US subsidies hurt UK biodiesel
By William Surman

Subsidised biodiesel from the United States is undercutting UK production and threatening the growth of the domestic industry, biofuel experts have warned.

The US energy act of 2004 offers fuel processors a tax break of around 11 pence per litre on biodiesel production. The break was designed to boost domestic production and create a demand for mid-west soy crops.

But using a loophole in the law, processors have now applied the subsidy to biodiesel exports to Europe.

Under US regulation, processors are given a tax break if they mix biodiesel with conventional fossil fuel. The greater the density of biodiesel in the mix the greater incentive, so a 99 per cent mix of biodiesel to fossil fuel – B99 – gains the greatest reward.

A spokesman for D1 Oil, a UK based biodiesel producer, said that the subsidised US exports had gathered a head of steam over the past twelve months and would be difficult to stop, especially in the short term.

“When the US biodiesel – B99 – arrives onto the pump in the UK it has around £150 per tonne price advantage over our produce.

“For the EU to take action we have to prove that they are damaging the EU industry. This shouldn’t be too hard but even then it probably won’t be until 2009 that something is done” he said, adding that the EU trade commissioner, Peter Mandelson had been supportive of the UK predicament.

In the meantime the US will continue to export B99 to the EU and damage the UK industry.

To add insult to injury, the European Biodiesel Board (EBB) has accused the US of a ‘splash and dash’ strategy whereby biodiesel is shipped from Europe and Latin America to US ports.

On arrival, a ‘splash’ of fossil fuel is mixed in to qualify for the tax break before it ‘dashes’ back to the EU.

© 2007 by CMO Infromation Ltd.