Foreign Affairs Minister Héctor Timerman (photo courtesy of Casa Rosada)

The European Union will impose punitive import tariffs on Argentine and Indonesian exporters of biodiesel for allegedly selling it in the EU below cost, a practice called ‘dumping’.

The Argentine Foreign Affairs Ministry released a statement today saying: “Unable to compete, Europe is pushing an aggressive protectionism against Argentine biodiesel.” The statement added that this is part of an “escalation of the historic European protectionism, aggravated today by the crisis that the European Union is going through.”

The EU started this investigation into dumping after the European Biodiesel board, a group representing 62 companies from 19 countries of the EU, filed a complaint in 2012. The board has complained in the past that Argentina’s trade policies give domestic companies an unfair advantage.

Argentina is the world’s biggest exporter of biodiesel, with US$2 billion worth of the fuels sold in the international market in 2011. Together with Indonesia, the two countries make up 90% of EU biodiesel imports. The tariffs will be between 6.8 and 10.6% for Argentine biodiesel imports and will be effective Wednesday.

Argentina has requested talks with the EU, but if the problem is not resolved in 60 days, Argentina can request a World Trade Organisation (WTO) settlement panel.

“Last year Spain had to modify a rule that prohibited the importation of Argentine biodiesel as a result of the claim of our country in the WTO,” the statement said referencing a time in 2012 when Argentina successfully overturned a similar measure involving Spain.

“The Argentina Government considers these restrictions on the entry of Argentine biodiesel and other products in the European market as obstacles to a climate of constructive dialogue,” it added.

In this crazy world of climate change, alternatives to fossil fuels are high on government agenda.

Using biodiesel as an environmentally-friendly form of energy is an increasingly popular option, but using crops for fuel can have implications for food supplies and prices. With inflation in Argentina already a serious problem, how enthusiastic are the general public for the government enforcing more biodiesel energy?

The Argentina Independent went out to find the opinion on the street. Photos by Beatrice Murch.

Diana Maingand, 47, assistant producer, Retiro

“Food is really expensive at the moment. I do not know a lot about biodiesel but I feel like it is more complicated than just food prices rising. Food depends on the countries; some countries have an abundance where as others do not. There are no answers so far, the whole thing is still in process.

“The problem with food varies with the people, the decision is not easy. Some people can pay that little bit more but many cannot and for this there no easy solution. To say for example we have the right to eat meat, but rearing animals takes up a lot of land, whereas if everyone were vegetarian, we would all have a lot more food. To be more sustainable, we have to change a lot more than just biodiesel.”

Franco Marcese, 50, builder, Quilmes

“In reality, I know almost nothing about biodiesel. I know it is not petroleum, it is a fuel made from vegetables, it is the future. But food prices are high. Everything is expensive, everything. Compared to other countries that have higher incomes than Argentina, it is more expensive.”

“There are other measures for sustainability, like electric cars, things like this that also serve as alternatives. The first thing is that food prices do not rise, because if that is not a country’s first priority, there will be problems.”

“There are countries that have higher production levels, ones with fields especially for biodiesel. But look, every farmer is going to try and earn more so if they can produce a crop for biodiesel which earns more than selling to shops, they will. And for this, we must control such things.”

Robina Olazar, 29, cleaner, Barrio Norte

“I know nothing about biodiesel but it is important that food prices do not change. We are living in difficult times, there is a lot of poverty, lack of jobs and everything is expensive. The environment is beautiful, and you learn a lot from interacting with the environment; it’s the best. But it [deterioration] is inevitable, it is inevitable.”

Pablo Mesedes, 26, technician/access control, La Plata

“The price of food in this changing economy is relative, it varies a lot, and we must get used to this. I know of biodiesel, I do not know about the exact process but there are a lot of campaigns about implementing it.”

“But I agree with biodiesel, if we do not have a healthy planet, we will not have a house, if we do not have a house we will not have anywhere to live. I am in agreement with alternative fuel, we need to have the right politics, to make change even if it does change the price of food.”

Martin Cabral, 27, voice actor, Las Floras

“I know a little about biodiesel and the environment is definitely the most important thing to worry about.  I want the world to be inhabitable for my children as well as my grandchildren.  Prices are high but Mother Earth is more important, we have nothing if we do not protect the world we live in.”

Transportation of Biodiesel (Photo: Nuno Morão)

Its supporters say the industry helps the environment, creates jobs, and boosts economic growth. But biodiesel fuel remains a polemic issue, especially in South America, where its use has grown considerably in recent years.

In Argentina, the industry has grown by 2250% since 2006 and has become the world’s fourth largest biodiesel producer, according to the Argentine Chamber of Renewable Energy. Growth is expected to be propelled further by a law approved last year stating that all petroleum derived fuel in Argentina should include 7% of biodiesel. Investors, drawn to Argentina’s large agricultural sector, relatively cheap land and inexpensive labour, are ploughing millions into biodiesel production.

According to Roberto Urquía, the former senator and owner of the Aceitera General Deheza (AGD), one of the biggest producers of biodiesel in the country, by 2015 biodiesel production in Argentina will reach 7million tons, almost triple the current output.

