Ambassador John Bruton, Head of the EU Commission Delegation to the United States, expressed disappointment this week (14th Januray) at the failure of efforts to repeal anti-competitive US biodiesel blending subsidies, which threaten the European biodiesel industry and leave US taxpayers effectively subsidizing European motorists.

Ambassador Bruton said, "The European biodiesel industry is being threatened by a flood of subsidized US biodiesel. It is estimated that around 1 million tons of biodiesel entered the EU from the US in 2007, roughly 15-20% of the EU biodiesel market and a tenfold increase over 2006. American tax credits allow US producers and others—who are eligible for European support as well—to unfairly undercut their competitors in the EU.*

"We're all for biodiesel in Europe. It's an important if small part of our energy mix, one that helps in the fight against global warming. That's why it's so important that the European biodiesel industry not be undermined by subsidized imports from the US and other countries. Global trade in biodiesel is to be expected and is a good thing, but that trade must be fair, not distorted by subsidies."

A 2004 US law encouraged US diesel producers to blend more biodiesel into their fuel mixtures. Unfortunately, the tax credits in the law subsidize not only blended fuel destined for domestic US consumption, but also biodiesel ultimately exported abroad. The $1.00 per gallon US subsidy allows American exports to enter the EU market at a price below the raw material costs of European producers.

Worse still for US taxpayers, the law also inadvertently allows foreign companies to claim the tax credit after simply blending a drop of US mineral diesel into their mixture. Such 'blended' foreign biodiesel is in most cases re-exported to the EU ("splash and dash"), further harming European producers. Congressional moves to repeal the export subsidy and "splash and dash" loopholes failed in 2007.

"What we are witnessing here is US taxpayers effectively subsidizing European motorists to the tune of around $300 million last year. And that figure is set to be even higher this year - all while Americans themselves are suffering at the pump. We appreciate Congressional efforts to address the problem last year but regret that, in the end, the proposed remedies didn't stay in the Energy Bill eventually signed by President Bush. As I work with Members of Congress in the coming months, I will continue raising this issue and push for a resolution; hopefully in time to stave off an expected complaint from European industry."**

* European support for biodiesel is given in the form of excise duty reductions to consumers, not to producers, thus ensuring that benefits apply only in the European market (to both domestic and imported biodiesel) and that no benefit is conferred upon export sales.

** On 30 November 2007, the European Biodiesel Board, representing European producers, announced its intention to lodge a countervailing duty complaint with the European Commission against US imports.