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By 2030, 80 percent of electricity should come from renewable energies. © IMAGO/imagebroker
A suspected fraud throws an entire industry into crisis. A company now has to go into bankruptcy proceedings – and is making serious accusations against the government.
Berlin/München – A month ago, the Farmers’ Association publicly criticized the Ministry of the Environment for its inaction in the face of the alleged biodiesel fraud, which caused German farmers “a multi-digit million amount” in damage. Despite the fraud cases known since January 2023, the Green-led Ministry of the Environment saw no need for action, according to the allegation. Now a company from the affected industry has insolvency in self-administration and cites these alleged frauds as the cause of its financial difficulties.
Landwärme GmbH is insolvent: price drop for biodiesel and co. as the cause
Landwärme GmbH and its parent company LW Capital GmbH initiated restructuring proceedings under self-administration on Tuesday (August 13), according to a company statement. The salaries of the 140 employees at the Berlin and Munich locations are secured by the Federal Employment Agency. Landwärme cites “the ongoing price decline in greenhouse gas reduction quotas since the beginning of 2023” that the company markets as the cause of the financial problems.
Greenhouse gas reduction quotas (GHG quotas) must be paid by oil companies to offset the CO₂ emissions emitted by their products. This is intended to encourage the switch to renewable transport. Biofuels and fuels based on green hydrogen (e-fuels) are also counted towards the GHG quota. Oil companies can therefore commission companies to meet the quota for them by placing biofuels on the market. But they can also invest in charging points to achieve the GHG quota.
Landwärme is one of these biofuel producers and mainly trades in biomethane. The company also advises and supports farmers with biogas plants who want to sell their gas. Since the beginning of 2023, they and other affected parties have observed a sharp drop in prices for GHG quotas. This is due, among other things, to the massive influx of allegedly mislabeled “biodiesel” from Asia.
Biodiesel fraud plunges companies into crisis: Politicians apparently remained inactive
Landwärme writes in its statement: “The drop in the price of GHG quotas was caused by incorrectly declared biodiesel and numerous other suspected cases of fraud in ‘Upstream Emission Reduction Projects’ (UER projects).” This caused the industry an estimated loss of 4.5 billion euros.
The allegations of fraud had been known for at least a year and were reported to the responsible Ministry of the Environment. As early as summer 2023, the newspaper The time about how “huge quantities of palm oil” were delivered from Indonesia and Malaysia to the Chinese island of Hainan and simply re-declared there. They were then transported by ship to Europe and were suddenly considered climate-friendly biodiesel. Companies in South Asia are clearing huge areas of forest for palm oil production.
“The fraud with the UER certificates was made possible not least because the responsible authorities (Federal Environment Agency, German Emissions Trading Authority) under the supervision of the Federal Ministry for the Environment did not investigate, pursue or sanction the fraud cases for months even after they became public knowledge,” says Landwärme. The alleged fraud with biodiesel is only one example of the incidents that are now causing the company problems. A few weeks ago, the ZDF Frontal. The Federal Environment Agency has commissioned a law firm to examine the cases.
Billions of taxpayers’ money wasted? China exports massive amounts of biodiesel
The figures show how strong China benefited from EU subsidies. According to the industry service Quantum Commodity Intelligence, around 12,000 tons of biodiesel were delivered from China to Europe in the first half of 2022. In 2023 there was a massive increase: in January of that year it was suddenly 260,000 tons. Between January and April 2023, a total of more than 830,000 tons came to Europe from China. This corresponds to an increase of 83 percent compared to the same period last year. Since then, biodiesel prices have fallen sharply.
Claus Sauter, managing director of another biofuel producer, Verbio AG, criticizes the policy in a statement from June 2024. “At the end of the day, the German taxpayer has been cheated out of billions with these fake projects. The oil companies have allowed it to be credited to them as a fulfillment option. Who is the victim in this whole thing? The consumer, because he thought he was doing something for climate protection.” He describes it as a “major scandal” that politicians are not taking responsibility for the waste of “billions for nothing.”
Ministry of the Environment rejects allegations: Fraud is being investigated “very closely”
The Ministry of the Environment rejects the allegations at the request of IPPEN.MEDIA A spokesman for the ministry explains that the ministry is monitoring the suspected cases of fraud “very closely”. This phenomenon is not just a German problem, but affects the entire EU internal market. “In this respect, a solution at EU level should be sought,” said the spokesman. However, there is still no confirmation of the suspected cases specifically with regard to the falsely declared biodiesel from Chinese production.
The spokesman also denies that the authorities are inactive. “The responsible Federal Office for Agriculture and Food (BLE) informed the Federal Ministries for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection (BMUV) and for Food and Agriculture (BMEL) immediately after the allegations of fraud became known, whereupon the BLE was instructed to involve the national law enforcement authorities (Bonn Public Prosecutor’s Office) and to inform the EU Commission comprehensively about the matter.”
The greatest leverage “for any legal consequences” lies with the EU Commission within the EU internal market. The Commission has announced an anti-dumping procedure, which the BMUV supports. “In order to prevent ‘fake’ biofuels from being placed on the market, the system of sustainability certificates must be reviewed and, if necessary, improved.”
Renewable energy company is insolvent: Could have been “avoided”
This reaction came too late for Landwärme. The company now has to go through insolvency proceedings and wants to “bring a financially strong partner on board” in order to become stable again. Anna Katharina Wilke has been appointed as restructuring manager, and Lucas F. Flöther is the general representative. Both lawyers come from the Flöther & Wissing law firm.
After the proceedings began, Landwärme Managing Director Zoltan Elek emphasised: “Landwärme will use the self-administration procedure to quickly position itself for the future. We will then return to profitability and the strong growth of previous financial years.” He added: “It is important to me to emphasise that this procedure could have been avoided if politicians and authorities had Fraud cases in biodiesel and UER projects pursued and combated more consistently.”
