- April 5, 2023
- Posted by: Tom Hedge
With the world facing ongoing environmental threats, the need to police counterfeit green fuels has become a matter of urgency. Counterfeit green fuels are those that have been falsely labelled as eco-friendly, when in fact they are not. These bogus fuels are produced with little regard for the environment, producing more CO2 emissions than their fossil fuel counterparts.
Their unchecked proliferation can have disastrous consequences for the climate which is why governments and organisations around the world are now actively policing the production and sale of these fuels. Doing so will help ensure that only truly green fuels are put into circulation, helping to protect the environment from further damage.
The Environmental Effects of Counterfeit Green Fuels
Biofuels made using palm oil have been touted as green for many years. However, 45% of global palm oil expansion has caused deforestation in order to make room for plantations, releasing large quantities of CO2 in the process.
Approximately 50% of Europe’s supply of palm oil is from Indonesia where around one third of their forests have been lost, releasing more than one million tonnes of CO2. Other major exporters include Malaysia and Thailand.
The Drying Out of Peatlands
The drying out of peatlands is another consequence of palm oil production. These areas hold around 30% of global soil carbon. Their acidic conditions prevent microbes from decomposing plant litter and therefore, the mosses grow and trap CO2. When peatlands dry out, their composition may become more favourable for microbes; as a result, they will become sources of carbon instead of carbon sinks.
Palm oil has proven to cause more CO2 emissions than fossil fuels when used in vehicle engines. Much like the argument for electric vehicles, there is no point in taking measures that do more harm than they resolve.
True renewables have tremendous potential but, unfortunately, the widespread use of fake green fuels can greatly reduce their adoption. Identifying and managing counterfeit green fuels appropriately is one of the keys to reaping the benefits of renewable energy sources. (Check out our Renewable Fuel ETRM and other commodity trading solutions to streamline your operations.)
How Are Fake Green Fuels Being Policed?
Fortunately, efforts to police counterfeit green fuels have seen significant progress over the past few years, with an increasing number of countries working to effectively police their production and sale.
No More Fake Green Vehicle Fuel
In 2018, the EU removed palm oil from its list of renewables but it was not until 2023 that the ban was due to come into effect, with palm oil use in vehicle fuels being phased out by 2030.
Tax Incentives Withdrawn in France
In 2019, the Netherlands confirmed the continued exclusion of biofuels made from palm and soybean oil.
In the same year, France stated it would withdraw tax incentives for fuel made with palm oil. This sparked debates between the government and Total, who had invested in palm oil production facilities within France. Regardless, it sent the message that unsustainable palm oil production would not be supported.
Indonesia filed a lawsuit at the World Trade Organisation stating the ban was unfair and, along with Malaysia and Thailand, threatened the EU with retaliation if a ban were to be introduced (one such threat was that Indonesia would block imports of milk power from the EU. Malaysia also filed complaints against the EU, as well as France and Lithuania due to the proposed ban.
Eventually, the EU introduced a regulation stipulating that importers would have to prove that the palm oil was not linked to deforestation. While this may sound like progress, it has not turned out that way.
Mixing Certified and Uncertified Palm Oil
One challenge that has been difficult in the battle against counterfeit green fuels is the fact that producers have been able to claim that their fuel is produced on certified land, when that is not truly the case.
Some plants in Indonesia, for example, consist of both certified land (land that was in use for palm oil production before 2008), and land that was converted after 2008 and caused deforestation.
The oil produced in each area is not separated, making the final product a combination of the two when it is exported. Therefore, companies such as Total and ENI had been able to continue their unsustainable exports, although things have changed over the last couple of years.
While phasing out palm oil over the next seven years is not ideal due to the potential ongoing environmental damage, other measures are being introduced. In 2020, ENI was sanctioned and fined five million euros due to misleading advertising as the supposed green imports were proven to be from uncertified land.
After the sanctions, ENI had to stop claiming its diesel to be green. This trend is going to continue, with companies making false claims facing hefty fines.
This will help raise awareness among the public about the false claims being purported by fuel companies and this is vital; 50% of European biofuel imports are used in biodiesel, yet only 40% of the claims that they are sustainable are correct.
A new EU directive is due to ban palm oil imports for use as biodiesel. In addition, member states will be giving penalties to companies making false environmental claims. This will help consumers make informed decisions.
Policing Counterfeit Green Fuels in Other Regions
Palm oil imports to the US steadily increased between 2004 and 2021, but imports from Malaysian producers FGV and Sime Darby Plantation Berhad have now been banned due to forced child labour and various other human rights abuses.
Whilst Australia’s palm oil imports are of a much smaller volume than that of Europe, some major Australian businesses have committed to source sustainable palm oil in future. This will help raise awareness globally and educate consumers on the situation.
Policing Unsustainable Soy Oil
Soy is another major source of deforestation, its demand causing deforestation to reach a 15-year high in 2021, with Brazil being particularly hard hit. 40% of US biofuel production relies upon soy; however, the majority is produced within the US itself.
Europe’s increasing use of soy oil for biofuel has been concerning. It is the fourth largest consumer of soy oil worldwide after Brazil, the US, and Argentina. Whilst import volumes are far less than that of palm oil, the European Parliament has proposed a ban on its use in biofuels.
The energy market for biofuels is going to change in the coming years due to government and NGO policing of counterfeit green fuels, with palm oil in European vehicle fuel to be phased out by 2030.
China and India are the largest importers of palm oil worldwide and due to the relaxing of COVID-19 restrictions, exports of this commodity are forecast to rise, bringing prices down by 23% this year.
While the planned domestic production of sustainable palm oil in China is in development, it is more important than ever for governments and organisations worldwide to continue in their attempts to ban unsustainable sources of this commodity and other counterfeit renewables, instead focusing on existing renewables and the development of new sources such as hydrogen.
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