Biofuel fraud: What it means for EU RED III, US RFS, and global sustainability claims

Introduction

The growing wave of biofuel fraud is creating waves in the industry. With increasing concerns about their trustworthiness, certifications like the International Sustainability & Carbon Certification (ISCC) are under scrutiny. As these cases are being investigated, the credibility of sustainability certifications is being called into question. 

For businesses navigating complex regulations like EU RED III, US RFS, and CORSIA, these certifications are essential for staying compliant and maintaining trust with investors, consumers, and regulators.

With all this uncertainty, companies are left wondering: How can we ensure our operations are safe from fraud or accidental greenwashing? And how can we maintain transparency in our supply chains without compromising confidential information? 

The stakes are high, but the path forward is clear. With the right traceability tools that support accurate mass balance accounting, businesses can take control and protect themselves from the risks lurking in these murky waters. It is not only the biofuel industry that depends on a secure and reliable certification process – many other industries that are also trying to move towards sustainability need this as well. Dependable ways to prove sustainability claims and regain public trust are more important than ever.

This article reveals the scale of fraud in biofuel certifications, unpacks its impact on the industry and regulations, and outlines how businesses can stay compliant and build trust through stronger traceability measures.

Understanding the biofuel certification fraud: What’s behind the scandal?

In 2023, 3.7 billion litres of renewable fuel were supplied, with 92.4% certified by ISCC. Most (71.4%) came from outside the EU and UK, where ISCC lacks oversight or government recognition. Around 40% came from used cooking oil (UCO) and palm oil mill effluent (POME) from high-risk supply chains. ISCC data from March 2025 shows certification volumes far exceeding physical production.¹ 

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This wave of fraud has finally been uncovered in the EU and UK, putting the entire sector’s credibility at risk. At a time when the industry is striving to meet ambitious climate targets, fake documents and misleading claims about the sourcing and sustainability of biofuels pose significant obstacles.

Outside the EU and UK, there is currently no legal framework in place to oversee ISCC certification bodies, meaning no official institution is tasked with monitoring the performance or integrity of the ISCC scheme or its local certifiers.

With certification schemes like ISCC and REDCert 3 intended to maintain oversight, the increasing complexity of these systems has led some to wonder if they can still be trusted. 

What does this mean for the biofuel industry?

On 26 March 2025, the EU Committee on Sustainability of Biofuels met to address this issue. While voluntary certification schemes, such as ISCC, were mentioned, the primary focus was on reinforcing the overall certification framework. Contrary to rumours circulated on social media, ISCC is not facing suspension. ISCC has been working closely with the EC on an action plan to enhance certification measures beyond current EC requirements, and continues to support the development of the Union Database (UDB) as a key tool for improving compliance. As the EC prepares to amend Implementing Regulation 2022/996, ISCC is contributing practical feedback to help strengthen the EU’s sustainability system.²

The European Biodiesel Board (EBB) has also released a comprehensive proposal to strengthen verification rules for sustainable biofuels, calling for stricter, immediate measures to level the playing field between domestic and non-EU producers, such as mandatory on-site audits abroad and enhanced transparency through the Union Database for Biofuels.³ 

The proposal includes provisions for Member States to authorise and track biofuel production volumes and feedstocks, and advocates for tougher sanctions, including retroactive withdrawal of certificates for non-compliance. The European Commission is now reevaluating the current rules, following mounting pressure from EU Member States, industry stakeholders, and NGOs to take firm action and ensure that only genuinely sustainable biofuels contribute towards Renewable Energy Directive (RED) targets.

The UK’s Renewable Transport Fuel Obligation (RTFO) has also been facing increased scrutiny as authorities investigate biofuel imports that may not have met all the necessary sustainability criteria.⁴ The UK government is investigating fraud in the growing HVO diesel market, which claims to cut emissions by up to 90%.⁴

So what does this mean for the industry?

• Loss of trust in sustainability claims: The reputation of biofuel producers who have relied on certifications to prove their sustainability claims is at stake. If certification systems lose credibility, these companies could also find themselves under scrutiny. 
• Stricter and costlier certification processes: With fraud cases making headlines, the certification process is likely to become more rigorous and expensive. Increased scrutiny from regulatory authorities could result in more frequent audits, expanded reporting requirements, and more costly compliance measures as the scope expands to other regions.

• Rising biofuel costs: As certification becomes increasingly difficult to obtain, expect biofuel prices to rise. This could have a ripple effect throughout the supply chain, resulting in higher costs for both consumers and businesses. And in an already volatile market, that’s the last thing anyone needs.

With so much at stake, it is clear that biofuel companies will need to reassess their approach to certification and compliance moving forward. Rebuilding trust in the system won’t be an overnight job. It’s going to take some time, but the good news is that steps are being taken to get things back on course. The question is, how can companies maintain their green credentials without falling victim to fraudulent practices? And, more importantly, how can they ensure their sustainability claims withstand scrutiny in an ever-changing regulatory landscape?

