”.

As an example, he pointed out that Taiwan’s UCO exports strangely surpassed its total cooking oil volume.

Biofuel fraud is a live issue in Europe. Recently, the International Sustainability and Carbon Certification (ISCC), which certifies biofuels voluntarily, received alerts about potential fraud involving unusually high trade volumes of biodiesel from waste and residues originating from China since February this year.

This influx of half a million tonnes of biodiesel from China caused a sharp drop in European biodiesel prices, with the import surge starting from late 2022 and peaking in January and February 2023.

In response to these concerns, the ISCC initiated audits of Asian companies in April. As a result, seven firms had their certificates withdrawn or temporarily suspended.

This suspension means they are not allowed to trade their products in the EU market during the period of suspension. However, no conclusive evidence of criminal behavior was found during these audits.

The sudden increase in imports triggered investigations by the European Commission and the German Federal Office for Agriculture and Food, which the ISCC is providing information for in order to support cases against specific biofuel companies.

Recently, a new form of biodiesel, known as hydrotreated vegetable oil (HVO), which is primarily made from UCO, has been gaining popularity in Ireland.

HVO is a drop-in fuel, meaning it can easily replace diesel directly or be used in a blend to meet mandatory blending rates, without any changes to vehicles.

HVO is claimed to reduce CO2 emissions by 90%. Many haulage and logistics companies, as well as Irish rail, data centres and generators are transitioning towards HVO.

In June, the Irish Farmers Journal attended the launch of UK-based Green Biofuels Ltd. new €30m terminal in the Port of Cork, Ringaskiddy, which will be used for importing their Gd+ HVO product into Ireland at scale.

We put the concerns around UCO fraud to Green Biofuels Ltd, who stated: “We are committed to upholding the highest standards in sustainability. We care about our planet and so do our partners.

“For this reason, we only source used cooking oil from fully verified, traceable sources and do not support the use of virgin crops or palm oil to produce Gd+ HVO.”