The European Union is launching formal anti-dumping and anti-subsidy investigations into imports of biofuel from the US, European sources said.
Biodiesel is produced from vegetable oils such as rapeseed
The move came after the European Commission investigated industry complaints that US support for biofuel producers was hitting Europe's industry.
The European Biodiesel Board called for the investigation starting Friday, June 13 two months ago, complaining that the European market was being flooded with US exports of a 99-percent biodiesel blend, which can receive a subsidy of 192 euros ($300) per ton.
On top of the US aid, exports of the so-called B99 blend are eligible for a subsidy in Europe as well.
Close to breaking point
The lobby said the subsidies were squeezing European producers' profit margins, putting most of them out of business and leaving capacity idle.
According to the Times Online, producers have implored Brussels to carry out the inquiry as quickly as possible to save the European industry.
The commission feels that the complaints fulfil the requirements of the EU's basic anti-subsidy and anti-dumping regulations in order to initiate further proceedings, one European source told AFP.
The commission will look at US federal excise and income tax credits as well as federal grants to finance increased production capacity and state-level subsidy programmes.
It is expected to have made provisional findings by March next year, which it will then present to the 27 EU member states, the sources said.
If it transpires that unfair subsidies and dumping are occurring, then US imports will face a steep hike in duties.
The biofuel backlash
Biodiesel is produced from vegetable oils or fats -- including used cooking oils -- with properties similar to petrol-based diesel.
The use of biofuels has come under growing attack recently in both the United States and Europe, where they have been blamed for helping to drive food prices to record highs by using up farmland that could be used for food crops.
As a result, the European Union has faced growing pressure to reconsider a target for biofuels to make up 10 percent of all vehicle fuels in the 27-nation bloc by 2020.
For the European industry the stakes are high, as biodiesel makes up 80 percent of the EU's total production of biofuels.
The large majority of biodiesel imports to Europe comes from the United States. The amount has risen from 7,000 tonnes in 2005 to around a million tonnes last year.