US biodiesel companies are lobbying for World Trade Organisation legal action against their European counterparts, the latest in a proliferation of trade disputes within the biofuels industry.
The move comes after last week’s announcement that European Union biodiesel manufacturers will ask the European Commission to impose emergency duties on US imports to combat what it describes as the effects of subsidies and unfair pricing.
The EU has a much larger market in biodiesel than the US, and European biodiesel producers say they are suffering as the result of cheap imports.
A legal opinion commissioned by the US biodiesel industry and seen by the Financial Times said that the EU’s technical fuel requirements, including biodiesel’s resistance to oxidation, break WTO rules by in effect discriminating against US producers.
The rules reflect the fact that European biodiesel is usually made from rapeseed oil while US biodiesel is made from soy or palm oil, which has different chemical properties.
The opinion, from the law firm Mayer Brown, says: “These requirements have been established with rapeseed biodiesel in mind, and neither soy nor palm biodiesel...can meet them.” The costs of adapting to the rules “place US biodiesel at a competitive disadvantage on the EU market without a corresponding justification based on performance”.
Manning Feraci, vice-president for federal affairs at the US national biodiesel board, said: “We think the European biodiesel specification is structured to favour their own industry. A sound legal argument can be made that this violates the EU’s WTO obligations.”
The biodiesel board has taken its complaint to the office of the US trade representative, which will have to decide whether to proceed with a WTO case. USTR declined to comment.
A Commission spokesman said: “The standards in question have been developed by technical experts, and they are adapted to the relevant conditions in the EC. If the US perceives there are problems, these should be worked through at technical level.” The EU biodiesel board did not respond to requests for comment.
The board asked the Commission last week to investigate whether US federal subsidies to biodiesel were damaging European producers.
Mr Feraci said that the suffering of the European industry reflected other changes in policy, such as the removal of German tax breaks on biodiesel.
“The European biodiesel industry is looking for someone to blame for their industry’s alleged woes,” he said. “It is inconceivable that the US industry is causing the harm that they claim we are.”
The US federal government subsidises biodiesel by $1 per gallon when blended with conventional fuel. European producers are concerned about a method known as “splash-and-dash”, where a small amount of US biodiesel is blended with fuel from other producers, such as Argentina, to benefit from the tax break and then exported to Europe.