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Lack of global classification and clear bioenergy trade statistics
The lack of a clear classification for biofuels within the multilateral trading system is another key factor restricting global trade. Import standards vary from country to country and it is not even known whether biomass fuels should be considered as an agricultural or industrial good. Trade classification has important implications for countries' tariff reduction commitments as well as the national support schemes they can apply. Thus far, fuels made from crops, such as bioethanol, are classified as agricultural goods in the World Customs Organisation's Harmonised Coding System for commodities (know as HS). This enables farmers to benefit from relatively high tariff protection for them. Biodiesel, on the other hand, is considered to be an industrial product. Wood pellets are currently not included as separate category in the HS system, but fall under wood wastes. The joint UNECE / FAO working party on forest economics and statistics and other bodies have pointed out the need for some changes to the HS in order to show the role of wood in energy supply. The next revision of the HS is scheduled to be implemented on 1 January 2012. The Inter secretariat Working Group (IWG) on forest sector statistics (FAO, Eurostat, ITTO) will attempt to have wood pellets added to the HS 2012 revisions (UNECE Secretariat, 2008).
A fundamental problem is that for many bioenergy carriers, several end-uses are possible, and thus it is hard to determine how much exactly is traded for energy purposes. Biomass commodities traded almost exclusively for energy end-uses are ETBE (bioethanol), FAMAE (biodiesel or solvent), fuelwood and charcoal. These commodities have their own HS-codes, and therefore their trade can be monitored rather straightforward. Categorizing new bioenergy commodities (such as pyrolysis oil, pellets from various agricultural residues, torrefied pellets etc) are challenges for the future. Especially problematic are agricultural commodities like cereals and oilseeds, animal or vegetal fats and oils (e.g. palm oil), which can all serve as feedstock for biofuel. Thus, it practically impossible to determine how much is traded of energy purposes, and estimates have to rely on crude assumptions and interviews with market parties.
WTO developments - In the past years, Brazil was pushing hard under the (currently stalled) 'Doha Round' of multilateral trade negotiations, to get biofuels classified as an environmental good. This would have qualified it for an accelerated phase-out of tariffs. On the other hand, a joint EU-US proposal to fully eliminate tariffs on a list of 43 products identified as "environmentally friendly" by the World Bank, including solar panels and wind turbines, does not include biofuels (EurActiv, 2008).
One argument put forward by the EU and the US is that in the context of constantly changing technology, they must take into account the question of "relativity" of green products – the so-called "clean vs. cleaner" debate. What may seem environmentally-friendly now may not be perceived in the same way in five years' time. The concern is that if tariffs are fully eliminated on relatively green products such as bioethanol, cleaner technologies that become available in the future, such as second generation biofuels made from non-food, woody crops, will lose the possibility of enjoying additional trade advantages. But Brazil and other bioethanol exporting developing nations, including Pakistan and Egypt, say the EU and US are merely being protectionist and attempting to put their own producers at an advantage (EurActiv, 2008).
The debate is linked to another key question that will need tackling: Whether different types of biofuels should be considered as "like products" or not, seeing as they present different benefits and flaws in terms of greenhouse gas reductions, energy efficiency and sustainability. According to the principles of "non discrimination" and "Most Favoured Nation" (MFN), WTO law demands that its members apply the same tariff rates to all imports of products that are close substitutes, regardless of their country of origin. This applies both to external tariffs and internal taxation policies. Countries that do not respect these principles are liable to legal action in the WTO (EurAvtiv, 2008, van Dam et al. 2008).
All references and a description of all barriers can be found in this working paper [231 KB]
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