Germany suspends UER certificates from eight Chinese projects

UBA, Germany's environment agency, has suspended eight Upstream Emission Reductions projects in China due to “irregularities,” it said Sept. 6.

UERs are an a tool German fuel suppliers use to meet emission targets through carbon offsetting further upstream in the supply chain. Among the regulatory rules are that projects need to be newly built and prove to have additional CO2-reduction benefits.

UBA said the UER certificates, which are like carbon credits, were “faulty,” and these projects did not result in the reduction of 215,000 metric tons of CO2 equivalent, as promised.

“This means that no new UER certificates will reach the market from these projects. That is good news," said UBA President Dirk Messner.

EBA said it is investigating other UER projects globally, most of which are based in China.

“For seven of the eight projects, the applications for the activation of UER certificates for 2023 were withdrawn after the UBA confronted the project sponsors with serious legal and technical inconsistencies in their projects and threatened an on-site inspection,” the statement added.

“In this way, the UBA has prevented unauthorized UER certificates totaling 159,574 tc02e from entering the market.”

In the biofuels segment, European lobby groups have expressed concern over opaque supply chains as cheap Asian imports have become increasingly prevalent both for biogenic feedstock and finished-grade biodiesel markets.

As part of an anti-dumping probe into Chinese biodiesel, the European Commission reported that import volumes of biodiesel and HVO to the EU trebled to 1.5 MMt between 2021 and its investigation period starting December 2023, while imports of Chinese used cooking oil, a key biofuel feedstock, accounted for around 40% of European supply in 2023, according to industry group Transport & Environment.

Industry stakeholders have increasingly called for stronger audit procedures to verify the green credentials of imported material, raising concerns that, among other things, palm oil is being passed off as used cooking oil.

Several European countries, including Germany and Ireland, have launched fraud investigations, while market participants have suggested a crackdown could deal a significant blow to growth ambitions for the renewables segment.

"Fraud is, or was, the only elastic part of the system," James Cogan, EU Government Affairs, Industry & Policy Director at biotechnology firm ClonBio Group told S&P Global Commodity Insights in July, after a string of high-profile bio-refining projects were paused, calling a shortage of genuine waste feedstocks an "open secret" in the market.

The German UER suspensions also coincide with growing scrutiny over carbon projects, particularly in the voluntary carbon market, as media and academic criticism over the quality of some projects has translated to low liquidity for credits and put pressure on prices.

Platts, part of S&P Global Commodity Insights, assesses a wide range of high-quality voluntary carbon credit funding projects that demonstrate additionality, permanence, exclusive claim, and co-benefits.

The value of these credits can vary from CORSIA-eligible offsets (Platts CEC, $17.05/tCO2e) to methane collection offsets ($3.35/tCO2e) and tech carbon capture offsets ($135/tCO2e), Commodity Insights data showed Sept. 5.