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E.U. Plans Probe Of U.S. Bioethanol Subsidies: Diplomats

Date: 16-Nov-11
Country: BELGIUM
Author: Juliane von Reppert-Bismarck

The European Union's trade authority plans to start an investigation into whether U.S. bioethanol exporters are receiving unfair state subsidies and selling their fuel to Europe at illegally low prices, diplomats said on Tuesday.

The European Commission investigation could result in import tariffs as early as next year on hundreds of millions of litres of the fuel if EU officials unearth evidence of unfair trade practices in the United States.

"The Commission wants an investigation, and EU capitals will not stand in the way, so it will begin this month," said one diplomat.

Biofuel producers have been racing to secure a slice of Europe's lucrative renewable energy market, where demand is boosted by official targets designed to fight climate change and wean the bloc off higher-polluting fossil fuels.

Specifically, trade officials will investigate EU industry allegations that tax credits in the United States allow its exporters to cut their EU selling price by about 40 percent, the diplomats said.

They will also investigate EU industry complaints that the price of U.S. ethanol is 15 to 20 percent lower in Europe than at home, the diplomats added -- a practice known as dumping that is illegal under international trade rules.

The Commission notified EU capitals of its intentions this month and invited comment, they said. Barring last-minute reversals, the investigation will start by next week.

An EU spokesman declined to comment on the confidential proceedings, saying only that the Commission "has received the complaint and is in the process of evaluating whether to launch an investigation."

INDUSTRY WARNINGS

Industry group ePURE, whose members produce 80 percent of Europe's bioethanol and include Germany's CropEnergies and Spain's Abengoa, requested the investigation in October, saying "massive and sudden imports" of U.S. bioethanol are damaging EU producers.

U.S. producers defend the Volumetric Ethanol Excise Tax Credit, which provides a 45-cent-a-gallon tax credit to ethanol blenders, as essential to propping up a fledgling industry.

The U.S.-based Renewable Fuels Association has dismissed any action that aims to penalise the scheme, saying it is likely to run out anyway by the end of this year.

Europe used about 5 billion litres of bioethanol in 2010, with about 12 percent imported from the United States and Brazil, according to industry estimates. The percentage is expected to rise as EU producers struggle with colder weather and smaller fields than their rivals in those countries.

In a similar case, the EU imposed tariffs in 2008 of up to 400 euros ($552) per tonne on U.S. biodiesel and extended them to Canada in 2009.

Biodiesel producers have been pushing for tariffs also to be levied against imports from Argentina and several Asian countries.

(Editing by Rex Merrifield and Jane Baird)

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