236
on biofuel trade have a large influence on global markets for biofuels and other
related products.
In sum, it is not hard to imagine a global “scramble” for biofuels, if many countries, especially those with large markets, set aggressive blending mandates and
generate significantly more demand than can be met by domestic production. The
largest producing countries also have large domestic markets. While they may at
times have some room for exports, their ability to consistently export on a scale
needed to help many other countries to meet ambitious mandates is questionable.
14.5.1 EU
The EU’s share of global biodiesel production in 2009–2010 was approximately
65% (European Biodiesel Board). The production of biodiesel has been heavily
subsidized because its production cost has been higher than that of fossil fuels.
Consequently, EU’s biodiesel has been consumed and traded internally. Like most
of the rest of the world, the EU has focused on promoting internal production for
internal consumption through various industrial policy and trade protection measures (Kutas et al. 2007). Historically, the EU has used high import tariffs to protect
agriculture; this also has protected biofuel feedstock producers. Recently, the EU
shifted to direct payments to biofuel feedstock farmers rather than import tariffs or
quotas. According to Swinbank (2009), “the EU maintains a tariff on ethanol of 10.2
euros per hectoliter (about 45 percent at current prices) and a somewhat lower tariff
on biodiesel of 6.5 percent.” Although the EU was considering to expand its use of
biofuels, it still provided trade protection to domestic biofuel feedstock producers.
Despite its high tariff and focus on protecting domestic producers, the EU also
set a high biodiesel blending mandate. This implied that imports would also be
required since EU production would not be able to produce enough to meet the
mandate (and/or that some EU land would have to be diverted from food to fuel
crops). This strict blending mandate reflected not only a desire for cleaner energy
but was also intended to enhance energy security and supply diversification.
The European Commission’s strategy, “An EU Strategy for Biofuels,” was published in 2006 (EU 2006). It stated that stimulating trade opportunities and supporting biofuel producers in developing countries were key elements of the strategy. The
strategy aimed to secure biofuel supplies from developing countries and to facilitate
the production of crude vegetable oil for bioenergy. The EU intended that the
biofuels from the high blending mandate would be complemented with imports
from countries like Malaysia and Indonesia. The EU’s main environmental concern
at that time was unilateral reduction of greenhouse gasses, and it had not considered
the potential for sustainability issues arising from production in the expected exporting countries (Jank et al. 2007). In fact, the Netherlands was the biggest market for
refining and combustion of palm oil at the time (Greenpalm.org 2011). The production of “green electricity” had the potential to boost demand for palm oil by more
than 1,000,000 MT annually; nevertheless, the Dutch government stopped its
M. Elder and S. Hayashi
on biofuel trade have a large influence on global markets for biofuels and other
related products.
In sum, it is not hard to imagine a global “scramble” for biofuels, if many countries, especially those with large markets, set aggressive blending mandates and
generate significantly more demand than can be met by domestic production. The
largest producing countries also have large domestic markets. While they may at
times have some room for exports, their ability to consistently export on a scale
needed to help many other countries to meet ambitious mandates is questionable.
14.5.1 EU
The EU’s share of global biodiesel production in 2009–2010 was approximately
65% (European Biodiesel Board). The production of biodiesel has been heavily
subsidized because its production cost has been higher than that of fossil fuels.
Consequently, EU’s biodiesel has been consumed and traded internally. Like most
of the rest of the world, the EU has focused on promoting internal production for
internal consumption through various industrial policy and trade protection measures (Kutas et al. 2007). Historically, the EU has used high import tariffs to protect
agriculture; this also has protected biofuel feedstock producers. Recently, the EU
shifted to direct payments to biofuel feedstock farmers rather than import tariffs or
quotas. According to Swinbank (2009), “the EU maintains a tariff on ethanol of 10.2
euros per hectoliter (about 45 percent at current prices) and a somewhat lower tariff
on biodiesel of 6.5 percent.” Although the EU was considering to expand its use of
biofuels, it still provided trade protection to domestic biofuel feedstock producers.
Despite its high tariff and focus on protecting domestic producers, the EU also
set a high biodiesel blending mandate. This implied that imports would also be
required since EU production would not be able to produce enough to meet the
mandate (and/or that some EU land would have to be diverted from food to fuel
crops). This strict blending mandate reflected not only a desire for cleaner energy
but was also intended to enhance energy security and supply diversification.
The European Commission’s strategy, “An EU Strategy for Biofuels,” was published in 2006 (EU 2006). It stated that stimulating trade opportunities and supporting biofuel producers in developing countries were key elements of the strategy. The
strategy aimed to secure biofuel supplies from developing countries and to facilitate
the production of crude vegetable oil for bioenergy. The EU intended that the
biofuels from the high blending mandate would be complemented with imports
from countries like Malaysia and Indonesia. The EU’s main environmental concern
at that time was unilateral reduction of greenhouse gasses, and it had not considered
the potential for sustainability issues arising from production in the expected exporting countries (Jank et al. 2007). In fact, the Netherlands was the biggest market for
refining and combustion of palm oil at the time (Greenpalm.org 2011). The production of “green electricity” had the potential to boost demand for palm oil by more
than 1,000,000 MT annually; nevertheless, the Dutch government stopped its
M. Elder and S. Hayashi