The EU continues its reign as the world's largest biodiesel producer, but nearly two-thirds of the region's installed production capacity is currently idle. According to the European Biodiesel Board, the EU produced approximately 9 million metric tons of biodiesel in 2009, while installed capacity measured nearly 22 million tons. Even with this high percentage of unutilized capacity, the EU produced about 65 percent of the world's biodiesel last year.

Overall, the EU produced 16.6 percent more biodiesel in 2009 than 2008, although not all areas of the region contributed to this increase. While Austria, Belgium, Finland, Italy, Netherlands, Poland and Spain increased production in 2009, production in Germany, Greece and the UK decreased. Currently, the top three biodiesel producing nations in Europe are Germany, France and Spain. As of July, 245 biodiesel plants exist in the EU, a slight decrease compared to 2008 statistics.

Unfair trade practices are considered to be the most significant factor stalling the EU's biodiesel industry. In 2007, the profitability of EU biodiesel producers was negatively impacted by U.S. biodiesel entering the market. While anti-dumping and countervailing measures were taken by the European Commission in 2009 to address this problem, a recent flood of imports from Argentina is once again causing economic hardship for EU biodiesel producers.

APPA Biofuels, a division of Spain's Association of Renewable Energy Producers, recently issued a report stating that 60 percent of the biodiesel utilized in Spain during the first quarter of 2010 was comprised of imports, with the vast majority of those imports coming from Argentina. Statistics published by the EBB show that 850,000 tons of Argentine biodiesel entered the European market in 2009, with an additional 260,000 tons of Argentine biodiesel entering the EU during the first quarter of this year.

According to APPA Biofuels, the influx of Argentine biodiesel into the European market primarily stems from an export tax system that favors biodiesel over soybean oil. The organization estimates that while a 32 percent export tax has been levied against soybean oil in Argentina, the export tax on biodiesel is only about 18 percent. This imbalance is further intensified by a tax scheme that exempts biodiesel entering the European market from Argentina, Malaysia and Indonesia from paying the 6.5 percent import tariff normally levied against biodiesel imports.

Beyond taking action to protect its biodiesel producers from unfair trade practices, the EU has also been active in creating policy to increase the use of biofuels. In 2008 the EU adopted the Renewable Energy Directive 2009/28 (RED), which introduced a 10 percent binding target for renewable energy use in transport by 2020. According to the EBB, there is already enough installed biofuel production capacity in Europe to meet that goal. The Fuel Quality Directive 2009/30 (FQD) has also been adopted. It provides greenhouse gas monitoring and reduction objectives for fuel suppliers and is meant to incentivize the use of cleaner, sustainable fuels.

The EBB specifies that these positive policy directives are at risk of nullification, however, if they are not swiftly and seamlessly implemented by its member states. The biofuels market can only be harmonized if all EU nations promptly transpose the RED and FQD in their national legislation, says the EBB. To level the playing field with fossil fuels, the EBB also recommends that the EC devise a system that allows for a more precise comparison of the greenhouse gas footprint of all fuels. "It is only when fossil fuels will be subjected to the same scrutiny that the EU will have a chance to reach its climate change objectives," says the EBB.

It is also important to the future of the European biodiesel industry that swift steps are taken to allow for a higher content of biodiesel in transportation fuel. Currently, fuel blends are limited to containing 7 percent biodiesel. According to APPA Biofuels and the EBB, approval of a B10 blend would increase demand and allow more idle capacity to be brought online.
While Germany has maintained its position as Europe's leading biodiesel producer, Dieter Bockey, spokesman for Germany-based Arbeitsgemeinschaft Qualitätsmanagement Biodiesel e.V. (AGQM), says that several plants have filed for bankruptcy in recent years. The facilities least affected are those run by traditional crushing companies, such as Archer Daniels Midland Co., Cargill Inc., Bunge Ltd. and Louis Dreyfus. "I think these will be the companies that survive," he says.

The European biodiesel industry seems poised to bring additional production capacity back on line in the near-term, however, the short-term outlook for second-generation biodiesel development seems bleak. While second-gen facilities are eligible for several subsidies offered by the German government, Bockey says there is no, and will be no, investment in that sector. It's simply too expensive. For the estimated price of one advanced biodiesel production facility, Bockey says an investor could install 15 traditional plants.


