FocusFake oils fuel European biodiesel traceability concerns

15 August 2012 16:37  [Source: ICIS news]

By Kate Wilcock and Sarah Trinder

LONDON (ICIS)--Used cooking oil methyl ester (UCOME) has experienced a surge of popularity in the European biodiesel market this summer but its rise has come at a cost for other biodiesel grades and there is increasing suspicion of fraud.

The EU's renewable energy directive (RED) is encouraging the use of UCOME by awarding double counting credits for its use in achieving renewable energy targets, as it is produced from waste.

However, issues have been raised by market participants about UCOME and the certification that the product is made with used cooking oil (UCO) rather than virgin vegetable oil (VVO).

Some sources suggest UCOME supplies in Europe outstrip the amount of the UCO feedstock.

“I am sure fraud is going on, with fake used cooking oil feedstock that is actually virgin vegetable oils,” one source said.

Another source agreed the problem with UCOME was people trying to fool the system, selling VVO as UCO and profiting from the higher prices.

“As a result I’m not confident in trading the stuff (UCOME),” the source said.

Adding to the uncertainty is a lack of regulations to ensure UCOME is traceable, which raises questions about its double-counting properties.

A European Biodiesel Board (EBB) spokesperson said the board was aware of the certification issues and were looking to develop a code of practice for UCOME with the European Commission.

“The EBB is very concerned about the traceability of UCOME and is in favour of stricter requirements to prevent fraud,” the spokesperson said.

The growing popularity of UCOME has not only raised concerns about its authenticity, but pressured the margins of rapeseed methyl ester (RME) or single feedstock biodiesel producers.

Sources said this ongoing pressure will likely see further plant closures on top of the mothballing of the Biopetrol Industries plant in Pernis, the Netherlands, earlier this year.

The switch to multi-feedstock plants is market driven, with RME production expected to be lower this winter as many countries have bought UCOME and enjoyed the favourable price and double counting ratio over RME RED.

Despite winter traditionally being the busiest trading time for RME due to its cold filter plugging point (CFPP) it is likely buyers will purchase RME on a hand-to-mouth basis and continue to buy UCOME when the prices are favourable.

Further questions have been raised by market participants about UCOME feedstocks, with debate as to what constitutes ‘waste’ and some saying that if a residue has a value, it cannot be waste.

“I am not in favour of double-counting material for first generation products,” one source said.

“This ‘waste feedstock’ product is now readily accepted in the market place when blended with other fatty acid methyl ester products to produce a finished biodiesel.

“The price of this material is artificially high, with it trading above virgin vegetable oils, when clearly the feedstock should be much lower,” the source said.

Despite the murky outlook, BioEnergy International is currently building a multi-feedstock plant in Le Havre, France, designed to process animal fats and UCO, rather than rapeseed.

White the overriding pressure from governing bodies has been to convert to UCOME production to prevent crop based biodiesel competing with food crops, the current situation may not be the move the European Commission planned for.

Furthermore, the lack of traceability for UCOME could ultimately mean it is not as environmentally friendly as first thought.

Until strict UCOME regulations are introduced, the European biodiesel market will be left open to fraud, while RME production and market liquidity decreases as a result.

($1 = €0.81)

By: Sarah Trinder
+44 20 8652 3214

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