EUROPEAN BIODIESEL PRODUCERS RAISE CONCERNS OVER TRADE DISTORTIONS

European biofuel producers have complained about unfair competition from imports. In a letter to European Trade Commissioner Peter Mandelson on 19 March, the European Biodiesel Board (EBB) noted that subsidised US imports have been flooding the European market. According to the EBB, "The US trade practice in fact is clearly breaching WTO rules and represents a serious threat to the fair trade of biofuels" at a time when a global biodiesel market is in its early stages of development.

Loophole encourages triangular trade

Under US policies to support biofuels, not only homegrown, but also imported biofuels that are blended in the US with as little as one percent mineral oil, enjoy a subsidy benefit of one US$ per gallon. This B99 biofuel blend can then be re-exported. When the B99 arrives in Europe, it again benefits from a tax brake on environmental grounds, and out-competes European-produced biodiesel. In practice, a triangular trade has developed, claims the EBB, with US biodiesel refiners importing biodiesel from Brazil, Indonesia or Malaysia, blending in small amounts of mineral diesel to benefit from the subsidy, and immediately re-exporting to Europe.

This complaint comes as key biofuel producing and consuming countries have launched an initiative to help develop a global market for biofuels (see Bridges Trade BioRes, 16 March 2007, http://www.ictsd.org/biores/07-03-16/story1.htm). In its letter to Commissioner Mandelson, the EBB noted that the bases for international biodiesel trade are currently being set, and said trade should be 'fair' (most countries provide some subsidies to support their biodiesel production). The EBB said that US exports are distorting the emerging global market, making it difficult for developing countries to launch their own exports in this area.

To remedy the situation in the EU, the EBB is asking the European Commission to put in place countervailing measures to cancel out the unfair competitive advantage the US exporters currently are enjoying. The US National Biodiesel Board agreed that the loophole that allows the import and re-export of biofuels should be closed.

Biodiesel growth slowing?

Amidst a general biofuels hype and against the backdrop of the recent adoption of a new European climate and energy policy that includes support for biofuels -- specifically a 10 percent blending target for vehicle fuels (see Bridges Trade BioRes, 16 March 2007, http://www.ictsd.org/biores/07-03-16/inbrief.htm#2) -- European biodiesel producers say they are facing a tough market. In Germany, the government, which levies a hefty tax on petrol and diesel, has started to tax biodiesel as well. Meanwhile, high oil prices have begun to come down. Many biodiesel plants are producing below their capacity, and new projects have been put on ice.

"We have been promised a market but it is not yet there," said Raffaello Garofalo, secretary general of the European Biofuels Board. "If there is no legislative support on taxation or binding targets, there is no real market for biodiesel," he added. Thomas Vahle of BioWerk Kleisthohe,

Global biodiesel production grew by 80 percent in 2006, reaching 5.4 million tonnes, and is projected to grow by 46 percent in 2007. Biodiesel is produced from agricultural oil crops, such as rapeseed or soy. Germany is the largest EU producer.

Additional information

Letter from the EBB to Mandelson http://www.ebb-eu.org/EBBpressreleases/let%20to%20CM%20Mandelson%20unfair%20B99%20and%20DETs.pdf

ICTSD reporting; "EU biodiesel firms blame politicians as demand falls," REUTERS, 22 March 2007; " World Biodiesel Output Growth May Slow - Licht," REUTERS, 29 March 2007; "EU Biodiesel Lobby Launches Attack Against US Subsidies," DOW JONES, 22 March 2007; "US Biodiesel Assoc Supports EU Call To End Export Loophole," 28 March 2007.