Germany triggers EU investigation into Chinese biofuels

© Reuters. FILE PHOTO: European flags fly outside the European Commission headquarters in Brussels, Belgium March 13, 2023. REUTERS/Yves Herman/File Photo

By Noah Browning and Philip Blenkinsop

LONDON (Reuters) - Germany has asked the European Commission to investigate the flow of allegedly fraudulent biofuels into the European Union, a spokesperson for the German Environment Ministry said, stepping up scrutiny on trade in the fuel that has rattled the industry.

EU incentives for biodiesel production made with waste oils and fat to increase renewable energy use have caused concerns that companies in Asia are mixing biofuels with cheaper oils and exporting them to Europe.

Germany "has asked the Commission to carry out an assessment to determine whether the sustainability criteria and requirements for greenhouse gas reductions ... are met for fuels originating in China," the spokesperson for the German Environment Ministry told Reuters.

A Commission spokesperson said in an email to Reuters that an unnamed member state had referred imports from China that had potentially been mislabelled as biofuels.

The spokesperson said the Commission aimed to step up its oversight of the trade, with a database of supply chains due to be up and running by the end of the year, and it will look into whether the fuel imports qualify for greenhouse gas emissions credits.

EU classifications qualify the most advanced biofuels for valuable greenhouse gas (GHG) emissions certificates that are bought and traded by industry players at the national level.

Germany, the EU's top energy consumer and biofuel importer, is the most valuable market in the bloc for the certificates.

"The Commission has to examine whether the sustainability and greenhouse gas emission savings criteria are met," the EU spokesperson said, adding that the allegations are being investigated.

The top European biofuels body warned last week that a flood of potentially "dubious" biodiesel imports into Europe from China could trigger the collapse of the EU's biofuels industry.

European producers and traders, who had flagged their concerns over the lack of oversight over Chinese imports, were cautiously optimistic on the decision.

"It's clear that the (German) government is moving - everyone is very expectant," a senior industry source said, who declined to be named due to the sensitivity of the matter.