FocusDelayed German biodiesel import vote frustrates market

28 January 2009 16:11  [Source: ICIS news]

By Rachel Howat

LONDON (ICIS news)--Frustration was mounting in the European biodiesel market on Wednesday following the decision to delay a vote in the German parliament regarding the future status of imported material, market sources said.

The proposed German legislation would make imports of biodiesel that had already received subsidies (for example, B99 from the US) ineligible to receive further German subsidies, or count towards mandated blending requirements.

The law also proposed that soy and palm-derived biodiesel should not be eligible for use in Germany until production of these products met sustainability criteria. No firm explanation of these criteria was given.

A vote had been scheduled for late January. However, the European Commission voiced concerns that the legislation would not be compatible with World Trade Organization (WTO) law, and the German vote has been postponed pending a rewrite to address this.

Amandine Lacourt, of the European Biodiesel Board (EBB), said: “The EU perspective is not protectionist but is aimed at creating a level playing field. Nowadays there is a lot of discussion on biofuels sustainability at the EU level. Germany may have to wait for approval for its measures at an EU level.

"The climate change vote in December outlined big ideas but it will take a while to get details in place. However, it is difficult for any member state to bypass the process.”

While politicians debate the finer points of biofuels legislation, the feeling from the industry is that any decision would be better than the current state of uncertainty.

A biodiesel broker said: “This is incredibly frustrating and disappointing. It is clearly not at the top of their list of priorities, but until the situation is clarified German buyers dare not buy imported material.”

Further confusion has been introduced into the German market with a law emanating from the Secretary of the Environment recommending that the biofuel mandatory quota should be reduced from the current 6.25% to 5.25% for the remainder of 2009. This law would come into effect around March.

A spokesperson for the Association of German Biofuel Industry (VDB) said: “This is causing a lot of trouble in the biofuels market. Petroleum companies do not know how much they will be blending, nor when. Producers don’t know how much or what kind of raw materials to buy. The whole market is in shock."

Germany is Europe’s largest market for biodiesel. However, domestic production has run at reduced capacities as cheaper imported product has prevented manufacturers from achieving required margins.

The proposed legislation is likely to be backdated to the start of 2009, with the result that there has been scarce buying interest out of Germany in any fatty acid methyl ester (FAME) products, which typically contain palm and soy oil derived methyl esters.

While rapeseed methyl ester (ROME) is more heavily used in the winter months anyway, due to its low cold filter plugging point (cfpp), it is more expensive than FAME blends and is therefore not used in the warmer months.

The current climate of legislative uncertainty was harmful to trade levels and could hold back the development of this emergent industry, according to market sources.

Johannes Lackmann, chief executive VDB, said: “Germany currently has a biofuels policy which is based on retroactive measures. We cannot work like this and urgently need a policy based on a long-term strategy.”

($1 = €0.76)

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By: Rachel Howat
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