There is no doubt that the US biodiesel industry, by all accounts successful and growing a few years ago, has encountered structural problems. 

The global economic crisis has obviously played it's part, but there are two additional major factors that have contributed to an accelerated slide in the fortunes of this industry:

One factor is indirect and subtle feedstock pricing manipulation by certain large investment banks, and vegetable oil processors that both simultaneously invested in upstream veg oils and downstream biodiesel production facilities. This was employed as a measure to control supply chains and markets as well as to hedge and limit competition. The main driver for many of these commercial market entrants was, and still is, higher vegetable oil prices. Even though biodiesel is known to reduce carbon emissions by 60% compared with regular diesel, climate change and carbon reduction is still secondary to short term profit for these players. Their actions in the market have demonstrated that they are not interested in building a sustainable biodiesel industry. Independent biodiesel producers without access to large amounts of working capital and sophisticated risk management resources have found it difficult to survive in an increasingly volatile market where traders were the only ones making money. In this kind of environment traders don't create real value, oftentimes they destroy it. The traders rely on banks and working capital facilities to play - and as we know this pool of cash and credit dissappeared. 

What has largely assisted in overcoming these albeit, indirect and disingenious attempts to scupper the biodiesel market in the US has been the $1 per gallon blending credit, provided by the US government that allowed biodiesel to be exported as B99 to Europe. Notwithstanding freight charges and previous import duties of 6.5%, European biodiesel buyers and traders were able to procure US biodiesel imports into Europe at significantly discounted rates compared with locally produced EU biodiesel. The US subsidy coupled with the European country subsidies ensured that there was sufficient demand and profit in the supply chain to enable the survival of most US biodiesel refineries with an ability to manufacture quality products and market these directly.

From 2007, and even though EU biodiesel inclusion targets were (and still are) far from being met, the European biodiesel producers cried foul of the "cheap US imports" and blamed these for most of their economic difficulties. With significant lobbying in Brussels and and at the EU Commission - hefty import tariffs have been imposed on B99 biodiesel from the US, and the market for US exports to Europe has now essentially evaporated.

This effective ban on B99 exports to Europe is a second major factor for the US biodiesel industry falling on hard times. The generous US subsidy for locally produced biodiesel which was intended to stimulate US biodiesel production has therefore largely been unsuccessful. This is unfortunate since the US government subsidy was actually making biodiesel cheaper for Europeans. However, the benefits of the lower priced imported US product was not passed onto the European motorists. By blending this product into the larger EU diesel and biodiesel pools, the profit was essentially gobbled up by the traders and the European buyers at the large oil companies - instead of being passed on to their customers.  Creating a sustainable market in Europe for less expensive biodiesel would have simultaneously increased the global uptake of biodiesel. This appears, for now, to have failed.  

Therein lies the rub: Carbon emission reduction and climate change is a global problem, and the view taken by the EU Commission - which in effect has turned down US monetary support, benefitting EU motorists and citizens - appears extremely shortsighted and self serving in favor of the EU lobbyists. The EU decision on B99 could easily be reversed. 

Policing by the EU Commission of it's own biofuel supply chains, buying practices and following the money trail - to ensure fair distribution of profits, including to their motorists, would be an ingenious step in the right direction. Buyers ultimately set and accept the price for "dumped" products. 

In the meantime, the US Administration could look closely at the structure of their own Biodiesel industry and limit unfair and anti-competitive behaviours in the integrated veg oil supply chain structures. In short the US Biodiesel industry needs its own voice in Washington. Soy beans do not equal biodiesel. 

One positive that can be taken out of the negatives is the realization that better, non-food based and sustainable feedstocks for biofuels such as algae, waste oil and biomass are essential. There has been renewed focus on these areas lately, but large scale commercialization is still years away. Let's hope the biofuels industry is able in the meantime to survive it's harsh challenges by inclusive, responsible and sustainable actions on the part of the oil industry, financial institutions and governments.   

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