Africa

As biodiesel industries in Europe and North America mature, development in Africa is just beginning. Although fragmented infrastructure development, political instability and government inaction are causing sluggish short-term growth in Africa's biodiesel industry, the long-term potential could be strong if the right economic environment is created.

It's unclear how much biodiesel production capacity is present in Africa, as Biodiesel Magazine was unable to secure any comprehensive statistics on the region. However, speaking at the Canadian Renewable Fuels Summit in Dec. 2009, Tammy Klein, executive director of Global Biofuels Services for Hart Energy Consulting, noted that Africa currently comprises an extremely small portion of the global biodiesel industry.

"Africa is far behind the rest of the world when it comes to biofuels," says Gerrit Smith, managing director of South Africa-based Bioneer Pty. Ltd. The short-term outlook isn't good, he says, noting that the food-versus-fuel debate has hindered the production of biodiesel in his region. "Until cellulosic ethanol and algae oil for biodiesel become feasible, we will not see any large biofuel developments," he says.

Smith says there is plenty of land and water to cultivate feedstock, but that lack of infrastructure will continue to impede development. Christine Adamow, CEO of Tanzania-based Africa Biofuel and Emission Reduction (TZ) Ltd. (ABF), agrees that infrastructure is a key impediment to growth, adding that there are several other factors to overcome, including a lack of policy, the ability to secure adequate land and access to skilled professionals.

While biofuels guidelines have been approved by the government of Tanzania, Adamow says they haven't been publicly released and policies are still in draft form. Smith stresses that, once established, it's important for biofuel policies to be enforced by local governments, nothing that South Africa published a biofuels strategy in 2005 calling for use of B2 by 2012, but has failed to take action to ensure the goal will be met.

Africa's biodiesel industry is currently in its infancy and there is a significant need for public education on biodiesel, says Ohene Akoto, owner and cofounder of Ghana-based Jatropha Africa. "It's the responsibility of African leaders to take up the mantle and help develop the industry," he says. "They should not rely on foreign aid as they [have with other industries]." Provided stakeholders are involved in the process, and the right political and economic environments are created, Akoto says he thinks the industry could develop quickly. Plantations and refineries are beginning to spring up, bringing hope that the industry is posed for significant growth.

While some have speculated that Africa's long-term role in the global biodiesel industry could be as a raw feedstock supplier to the North American and European markets, Adamow says that current economic conditions aren't conducive to that type of business model. ABF's project in Tanzania focuses on bringing oil from the Croton megalocarpus tree to market. "We have been consistently approached by U.S., Canadian, and European groups wanting to import croton nuts," she says. "If we could ship croton nuts to these three areas and make it economically feasible, I think it's a wonderful idea. But, right now the laws of economics don't support that type of model."

Although becoming a global feedstock supplier could be a long-term strategy for growth, the short-term goal of African producers is to supply fuel into local markets. To be effective, government support is needed. "We need a mandatory blending policy for all African countries [as well as subsidies and tax breaks] to make producers competitive," Akoto says. African consumers want the cheapest fuel, Smith adds, and biofuel is currently priced too high for most African markets. "The government should recognize stakeholders and give them targets which will force them to produce biodiesel cheaply," Akoto says, adding that there is also a significant need to develop policy that guarantees local markets for biodiesel and provides a link between research institutions and the industry.


South America

South America's biodiesel industries are booming as a result of domestic demand along with strong export markets. Two countries, Argentina and Brazil, continue to lead the pack and are among the top five biodiesel-producing countries in the world. The two nations' markets are distinctly different though.

Argentina is a net exporter of biodiesel, overtaking the U.S. this year. In 2009, Argentina exported its entire biodiesel production of 1.2 million tons, totaling $900 million, nearly all of which was shipped to Europe. In May, biodiesel exports reached 74,382 tons, according to Biocombustibles Argentina Chamber's Web site.

"It's expected that the export of biodiesel this year will total approximately 1.5 million tons," says Claudio Molina, executive director of the Argentine Association of Biofuels and Hydrogen. Export volume for 2011 is projected to hit 449 million gallons, according to a USDA Foreign Agricultural Service report published in July.

Argentina ranks as the world's fourth largest producer, due to its rapidly emerging domestic market. According to the Argentine Renewable Energies Chamber (CADER), as of May, Argentina has an installed production capacity of 2.37 million tons coming from 19 producing plants registered under the energy secretary assigned to fulfill an 859,000-ton B5 mandate effective March 1. Under Resolution 7/10, producers commit to specific production volumes for the calendar year. The decree also created a fair pricing structure for biodiesel. Under the B5 mandate, producers must choose if they intend to export their fuel or supply the domestic market. They cannot do both under law 26.093.

