Ethanol tariff induces debate at NEC

By Tom Bryan | February 18, 2014

It is rare that a conference panel needs to be truly moderated, but the rabble-rousing conversation that ensued between international ethanol industry representatives at the National Ethanol Conference kept Bliss Baker busy Tuesday morning. The spokesperson for the Global Renewable Fuels Alliance managed a provocative 45-minute discourse between ethanol industry leaders from the United States, Canada, Brazil, India and Europe. The conversation quickly grew heated over standing disagreements on the European Union’s import duty on U.S. ethanol.

Bob Dinneen, head of the U.S.-based Renewable Fuels Association, said in a speech earlier on Tuesday that Europe would benefit from dropping the tariff and allowing greater access to cheap American ethanol. Rob Vierhout, the head of Europe’s principal ethanol trade association, ePure, fired back. “We had clear evidence of dumping,” Vierhout said. “We are for fair trade, but if you start dumping, we have instruments at our disposal that can be used.”

Dinneen countered, saying no evidence of dumping was ever found, and it will only be a matter of time before Vierhout’s ethanol producer members are forced to face the reality of a more open global market. “The fact of the matter is that U.S. ethanol is low-cost,” Dinneen said. “And [Europe] hasn’t been able to meet its own demand. You needed to turn to imports.”

Dinneen continued, “You may have bought yourself a year, but in the end we are going to have fair trade.”

The debate quickly became lopsided, as Dinneen was supported by a strange bedfellow in Joel Velasco, longtime representative of UNICA, Brazil’s chief ethanol association. “The truth is [Vierhout] has never met a gallon of ethanol he has liked if it wasn’t made by one of his producers,” Velasco said, affirming that the once contentious ethanol trade relationship between the U.S. and Brazil has softened in the past couple of years, largely after the U.S. ethanol tax incentive ended and the ride-along import tariff disappeared with it.

Now working together to build global markets for ethanol, Velasco and Dinneen found themselves largely agreeing with one another Tuesday, while jointly urging Vierhout and his EU members to rethink their market ideologies. “There is now lots of trade between [Brazil and the U.S.],” Dinneen said. “And we’re working together to build markets.”

Vierhout defended his position, reminding the other panelists that the EU imports more than a quarter of the 5 billion liters (1.3 billion gallons) of ethanol it consumes annually, even though it has the production capacity to make as much as 8 billion liters (2.1 billion gallons). “We import 27 percent of our ethanol. Do you?” he asked the others. “We can easily meet the demand. I don’t want you to shut down plants, but that’s what’s happening to us. We’re shutting down plants.”

Before the EU trade dispute reared up, Baker engaged the panel on the topic of managing the nuances of waging battle against its principal patron, Big Oil. “It’s complicated because they’re our customer,” Baker said, asking the panelists whether or not the oil industry truly wants ethanol “to disappear.”

Velasco took the high road. “It’s not always like that,’ he said explaining that Shell is a major player in the Brazilian biofuels industry. The Canadian Renewable Fuels Association’s Scott Thurlow agreed, saying the oil industry can’t be subject to a blanket characterization as an enemy to ethanol. “They see the value of the product, but that’s not to say that there aren’t fierce opponents to our industry,” he said. “There are.”

Dinneen reminded the audience that the original renewable fuels standard, passed in 2005, was the result of a historic collaboration between the biofuel and oil industry lobbies. Dinneen and the ethanol industry lost the American Petroleum Institute’s support, however, two years later. “They were less enthusiastic about the 2007 bill, which took the RFS from 7.5 billion to 36 billion gallons,” Dinneen said, adding, “They are our customers at the end of the day, but this is a serious battle. They are trying to keep their market share and we are trying to take it away. They would like to keep ethanol in its octane box, but we can do more than that.”

Velasco said Brazil is contemplating a move up to 27 percent ethanol in its gasoline—an aspiration Dinneen questioned—and he said consumers, in both Brazil and the U.S., are ready for more ethanol. “Let’s not be pessimistic (about the oil industry resistance to greater ethanol blending),” He said. “The U.S. has conquered 10 percent of the market and is on its way to 15 percent. We can do this.”

When asked about the world’s future ethanol markets, Velasco said he believes Asia offers the largest near- and long-term growth opportunities for ethanol imports. “That’s where the biofuels industry needs to focus,” he said. “A small sliver could equal huge gallons. We need to expand the scope of nation’s we focus on.”  

Thurlow concurred, but said it’s not just growing overseas markets that will drive ethanol’s next growth wave, but the demand for low-carbon fuels in a world that’s increasingly accepting of climate change and finding ways to monetize the carbon differential of clean energy. Wary of carbon-reduction schemes that support indirect land use change theory, Dinneen tentatively agreed with Thurlow, saying, “We just need to make sure that any carbon policy is based on good, sound science.”      

A fifth panelist, Jayant Godbole, president and director of Praj Americas Inc., provided a brief overview of ethanol production and use in India. And he stayed out of the fray.