updated 3/12/2009 3:37:10 PM ET 2009-03-12T19:37:10

The European Union slapped import fees on U.S. biodiesel Thursday, saying it had to protect European producers from unfair American subsidies and below-cost selling.

The EU fees will affect biodiesel sold by Archer Daniels Midland Co., Cargill Inc. and several others to Europe, the world’s biggest user and producer of crop-based fuels.

EU trade spokesman Lutz Guellner said the fees were based on “clear evidence that unfair subsidization and dumping of U.S. biodiesel has taken place and that this is harming otherwise competitive EU industry with potentially dire long-term effects.”

The EU said U.S. biodiesel producers sold biodiesel to Europe far below the real costs of production and received federal tax credits and state subsidies.

It said this helped U.S. exporters increase their share of the EU market for biodiesel from 0.4 percent in 2005 to more than 17 percent from April 2007 to March 2008.

The U.S. is the EU’s biggest foreign supplier of biodiesel, providing 700 million euros worth of fuel to a total market worth 5 billion euros.

The duties will initially be in place for four months, starting Friday, and could be confirmed after that for up to five years.

The European Biodiesel Board said the new import fees would help re-establish a level playing field for European producers, claiming unfair U.S. competition has already caused some companies to go bankrupt or to quit biodiesel production.

“For more than two years, U.S. biodiesel has been sold in the European market at a substantial discount, even at a lower price than the vegetable oil raw materials purchased by the EU industry for producing biodiesels,” it said in a statement.

Biodiesel is usually mixed with mineral fuel to power diesel cars, trucks, buses and trains. It can also be used as a heating fuel.

The EU plans to use far more biofuels in the coming years, setting a target to replace 10 percent of transport oil with biofuel by 2020 — or 33 million metric tons of oil.

EU biofuel output in 2006 was 6 million metric tons and it will likely have to increase output rapidly and import far more to meet its goals, part of a strategy to cut back on the greenhouse gas emissions that cause climate change.

This biofuel target has come under fire from environmentalists and others who claim that it will see land taken away from food production and put pressure on natural reserves — especially in developing countries.

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