In a move that would augment domestic consumption and relieve biodiesel shipments to Europe, CADER President Carlos St. James confirmed to Biodiesel Magazine that in September the mandate will increase to B7.

"Until last year, Argentina imported about 5 percent of its diesel needs, typically from Venezuela, which has particularly high sulfur content," St. James says. "Given the abundant installed capacity, meeting the B5 or B7 [mandate] is easy."

Argentina is considering a raise from B7 to B10 possibly later this year or early next-increasing consumption to 1.3 million tons per year-but "negotiations need to happen with the automotive industry first," St. James says. Early projection estimates by the USDA FAS report peg future production capacity to reach 2.9 billion liters by 2011 and 6 billion liters by 2015 while consumer demand is expected to reach 1.19 billion liters by 2011, pending consequential increases in blend mandates.

The entry of large soybean crushing companies such as Bunge, Louis Dreyfus, EcoFuel S.A. and Renova SA and foreign investors that can generate large projects, created a trend towards building the large, centralized plants that dominate Argentina's biodiesel landscape. Its rich soybean-growing Santa Fe Province accounts for around 80 percent of Argentina's biodiesel production capacity. With one of the most efficient oil-crushing industries in existance, Argentina is the world's third largest soybean producer and top soy oil and meal supplier. Its crushing capacity is approximately 50 million tons per year, with annual oil production between 7 and 7.4 million tons, according to the USDA report.

St. James adds that CADER promotes feedstock diversification into jatropha, camelina, pongamia more rapeseed and the country's own tallow. "Argentina is the world's fifth-largest beef producer, yet none of our biodiesel is made from tallow," he says.

Fernando Markous, chief executive officer of Belgium-based biodiesel process technology supplier Desmet Ballestra in Argentina, says the company is seeing a steady growth in biodiesel plant development in the region. "We have at least three biodiesel projects from now and into the next year," Markous says. The company has 28 years experience operating in the Argentine market, where the company has supplied process technology for several major oil companies such as Patagonia Bioenergia and Renova S.A., both in San Lorenzo, Santa Fe Province. Renova S.A. operates the largest biodiesel plant in San Lorenzo with an annual capacity of 480,000 tons per year. "We foresee there will be at least two or three more plants that will be built in Argentina by next year by other developers as well," Markous adds.

In contrast to Argentina, all of the biodiesel produced in Brazil is consumed domestically. According to the Brazilian Oil, Natural Gas and Biofuels Agency (ANP), Brazil houses 64 operating plants with a combined installed capacity of 4.6 billion liters. It is estimated production will reach 2.35 billion liters this year under its B5 blending mandate based on estimated consumption, according to an FAS report. The Brazilian government launched a national program to encourage small producers and farmers in least developed regions to become involved with biodiesel production. Brazil has steadily increased blending mandates over the years, well ahead of its projected 2012 goals, beginning with B2 from 2005 to 2007, B3 in 2008, B4 in 2009 and finally B5 in January this year.

Projected increases in consumption would require an additional 100,000 tons of soybeans annually under a maintained B5 mandate. Soybeans account for 85 percent of Brazil's biodiesel feedstock, followed by animal fats (12 to15 percent) and cottonseed oil (3 to 5 percent), along with lesser amounts of caster bean and palm oil, the FAS reports.

Brazil's top four biodiesel producers-Ecodiesel Brazil, Archer Daniels Midland Co., Granol and Petrobras-account for more than half the biodiesel produced in Brazil. Petrobras alone announced recent expansions, including a new 120 MMly plant expected to operate in 2013 in Para, and made an investment to expand from 108.6 MMly to 217.2 MMly at its Candeias facility. Though volumes continue to be produced, a large surplus, about 65 percent of capacity, is without use, according to Luiz Horta Nogueira, professor of the Federal University of Itajuba and UN consultant.

In the short term, the Brazilian biodiesel industry faces challenges relevant to feedstock diversification and for garnering more social acceptance. Nogueira says a trend toward harvest and use of palm oil and animal fats is developing.

Colombia is South America's largest palm oil producer and 35 percent of its product is exported as biofuel. Ecopetrol SA, Colombia's largest oil and gas supplier, produces biodiesel for the country. Colombia expects to increase biodiesel production capacity to 550,000 tons this year.

