As global trade of biofuels heats up, European biodiesel producers this week charged that they have uncovered an “unfair” loophole for biodiesel sourced from Brazil and Malaysia to enter the EU: shipment via the U.S. where the biofuel qualifies for a hefty U.S. subsidy.
On Monday, the European Biodiesel Board (EBB) – which represents 80% of the region’s producers – sent a letter to the European Commissioner for Trade alleging that unfair trade practices are dominating the first international exchanges of biodiesel.
“More specifically EBB is very concerned with unfair competition from highly subsidised biodiesel exports from the U.S. entering the EU market as ‘B99’ blends.” The US trade practice in fact is clearly breaching WTO rules and represents a serious threat to the fair trade of biofuels.”
Since 2004, U.S. biodiesel producers have been eligible for a subsidy of $1 per gallon for biodiesel blended with diesel fuel.
Third countries such as Brazil and Malaysia are shipping biodiesel to U.S. harbors to be blended with 1% diesel, and then shipping it out afterwards to the EU, said EBB.
“In this frame the EU biodiesel industry urges the European Commission to take any action necessary to counter and then eliminate unfair “B99″ subsidized exports from the U.S.,” said the letter. “This should include urgent measures such as a countervailing duty to balance the injury caused to European biodiesel firms.”
Such subsidized B99 imports have not only disrupted the margins of many EU biodiesel producers due to “dumping” on the region’s markets, but have also put several producers out of business, said EBB.
In addition to these charges, EBB also singled out Argentina’s export tax system as unfairly benefitting the South American country’s biodiesel export industry.
Argentina only imposes a 5% tax for biodiesel exports, but a 27.5% export tax for soybeans and a 24% tax on soymeal and soyoil, a tax system which incentivizes local producers to use vegetable oils for biodiesel, said EBB.
While Argentina is not yet a big biodiesel producer, several biodiesel plants are already under construction and will be in operation soon, said the association.
The EU last year produced around 4.5 million tons of biodiesel, or 70% of the world’s biodiesel output, followed by No. 2 producer U.S. which manufactured about 1 million tons of biodiesel.
However, other countries including Brazil, Argentina, Malaysia and Indonesia are rapidly ramping up their biodiesel output.
“It’s a good idea,” said Miguel Biegai, a biodiesel analyst at agribusiness consultancy Safras & Mercado. “Export to a U.S. harbor, add a drop of diesel, get a $1 per gallon in subsidies, and then ship the blend off to Europe.”
If the practice takes off, then Brazil could potentially ship 500 million liters of biodiesel, or more, to the EU this year, he added.
The EU currently charges an ad valorum tariff of 6.5% on biodiesel imports. In January this year, B99 biodiesel imports to the EU in January 2007 totaled roughly 30,000 tons, according to EBB data.
If B99 biodiesel imports continue to accelerate, then the EU could import over half a million tons of B99 fuel by the end of 2007, said EBB.
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