Bloc also charges the US ''illegally'' subsidizes its domestic industry

The move came after the European Commission investigated complaints from several EU-based companies that the alleged US action was adversely impacting the trade bloc’s biodiesel industry.

The European Biodiesel Board (EBB) originally called for the investigation in April, complaining that the European market was being flooded with US exports of a 99% biodiesel blend, which can receive a US government subsidy of $300 dollars per ton.

In addition to the US aid, exports of the so-called “B99” blend are also eligible for a subsidy in Europe as well, the EBB said.

The companies asking for the action said in their complaint that the subsidies were “squeezing European producers' profit margins,” putting many of them out of business and “leaving capacity idle.”

In the official announcement of its decision, the Commission said the complaints “fulfill the requirements of the EU's basic anti-subsidy and anti-dumping regulations in order to initiate further proceedings.”

The Commission said it will study the application of US federal excise and income tax credits as well as federal grants to finance increased production capacity. State-level subsidy program will also reportedly be examined.

The group also said that it will investigate the allegations and make provisional findings by March of next year, which it will then present to the EU’s 27 member states.

Biodiesel is produced from vegetable oils or fats – including cooking oils – with properties similar to diesel fuel.

The use of biofuels has come under growing attack recently in both the US and Europe, where they have been blamed for helping to drive the price of corn and other commodities to record highs by using up farmland that could be used for food crops.

Between 1972 and 1975, global food prices rose 78%, while between 2005 and 2008, they rose over 80%, according to the World Bank, which made headlines in April when it released a report stating that 30 of the world’s lesser-developed nations were “at risk of social unrest because of rising food prices.”

As a result, the European Union has faced growing pressure to reconsider its target for biofuels to make up 10% of all vehicle fuels in the entire bloc by 2020.

For the European industry, the stakes are high, as biodiesel makes up 80% of the EU's total production of biofuels.

Most of biodiesel imported by Europe comes from the US with the volume of US-sourced imports growing from 7,000 tons in 2005 to more than 1 million tons last year.

07/03/08

Source: www.caltradereport.com