Biodiesel Trade: A Global Issue

By Peter Brown | April 15, 2008
A nasty little biodiesel conflict is brewing, fueled by foreign oil, paid for by U.S. citizens and playing a part in the decline of Europe's biodiesel infrastructure. My company, Euro Marketing Tools, sits squarely in the middle of the conflict, and we have a worm's-eye view of the issues as we work on projects in the United States and Europe.

The so-called "splash-and-dash" issue involves the swift passage of biodiesel from all over the world through U.S. ports to pick up a couple of gallons of diesel fuel and collect up to $9 million in federal blending credits per load. The newly created 99.99 percent biodiesel is then shipped to Europe where it is sold on the open market with an extra $1 per-gallon profit compared to the local competition.

The U.S. taxpayer has been the biggest loser in this operation because he is the unwitting treasure chest from which the subsidies flow. To start with, it is very clear that $1 per gallon in the highly competitive petroleum industry is a huge subsidy to dump overseas with absolutely no local, national or even international benefit to the United States. It is even bigger when you take into consideration that a lot of that biodiesel is not even made with American oil, in American processors or even using American ships.

But even if some American producers are selling their biodiesel in Europe, it still does not meet the smell test of ethical business because the blenders' credit had a triple purpose: to increase energy independence, lower pollution rates and promote the production of renewable fuels-all in the United States. Once the splash-blended biodiesel hits European shores, it immediately benefits from the full panoply of the European incentives, from tax breaks to subsidies. In effect, having taken from Paul (the U.S. taxpayer) the exporter/importer will now take from Pierre to pay himself.

There is little joy in Europe when a new load of biodiesel arrives. A German biodiesel producer told me about a year ago that he feels twice betrayed-the first time when his government removed his product from preferential tax treatment, the second when the U.S.-subsidized biodiesel was dumped into his market. Needless to say he no longer makes biodiesel but has a thriving business distributing "foreign oil."

In the United States and Europe, legislation is slowly moving into position. U.S. Rep. John Shadegg, R-Ariz., introduced legislation closing up the so-called "splash-and-dash" loophole, and the European Commission is going into bilateral trade talks on the issue. The European Biodiesel Board has held an active and bitter campaign on the issue for over a year condemning the practice in order to protect its members. The sad thing is that it may be too little too late; severe damage has already been done to the European biodiesel industry. Some of it is self inflicted, but quite a bit is through our administration's laissez faire attitude.

It will not be easy to put this genie back in the bottle. No one has done anything illegal and no one really anticipated how international our business would become. Decisions in Washington, D.C., have repercussions in Indonesia. But this small trade conflict amply demonstrates that the altruistic reasons for making biodiesel now have a healthy layer of financial interest. In our estimation, each country will have to keep their biofuels incentives strictly within their borders, apply their own incentives and base them on the local sale of biodiesel. Biodiesel will once again become a regional solution to a global crisis.

Peter Brown is the principal of Euro Marketing Tools, a sales and marketing group specializing in the creation of ecologically friendly biodiesel facilities in Europe and the United States. Reach him at or (408) 206-7035.

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