2024 Margins Down 40% from 2022 as Advanced Biofuel Tickets Stay Low
ResourceWise: Sep 13, '24
The US government is investigating the integrity of various biodiesel producers' practices as concerns grow over potentially fraudulent ingredients used to create these fuels.
According to a Reuters report, the issue stems from the feedstocks supplying biodiesel production. The US Environmental Protection Agency (EPA) is actively investigating after growing calls and concerns by farming associations and lawmakers.
The primary feedstock in question is used cooking oil, or UCO. The EPA’s audits will scrutinize the origins of the UCO to verify its authenticity.
High Volume of Chinese UCO in US Market Under Scrutiny
The concerns around suspicious UCO were triggered by a massive influx of the material from China and other overseas sources. The exceptionally high volume of the feedstock jeopardizes the US market by pushing out domestic producers of raw feedstocks such as soy and corn oil.
The EPA has been closely monitoring the matter for over two years to ensure adherence to the federal guidelines. At least two investigations are nearing their conclusion, and many more are expected to start soon.
An EPA spokesperson has characterized these assessments as a routine part of ensuring compliance with US biofuel regulations.
According to EPA statements, inspections have been conducted among various renewable fuel producers. This includes an analysis of the UCO sources used in the creation of renewable fuel.
Doubt Remains on Feedstock Legitimacy with Risk of Palm Oil
Although the EPA says their investigations are nothing more than “business as usual,” the risk of feedstock fraud remains high. The worry is that UCO sourced from Asia may not be authentic and fresh vegetable oils like palm could have been mixed in.
This sort of mixing creates a big problem in renewables. First and foremost, fresh oil mixed in with UCO defeats the broader purpose of reusing oil altogether. What good is a UCO market if it’s using fresh, unused oil?
Secondly, mixing fresh oil into UCO and claiming it as 100% distorts the value of the commodity. It also violates US biofuel laws. To benefit from tax subsidies and other incentives, businesses must use authentic, renewable feedstocks.
Finally, and perhaps most alarmingly, palm is one of the alleged fresh oil sources being sold as UCO.
The use of palm oil is a contentious issue from both an environmental and labor standpoint. The palm oil industry is often associated with labor exploitation and is known to be a significant contributor to deforestation, particularly in regions like Indonesia. Its potential use in producing biofuels not only skews the market dynamics but also undermines attempts at preserving the environment and reducing greenhouse gas emissions.
Chinese Biodiesel Problems Extend to EU
Issues with Chinese biodiesel and related feedstocks are not limited to US production.
The EU recently ruled to place anti-dumping duties on Chinese biodiesel imports after alleged market manipulation. Similar to the US feedstock situation, an immense influx in Chinese biodiesel to Europe disrupted the domestic market. The ruling will impose significant tariffs to curb these negative market effects.
Related: EU Tariffs on Chinese Biodiesel and the Effects on the International Biofuels Market
Dumping and market manipulation may not have been the full story in this situation, either. Many member countries, notably Germany and France, called on the EU to improve inspection and assessment on Chinese biofuels.
Like the US feedstocks, the countries claimed that China was mixing cheap, environmentally-damaging feedstocks like palm oil into biodiesel and touting it as eco-conscious, UCO-based material. This would allow China to export massive amounts of both biofuels and feedstocks at a lower expense while taking advantage of various incentives along the way.
Biodiesel Market Will Require Continued Regulatory Vigilance
Rulings such as the EU’s anti-dumping legislation and the US EPA’s investigation aim to put a stop to this sort of market fraud. Ensuring transparency and regulation adherence in the biofuel industry is paramount to its ongoing growth and success.
Responding to and preventing fraud are the only ways to achieve the greener future that biofuels aim to achieve. Stopping market manipulation also helps to protect the interests of domestic producers. Work like this is critical in moving us all toward a more sustainable world ahead.
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