How biofuel fraud impacts EU RED III, US RFS, and CORSIA

To fully grasp the ripple effects of biofuel certification fraud, it is necessary to step back and consider the broader context, particularly the regulations that drive biofuel production and sustainability efforts.

EU RED III

The EU’s Renewable Energy Directive (RED III) is a significant piece of legislation that promotes the increased use of renewable energy sources, including biofuels. It sets binding targets for renewable energy consumption, and fraudulent certifications can undermine compliance with these goals. For businesses, this means the risk of incurring hefty penalties and reputational damage if their biofuels are involved in fraudulent schemes.⁵

EUDR

While primarily aimed at preventing deforestation linked to commodities such as soy, palm oil, and wood, the EU Deforestation Regulation (EUDR) also plays a critical role in combating fraud in the biofuels sector. By requiring companies to trace the origin of raw materials and prove they were not sourced from recently deforested land, EUDR adds a much-needed layer of accountability to biofuel supply chains. This is especially relevant for products such as used cooking oil (UCO) and palm oil mill effluent (POME), where fraudulent relabelling and false sustainability claims have eroded trust. With stricter traceability and geolocation requirements, EUDR can help close loopholes that have allowed unsupervised regions to flood the European market with unsustainable or fraudulent biofuels.

US RFS 

The Renewable Fuel Standard (RFS) in the United States requires a certain percentage of transportation fuels, including biofuels, to be derived from renewable sources. If biofuels aren’t appropriately certified – or worse, are found to be fraudulent – businesses face not only penalties but also the potential for legal action. Add a tarnished brand image to that mix, and it’s clear why maintaining trust in certification systems is essential.⁶

UK RTFO

The UK’s Renewable Transport Fuel Obligation (RTFO) mandates that fuel suppliers blend a certain proportion of renewable fuels into their transport fuel mix. To count toward RTFO targets, fuels must be verified through recognised sustainability certifications. However, the system has faced challenges from fraudulent claims, particularly around imported waste-based biofuels. As scrutiny intensifies, companies must ensure that they have robust documentation and verification systems in place to remain compliant and avoid enforcement action.⁷ 

CORSIA

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is a global initiative designed to mitigate aviation emissions. Biofuels are seen as a crucial part of aviation’s sustainability plans. If fraud in biofuel certification continues to shake the industry, it could hinder airlines’ ability to meet their carbon-neutral growth targets, affecting not just the biofuel sector but the aviation industry as a whole.⁸

How traceability boosts compliance and transparency for biofuels

In light of growing concerns about biofuel fraud, companies must take proactive steps to safeguard their operations and establish a stronger, more transparent supply chain. The key to navigating these challenges lies in providing verifiable proof of sustainability claims.

The good news is that digital solutions can help. By embracing technology, businesses can enhance traceability, reduce the risk of fraud, and ensure they stay ahead of regulatory changes. With solutions like Circularise’s traceability platform built on the blockchain, companies can create transparent, immutable records of their biofuels’ journey, from sourcing to mass-balanced quantities, and production through to certification. This level of traceability not only helps with compliance, but it also allows companies to confidently assure their customers and investors that their sustainability claims are credible.

What are the next steps?

To safeguard against the growing threat of fraudulent certifications, businesses must be proactive in reinforcing their compliance strategies. Here are some key steps companies can take to ensure their biofuels are certified authentically and remain on the right side of regulations:

Invest in digital traceability solutions

Leveraging digital traceability tools, such as Circularise’s traceability platform, is one of the most effective ways to combat fraud. These platforms allow businesses to track every step of the biofuel supply chain, from production to final delivery, ensuring that sustainability claims are transparent and verifiable. This not only helps companies stay compliant with regulations like EU RED III, US RFS, and CORSIA, but it also makes it much harder for fraudulent activities to slip through the cracks.

Conduct regular audits

While technology can significantly enhance traceability, third-party audits continue to play a crucial role in verifying sustainability claims. Regular audits from trusted, independent organisations can provide that extra layer of assurance, helping companies catch any discrepancies in biofuel sourcing or certification before they become a larger issue.

Stay informed on certification changes

As the biofuel certification landscape evolves, it is crucial to stay ahead of any regulatory changes. Keeping an eye on updates related to certification schemes will help businesses anticipate new compliance requirements. Subscribe to industry newsletters and join relevant industry groups to keep your company informed.

By embracing these best practices, businesses can minimise their risk of greenwashing and fraudulent certifications. Not only does this help safeguard your reputation and ensure you're meeting regulatory requirements, but it also sends a clear message to customers and stakeholders that you're committed to sustainability and transparency.⁹

At Circularise, we provide digital traceability solutions that enable businesses to navigate the complexities of biofuel certification with greater efficiency and transparency. By providing secure, verifiable sustainability claims, we ensure that your biofuel operations remain compliant, transparent, and protected from fraud.