10 December 2015

European Commission investigates possible manipulation of ethanol benchmarks in the biofuels sector

The European Commission (the Commission) has opened an investigation into whether three ethanol producers manipulated the ethanol benchmarks published by Platts, a price reporting agency that provides benchmark price assessments. The prices published by Platts are used as benchmarks for trade in the energy, petrochemicals, metals and agriculture markets in Europe and elsewhere.

Abengoa S.A., Alcogroup SA and Lantmännen ek för and their relevant subsidiaries are now under investigation. These companies produce, distribute and trade ethanol (an alcohol made from biomass derived from crops such as wheat) that is commonly mixed with gasoline and used as a biofuel to power motor vehicles.

The Commission is examining whether these companies acted in breach of Article 101 of the Treaty on the Functioning of the European Union, which prohibits anti-competitive agreements and concerted practices, by colluding to manipulate ethanol benchmarks. Specifically, the Commission will look into whether these companies agreed to submit or support bids disclosed to Platts, with the aim of driving benchmarks upwards and increasing the price of ethanol. Such behaviour would be harmful to competition and could be detrimental to the Commission’s objectives of maintaining competitive renewable energy markets, boosting renewable energy usage and limiting greenhouse gas emissions.

It is worth noting that the benchmarking sector is already being reviewed by the Commission: in 2013, a Regulation was proposed to “improve the functioning and governance of benchmarks and to ensure that benchmarks produced and used in the EU are robust, reliable, fit for purpose and that they are not subject to manipulation.” This Regulation is currently at the final stages of approval before the European Council and the European Parliament.

Experts within the biofuels sector will undoubtedly keep a close eye on how the Commission’s investigation develops, especially given the indication from Commissioner Margrethe Vestager that the proper functioning of biofuels markets is “an important element of the Commission’s ambitious strategy to limit greenhouse gas emissions and to boost renewable energies.”

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