EU-US biodiesel row heats up

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Published 28 April 2008, updated 28 May 2012

Tags

biodiesel, biofuels, trade barriers, trade dispute, United States

European biodiesel manufacturers have filed an official complaint to the Commission regarding "unfair" US biodiesel subsidies, substantiating expectations that biofuels could be at the heart of the next large-scale trade spat at the WTO.

According to the European Biodiesel Board (EBB), a US Federal measure allowing for minimal biodiesel blends to be subsidised before being exported has led to a "dramatic surge" in US biodiesel exports to the EU and is "creating a severe injury" to the European industry.

The organisation explains that, under US law, producers of the so-called "B99" blend qualify for subsidies of approximately €200 per tonne. Yet the blend is made simply by mixing pure biodiesel (often cheaply imported from countries like Indonesia or Malaysia) with as little as 0.1% or less of mineral diesel.

This 99.9% biodiesel blend can then be resold in Europe as pure biodiesel, where it is again eligible for European blending subsidy schemes. According to the EBB, the process allows US biodiesel exporters to undercut EU biodiesel prices – some say by as much as 30%. And the weak dollar is doing nothing to alleviate the pressure.

The group, which represents 56 companies and associations, responsible for 80% of biofuel production in the EU, presented a legal complaint to the Commission on 25 April, calling for it "to initiate an anti-dumping and anti-subsidy investigation, with a view to imposing as soon as possible countervailing measures against US 'B99' exports to the EU".

Positions:

This intense price competition "has progressively disrupted the margins of European biofuel producers, putting most of them out of business," said the European Biodiesel Board in a statement on 25 April.

According to the EBB, the problem is not only threatening European industry, it is also undermining progress towards the Union's ambitious target of achieving a 10% share for biofuels in transport fuel by 2020.

EBB Project Manager Amandine Lacourt told EurActiv that the Commission's trade department has so far been "very, very receptive" to the concerns of Europe's biodiesel producers.

Peter Power, a spokesman for EU Trade Commissioner Peter Mandelson, confirmed that the Commission would look at any such complaint "very carefully", adding: "We will not under any circumstances tolerate unfair trade."

But American biodiesel manufacturers immediately counter-attacked, accusing European producers of being "hypocritical".

"The supposed woes facing the European biodiesel industry have nothing to do with US exports. The EBB's membership produce fuel from a more expensive feedstock than American producers and the cost of that feedstock has significantly increased," argued the US National Biodiesel Board in a statement released on 25 April.

The US group says it "plans to use every resource at its disposal to wage a vigorous defence against the EBB's baseless allegations".

What's more, the NBB will be asking the US Trade Representative to take action against "blatant" EU trade barriers, which "provide preferential treatment to European fuel producers," it said.

The main bone of contention for US producers relates to certain technical content specifications imposed in the EU, which largely favour Europe's main biofuel crop: rapeseed.

US producers are also wary of "sustainability criteria" for biofuel production, currently under preparation within the EU (EurActiv 01/04/08). At the very least, the criteria are expected to introduce a ban on biofuels planted in protected areas, forests, wetlands and grasslands, as well as an obligation for biofuels to deliver life-cycle CO2 savings of at least 35% compared to fossil fuels. They could also include social standards, such as an obligation for producers to respect International Labour Organisation accords on equal pay and child labour.

But the EU's trade partners are already sounding the alarm that such standards are unlikely to be compatible with World Trade Organisation rules and could lead to retaliatory measures.

Next steps:

25 Apr. 2008: European biodiesel producers file an official legal complaint against the US to the European Commission. The EU executive now has 45 days to decide whether to launch investigations. If, within the following nine months, a probe does conclude that subsidised US biodiesel is being dumped on EU markets at below-cost price, the bloc would be entitled to impose additional duties on imports of US products to balance the injury caused to European biofuel firms.
13 May 2008: High-level delegations from the EU and the United States will attempt to resolve the issue at the second meeting of the Transatlantic Economic Council, which aims to eliminate remaining regulatory obstacles hampering transatlantic trade and investment.

External Links

Background:

As part of Europe's strategy to reduce oil dependency and fight climate change, EU leaders committed, at the March 2007 European Council, to raising the share of biofuels in transport from current levels of around 2% to at least 10% by 2020.

The two most important liquid biofuels currently available in Europe are ethanol and biodiesel, made from agricultural crops such as corn, sugar cane and rapeseed.