EU Duties on U.S. Biodiesel Bring Debate to the World Biofuels Conference

By Bruce Ross, Ross Gordon Consultants SPRL

There’s no question what the hot topic was at the World Biofuels Markets Conference held in Brussels in mid-March. On March 12, 2009, the European Commission imposed provisional countervailing duties on U.S. biodiesel exported to the European Union (EU).

This action followed a formal complaint from the European Biodiesel Board (EBB) that imports of U.S. biodiesel represented dumping, U.S. subsidies to encourage biodiesel production were unfair, and that the situation is causing severe damage to the EU’s biodiesel industry, where 15 companies have gone bankrupt, new plant projects have been shelved, and the industry is operating at around 50 percent of capacity.

The conference forums involving Raffaello Garofalo, secretary general of the EBB, and U.S. biodiesel exporter Gene Gebolys, chief executive officer of World Energy Alternatives and chair of the National Biodiesel Board (NBB) Regulatory Committee in the United States, attracted much interest among stakeholders, not the least of several U.S. players. It was standing room only for the session in which Garofalo and Gebolys sparred about the justification for, and possible consequences of, the EU’s countervailing duties. The two clearly did not see eye to eye, but did manage a few smiles and didn’t actually come to blows.

The EBB has argued that the U.S. biodiesel industry is predominantly an export-driven market, pointing out that in 2008 almost 80 percent of U.S. domestic production was exported to the EU with the aid of an “unfair” $300 per metric ton subsidy.

Garofalo was clearly delighted to have scored some points off his U.S. counterparts with the imposition of the duties, but Gebolys was able to notch a few of his own. Gebolys pointed out that while U.S. biodiesel would now be effectively barred from the EU market for five years – unless the United States manages, during the coming four-month period, to persuade the commission not to make the duties definitive – the EU market would probably face the challenge of biodiesel imports from other supplying countries such as Canada and Argentina. This is because in his view, EU biodiesel production, based mainly on rapeseed oil, is uncompetitive in global terms. Gebolys subscribed to the view that the planned EU duty will not in itself cause a major turnaround as Europe’s biodiesel sector is suffering from serious overcapacity.

To underline Gebolys’ point, a representative of a 15-strong Argentine delegation at the conference more or less stated outright that Argentina would be looking to fill the gap on the EU market left by disappearing U.S. biodiesel. Gebolys then suggested that perhaps the EBB is now condemned to being a professional complainant to the EU authorities, in other words, while it seems to have won the current battle, will EBB win the war? There was also ample speculation among delegates that U.S. biodiesel could continue to flow into the EU via other countries without detection, despite warnings from Garofalo that companies doing so would be investigated and prosecuted to the fullest extent.

Gebolys’ point about competition for EU market shares was underlined by Christian Egenhofer, senior research fellow at Brussels, Belgium-based think tank Centre for European Policy Studies. He argued that there is a danger the global biodiesel industry will gloss over inefficiencies and cost problems by concentrating on protecting domestic markets. There was widespread recog-nition that the problems of the EU biodiesel industry are not solely due to U.S. imports; lower oil prices and changes to subsidies in Europe’s biggest market – Germany – have also played a big part.

The U.S. subsidy situation was by no means the only item discussed at the conference. Other topics were more encouraging and several were of direct interest to the rendering industry, which was not entirely accidental.

The National Renderers Association (NRA) had offered a speaker for the conference to cover the performance and environmental advantages of using animal fats and used cooking oils as feedstocks for biodiesel production. The association made its offer having noted that at last year’s conference the agenda was dominated by speakers concentrat-ing on already established bioethanol derived from crops, on possible future production of biodiesel derived from the jatropha plant – a technology not yet proven to be sustainable in either commercial or environmental terms – and on the even more futuristic fuels derived from algae.

The NRA believed the benefits of using animal fats as a biodiesel feedstock were not being given sufficient attention and successfully asked for a speaker slot to be provided for a North American biodiesel producer using animal fats as a feedstock. Jeremy Goodfellow, vice president of Energy at Sanimax, gave a very upbeat message about how animal fat-based biodiesel has major advantages: it uses a proven technology to create a high quality product, meets all engine specifications and fuel standards, and is more sustainable than vegetable oil-based biodiesel. He emphasised that there is no reason why the general lack of understanding of the product by the rest of the fuel industry cannot be overcome, and stressed that animal fat is not a waste product, but that it has multiple applications and is a valuable resource.

The whole session was very positive with the benefits of animal fats being expounded by several speakers, including a Swiss scientist who gave animal fats good scores in terms of their contribution to climate change mitigation based on full life cycle analysis.

The EU’s regulatory framework is becoming more favorable to the encouragement of biodiesel from animal fats and used cooking oil. The recently agreed upon Renewable Energy Directive (RED) and the currently debated revisions to the EU’s animal by-products regulation are likely to improve the chances of animal fats being used as a feedstock. RED, agreed in December 2008 but not yet implemented, states that the typical greenhouse gas emission savings for rapeseed biodiesel is 45 percent, and for waste vegetable oil or animal fat biodiesel it’s 88 percent. Garofalo himself said that “implement-ing RED is far more important” in the long-term than the argument with the United States over biodiesel imports. Indeed there was general agreement among conference delegates that renewable fuel mandates are a better way to encourage a viable market for biofuels than taxes or subsidies.

So it appears this is a good time to stress the value of animal fats in biodiesel production, thereby increasing their market worth. The NRA and North American rendering industry have a clear interest in these legislative developments.

To continue the positive vibes, even the sparring EBB and NBB agreed that it would be better for all concerned with developing the biodiesel market to work together to promote this biofuel rather than trying to protect regional market shares. The NRA hopes that animal fats can be promoted more in the future so they play an even bigger role in the biodiesel market than is already the case. Data shows that in 2008 almost 20 percent of U.S. biodiesel was produced from animal fats and greases (90 percent in Canada). The figure for the EU is about 15 percent. That’s a good platform to build on if more people are prepared to talk about the benefits of animal fats.

Right on cue, as if arranged to chime with the NRA’s viewpoint, in the awards ceremony on the evening of the first day of the conference the winner of the Sustainable Biodiesel Award for a distributor or producer was picked up by Argent Energy, the United Kingdom’s pioneering producer of biodiesel from wastes and residues, mainly tallow and used cooking oil. Argent produces about 45,000 metric tons (12.2 million gallons) of biodiesel annually.

Amidst all the drama of the biofuels conference was the keynote speaker – Sir Bob Geldof, musician, activist, and businessman. Geldof said he is a strong supporter of biofuels, not the least because of their potential to help those less fortunate. He also surprised many people by stating very clearly that decisions about the viability and usefulness of biofuels should be based on science and science alone.

International Report – April 2009 RENDER | back