Can Argentina’s Biodiesel Industry Grow Despite the Politics?

It may be winter in South America, but Argentina believes its “growing season” is still going strong. Over the past six years, the biodiesel industry in Argentina has been growing at an unprecedented pace. Not only has the country become the fourth largest producer of biodiesel globally, it has also become the world’s largest exporter of biodiesel, looking for as many import markets as it can find. The country currently mandates 7 percent biodiesel usage and is considering raising it to 10 percent. Further, the rate of growth in Argentina has exceeded the amount of biodiesel it has been able to consume within the country. Despite this impressive progress, political barriers the country faces on an international scale may hinder growth expectations.

Late in May of 2013, one of Argentina’s largest export markets, the European Union, slapped the country with antidumping duties in order to protect the domestic market within Europe from cheaper imports. To the EU, Argentina is just another country that will become irrelevant within the European biodiesel market. To Argentina, this means looking at other export markets for ways to take up the slack. The U.S. market seems to be an obvious choice, regardless of all the hurdles the second iteration of the renewable fuel standard (RFS2) provides.

For several years now, Inspectorate America Corp. has helped to load, analyze and facilitate numerous imports of soy biodiesel from Argentina into the U.S. However, since the inception of the RFS2 and other requirements, these shipments have not qualified for renewable identification number (RIN) generation. As such, this has made imported biodiesel unattractive to certain market segments within the U.S. Due to a lack of blending infrastructure, there are a number of obligated parties that rely on the received RINs to help prove that they are meeting their obligated volumes of renewable fuels. At times when the imports are cheaper, in conjunction with the federal blenders tax credit, the price differential has seemed to ease the wariness. Now, to increase the marketability of biodiesel from Argentina, it is reported that the country is looking to register and comply with the RFS2 regulations in the U.S. Inspectorate America has been able to sample and test many of these imports to demonstrate that the product meets the appropriate specifications, but validating political policies will require new controls.

Official representatives from Argentina have been quoted saying they expect to have U.S. EPA approval in the next couple of months, but that is unlikely. According to the current RFS2 standards found within the code of federal regulations, the production facilities within Argentina would have several requirements to comply with, depending upon their desired level of participation under the EPA program.

First, they must register. The federal program offers the flexibility to register in several ways, but each scenario requires an approved pathway that would allow the participant(s) the ability to prove no land use change and preserve the identity of certain production lots. The producer must also perform a life-cycle analysis to demonstrate a reduction in overall greenhouse gas emissions.  

Second, site assessments and engineering reviews are required to evaluate production facilities. Once the assessment process is complete, only then can an individual facility be considered registered and given EPA-issued company and facility identification numbers. Yet, this still might not allow the foreign producer to generate RINs. The recordkeeping requirements and annual compliance audits may be more than a burgeoning industry can handle. It could, however, allow a registered importer the opportunity to generate RINs for a batch of renewable fuel produced outside of the U.S.

While the RFS2 program is robust and permissible in many ways, the EPA has always been slow and deliberate in its actions. Argentina has a number of reasons to look for alternate outlets for its growing biodiesel industry, including announcing that it plans to participate within the RFS2 program in the U.S. At the very least, it keeps the hopes of a growing industry alive as they reach for validation on an international scale. But, with the current prevalence of ever-changing regional policies and politics in a global marketplace, it may be too early to expect continued growth of the biodiesel industry in Argentina.  

Author: Scott Fenwick

Technical Business Manager, Biofuels for Inspectorate

217-278-0963

[email protected]

www.Inspectorate.com