CHINA WATCHIs China Engaged in Biodiesel Fraud?
European biofuel producers have come under significant price pressure as Chinese companies inundate the European second-generation biofuel market with their cheaper products. Shipping advanced biofuels from China to Europe should add about 20% to the price of the fuel, yet Chinese producers are selling it for half the price charged by European producers. The suspicion is that Chinese producers are using palm oil in the production of the fuel, even though palm oil, which will be phased out as a biofuel ingredient by 2030, is already tightly capped in Europe because it is linked to the destruction of rainforests in countries like Malaysia and Indonesia.
Biofuels are an important cornerstone of Europe’s ambitious plan to reduce harmful carbon emissions in the transportation sector. So-called advanced biofuels are especially important as they are made from nonfood biomass like used cooking oils, tallow, and other waste and residue lipids.
Demand for those second-generation biofuels is high in Europe, and a lot of it is presently coming from China, says Elmar Baumann from the German Biofuel Industry Association (VDB).
“Imports from China have approximately doubled in the first half of 2023 compared with the previous year,” Baumann told DW.
Chinese Biofuel Glut Raises Suspicion
That an increase in supply follows greater demand isn’t necessarily surprising. However, in the case of advanced biofuels the production process is complex requiring specialized facilities, explains Claus Sauter, chief executive of Verbio — one of Europe’s largest biodiesel producers.
Sauter told DW that it would usually take about three years to design and construct an advanced-biofuel plant. China’s massive shipments to Europe, however, have come virtually “out of nowhere.”
What also raised his suspicion, Sauter said, was the high product quality and its meager price. “The Chinese offer this stuff at half the price, even though shipping costs alone make up 20% of the product price. That can’t be right,” the CEO told DW.
Biofuel industry lobbyist Baumann is also skeptical. “We have strong doubts that the raw materials China supposedly collects are really ingredients of their biofuel products,” he said. Baumann speculates that cheaper palm oil is being reclassified and added.
Biofuels for Climate Targets
Under European Union climate legislation, the oil and gas industry, as well as transportation and some other sectors are forced to reduce their carbon footprint by 8% in 2023. Simultaneously, the share of advanced biofuels must reach at least 0.3% in the fuels they use or produce.
The share of conventional biofuels such as those made from rapeseed, soy or cereals is limited, however, because they are supposed to be mainly used for food. They also count only half as much compared with advanced biofuels under the EU’s industrial emission reduction targets. That is why fuel producers prefer to add advanced biofuels to their products.
Price Pressure Building Amid Unchecked Supplies
But what appears to be a profitable business for advanced-biofuel producers, with guaranteed demand from fuel companies and plenty of state subsidies, has turned on its face due to a glut of cheap supplies from China. Market prices for the new fuels have plunged 50% since the beginning of the year.
