EU Threatens Trade War Over US Biodiesel Subsidies

04/28/2007

The Independent
Published: 29 April 2007


A transatlantic trade war is looming over a US biodiesel export credit that is driving UK manufacturers of the green fuel out of business.

The EU Trade Commissioner Peter Mandelson is preparing to wade into the row, which could result in a World Trade Organisation investigation and retaliatory tariffs being imposed on American biodiesel exported to Europe.

The subsidy allows US exporters to undercut European rivals by at least a quarter, forcing many to cut production and sell at a loss.

The US "B99" subsidy is controversial because it benefits exporters. In most of Europe, tax breaks are available only at the point of sale.

Commodity traders are also exploiting a loophole in the subsidy system that is making its impact even more damaging.

The perfectly legal trick - coined "splash and dash" by the industry - also makes a mockery of the purpose of biofuels, which is to reduce the use of fossil fuels and thereby cut carbon emissions.

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