31 December 2008 12:23 [Source: ICIS news]
By Rachel Howat
LONDON (ICIS news)--It is already clear that, as far as the European biodiesel market is concerned, 2009 will be all about tax.
Trading on all blended products has slowed in recent months with no fatty acid methyl ester (FAME) blends trading for further forward than the first months of 2009, amid fears that taxation could be brought into effect in March.
“Contracts can be written so that if a law changes retrospectively with regard to taxation then liability has already been assigned to either the buyer or the seller,” said a trader. “However, this is not easy to do, and the uncertainty puts off anyone who doesn’t really need product from coming to market.”
In the later months of 2008, the German government passed legislation which made it possible that soy and palm derived biodiesel would no longer receive the same tax breaks nor count towards biofuel quotas in the same way as rapeseed derived product.
While environmental concerns over sustainability of production were the ostensible driver for this legislation many in the market voiced their belief that the law was more concerned with protecting German rapeseed farmers from outside competition.
Summer-grade biodiesel includes larger amounts of soy and palm-derived biodiesel due to the relative cold filter plugging points (cfpp) of the products. Rapeseed oil methyl ester (?xml:namespace>
Buyers will therefore switch between blends, using FAME 0 in the summer. This uses a mixture of mainly soy and palm oil and is priced significantly cheaper than products with a lower cfpp point.
Soy methyl ester (SME) comes in to Europe predominantly from the
Europe is the world’s largest importer of biodiesel, while the
Amandine Lacourt, project manager for the European Biodiesel Board (EBB), said: “Despite the end of ‘splash and dash’ B99, imports from the
Palm oil methyl ester (PME) from southeast Asia is also much cheaper than European produced material. Up until now this has only affected summer grades of biodiesel, and those destined for warmer climates, as PME has a high cold filter plugging point (cfpp).
However, there are pilot schemes now in place in
While producers complain that there is no way that EU biodiesel production can attract investment when they are prevented from charging higher prices by the cheaper US and Asian material, the green movement points to the poor sustainability track record of these imports.
Massive deforestation has taken place in
A biodiesel trader in
A broker at Starsupply said: “Biodiesel really does have green credentials if you look at the carbon cycle. However, if you look at the amount of biomass which is produced, the problem at the moment is that we need to figure out how to collect and best utilize all of it. The full potential of biodiesel will not be seen by our generation – this is a long-term plan.”
Second-generation biofuels, while much hyped in the media as the solution to the “food versus fuel debate,” have yet to be proven commercially viable. Both environmental groups and EU producers stress that for biodiesel to reach its potential it needs legislative support to encourage investor confidence.
The EU climate change bill, voted on at the end of 2008, was greeted with muted enthusiasm by biodiesel producers. Despite lowering interim targets and stressing the importance of unproven second-generation fuels the legislation did maintain a commitment to renewable fuel targets.
For those who are still committed to biodiesel as a green product the possibility of higher import duties is welcome.
“Shipping biodiesel halfway around the world surely counteracts any carbon offsetting which has been achieved,” said one broker. “Imports will always be less environmentally friendly than domestic production, but if the
($1 = €0.71)
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