Brussels is readying itself for a trade war with the US over its generous biofuel subsidies, which critics claim are forcing European producers out of business and encouraging so-called "splash-and-dash" practices that undermine the fuel's environmental benefits.
According to confidential documents seen by the Guardian, European trade commissioner Peter Mandelson has agreed to support anti-dumping complaints lodged by the European Biodiesel Board.
The US government will be asked this week to respond to allegations that subsidies of up to 11p per litre on exports of B99 biodiesel – a biofuel with up to one per cent of normal petroleum added – amount to unfair competition. European producers claim the subsidies have resulted in cheap US exports being dumped in Europe and prompted "splash-and-dash" operations whereby biofuel is shipped into the US, has a small quantity of diesel added to qualify for the subsidy, and is then shipped to its intended market.
Environmentalists have slammed the practice for resulting in increased carbon emissions, while European biofuel producers have maintained that they cannot compete with the generous US subsidies.
D1 Oils, one of the UK's leading producers, announced earlier this year that it was shutting all its refinery operations amid claims that it could not compete with US imports. Speaking at the time, company chief executive Elliott Mannis said all European producers were struggling. " It is difficult to make any money in biodiesel across Europe in the current conditions," he said. "At the moment, we don't believe the UK is a viable place to conduct biofuel refining."
The European Biodiesel Board claims US exports of B99 to the European Union rose from 100,000 tonnes in 2006 to 1m tonnes in 2007, equating to about 15 per cent of the total European market.
However, the US is understood to be gearing itself up for a fight over the subsidies, which represent a central plank in the Bush administration's climate change policy.
The US National Biodiesel Board has previously threatened to lodge a counter complaint, alleging that European producers are benefitting from a trade barrier in the form of stringent EU biodiesel specifications.
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