22nd May 2008 - MEP McAvan slams "crazy" biofuels scam

Last night in the European Parliament in Strasbourg, Yorkshire and the Humber Euro-MP Linda McAvan pressed the European Commission to act over a rogue American subsidy scheme which is blamed for costing jobs and harming the environment.

The "splash and dash" scam involves European biodiesel being shipped across to the US where just a “splash” of fuel is added, allowing American traders to claim subsidies from the American government for “blending” fuels. The product is then shipped back to Europe where - because of the subsidy - it can be sold more cheaply than the market price.

Biofuels are increasingly being used to replace traditional fossil fuels in the fight against climate change and have been strongly supported by governments on both sides of the Atlantic.

However, the European Biodiesel Board says that this practice is undercutting legitimate European producers and costing jobs in Britain and Germany.

Linda McAvan wants to see the practice banned. She says;

"The practice is not illegal but it makes a mockery out of our attempt to make transport fuels more "green". Shipping emissions represents around 5% of global CO2 emissions. This is nearly double Britain's total emissions, and more than all African countries combined. It is also more than double aviation. Shipping emissions are therefore something we as MEPs want tackling. To trade biodiesel needlessly across the Atlantic adds CO2 to the environment and is crazy."

In Strasbourg last night, Ms McAvan asked EU Agriculture Commissioner Mrs Fischer Boel what action EU taking.

The Commissioner responded that Trade Commissioner Peter Mandelson has already raised the issue with the US authorities, asking that the subsidy not be given to American exports, but there is little sign the policy will change. However, if European biofuel producers can put together the evidence, the Commission will look to make a formal complaint.

Ms McAvan said afterwards that whilst she welcomed the fact that the Commission recognises there is a problem and is ready to act, she is concerned delays could seriously undermine European farmers and producers.

A full text of Ms McAvan's question and the Commissioner's response is below:

President. − Question No 29 by Linda McAvan (H-0306/08)
Subject: Biofuel trading practices

What action is the Commission taking to stop the reported biofuels trading practice that exploits US agricultural subsidies?

The practice involves shipping biodiesel from Europe to the US where some fuel is added, allowing traders to claim 11p a litre of US subsidy. It is then shipped back and sold below domestic prices. It is estimated that up to 10% of exports of biofuels from the US to Europe are part of this rogue scheme. This is not an illegal act, but puts the European biofuel industry at risk. It also involves unnecessary shipping across the Atlantic, which increases emissions of greenhouse gases.

Will the sustainability criteria as proposed by the Commission solve this problem and make it illegal to sell biofuels on the European market that have been involved in this practice?

Mariann Fischer Boel, Member of the Commission. − While the Commission cannot comment on the extent of the alleged practice referred to in the question, it shares the concerns about the impact on the European industry of the United States tax subsidy.

The subsidy appears to benefit all bio-diesel exported from and, by the way, sold in the United States, whatever its source.

According to the industry data, the US exports to the European Union rose from 100 000 tonnes in 2006 to 1 million tonnes in 2007, which is equal to about 15% of the European market.

My colleague, Commissioner Mandelson, has raised this on a number of occasions with his US counterpart, Trade Representative Susan Schwab. He has advocated a change in the US legislation, for example restricting the subsidy to goods sold in the United States as a possible solution to the problem. So far there has been no movement from the United States side and the tax credit remains in force.

The Commission would be prepared to consider an anti-subsidy investigation upon receipt of a properly documented complaint from the European Union industry containing sufficient evidence of countervailable subsidisation and injury.

The honourable Member asks whether the sustainability scheme proposed by the Commission in its proposal for the directive on the promotion of the use of energy from renewable sources, adopted by the Commission this January, will solve the problem created by the trading practice referred to in the question.

The sustainability scheme provided for by the Renewable Energy Directive is about ensuring the sustainability of biofuels.

It is designed to promote the use of sustainably produced biofuels while discouraging the use of poorly performing ones.

You will remember the 35% discussion. The sustainability scheme would therefore not be able to address trading practices such as the one referred to in the question from the honourable Member.

Linda McAvan (PSE). – Commissioner, I am glad you are dealing with this. I think it is a scandal and it makes a mockery of all the work we are doing on climate change. In terms of sustainability criteria, if we have a greenhouse gas savings criterion, would these kinds of biofuels not fall foul of that because it has been shipped up and down the Atlantic adding greenhouse gas from shipping emissions, which are 5% of world CO2 at the moment?

If we have to wait for a complaint from industry and the opening of a procedure on illegal subsidies, how long will that take? My fear is that, by the time we get something done, the European industry will have gone out of business.

Mariann Fischer Boel, Member of the Commission. − The method of the calculation of greenhouse gas emission from biofuels compared to fossil fuel emission contained in the Renewable Energy Directive follows what we call the life cycle approach, which also takes into account the level of emission produced during transport of biofuels both within and outside the European Union. In this respect let me reiterate once more that reducing greenhouse gas emission from transport is one of the guiding objectives of the biofuel policy.