Carlos St James, CEO of Rubenius Argentina SA and president of the Argentine Renewable Energies Chamber, believes the government is starting to pay more attention to cleaner forms of energy with the development of wind and solar panels and of course, the biodiesel industry.

St James believes Argentina has an extremely efficient production of biodiesel and right now figures show the country can produce 2.5 million tons by the end of this year, which will bring US$3bn to the economy. “It is good for the environment and will also create many jobs,” he says.

Food vs Fuel

Despite the supposed economic and environmental benefits of increased biodiesel production, the industry has its critics, largely due to its potential impact on food supply.

99% of the biodiesel produced in Argentina is the first generation type, which means it is made out of food-producing plants like soybeans, canola and palm trees. The national production focuses mainly on the oil derived from soybeans.

The use of first generation biodiesel divides opinion since the biodiesel and food industries will be competing with each other to get the material for their final products. If more crops are processed as biodiesel, fewer are harvested for food, causing prices of basic foods to rise.

Soy Plant (Photo: UGA College of Ag)

“In a world with hunger it is unjust to use food to produce fuel”, states St James. On the other hand, he says that “the food vs. fuel debate doesn’t apply to the soybean biofuel,” which is the one mainly produced in Argentina. The reason is that the sectors require different parts of the soybean plant: 85% is protein and used to produce food, whereas soy oil is used for the production of biodiesel is the rest. “Argentina is producing more and more soy, which complements food production. This means the more soy you have, more food you get.”

However, even if most of the soybean biodiesel crops will also supply the food industry, it does not mean that there will be no shortage of agricultural production in the long run.

There are two potential soy crops per year and the ideal to have a healthy soil is to alternate crops, since the soybean plantation takes a lot of nutrients out of the soil. The farmers in Argentina are planting soybean crops over and over again, which might lead to infertile lands and scarcity of agricultural products for both food and biodiesel in the future.

Furthermore, Argentina only consumes a small fraction of its national soy crop (most is exported to China), so increased soy production at the expense of other crops such as wheat and corn can affect national food supply.

Efforts are being made to lessen the food vs fuel debate. A second generation of biodiesel is made out of non-food products such as leaves, husk and stems as well as other non-food crops, such as grass, though this accounts for just 1% of biodiesel production in Argentina at the moment.

Meanwhile, so called “advanced biofuels” are being developed, promising to provide more effective and renewable energy without diminishing food crops. For example, the Gliocladium roseum, a fungus found in a Patagonian forest in 2008, has in its composition several different molecules of hydrogen and carbon, which are also found in diesel. According to professor Gary Strobel from the Montana State University, “this is the only organism that has ever been shown to produce such an important combination of fuel substances.”

This means Argentina might have a great economic advantage in the next few years with the development of clean energies. “This fungus can even make these diesel compounds from cellulose, which would make it a better source of biofuel than anything we use at the moment,” adds the scholar.

Prioritising the Domestic Market

With these new forms of biodiesel still undeveloped, first generation biodiesel production is set to continue growing in Argentina. Indeed, despite concerns about use of food crops for fuel, for now, biodiesel producers in Argentina are more worried about overcoming barriers to trade.

AGD's Exportation Figures for 2010 (Photo courtesy of AGD)

Santiago Sanchez, one of the researchers at AGD, says that the company exports more than 80% of their output to over 80 countries, especially the EU. According to Sanchez “the constant changes to the commercialising laws of agricultural products is the main concern of the company when it comes to the internal market.”

In addition, some European countries such as Spain are trying to defend their domestic market by adopting protectionist measures against Argentine soy and biodiesel.

With this in mind, the government is trying to prioritise the internal market. According to Javier de Urquiza, coordinator of the National Bio-fuel Programme. “The message now is ‘less exports and more domestic market’. This is the big challenge for the sector,” stated Urquiza. Minister of federal planning, Julio De Vido, also declared last month that “the profits generated by the bio-fuels should stay [in the country] to sustain growth.”

One idea to stimulate local demand is to again increase the minimum amount of biodiesel in petroleum-derived fuels to 10%, something currently under consideration in government. However, St James says if there is more than 7% of biofuel some vehicles might suffer from engine problems. “The automotive industry is not ready for that” as the engines are not prepared to receive over a certain amount of biodiesel. “That is their dirty little secret.”

Lead Photo by Michele Molinari

Following 48 hours of rest, president Cristina Fernández de Kirchner returned with an optimist speech on economy and progress in the country, “we are on the right track…Argentina is prepared for the global crisis,” she stated.

Without referring to her current health problems, she spoke of her husband, the late and former president Néstor Kirchner, and his commitment to presidency despite his health conditions.

The president inaugurated a wind turbine factory in Florencio Valera, the first national plant producing such components. During the event it was also announced that a new biodiesel plant will be opened in La Pampa and that there will be investment in to building the most significant truck tire factory in Latin America.

In addition, the first ever Blackberry manufactured in Argentina was demonstrated.

The new developments in industry are promised to provide over a thousand new job opportunities, generate exports and substitute current imports.