INTERVIEW: Biofuel sector unprepared for launch of EU traceability platform: BioLedger

The deadline for implementing the EU's biofuels traceability platform, the Union Database for Biofuels, is rapidly approaching on Nov. 21, yet many biofuel supply chains are not adequately prepared, according to the head of BioLedger, a service provider aiding companies in compliance with audit schemes.

Speaking during a recent interview with S&P Global Commodity Insights, BioLedger CEO Patrick Lynch highlighted a lack of motivation as a key issue behind the lack of registration in the platform, adding that concerns are mounting about how this might impact supply dynamics within the market.

The UDB is designed as a global mass balance system to enable the European Commission to swiftly and effectively respond to fraud.

"There will potentially be reduced volume in the market as the main aim is to prevent fraudulent supplies from entering the European market," said Lynch.

One market source in the used cooking oil sector said: "We may see a price surge due to the UDB being implemented."

Another source said that if companies were struggling to meet the criteria, "that might take UCO out of action or create a different market place," although he added that so far he hasn't seen the UDB as having a particular impact on pricing.

Platts, part of Commodity Insights, assessed FOB Amsterdam-Rotterdam-Antwerp UCO at $1,150/mt on Nov. 14, up $50 in the week and close to a nine-month high.

Registration for the database might also be challenging for overseas suppliers as not all languages are represented in the system and firewalls in China can block access to international websites like the UDB, according to BioLedger, which is the first provider nominated by voluntary schemes to be approved and connected to UDB by the EC.

"Large economic operators in Europe, Brazil and the US are trained, agricultural companies are considering how they will automate their transactions, but most smaller companies and collectors have not had training and don't know how to comply," Lynch said.

Waste-based biodiesel and renewable diesel economic operators globally are likely to have a strong understanding of digital traceability and are possibly better prepared for the UDB as traceability risk and fraud have been common concerns in EU and US supply chains, he added.

Lack of motivation

Most of the supply chain is not ready to comply with the UDB as "there's immature preparedness" for the November deadline because motivation had been removed throughout 2024, said Lynch.

Market players lack motivation to record transactions in the UDB because their suppliers haven't been onboarded, auditors aren't checking, customers haven't raised concerns and EU member states haven't legislated UDB registration into national law, he added.

Registering data in the UDB won't be a significant shift for companies as they're already capturing the same information in spreadsheets to comply with their Voluntary Scheme audits, he said.

"I think some people are expecting the UDB to be delayed because it's simply not ready. For many people, it's been impossible to put in place," one of the market sources said.

"The way it's been implemented is very messy and not very well thought through, I think we'll get there eventually," another source said.

Timeline

The Renewable Energy Directive requires a fully operational UDB to be implemented by Nov. 21, a deadline for the European Commission and not economic operators. An amendment to the RED in 2022 extended the scope of the UDB to include gas supply chains.

Operators certified under voluntary schemes, such as the ISCC, needed to be UDB compliant and record transactions as of January 2024.

"The European Commission approved the RED Voluntary Schemes, under the new condition that from 1st January 2024, they require their auditors to verify that all company transactions are recorded correctly in the UDB," said Lynch.

In addition to requiring the EC to build an operational UDB, RED mandates that the EC enforces compliance on voluntary schemes. Regulation 996 obligates voluntary schemes, auditors and EU member states to enforce compliance on all companies across the supply chain.

"The EC did not specify a date for implementation, but the implementing regulation 2022/996 defines it as 'when the UDB becomes operational'," Lynch said. "The definition of 'fully operational' comes down to the EC," Lynch added.

The commission said Jan. 15 that the UDB for liquid value chains was fully operational.

Uncertainties

All of the voluntary schemes were expected to begin verifying UDB compliance as part of certification audits starting Jan. 15. However, just before this deadline, the ISCC and industry associations raised concerns, stating that the UDB needed to be more stable to serve as a basis for compliance audits.

"There was generally an absence of readiness at the start of 2024. So, 2024 was communicated as a 'transitional year' without a clear definition of what that means," said Lynch. The new deadline was then seen as Nov. 21, 2024, across the liquid value chain, and the EC allowed economic operators to use this as the extended deadline, Lynch said.