‘Unacceptable’ EU Biofuel Tariffs Rile Indonesian Government

(Bloomberg) --

The Indonesian government says the European Union’s tariffs on the Asian nation’s biodiesel shipments are “unacceptable” and all options to counter the policy are on the table, including retaliatory actions.

The EU imposed five-year tariffs on Indonesian biodiesel imports to counter alleged subsidies to producers of the fuel, which is typically made from palm oil and other fats for use in diesel engines.

When asked whether Indonesia will retaliate with a similar policy against exports from the EU, Rizal Affandi Lukman, a senior official at the ministry overseeing palm oil, said “all options are open to be taken by the Indonesian government.”

The latest move from the EU is likely to further aggravate a feud between the two trading partners. Tensions escalated earlier this year after the European Commission decided to place stricter limits on palm oil’s use in biofuels from June on concerns over deforestation.

The EU said in July that it intends to adopt the anti-subsidy duties, prompting the Indonesian government to threaten raising tariffs of the EU’s dairy products and halting purchases of Airbus SE airplanes. Another option is to file a complaint to the World Trade Organization, Lukman, a deputy at the Coordinating Ministry of Economic Affairs, said on Tuesday.

“Material Injury”

Indonesia’s subsidized exports are causing “a threat of material injury to the union industry,” the European Commission said on Monday. The new EU duties on Indonesian exports range from 8% to 18%.

The tariffs are based on misconceptions over the role of Indonesia’s Oil Palm Plantation Fund Management Agency, Lukman said. The agency, which is managed by the finance ministry, collects palm oil export levies and funds incentives for its domestic biodisel mandate and finances replanting programs.

“The EU has mistakenly labeled the Oil Palm Plantation Fund Management Agency as a government subsidy fund for exporters of biodiesel,” Lukman said in a text message in response to Bloomberg inquires. “The allegation is inaccurate.”

Domestic Biodiesel

Indonesian biodiesel makers will cut or stop shipments to the EU and will focus more on supplying the domestic market, said Paulus Tjakrawan, vice chairman of the Indonesia Biofuel Producers Association. The country will raise its biofuel program to include more palm oil next year, which will compensate for the loss of shipments to the EU, he said in text message.

Indonesia will raise mandatory blending requirements to B30 next year, or 30% palm oil with 70% diesel, from B20 now, which will increase consumption of palm-biodiesel to 9.6 million kiloliters from 6.6 million kiloliters this year.

To contact the reporters on this story: Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net;Yoga Rusmana in Jakarta at yrusmana@bloomberg.net

To contact the editors responsible for this story: Anna Kitanaka at akitanaka@bloomberg.net, Atul Prakash

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