The increase of biodiesel production in 2007 and 2008 is still not in line with the ambitious EU objective for climate change mitigation outlined in the recently published Renewable Energy Directive 2009/28. This situation has to be understood primarily against the background of unfair international trade competition which has severely affected the profitability of EU biodiesel producers since early 2007.
For more than two years, EU biodiesel producers had to compete with heavily subsidized and dumped biodiesel from the US (known as “B99”). US B99 has been sold in the EU with a considerable discount, even at lower price than the raw material soybean oil. Following the complaints lodged by EBB in 2008, the European Commission’s investigation established that unfair US B99 caused significant damage to the EU biodiesel industry, particularly in terms of profitability and return on investments.
In March 2009, EBB strongly welcomed the imposition of provisional anti-dumping and countervailing measures against unfairly traded US biodiesel. Last July 7, 2008, these measures have been extended for five years following the approval of EU Ministers. EBB applauds the EU decision to adopt robust measures against an unfair trade practice clearly breaching WTO principles. This decision will help re-establishing EU producer’s legitimate right to operate in a level-playing field.
In spite of degraded market conditions, the EU biodiesel industry showed in 2008 some relative resilience, allowing a moderate production increase compared to 2007. This however stands far below what EU biodiesel producers could achieve in a more favorable environment.
The situation outlined above is all the more illogical if one considers that, with close to 21 million tonnes of installed production capacity in 2009, the EU biodiesel industry stands ready to deliver much higher volumes than it has done in 2007 and 2008.
In 2009, production capacity has increased by 31% compared to 2008. The number of biodiesel plant as of July 2009 stands at 276. This is the result of considerable investment, committed well before the rise of unfair US B99 on the EU market.
EBB statistics for 2008 and 2009 however show that at least 50% of existing plants remain idle. Unfair international competition has been the main driver of this trend, while the political discussions in 2008 on adoption of the Renewable Energy Directive have added to market uncertainty. This situation means that the important investment from the industry has so far not been mirrored by the corresponding market deployment. Yet, it is important to underline that the existing biodiesel production capacity is an asset to cover an important part of the 10% binding target for renewables consumption in the transport sector, which has been established by Directive 2009/28. The 10% target will indeed require the production of at least 30-35 million tonnes of biodiesel by 2020.
The entry into force of the Renewable Energy Directive last month, as well as the already well established support schemes at Member States level shows that, contrary to the situation prevailing in the US until now, the EU and its Member States have been able to create a genuine framework supporting the deployment of biodiesel and biofuels, notably in the form of mandatory blending targets.
In addition, it should be reminded that EU demand for biodiesel is structurally supported by the growing EU mineral diesel deficit (32 million tonnes imported in 2006, mainly from Russia), a trend that is expected to continue beyond 2030. Biodiesel plays and will continue to play a decisive role for EU’s security of energy supply.
In 2008, biodiesel accounted for 78% of the biofuels consumed in the EU (EU bioethanol production in 2008 was 2.2 million tonnes) and is likely to remain the main biofuel in meeting the target of 10% transport fuels by 2010. The EU still holds the leading position at worldwide level in terms of biodiesel production, with close to 65% of world’s biodiesel output.
As outline above, the rapid development of US biodiesel production has been artificially driven by unfairly designed subsidies, without being matched by a corresponding domestic demand.
Even more than in 2008, Argentina stands out as a newly emerging player on the international biodiesel market. This growth has been so far largely driven by the existing DETs scheme, which creates unjustified advantages, and as result of which most of Argentinean biodiesel is exported outside the country.
Argentina, Malaysia and Indonesia continue to feature amongst major biodiesel producing regions, all enjoying a disputable preferential access to the EU market under the Generalized System of Preferences.