Its government introduced a B5 blend mandate in 2008 and is currently considering increasing to B10, which should require approximately 448,000 tons of biodiesel. A possible increase to B20 is expected by 2012. Colombia could also export its biodiesel, according to the Columbian Federation of Palm Oil Producers. One possible destination could be Central America where Colombia is already funding development of three small biodiesel projects. Exports to Europe or the U.S. are unlikely. Moreover, palm oil is currently not an approved pathway for meeting the biomass-based diesel requirement in the RFS2 for U.S. biodiesel.


North America

Mexico passed the Law for the Promotion and Development of Biofuels in 2008, but no incentives were included to drive growth, says Raul Felix, coordinator of the Climate Change & Renewable Energy Practice in Mexico for Baker & McKenzie. The idea of the law is to commercialize a domestic biofuel industry by opening markets, but current market conditions have made this unfeasible.

Felix said Mexico's strategy is to grow slowly and develop a local industry that "we don't have right now," he told Biodiesel Magazine. Mexican Petroleum (PEMEX), the state-owned petroleum company, controls fuel outlets in Mexico. Nothing precludes selling biodiesel to public, he says, but the minister of energy must authorize the deal.

The agriculture ministry pushed for use of bio blends beginning in 2010, Felix says, but when PEMEX called for bids on supply, no companies came forward with a low enough price. Another setback is regulatory development of quality standards. Felix says Mexico hasn't officially adopted U.S. (ASTM) or EU (EN) standards. "We're using those for reference, but we haven't enacted our own yet," he says. "If we align with anyone, it will likely be with the U.S."

Three key populous cities where a majority of the country's people live-Mexico City, Guadalajara and Monterey-are the most promising biodiesel markets. "There's been some movement, slowly, in terms of public sector demand from local markets," Felix said. Regarding feedstock and fuel production, he adds, "There's a whole set of independent producers aiming to develop products for export to U.S., either to ship to the U.S. or Europe. Those are slowly starting, but the financial crisis didn't help at all."

He says work in the ag sector to supply feedstock is under development. "The Northeast Mexican states below Texas are working on it, they still haven't finished any projects, but they're gaining funding and investors, so they're moving in right direction," Felix says. There are no subsidies so growing feedstock and exporting to the U.S. is a real option. "I'm not necessarily saying these are biodiesel maquiladoras, but [they would] export product to be refined in the U.S.," he says, adding that startups and joint venture companies can take advantage of cost efficiencies in Mexico and export product to U.S. partners where they can claim tax incentives.

The U.S. biodiesel industry has been without a major industry driver, the $1 per gallon federal biodiesel blenders tax credit, for more than eight months now; and the impact on production, even with a combined 1.15 billion gallon federal mandate now in effect, is nothing short of dramatic. A vast majority of the roughly 3 billion gallons of productive capacity is idled. The 1.15 billion gallon mandate, while the only real market driver today along with various state requirements, is deceptive though-it doesn't mean production will hit that mark. Certain imports can qualify, and renewable identification number (RIN) credits from 2009, some even retired, can apply toward this year's requirement; plus, a percentage of 2008 biodiesel RINs are eligible. RIN prices have been high and some producers are capitalizing on the upswing, but a majority of U.S. plants are idled or producing significantly under capacity.

In Canada, a B2 standard is expected to give market to 500 million liters of biodiesel, according to the Canadian Renewable Fuels Association. The national trade group says 12 biodiesel plants are either in operation or under construction in Canada, ranging in size from 1 MMly to 225 MMly. Provided those under construction are actually finished, and if all 12 plants were operating at capacity, Canada's domestic biodiesel industry could supply nearly all the biodiesel required to meet its federal B2 mandate.


Asia-Pacific

Like the current trend in the U.S., biodiesel production in much of the Asia-Pacific region remains in constant flux for similar reasons. In an analysis of the Asia-Pacific biodiesel industry, Frost & Sullivan, a global market-analysis group, said most governments in the region recognize that biodiesel can reduce oil imports, improve fuel security and stimulate domestic agriculture. But, it also noted, "Although there are several strong drivers of growth in the Asia-Pacific biodiesel industry… the past year witnessed a significant downturn in [its] fortunes."

