EU ethanol firms seek investigation of U.S. subsidies

BRUSSELS Thu Nov 3, 2011 1:04am IST

Stocks

   

BRUSSELS (Reuters) - European Union bioethanol producers have asked regulators to investigate whether U.S. exporters are receiving illegal subsidies, a move that could trigger import tariffs on the green fuel, EU producers said on Wednesday.

Placed with the European Commission on October 12, according to industry sources, the complaint could result in a formal investigation later this month, and in provisional tariffs next year on hundreds of millions of liters of bioethanol from the United States.

"Massive and sudden imports of U.S. ethanol, combined with unfairly low prices over the last few years, have seriously damaged the economic situation of European producers," Rob Vierhout, Secretary-General of industry group ePURE, said in a statement.

The case marks the latest stage in an intensifying global race to secure a slice of Europe's lucrative renewable market, where demand is boosted by official targets to fight climate change and wean the bloc off fossil fuels.

"The unfair competition of U.S. imports is simply depriving the EU industry of the benefit of this positive evolution in its own domestic market," Vierhout said in the statement.

European biofuel makers' troubles have been exacerbated by cold weather and smaller fields than their rivals in the United States and Brazil.

In 2008, the EU imposed tariffs worth up to 400 euros ($552) per tonne on U.S. biodiesel and extended these to Canada in 2009.

Biodiesel producers have been pushing for tariffs also to be levied against imports from Argentina and several Asian countries.

U.S. TAX CREDIT SCHEMES

ePURE, whose members produce 80 percent of Europe's bioethanol and include Germany's CropEnergies and Spain's Abengoa, says U.S. tax credits for firms that blend ethanol with gasoline are illegal because they threaten the development of ethanol as transport fuel in other countries.

"The federal excise tax credit and the federal income tax credit represent only the most visible portion of a comprehensive subsidization policy at all levels of government in the United States," ePURE said in its statement.

The group said earlier this year it would target as illegal a 45-cent-a-gallon U.S. tax credit known as the Volumetric Ethanol Excise Tax Credit or VEETC. U.S. producers defend this scheme, saying it is essential to propping up a fledgling industry.

EU imports of U.S. ethanol blends surged by more than 500 percent between 2008 and 2010, and imports are expected to double year-on-year in 2011 according to EU industry figures.

"This impressive trend is the direct result of U.S. federal and sub federal subsidies, which allow U.S. operators to adopt aggressive pricing practices on the European market," ePURE said.

Congress decided last year to extend the VEETC scheme until the end of 2011, but it is unclear whether the scheme will be scrapped due to budget cuts, ending the need for EU action.

The U.S.-based Renewable Fuels Association has dismissed any action that aims to penalize VEETC, saying it will run out by year's end.

On Wednesday, the association could not be reached for comment.

European producers have also asked European regulators to keep a register of U.S. imports, a move that may allow tariffs to apply retroactively. ($1 = 0.725 Euros)

(Editing by Barbara Lewis and Alden Bentley)