The European Commission (EC) launched its much-anticipated Union Database for Biofuels (UDB) in January, aiming to transform the traceability of supply chains for biofuels used across Europe and beyond. Any biofuels that are consumed in the EU will need to be registered in the UDB, regardless of their origin. Therefore, companies which want the option to sell their biofuels into the EU will also need to be involved, creating ripple effects of the UDB outside Europe.

Since the inception of the Renewable Energy Directive (RED) in 2010, biofuels used in the European transport sector have had to comply with mandatory sustainability criteria and achieve minimum lifecycle greenhouse gas (GHG) emissions savings, compared to their fossil equivalent. Biofuels are liquid fuels, such as biodiesel or bioethanol, made from biogenic material including crops, or wastes and residues like used cooking oil or straw.

The sustainability and GHG criteria apply to all biofuels consumed in the EU, regardless of the origin of the feedstock or fuel.

Successive amendments to the RED over time have increased the minimum GHG-saving requirements and tried to steer away from the use of crops by capping crop-based biofuels and providing double incentives for biofuels made from more sustainable wastes and residues.

The challenge of certifying global supply chains 
The main mechanism that biofuel companies use to demonstrate compliance with the sustainability and GHG criteria is the use of certification schemes (so-called ‘voluntary schemes’). Currently, there are 14 voluntary schemes recognised by the EC, covering a range of feedstocks, geographies and scopes. Between them, these schemes have developed into global enterprises that deploy teams of auditors able to independently check and verify supply chains worldwide.

The system has developed into one that is today certifying over 16mn toe of sustainable biofuels consumed in the EU. However, the global and complex nature of supply chains leads to a challenge in ensuring that the claims made in the EU are robust, even within a certified environment.

The double incentive for biofuels from waste and residue provides a large economic incentive to supply those types of biofuels to the EU. To illustrate this, the price of used cooking oil (UCO) biofuels for supply to the EU consistently trades at a higher price than their virgin vegetable oil equivalents. This incentive has resulted in significant trade flows of waste oils and waste-based biofuels into Europe from around the world.  

There have been several high-profile cases of UCO fraud, including both ‘mis-claiming’ and ‘double-claiming’. Mis-claiming fraud is where pure virgin oils (such as cheaper palm oil) are labelled as UCO or mixed with UCO to increase the volumes traded.

Many European stakeholders also see such mis-claiming as a way of circumventing restrictions on the use of palm oil in the EU. Accusations of such fraud are supported by very high rates of collected UCO in regions such as South-east Asia compared to Europe or the US. 

Double-claiming fraud is when companies sell the same sustainability information more than once, for example, to different customers across more than one country, which can be hard to detect without a broader oversight of the system.

Improving the system
There have been improvements to the system over time. In 2015, the EC introduced annual reporting by voluntary schemes to increase transparency and consistency.

In 2022, the EC published an implementing act aiming to strengthen and harmonise the voluntary scheme certification rules, including stricter rules for auditing wastes and residues, which are now incorporated into all the recognised voluntary schemes, and closer supervision of the voluntary scheme process by the member states and the EC.

Successive amendments to the Renewable Energy Directive over time have increased the minimum GHG-saving requirements and tried to steer away from the use of crops by capping crop-based biofuels and providing double incentives for biofuels made from more sustainable wastes and residues.

The vision for the UDB
The introduction of the UDB is the next and arguably most transformative step to improve the system. The RED II, the revised-upwards target for renewable energy use in the EU by 2030 which came into force in 2020, called on the EC to set up the UDB to enable tracing of liquid and gaseous transport fuels. Once fully implemented, all renewable transport fuel consumed in the EU and counting toward RED II targets will need to be entered into the database. The UDB explicitly aims to improve the traceability of biofuels, avoid double counting and address concerns about fraud.

In scope are all renewable liquid and gaseous fuels used in the transport sector, including biofuels and biomethane, renewable fuels of non-biological origin (including green hydrogen) and recycled carbon fuels.

Originally envisaged to cover the supply chain from the point of fuel production, the EC soon realised that the most significant sustainability and fraud risks are at the origin of the supply chains. Therefore, to ensure a robust system, the UDB has been set up to cover the full bioenergy supply chain scope from feedstock production, or first collection, through to the point the fuel is supplied on the EU market.

Once sustainable material has been registered in the UDB, opportunities for fraud become far more difficult as, at a system level, the inputs and outputs of sustainable material through the database will need to be balanced.

Guidehouse supported the EC in 2020 with a scoping study for the UDB, which served as the starting point for its development. Development of the UDB is being carried out in-house by the EC’s IT team, with the support of a wide range of stakeholders and companies willing to pilot the system.

How will it work? 
The UDB is intended to complement the existing certification and traceability requirements for liquid and gaseous transport fuels under the RED II. Member states will require companies to enter information on the volume and sustainability of feedstocks into the database, starting from the (first) gathering point for agricultural or forestry raw material, or collection point for wastes and residues up to the point of consumption.

For gathering or collecting points this means that companies supplying farms or points of origin will need to be entered into the UDB and all deliveries from these farms or points of origin will be documented. Similarly, all dependent warehouses and collecting points covered by group certification will need to be recorded so that material can be traced at every location where it is stored. Auditors will be required to verify that the information entered into the UDB is accurate and consistent with the audited data.

Those feedstocks in the database will then be transferred down the supply chain to the companies producing biofuels and then to the market. It will not be possible to ‘enter’ biofuel into the database without it relating to a volume of feedstock already registered in the database, thus ensuring the full traceability of the supply chain and removing the possibility of double-claiming.

A key advantage of the UDB is that it digitises the certification process, which to date has relied on so-called proofs of sustainability (PoS) as the primary mechanism by which companies trade and claim material as being sustainable. Although the UDB will not entirely replace a PoS, the requirement to book all material flows in the UDB will greatly reduce the potential for human error and opportunities for fraud.

Several options are available for companies to connect with and manage transactions in the UDB, including a direct exchange with the UDB using the built-in web interface or a third-party service provider connected to the UDB and approved by the voluntary scheme. The certification schemes; International Sustainability & Carbon Certification (ISCC); Biomass, Biofuels Sustainability voluntary scheme (2BSvs); and the Roundtable on Sustainable Biomaterials (RSB) scheme working with Bioledger, are all developing solutions for the market. Other entities are expected to follow.

Big ambitions
Developing the UDB from scratch has been a complex and technically ambitious project, and the ambition for the project continues to grow. The list of issues the UDB is already trying to solve for liquid biofuels is long. The future ‘wish list’ includes the integration of biomethane and, in the future, renewable hydrogen traded across the European gas grid; biofuels used in the aviation and maritime sectors, which officially now enter the RED III targets; as well as the expected inclusion of biomass heat and power sectors.

A key challenge currently is integration with already operational member state systems to enable a smooth rollout and ensure no additional administrative burden for companies.

Once fully operational, the UDB has the potential to transform the trust in the industry and the quality of data available to member states and EU policymakers to steer the sector in a more sustainable direction. But developing and testing the system and integrating it into already operational and rapidly growing markets will take time and proper testing. However, the end goal – to provide a single trusted overview of all the bioenergy consumed in the EU, where it comes from, and its sustainability and GHG-saving credentials – is well worth the effort.