Nearly 74 percent of demand in the region is located in Indonesia, Malaysia, China and the Philippines, according to Klein. In Malaysia, Mission NewEnergy has just completed a 75 MMgy biodiesel plant. The addition of the plant helps the company to become "a high-volume, low-cost producer of biodiesel and best positioned to achieve profitability even where market conditions yield inconsistent refining spreads," said Nathan Mahalingam, MNE group managing director.

WH Leong, vice president of Malaysian-based Carotech Inc., said a big hurdle is a combination of cost, industry support and government mandates. "Malaysia does not have any issue related to feedstock availability," Leong said. Biodiesel struggles to compete with heavily subsidized diesel without a subsidy of its own or a use mandate to support the industry. "The Malaysian government has been saying they will implement a biodiesel mandate for the past 3 years…but nothing has happened." There are 21 biodiesel companies/producers in the country, with at least six plants under construction. Only a handful of existing plants are running now. While in 2009, Malaysia exported nearly 76 million gallons of biodiesel, through June, it has exported just 23 million gallons.

In October, the islands of Java and Sumatra of Indonesia will implement a 2.5 percent biofuels mandate and more importantly, according to the Indonesian government, the country will reinstitute its B5 standard within the year due to improved yields on both palm and jatropha. The Indonesian National Team for Biofuel Development has said that as much as 15 million hectares of land are suitable for jatropha. As the world's largest producer of palm oil, the country is still working to create a competitive industry because palm oil is still subject to volatile price swings, according to Klein, who added that the crippling factor is palm oil demand from the food market. For 2010/2011, FAS reports that Indonesia will produce a record 24.5 million tons, up 3 million, or 14 percent, from last year. Over the next 10 years, the Indonesian government plans to double palm oil production capacity to 40 million tons.

While Malaysia and Indonesia don't have mandates, the Philippines has a 1 to 2 percent biodiesel requirement. The Philippines Biofuel Situation and Outlook report issued from FAS notes that "there have been no major issues in complying with the biodiesel mandates," and in 2011, "a higher mandated biodiesel blend is possible." The total installed capacity for operating plants hovers close to 80 MMgy, spread between 7 facilities, and in 2010 the Philippines is expected to produce roughly 36 million gallons. Last year, total capacity was just over 104 MMgy between 12 facilities, and the country produced close to 37 million gallons. The main feedstock used is coconut oil.

The story for the largest of the four main Asia-Pacific countries remains the same. China has the greatest growth potential based on economic activity, and the needs of its massive population. Already owning the world's largest automotive market, the People's Republic of China provided $1.5 billion in total subsidies in 2009 for automakers that perform technological upgrades and develop alternative fuel vehicles. Gushan Enviornmental Energy Ltd., a biodiesel producer with seven plants in the Sichuan, Hebei, Fujian and Hunan provinces and also in Beijing, Shanghai and Chongqing, reports that "the share of renewable energy used in primary energy consumption will be increased to roughly 10 percent by 2010 and nearly 15 percent by 2020," according to the PRC. Like Malaysia, China has been flirting with a biodiesel mandate, and the PRC is currently considering a B5 mandate by the end of the year.

India also has enormous room for growth, but has yet to solidify any mandates, programs or significant infrastructure for biodiesel production. In 2009, India issued the first "National Policy on Biofuels" outlining the country's views, stating, "The Indian approach to biofuels, in particular, is somewhat different to the current international approaches," adding, "It is based solely on nonfood feedstocks to be raised on degraded or wastelands that are not suited to agriculture." India has set a target of 11.2 to 13.4 million hectares to be planted with jatropha by 2012, all to be used as a biodiesel feedstock. Indian Railways has already begun planting on land adjoining railway tracks, and it uses biodiesel in most of its 7,500 locomotives.

In Australia, there are government subsidies of roughly 38 cents per liter. Seven biodiesel plants and one renewable diesel plant exist, but only four are operational, according to the Biofuels Association of Australia. Heather Brodie, CEO of BAA told Biodiesel Magazine that the same factors affecting the U.S. industry affect Australia: government policy, infrastructure and an expiring subsidy program. Australia also just recently opened an investigation of subsidized U.S. biodiesel being dumped in country over the past few years.

Ron Kotrba is editor of Biodiesel Magazine. Reach him at (701) 738-4942 or rkotrba@bbiinternational.com. Bryan Sims, Luke Geiver and Erin Voegele are associate editors of Biodiesel Magazine. They can be reached at (701) 746-8385.