Europeans Threaten Antidumping Action against U.S. Biodiesel Subsidies

U.S. law firm, Stoel Rives, alerted this week that the European Biodiesel Board (EBB), a trade group, has issued a press release threatening legal action against U.S. biodiesel subsidies, which it claims artificially reduce the price of biodiesel sold in the European market by 120 to 180 Euro per metric ton (approximately $0.60 to $0.90 per gallon) compared to what European producers charge.

Under U.S. law, biodiesel, whether used domestically or exported, is eligible for a $1 per gallon biodiesel mixture credit against U.S. federal fuel excise taxes or federal income taxes so long as it is blended with petroleum-based diesel fuel, and is made from feedstocks that qualify it as “agribiodisesel.” Other feedstocks are eligible only for a $0.50 per gallon credit.

In March, the EBB had sent a letter to the European Commission concerning both U.S. and Argentinian biodiesel subsidies. No action appears to have been taken on that letter.

Most European biodiesel is produced from rapeseed, which is the equivalent of canola used in some U.S. and Canadian biodiesel production. Most biodiesel in the United States and Argentina is produced from soybean oil, and European Union standards for biodiesel have typically made it more difficult for soybean-based biodiesel to be imported into the European Union. Nonetheless, the EBB claims that U.S. exports to the European Union have increased from 90,000 metric tons in 2006 to 700,000 metric tons to date in 2007. Total U.S. biodiesel production in 2006 was estimated at one million metric tons, but has increased significantly this year.

According to Stoel Rives, the EBB’s press release threatened action both before European antidumping authorities and before the World Trade Organization. The U.S. biodiesel subsidies are set to expire at the end of 2008, but are quite likely to be extended.

Diesel fuel is used far more extensively for passenger cars in Europe than in the United States, and the European Union has a goal of 10 percent use of biofuels by 2020. However, the EBB claims that the U.S. subsidies (which the EBB asserts are also taken advantage of by Asian biodiesel producers who transship through the United States) are shutting down European biodiesel production and making expansion of such production difficult.

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