Miliband steps into biofuel row between EU and US

David Miliband, the Secretary of State for Environment, Food and Rural Affairs (Defra), has intervened in a trade row brewing between the US and EU over biodiesel subsidies.

The Independent on Sunday revealed last week that Peter Mandelson, the EU Trade Commissioner, could call for a World Trade Organisation investigation or impose retaliatory tariffs on US biodiesel exports to Europe.

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Now Mr Miliband is in talks with UK trade ministers to try to resolve the row. A Defra spokesman said: "David Miliband is well aware and concerned about the issue and keen to work with colleagues in government and in the European Commission to find a way through."

The contentious subsidy is called "B99". It allows US biodiesel exports to undercut European-based manufacturers. In contrast, European subsidies for the rapidly growing biofuel industry are granted on the point of sale.

A loophole in the subsidy is also being exploited by traders in a trick dubbed "splash and dash". This allows them to buy biodiesel in Europe, ship it to the US, where it is "splashed" with gas to qualify for the subsidy, and then ship it back to Europe for sale. Transporting the cargo across the Atlantic twice undermines the whole purpose of biofuels, which is to reduce carbon emissions.

Sceptics are increasingly critical of the environmental benefits of biofuels and the increasing influence of the agricultural lobby over the industry, of which B99 is one example.

Chris Goodall, carbon guru and author of How to Live a Low Carbon Life, said: "The current biofuels frenzy is more to do with the power of the agricultural lobby than it is about tackling climate change."

From next year, under new government targets, every other litre of petrol sold at the pumps in the UK will have to contain some biofuel.