July 26, 2008

 

Offer to remove Brazilian ethanol tariff may end EU's ethanol industry

 
 

An EU offer to cut tariffs on its Brazilian ethanol imports on the WTO trade talks may sound the death knell for the region's ethanol producers.

 

Brazil uses sugarcane to make ethanol, which incurs a much lower cost than EU ethanol producers, who use grains.

 

The proposal made this week would cut tariffs on 1.4 million tonnes of ethanol imports annually by 2020, worth US$1 billion each year.

 

Calling the offer 'unacceptable', Robert Vierhout, secretary general of the European Bioethanol Fuel Association, said Brazilian imports would wipe away the entire European production.

 

The EU ethanol industry now has the capacity to produce about 3.5 million tonnes annually, the industry group says. That figure is expected to rise quickly, as another 2.7 million tonnes of capacity is under construction.

 

Pure ethanol imported to the EU faces a tariff of EUR0.19 a liter.The tariff cuts proposed by the EU would apply to smaller amounts of ethanol imports in the beginning and gradually increase 1.4 million tonnes in 2020, EU officials said.

 

The EU is debating a measure that would require 10 percent of the bloc's transportation energy to come from biofuels or other renewable sources by 2020.

 

EU trade commissioner Peter Mandelson made the offer in the hopes that Brazil would offer to lower tariffs on imports of industrial goods from the EU and other developed countries.

 

However, Brazil does not seem to be biting.

 

Brazilian Foreign Minister Celso Amorim, seemed uninterested, Mandelson said on his blog.

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