Eight nations warn EU over biofuel barriers

BRUSSELS (Reuters) - Eight developing nations warned the European Union on Thursday they could file a World Trade Organization complaint over what they see as unfair barriers being raised against their biofuels.

The EU, which is currently fine-tuning its biofuel regulations, should steer away from dictating where developing nations can grow biofuels and where they can not, said a draft letter seen by Reuters.

The EU's final stance will be decided in coming weeks between member states and the European Parliament, which has so far angered biofuel producers by suggesting dozens of restrictions.

"They impose unjustifiably complex requirements," said the draft letter. "Some of our countries don't exclude the possibility of defending their rights in the World Trade Organization, as a last resort."

"The letter is being signed today by the ambassadors of Argentina, Brazil, Colombia, Malawi, Mozambique, Sierra Leone, Indonesia and Malaysia," said a diplomat from one of the countries.

A spokesman for the European Commission, which originates EU laws, said it was too early to comment while parliament and member states are still thrashing out the final version.

HUGE MARKET

The Commission has proposed that 10 percent of all road transport fuel comes from renewable sources by 2020, as it seeks to heed U.N. warnings that climate change will bring more extreme weather and rising sea levels.

Much of that 10 percent would come from biofuels, creating a huge potential market that is coveted by exporters such as Brazil and Indonesia, as well as EU farming nations.

But environmentalists charge that biofuels made from grains and oilseeds have pushed up food prices and forced subsistence farmers to expand agricultural land by hacking into rainforests and draining wetlands -- known as "land-use change."

The parliament has responded by altering the Commission's proposals to include tough eco-standards for biofuels.

But developing nations contend this would prevent them from expanding agriculture into wild areas -- as European nations have already done to improve their own living standards.

Proposals to protect Savannah would rule out nearly all suitable land, while measures to protect biodiversity could become an "open-ended list," the letter said.

"Provisions relating to land-use change will impinge disproportionately on developing countries, where there are stocks of undeveloped arable land that can be used for biofuels production," it added.

The European Parliament has also proposed reducing the share of fuels from food crops to 6 percent of EU fuel, down from the 10 percent proposed by the Commission, and it has demanded a review in 2014.

"We believe that the establishment of a review process in 2014 is not necessary and is likely to generate uncertainty for investors," said the letter.

(Reporting by Pete Harrison; editing by Mark John)