How Does Biodiesel Contribute to the Eu’s Market?
How does biodiesel contribute to the EU’s market?
It is known that energy consumption mostly depends on oil (petroleum). The oil reserves in the world however are very limited, while the global demand for energy is progressively increasing. In other words, the most dependable energy in the world will become scarce due to the high demand. It is therefore necessary to overcome this scarcity problem by developing alternatives of energy to substitute oil in the future—biofuel, for example.
Biofuels can be described as solid, liquid, or gas fuels derived from biomass[1] and any renewable energy sources (Patil; Tran; Giselrød, 2008: 1188-1189). There are four main features of biofuels (Koizumi, 2014: 1-2): 1. Biofuels are renewable fuels; 2. Biofuels utilization can contribute to energy security; 3. Biofuels expectedly generates fewer greenhouse gas emissions; and Biofuels can contribute to boosting agricultural, rural, and social development. Currently, there are two kinds of biofuel produced on an industrial scale, biodiesel and bioethanol. According to Licht trade data on world biofuels production in 2012, bioethanol production is much higher than the biodiesel production[2], yet in the other hand, biodiesel trade share is much higher.
EU is the largest biodiesel producer in the world.[3] By producing biodiesel, EU is meeting a major opportunity for its economy. Producing biodiesel can help EU’s economic development, for example, biofuels production generally increases the demand for agricultural output and this eventually impacts the incomes and returns in agriculture (MosChini; Cui; Lapan, 2012: 277-278). Also, particularly, biodiesel provides new job opportunities in rural areas and within industrial companies (EU, 2006: 5). Other than that, biodiesel has been a big contribution to the EU market. Biodiesel is the most important biofuel in the EU. Approximately, biodiesel represents 80% of the total transport biofuels market (USDA, 2015). Therefore, the demand for bioethanol and other gasoline substitutes will be restrained slightly. In addition, biodiesel imports are mostly imported from Argentina and the US. However, the B99 (blends of 99.9% biodiesel with 0.1% mineral oils) biodiesel export from US has been a controversial issue for several years—this is due to the lower prices of B99 than the biodiesel produced in the EU, which actually the US producers had claimed maximum subsidies for the blends—and afterwards, an anti-dumping duties were imposed on the US biodiesel exports in 2009 (Johnson; Pacini; Smeets, 2012: 4-8).
Why does EU feel “injured” by Indonesia’s biodiesel production?
Apart from the US case (2009) above, the EU imposed anti-dumping duties on biodiesel imports from Indonesia as well. Throughout a 15-month investigation, the European Commission affirmed that Indonesian biodiesel producers were dumping their products on the EU market. As founded in the investigation, Indonesian biodiesel producers are able to get biodiesel raw materials at prices that are lower than the world market prices available for other biodiesel producers, particularly EU (European Commission, 2013: 1-2). Furthermore, the investigation also found out that the dumping margin for Indonesia was between 8.8% and 23.3%. This implies that the Indonesian biodiesel imports had eventually negatively affect the EU biodiesel producers’ financial.