FocusEU biodiesel proposals to benefit industry

28 October 2008 16:49  [Source: ICIS news]

By Rachel Howat

Palm oil being harvested in MalaysiaLONDON (ICIS news )--The European biodiesel industry should welcome the proposed sustainability criteria restricting soy methyl ester (SME) and palm methyl ester (PME) imports, leading biodiesel players said on Tuesday.

The proposals will be put to the vote at the upcoming European Parliament vote on the EU climate package.

European biodiesel trading was reported to have ground to a virtual halt amid uncertainty over the outcome of the upcoming vote, said market participants.

Yet, while the reluctance to trade was said to be understandable in the run-up to the vote, European biodiesel players said that the legislation need not be viewed as harmful to the industry.

“Contrary to popular opinion, sustainability clauses are nearly always already in place on material traded in ARA [Amsterdam, Rotterdam, Antwerp], with most of the majors, such as BP, Chevron, Greenergy and Shell, having their own sustainability criteria in place,” said a biodiesel broker.

For companies in this position, the proposed legislation would have little effect on the day-to-day running of their business.

Rather than focusing on the possible headaches that could be created by the increase in paperwork, European producers should welcome any measures which would help to reduce the flow of cheap, subsidised, US biodiesel into the EU, said a source.

The soy restriction in the sustainability clauses would be particularly relevant to US material, which is mainly Argentine-derived SME that has stopped off in the US to collect the $300/tonne (€240/tonne) subsidy before coming to Europe.

A broker said: “What the EU legislation will do is standardise the clauses and create a more level playing field, hopefully making it harder for the Americans to flood the market with cheap product undercutting the European producers.”

Last week a spokesperson for the European Biodiesel Board (EBB) told ICIS news that the priority was to get rid of B99 biodiesel dumped into Europe.

While market players may be focusing solely on the numbers, sustainability legislation also has the backing of major environmental pressure groups.

Crude palm oil (CPO)-derived biodiesel in particular has developed a reputation as being ecologically unsound, with pictures of islands entirely devoted to palm farming causing concern even among the European biodiesel trading community.

Not only is the dedication of large tracts of land to the growth of palm or soy seen to harm biodiversity but the focus on feedstocks for biofuels was also blamed by many in the media for the summer’s high food prices and sparked food-versus-fuel debates.

While environmental pressure groups have voiced concern over some of the wording and implementation strategies of the climate change paper, there was broad support for the sustainability clauses.

A renewable energy expert for Greenpeace said: “We believe that good and credible sustainability clauses are essential for the future of bioenergy in Europe.

"It is so important that the EU are cautious and get the legislation right this time as it is bad for the industry as a whole to keep changing."

A broker added: “Removing uncertainty over the future of these products can only be a good thing for the market.”

($1 = €0.80)

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By: Rachel Howat
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