Europe biofuel group threatens action on U.S. subsidy

MILAN (Reuters) - European biodiesel makers said on Tuesday they may take a legal action against what they see as unfair subsidies for U.S. biofuel which threaten their business.

Biodiesel makers in many European Union countries have come under pressure from growing sales of cheap U.S. biodiesel made with the help of subsidies, the industry association European Biodiesel Board (EBB) said in a statement.

Price competition has eroded margins for EU producers, forcing some out of business and would lead to stagnation or even decline in EU biodiesel output this year, the EBB said.

"This is why, unless the situation is solved very shortly by the U.S. legislature, the EU biodiesel industry will initiate a comprehensive legal action against this unfair trade practice, in the form of a joint anti-dumping and anti-subsidy complaint, possibly supported by a WTO complaint," EBB said.

Earlier this year, the EBB complained to the European Commission about the practice which allows U.S producers to cash in twice for subsidies -- at home and in the EU.

Under the U.S legislation, biodiesel can be subsidized up to $264 per cubic meter, or about 200 euros per tonne, by adding a "drop" of mineral diesel to biodiesel, EBB said.

U.S. producers can claim the maximum subsidy for a B99.9 blend which contains 99.9 percent biodiesel and 0.1 percent fossil diesel. Such a blend can then be exported to Europe where it is eligible for European subsidy schemes.

EBB said that in most cases B99 blends are sold in the European market as "pure biodiesel" and at a substantial discount, in some cases at a lower price than the one paid by the EU producers for raw materials to make biodiesel.