EU – U.S. BIOFUEL TRADE WAR?

Add this to the list of unintended consequences arising from incentives for agrofuels.

“Splash and dash” is the technique foreign agrofuels producers use to take advantage of U.S. subsidies. It is especially popular among importers of B99 diesel into Europe. Pure Agrofuels manufacturers in Brazil, Indonesia and Malaysia pass their product through U.S. ports where a bit of petroleum diesel is added, qualifying the entire shipment for a U.S. subsidy.

Perhaps the most objectionable aspect of the practice is that it often adds many miles of transport under greenhouse gas-generating fossil fuel power in order to deliver supposedly climate change-mitigating fuel to Europe.

European Commissioners (EC) like Peter Mandelson suggest the subsidy may be worth 11 pence/litre (~88 cents/gallon).

EU biodiesel producers and suppliers cannot compete. The UK’s D1 announced last month it will close a new refinery and lay off all employees.

The EC is threatening to put a duty on U.S. biodiesel imports if “splash and dash” is not discontinued, although public statements remain muted. Unnamed EU diplomat: "The Commission is in contact with the United States to clarify certain details regarding U.S. production…"

The U.S. Congress looked into closing down this abominable practice in the 2007 energy bill but “somehow” the loophole in the biodiesel subsidy left it in place.

If Congress doesn’t close the loophole soon, it risks starting a trade war with the EU. The situation is urgent for the European biodiesel industry. Linda McAvan, Labour MP, UK:"My fear is that by the time we get something done, the European industry will be out of business."

So far, the U.S. National Biodiesel Board (NBB) is defending the subsidy and ignoring "splash and dash."

(from the Christian Science Monitor - click to enlarge)

EU seeks U.S. biofuel details after dumping claim
(William Schomberg w/Peter Blackburn), May 26, 2008 (Reuters)
and
Brussels trade war with US looms over biofuel
Terry Macalister, May 26, 2008 (The UK Guardian)

WHO
European Commission (EC) of European Union (EU) (Peter Mandelson, Commissioner); U.S. National Biodiesel Board (NBB) and European NBB; D1 (Elliott Mannis, CEO)

(click to enlarge)

WHAT
A biofuels trade war is looming between the EU and the U.S. over “splash and dash.”

WHEN
- From 2006 to 2007: U.S. “exports” of biodiesel grew 10 times.
- The European NBB lodged a formal complaint with the EC in April. It has now decided to consider the matter.

(click to enlarge)

WHERE
- European mandates for the use of agrofuels in the effort to mitigate global climate change are driving “splash and dash.”
- The UK requires 2.5% of all vehicle fuel to be crop-based.

WHY
- U.S. exports of biodiesel to the EU went from 100,000 tonnes in 2006 to 1 million tonnes – 15% of the EU market – in 2007.
- The EC is threatening punitive duties on a variety of U.S. imports if the “splash and dash” loophole is not closed.
- The EC considers the U.S. subsidy of biodiesel to be a violation of World Trade Organization rules.
- British Labour MP Linda McAvan has called for the EU Parliament to investigate “splash and dash.”

(click to enlarge)

QUOTES
- Linda McAvan, Labour MP, UK: "[Splash and dash] involves unnecessary shipping across the Atlantic, which increases emissions of greenhouse gases".
- Mariann Fischer Boel, agriculture commissioner, EC: "While the commission cannot comment on the extent of the alleged practice referred to in the question, it shares the concerns about the impact on the European industry of the United States tax subsidy."
- Manning Feraci, US National Biodiesel Board: "It is hypocritical for the EBB to cry foul while they benefit from a blatant trade barrier."