US subsidies hurt UK biodiesel

The US energy act of 2004 offers fuel processors a tax break of around 11 pence per litre on biodiesel production. The break was designed to boost domestic production and create a demand for mid-west soy crops.

But using a loophole in the law, processors have now applied the subsidy to biodiesel exports to Europe.

Under US regulation, processors are given a tax break if they mix biodiesel with conventional fossil fuel. The greater the density of biodiesel in the mix the greater incentive, so a 99 per cent mix of biodiesel to fossil fuel – B99 – gains the greatest reward.

A spokesman for D1 Oil, a UK based biodiesel producer, said that the subsidised US exports had gathered a head of steam over the past twelve months and would be difficult to stop, especially in the short term.

“When the US biodiesel – B99 – arrives onto the pump in the UK it has around £150 per tonne price advantage over our produce.

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