The massive export of subsidised US biodiesel is becoming an increasing source of concern to the EU biodiesel industry. In a statement released yesterday (16th October) the European Biodiesel Board (EBB) urged the European Commission to take the necessary actions to counter and then eliminate unfair “B99” subsidised exports, a trade practice that is, it says, clearly breaching WTO rules and threatening the concept of international trade in biodiesel.

In most EU countries biodiesel producers are experiencing dumping competition from B99 blends, says the EBB. This competition is price-setting and is progressively disrupting the margins of European biodiesel producers, putting out of business most EU producers. As a result the important biodiesel industrial capacity risks remaining largely unemployed and production may start stagnating if not declining already as from this year, if urgent action is not taken.

This is why, unless the situation is not solved very shortly by the US legislator, the EU biodiesel industry will initiate a comprehensive legal action against this unfair trade practice, in the form of a joint anti-dumping and anti-subsidy complaint, possibly supported by a WTO complaint.

The problem stems from the framework of US Federal measures adopted in 2004, whereby biodiesel can be subsidised up to $264 per m3  (approximately €200 per tonne) only by adding a “drop” of mineral diesel to biodiesel. US producers can therefore claim the maximum subsidy for a “B99,9” blend. Such a blend can then be exported to Europe where it is eligible to European subsidy schemes.

Since the benefit of the blender credit is not restricted to biodiesel produced and consumed on the US territory, the 2004 support provisions have resulted in a surge of B99 exports to the EU. In most cases B99 blends are sold in the European market as “pure biodiesel” and offered with a substantial discount (over €120-180/tonne), in some cases at a lower price than the one of the raw materials purchased by the EU industry for producing biodiesel.

It is estimated that some 700,000 tonnes US methyl ester have entered the EU since January 2007 (compared to only 90,000 tonnes for the whole 2006), meaning that the 1 Mo tonnes threshold could be reached before the end of this year. This represents a sudden and sharp increase in exports which, says the EBB, is only explainable by unfair support measures.

At the same time, there are worries that such unfair practice will not be closed rapidly by the US Congress and that the support scheme will even be extended beyond 2008. In any case, closing the so-called “splash and dash” loophole, whereby foreign producers (Indonesian, Malaysian) are taking advantage of the US biodiesel credit before shipping their commodities to Europe, will not solve the REAL problem. Indeed, the “splash and dash” practice represents only a very minor share (less than 10%) of the overall B99 shipments that are reaching Europe. The very largest part of B99 is coming from US producers, using US agricultural raw material. The strong support measures enjoyed by US farmers explain the permanence of this unfair practice, says the EBB.