Transport and Environment (T&E) has issued a briefing into the growing concerns surrounding the use of Palm Oil Mill Effluents (POME) in EU biofuels, highlighting potential fraud and discrepancies in reported volumes amidst the shift towards waste-based alternatives.
EU biofuel policies shift towards waste-based alternatives
According to T&E, over the past decade, the EU’s biofuel policies, initially promoting palm oil-based fuels, have shifted toward using waste materials like used cooking oil, animal fats, and palm residues, such as Palm Oil Mill Effluents (POME). While these changes aim to reduce deforestation linked to biofuel production, concerns have arisen about the legitimacy of some biofuel imports. A recent report by T&E reveals troubling trends in the use of POME in EU biofuels, suggesting that the reported quantities exceed what is feasible, raising suspicions of fraud.
Impact of the EU’s phase-out of palm oil biofuels
The EU’s shift from palm oil-based to waste-derived biofuels was influenced by the 2018 decision to phase out conventional palm oil biofuels, resulting in an 80% reduction by the end of 2023. Waste materials like POME have become increasingly important, making up 40% of compliant biofuels in 2023. However, the growing demand for POME has led to a significant surge in its consumption, especially in the form of Hydrotreated Vegetable Oil (HVO) for low-emission diesel alternatives. As of 2023, POME accounted for a large share of HVO production, with major oil companies like Eni, Shell, and Total using it extensively. This rapid increase in POME use, particularly in countries like Spain, Italy, Germany, and the UK, has prompted concerns about the authenticity of reported volumes, suggesting the possibility of fraud in the biofuels supply chain.
Concerns over fraudulent reporting and market discrepancies
The reported consumption of POME in the EU far exceeds global production estimates, pointing to a mismatch that raises suspicions of fraudulent reporting. Estimates suggest that actual POME oil production in Malaysia and Indonesia is lower than reported figures, with competition for biogas production and limited collection capacity likely contributing to discrepancies. This situation is compounded by increasing POME prices, which could prompt a reclassification of the material as a by-product rather than a waste residue. Despite efforts to address fraud, including stricter auditing rules since 2022, reports from certification schemes like ISCC highlight persistent inconsistencies in the volumes of certified POME biofuels, further emphasizing the need for enhanced oversight and stricter enforcement in the EU biofuel market.
Recommendations
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Palm oil mill effluent (POME) residues should be prioritised for local decarbonisation efforts in producing countries, especially with emerging uses such as biogas production.
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POME should be removed from the Annex IX list of double-counted advanced biofuels in the EU Renewable Energy Directive, considering that several EU member states have recommended limiting the amount of POME-based biofuels that can be counted towards the Directive targets.
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A complete review of the certification system is needed, shifting from industry-led voluntary schemes to more stringent EU and national regulations. National governments should establish supervision procedures, such as cooperation frameworks with third countries.
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A dedicated EU-level fraud investigation unit that can be triggered by industry whistleblower alerts, suspicious transactions, or suspected market distortions should be established.
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These recommendations should be complemented with support for cleaner alternatives, with direct electrification preferred for road transport and hydrogen-based fuels for sectors harder to electrify, such as aviation and shipping.
