Biofuel boondoggle: US subsidy aids Europe's drivers
A maneuver called 'splash and dash' cost US taxpayers perhaps $30 million last year, but the charges are rising fast.
from the June 8, 2007 edition
Page 2 of 3
The US importer of the load applies to the Internal Revenue Service for the credit – a dollar for each of the 9 million biodiesel gallons, Mr. Baize calculates. The next day the tanker can set sail – dash – for Europe. There, the US importer resells the biodiesel, taking advantage of European fuel-tax credits that, in effect, keep biodiesel prices above US prices.
"Splash-and-dash is something Congress never intended," says Baize. "It's bad for taxpayers and it ought to be fixed now."
Signs of splash-and-dash began to show up last fall. But efforts to fix the problem only began taking shape in Congress this spring after European biodiesel manufacturers complained in March about the subsidized imports and the US biodiesel industry also complained a month later.
"This [splash-and-dash] is something our people are aware of and that's on their radar screen," says a staff aide on the House Ways and Means Committee, who requested anonymity because he was not authorized to speak to the press. "It's one of the issues that's driving closer scrutiny."
European officials are also unhappy about the practice. Such "touch and go" maneuvers could quickly become a much larger problem, warned Raffaello Garofalo, secretary general of the European Biodiesel Board, in a March 19 letter to the European Trade Commissioner.
European manufacturers are worried about all US biodiesel imports – not just the splash-and-dash variety – because the subsidized fuel is flooding their markets, cutting into their domestic biodiesel business and lowering prices.
"We want really to get a fair trade and want this unfair subsidy to stop," says Mr. Garofalo in a phone interview. "The US products get subsidies in the US, and in Europe, a double subsidy."
The industry is calling for trade sanctions against the US.
So rich is the US subsidy, however, and awash in biodiesel is the European market at present, that a third form of imported biodiesel is now reportedly hitting European shores – at US taxpayer expense. European biodiesel producers themselves are shipping fuel to US ports to get the US blenders credit and then bringing it back to Europe for sale, according to British press accounts.
But US biodiesel manufacturers and Congress may not be in a hurry to close the loophole, some insiders say. That's because the blenders credit not only benefits splash-and-dash traders, it gives US producers of soybean-based biodiesel a distinct export advantage, industry insiders say.
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