Despite its increasing presence on the world market, international biofuels trade issues haven’t been adequately discussed, according to the International Food and Agricultural Trade Policy Council (IPC). The group suggests governments and international trade groups such as the World Trade Organization (WTO) begin working together to ensure a smooth transition for biofuels into world trade markets.

In late October the IPC launched a paper discussing the factors limiting international biofuels trade. Robert Howse, a University of Michigan law professor, was the lead author and discussed the findings. He said the uncertainty over biofuels classification risks stunting growth in trade even as global demand for biofuels is rising. Many governments are mandating the use of biofuels. “In a number of cases it’s hard to imagine those mandates can be met with domestic sourcing of renewables,” Howse said. “The issue becomes, how do you liberalize market access in order to give the possibility to use imports?”

Howse said part of the issue in liberalizing market access is classification of the fuels. Ethanol and biodiesel are currently referred to as agricultural or industrial products. “That’s one of the major areas on clarity,” Howse said. “You don’t have specific clarifications for biofuels in internationally accepted tariff classifications.”

Howse also said government measures to protect domestic biofuel production, including tax incentives, high tariffs and subsidies, is affecting the fuel’s availability on the world market. A greater clarity about subsidy notification requirements and a closer look at potential cross-subsidization of by-products associated with biofuel production is useful, given the uncertainty of whether WTO rules for agricultural or industrial products are applicable, the paper concluded.

Another issue that may affect the international trade of biofuels is sustainability. Howse said some European countries are beginning to consider requiring that imported biofuels be derived from sustainable feedstocks.

Howse urged more detailed analyses on the issues in the future. He said the paper was the first step in opening up the discussion. “The response has been kind of a wake-up call that, in fact, the way these markets are going, trade and trade barriers are going to be a very big part of the picture in the future,” Howse said.

He said biofuels trade hasn’t been discussed before because it is a relatively new market and energy issues are typically tied to national security, making some stakeholders shy away from discussing the topic. “Once you get past that threshold, you can have trade negotiations that are explicitly targeted to biofuels,” Howse said.

Dave Nilles is Online Editor for Biodiesel Magazine. Reach him at dnilles@bbibiofuels.com or (701) 373-0636.

Posted: 11:39 a.m. CST Monday, November 6, 2006