ECIPE, 2009
How Europe's biofuels policy and the Renewable Energy Directive violate WTO commitments
This paper examines the trade-policy consequences of current approaches in the European Union towards biofuels. The EU uses a broad range of measures to subsidise the production of biofuels in Europe and to protect them from foreign competition. It is one of the biggest manifestations of "green protectionism". Green protectionism is not about environmental policy itself, but about adding non-environmental objectives that are discriminatory, or overly trade restrictive in intent and/or effect, to environmental policy. Tariffs and subsidies have been part of the tool box for some time. Now the EU is also about to adopt a technical regulation in the Renewable Energy Directive that runs the risk of effectively cutting off market access for foreign competitors of European rapeseed oil. Unless it is changed, this measure is also at serious risk of running afoul of Europe’s obligations in the agreements of the World Trade Organisation (WTO). Europe’s tariffs on biofuels vary. Ethanol is protected with tariff equivalents between 39% and 63%. Biodiesel is less protected by tariffs; vegetable oils for biodiesel production have tariffs at 3.2%. Biofuels production in Europe is heavily subsidised. Support has also been increasing in the past years and today stand at approximately EUR4 billion. Another way to look at subsidies is that every litre of ethanol consumed in Europe gets 0.74 EUR and every litre of biodiesel 0.5 EUR.
