The potential for large scale fraud in Europe’s renewable fuels sector arises from the Renewable Energy Directive being designed in such a way as to give a market value to certain waste-based biofuels feedstocks – such as used cooking oil – of up to double the value of the least cost virgin vegetable oil alternatives – such as palm oil. This creates profit opportunity for unscrupulous operators. At the same time the Directive does not impose requirements to physically check or inspect supply chains for authenticity and traceability. Thirdly, there is no EU body charged with detecting or investigating irregular trends or practices. Fraud is, literally, unchecked.

With demand for used cooking oil (UCO) rising 45% annually in the EU, its consumption in the biofuels sector has grown 1000% in the six years to 2020, to reach over 4 million tonnes. World UCO capacity is limited and requires significant investment in collection infrastructure to increase supply, whereas palm oil is cheap, abundant and can be readily procured in ever larger quantities. Palm oil imports disguised as UCO are not checked whilst the fraud is highly profitable.

The problem is well known, and it’s getting worse. Palm oil disguised as UCO can easily originate in recently deforested areas, causing a negative environmental and climatic impact. Imported deforestation is a hot political issue in the EU, and the European Parliament has taken the European Commission to act to tackle the problem. No loopholes should be left open, such as the current unchecked UCO imports.

In 2018 the EU Renewable Energy Directive RED2 was signed into law and it mandated that a “Union database be put in place to ensure transparency and traceability of renewable fuels”.

This measure was included in order to address the large scale fraud risk that exists under the Directive, as described by the European Court of Auditors in its 2016 Special Report on the matter.

The objective of the Union database is to improve transparency over the supply chains, which involve 27 member states, 14 certification schemes and several thousand collectors, traders, processors and buyers across 170 countries. The database should allow stakeholders detect suspicious trends and imbalances. For instance it would allow stakeholders check for coherence between the amounts of UCO biodiesel placed on the EU market and the amounts of UCO feedstock collected at source. Any suspicious swelling of volumes along the supply chain could be detected and investigated. Similarly, it would allow regulators examine whether the amounts declared as originating from a given country were plausible, in relation to that country’s ability to generate, certify and export such volumes. This is especially important, for instance, in cases where a country has limited UCO collection capacity, easy access to palm oil and no national regulation preventing the substitution of UCO with palm oil.

However the database has not been implemented as of April 2021, and there are few indications of real progress being made. In fact, over two years since the legislation was passed, it has not yet been designed and there are no visible indications of material progress being made.

The current work at the European Commission to build the database does not impress by the amount and expertise of the resources engaged in the project. There is no evidence of a governance structure being in place for the project, to oversee progress, manage risk and report on it to the legislators and stakeholders who mandated it, and who depend on it for the correct functioning of the legislation.

Farm Europe calls on the European Commission, in particular on DG ENER, to give this project a higher commitment and priority. Fraud should never be allowed to go unchecked, and the reputation of the Commission is at stake.

For those who are not familiar with the Taxonomy Regulation, it aims at “launching an ambitious and comprehensive strategy for sustainable finance with the aim of redirecting capital flows to help generate sustainable and inclusive growth”.

A draft Delegated Act “establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation or climate change adaptation and for determining whether that economic activity causes no significant harm to any of the other environmental objectives” was now leaked, shedding light on the intentions of the Commission services.

On biogas and biofuels the draft Delegated Act sets out the relevant criteria. They should normally be in line with the existing criteria for sustainability spelled out in the Renewable Energy Directive (RED II).

But although there is a dutiful link to the RED II, the following sentence is added up in the Annex I –point 4.13: “Food-and feed crops are not used for the manufacture of biofuels for use in transport.”

On which grounds do the Commission services go beyond what is actual EU law on the sustainability of biofuels? On which grounds do they depart from the sustainability criteria spelled out in RED II?

What are the facts that underpin excluding sustainable crops? The Commission herself has recently acknowledged that EU crop based biofuels are sustainable. No impact on food and feed prices, no environmental downside.

On the contrary, those biofuels that would now be excluded are by far and large the main contributor to decarbonizing the transport sector. On top of promoting employment in rural areas, sustaining farmers’ incomes and improving the availability of high quality protein for animal feed.

How do the Commission services want to reach the new ambitious targets of decarbonisation of the transport sector, within the EU Green Deal, if they wish to cut those sustainable biofuels from the benefits of sustainable finance?

The sentence is thus tantamount to “shooting ones feet”. It shatters the potential of sustainable biofuels to decarbonize transport. It should be erased.