Argentina biodiesel: taxes, domestic mandates and production

An update on recent biodiesel-related developments in Argentina
By Ron Kotrba | April 30, 2014

Reports have been circulating recently about the Argentine government moving to temporarily strike a 22 percent tax exemption on biodiesel used in thermoelectric plants and a 19 percent tax exemption on biodiesel for on-road use, measures to help the stymied industry after the EU, Argentina’s major biodiesel export market, installed tariffs last year to help prop its own hurting industry.

According to Carlos St. James, president of the Latin American & Caribbean Council on Renewable Energy (LAC-CORE), biodiesel used for thermoelectric plants has been subject to two taxes, a 19 percent tax and a 22 percent tax “totaling a whopping 41 percent,” he says. Imported fuel oil, typically used for thermoelectric plants, is exempt from both these taxes, St. James says, so the elimination of taxes would make Argentine biodiesel more competitive.

“However,” St. James tells Biodiesel Magazine, “biodiesel usage in thermal plants to make electricity represents only 14 percent of the biodiesel market versus 50 percent for the domestic automotive industry, so the measure is a good move, but not nearly enough to make a significant difference.” 

St. James adds that biodiesel use for automotive blends will still be subject to the 41 percent in taxes, and also competes with imported fuel oil.

“This move is a step in the right direction,” St. James says, “but far more needs to be done if the Argentine biodiesel industry is to survive. The law was written primarily for small producers, yet they have mostly closed due to lack of working capital financing, and their share has been taken up by the large, integrated biodiesel producers, which were set up primarily as exporters.”

Other measures taken in Argentina to spur demand for domestic biodiesel include boosting the biodiesel blend mandate from 8 to 10 percent for the on-road sector, and from 2 to 10 percent in the thermoelectric power generation sector. Both measures went into effect Jan. 1.

Depending on what production numbers are leveraged, in 2013, the U.S. produced roughly 1.8 billion gallons of biomass-based diesel (biodiesel and renewable diesel). Brazil, on the other hand, produced 2.567 million metric tons (770.7 million gallons) of biodiesel, and Argentina biodiesel production fell to 2.026 million tons (608.2 million gallons). Production in the U.S. and Brazil increased over the previous year, but in Argentina biodiesel production in 2013 was down from 2.4 million tons (730.1 million gallons) in 2012.

“In 2013, Argentina lost its place in world ranking from second largest producer in the world to third,” St. James says. According to LA-CORE, the U.S. leads global biodiesel production, followed by Brazil and Argentina.