The European Commission is investigating the flow of allegedly fraudulent biofuels into the EU following a complaint from Germany, sources told Reuters, as a Commission spokesman said the bloc was determined to tighten oversight of the trade.

The spokesperson said in an email to Reuters that an unnamed member state had referred imports from China that have potentially been mislabelled as more profitable biofuels. Industry sources named the country as Germany.

EU incentives for biodiesel production made with waste oils and fat to increase renewable energy use has caused concerns that companies in Asia are mixing biofuels with cheaper oils and exporting them to Europe.

The commission aims to step up its oversight of the trade, with a database of supply chains due to be up and running by the end of the year, the spokesperson said, and will look into whether the fuel imports qualify for greenhouse gas emissions credits.

Germany's Environment Ministry, the body industry sources said had requested the investigation, did not immediately respond to a Reuters request for comment.

Germany is the bloc's top energy consumer and biofuel importer.

EU classifications qualify the most advanced for valuable greenhouse gas (GHG) emissions certificates that are bought and traded by industry players at the national level. Germany is the most valuable market in the bloc for the certificates.

"The Commission has to examine whether the sustainability and greenhouse gas emission savings criteria are met," the EU spokesperson said in the email, adding that the allegations are being investigated.

The top European biofuels body warned last week that a flood of potentially "dubious" biodiesel imports into Europe from China could trigger the collapse of the European Union's biofuels industry.

European producers and traders, who had flagged their concerns over the lack of oversight over Chinese imports, were cautiously optimistic on the decision.

"It's clear that the (German) government is moving - everyone is very expectant," a senior industry source said, who declined to be named due to the sensitivity of the matter.

(Reporting by Noah Browning, Editing by Louise Heavens)

Source: Reuters