EU imposes duties on Indonesian biodiesel

Brussels

THE European Commission on Tuesday imposed countervailing duties of 8 per cent to 18 per cent on imports of subsidised biodiesel from Indonesia, saying the move was aimed at restoring a level playing field for European Union (EU) producers.

"The new import duties are imposed on a provisional basis and the investigation will continue with a possibility to impose definitive measures by mid-December 2019," the EU executive said in a statement.

Last week Indonesia's trade minister said he would recommend to an inter-ministerial team a 20 to 25 per cent tariff on EU dairy products in response to the EU targeting the country's biodiesel, adding that he had asked dairy product importers to find sources of supply outside the 28-nation bloc.

The EU duties are another blow to Indonesian biodiesel producers after the bloc said in March that palm oil should be phased out of renewable transportation fuels due to palm plantations' contribution to deforestation.

The European Commission, which coordinates trade policy for the EU, launched an anti-subsidy investigation in December following a complaint by the European Biodiesel Board.

It said its investigation showed that Indonesian biodiesel producers benefit from grants, tax benefits and access to raw materials below market prices.

The EU biodiesel market is worth an estimated nine billion euros (S$13.92 billion) a year, with imports from Indonesia worth about 400 million euros, it said.

Indonesia Biofuels Producers Association (APROBI) chairman MP Tumanggor told Reuters that companies impacted by the anti-subsidy duties will likely be forced to renegotiate their contracts with buyers in the EU and it may reduce 2019's biodiesel exports.

"We initially targeted 1.4 million tonnes exports this year to Europe, that will not be reached," Mr Tumanggor said, adding that exports may only reach around one million tonnes.

He said the group is in consultation with the government to respond to the duties decision by the EU.

Indonesian officials did not respond to requests for comment from Reuters on the countervailing duties decision.

In a separate report, Indonesia's Energy and Mineral Resources Ministry said biodiesel with 30 per cent palm diesel blend passed a series of cold temperature tests this week as the government aims to increase the palm content in biodiesel early next year.

Indonesian President Joko Widodo said earlier this week he wants the so-called B30 standard to be adopted in January next year, up from the current B20 standard which contains a 20 per cent blend of palm fatty acid methyl ester (FAME).

Mr Widodo said the higher blend of palm in biodiesel should be able to address the problem of high energy imports and slowing global demand for palm by increasing domestic consumption of the vegetable oil.

The energy ministry said a number of passenger cars were tested in Java's highland region where they were left in cold temperatures for up to 21 days.

"The start ability test results show that the cars can be started normally. This proves that the B30 flows well in the engine even though it has been left for 21 days in cold conditions," Dadan Kusdiana, head of the research department at the energy ministry said in the statement. The B30 fuel is expected to go through more tests until October.

Energy ministry estimates that consumption of FAME could increase by more than 50 per cent next year with the implementation of the B30 standard. Indonesian palm oil exports are under pressure after the European Union said palm should be phased out from transportation fuels in its market due to its contribution to deforestation, while India, the world's top vegetable oil buyer, has imposed an import tax on palm oil. REUTERS