Bio-Fueling a Trade War

Europe is facing the twin challenge of trying to get economic growth back on track while being a good steward of the environment. These goals are not necessarily in conflict with each other—unless of course the protectionists get in the way. The European Commission in June adopted regulations about the international trade of green energy technologies that might trigger a global trade war that would harm the economy and the environment in the process.
The “Renewable Energy Directive” pushes the European U-nion to generate increasing amounts of energy from green, renewable sources, including biofuels. A good idea in principle. But European biofuel producers—fearful of increased competition from the U.S. and Asia—succeeded in pressuring Brussels to restrict imports of biofuels from abroad. The Commission wants to impose onerous production standards on Asian and Western Hemisphere biofuels that wouldn’t apply to European producers. What’s more, a coalition that includes European biofuel producers and NGOs are pushing the EU to use the so-called Indirect Land Use Change policies to further discriminate against U.S. biofuels. Indirect Land Use Change is a fundamentally flawed concept whereby European government bureaucrats would seek to punish biofuel producers—in this case American—for the supposed indirect impact that their production has on land use and food prices in the developing world. The problem is that this is virtually impossible to calculate accurately and objectively, which leaves too much room for protectionist tinkering with the numbers.

Biofuel producers, particularly in Germany, also complain that large American agribusinesses are “dumping” subsidized biofuels on the market. No doubt U.S. producers enjoy generous government handouts—but so do their German competitors. Moreover, Europe’s consumers would certainly benefit from access to cheaper clean energy sources precisely when their economy needs a boost. While German producers might chafe at the competition from America, Europe’s automobile drivers and manufacturers who rely on biofuels as a key power source would be the beneficiaries.

Meanwhile, Europe’s biofuel producers have argued also for limiting Asian imports. Asian producers can’t be accused of dumping, so instead European producers argue that their fuels aren’t environmentally friendly. Their claims are amplified by NGOs such as Greenpeace and Friends of the Earth. But these allegations don’t stand up to scrutiny.

Wall Street Journal, through Google News