Prices of used cooking oil (UCO), which once traded at a premium to other biofuel feedstocks because of its low carbon intensity score, have flipped to a discount to distillers corn oil (DCO) and bleached fancy tallow (BFT) because of tighter traceability requirements and higher imports.
UCO prices at the US Gulf coast were last assessed by Argus at 64.25¢/lb, while DCO prices closed at 74.25¢/lb and BFT prices closed at 67.5¢/lb in the region. UCO prices at most times in 2022 were priced at a premium to DCO and BFT, mainly because its lower carbon intensity (CI) score generates more Low Carbon Fuel Standard (LCFS) credits in California.
But since February 2023, UCO has been consistently priced at a discount to DCO, the highest-priced feedstock derived from waste fats and oils, known as second-generation feedstocks.
Liquidity in the UCO market has waneddue to Environmental Protection Agency's (EPA) additional recordkeeping requirements asking biofuel producers to possess records that show the origin point of UCO used for biofuel production. Producers are subject to a recordkeeping requirement to verify that all feedstocks are a renewable biomass, but UCO has an additional obligation.
Biofuel producers typically receive UCO that is collected from hundreds or thousands of restaurants.Feedstock traceability platform Veriflux's co-founder Dani Charles said tracking "the sheer volume of data" behind UCO collection is a challenge for producers.
Veriflux is an EPA-funded technology platform that tracks the origin point of renewable feedstocks to its final destination.
Imports of international UCO, which is cheaper than domestic UCO, have also increased since early 2023, erodingdemand for domestic supplies.
The EPA came out with UCO traceability requirements in 2020, but it was not until mid-2022 that producers and suppliers started keenly looking for solutions. The stringent requirements were put in place because the government wants to make sure the low carbon biofuel production it incentivizes is not compromised by fraudulent feedstocks. The Covid-19 pandemic and the US biofuels trade associationClean Fuels Alliance America's (CFAA) objection to the traceability requirements added to delays in the response from aggregators and biofuel producers.
Most biofuel producers buy feedstocks from aggregators that collect UCO from food businesses and hospitality businesses, and aggregators will not disclose their sourcing lists to customers because they view such information as a trade secret, CFAA told EPA.
EPA in June, as part of a final Renewable Fuel Standard (RFS) rule that sets annual biofuel blending requirements, adopted a compromise, allowing the use of independent auditors and third-party tracking platforms to verify UCO origination data from the suppliers on behalf of the biofuel producers.
"Clean Fuels worked with EPA to achieve flexibility in federal reporting requirements," CFAA spokesman Paul Winters said, "EPA heard many of our concerns and made several significant changes in the final rules."
The optionality for a producer to leverage a third-party platform removes some of the friction around sharing confidential business information (CBI), Charles said. Veriflux encrypts the CBI, so that it is only visible to the company that contributed it as well as to the EPA and auditors.
The company successfully launched a pilot program in New York City in 2022, in collaboration with Waste Management and the New York City Department of Environmental Protection (NYCDEP), to trace solid and liquid food waste to Waste Management's recycling plant in Brooklyn and later to NYCDEP's Newtown Creek Wastewater Resource Recovery Facility in Brooklyn.
EPA also implemented an alternative approach that would allow feedstock aggregators to maintain UCO collection data if there are CBI concerns. Under the alternative, renewable fuel producers are required to engage in a Quality Assurance Plan (QAP) and utilize a QAP provider to verify the authenticity of records held by the feedstock aggregator.
Since the release of final RFS volume mandates, Veriflux has received more inquiries about its platform, Charles said. "Technology isn't just a solution, it's really the only solution, and any other attempt to do this by paper or just by spreadsheets really isn't feasible at scale."
LCFS programs are expanding in the US and Canada. Washington LCFS program came into effect in January 2023, and the Canadian Clean Fuel Standard (CFR) is in effect from this month. Minnesota and New Mexico lawmakers are studying the prospects of a LCFS program. UCO-based biofuels benefit under these programs because of UCO's lowest CI score, so the biofuels industry is keen on working towards traceability solutions while scrutiny tightens in the US and worldwide.
The International Sustainability and Carbon Certification (ISCC)recently conducted unannounced audits in China and Singapore after concerns were raised about Chinese biodiesel being wrongly labeled as advanced biofuel. Suspected usage of palm oil in Chinese biodiesel was another concern as [exports from Indonesia and Malaysia had increased to China]( https://www.argusmedia.com/en/news/2441612). Three ISCC certificates were suspended as result of the audit.
The European Waste-based & Advanced Biofuels Association (Ewaba) recently wrote a letter to the ISCC, demanding immediate implementation of strengthened sustainability-tracing requirements.
