January 9, 2012

 

US soy traders seek energy law deals with the EU

 

 

To defend their grip in the EU biodiesel market, US soy exporters are trying to persuade individual member states that US soy meets the sustainability criteria of an EU-wide energy directive.

 

That would ensure that biodiesel producers in the EU continue buying US soy for energy production because it would allow them to meet the directive's sustainability mandate and thereby remain eligible for government subsidies.

 

US soy exporters are focusing their effort on individual member states because they have failed to convince the European Commission to enter an interim arrangement under which it would consider US soy to meet the sustainability criteria of the Renewable Energy Directive (RED).

 

The directive states that biofuels must not be made from land that was converted from a designated high-biodiversity value category after January 2008. This includes primary forest, highly-biodiverse natural grasslands, and other designated habitats.

 

US soy are currently not considered to comply with the RED for two reasons. The first is that US producers do not comply with any EU-sanctioned certification schemes to monitor the conditions under which soy is grown and the steps of the supply chain before biofuel producers purchase it.

 

The second reason is that the EU has taken the view that biodiesel produced from US soy falls short of its requirements for greenhouse gas savings. It based this evaluation on Brazilian production data, however, and the US industry has already submitted its own data to prove that it meets the requirements.

 

This data is under consideration by the EU, and US industry sources indicated that the certification requirements now represent a bigger hurdle.

 

US industry overtures to the member states have the implicit endorsement of the European Commission, and their efforts may bear fruit mainly because most member states have not yet implemented the directive despite a 2010 deadline for doing so. Directives, unlike EU regulations, need to be transposed into national laws by member states' legislatures before they become effective.

 

The United States has a number of domestic growing requirements in place for farmers that are meant to ensure crops are cultivated in a responsible way, and the US soy industry hopes that member states will be able to officially recognise these schemes as ensuring sustainability.

 

Because all US growers must comply with these federal programs, the industry also argues that the supply chain traceability requirements under the RED are unnecessary and overly burdensome - although it is still unclear whether it will be able to convince member states on this point.

 

The European Commission appears to be sticking firmly to idea that member states must be able to trace the movement of soy under a so-called "mass balance" system, although it has shown flexibility on when soy suppliers need to supply documentation.

 

Maintaining the European biodiesel market is crucial for US soy growers because they have lost the food market. This is due to the fact that most US soy is genetically modified (GM) and therefore subject to European labelling requirements.