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RSS FeedTranscript: Morning Session - Biofuels For Transportation Conference
by Worldwatch Institute on June 9, 2006
WORLDWATCH INSTITUTE
INTERNATIONAL CONFERENCE
WEDNESDAY, JUNE 7, 2006
CAPITOL HILL, WASHINGTON, D.C.
PARTICIPANTS:
CHRISTOPHER FLAVIN,
PRESIDENT, WORLDWATCH INSTITUTE
PETER CONZE,
DIRECTOR GENERAL, DEUTSCHE GESELLSCHAFT
FÜR TECHNISCHE ZUSAMMENARBEIT (GTZ)
KLAUS SCHARIOTH,
AMBASSADOR OF THE FEDERAL REPUBLIC OF GERMANY
TO THE UNITED STATES OF AMERICA
PAUL D. WOLFOWITZ,
PRESIDENT, THE WORLD BANK
SUZANNE HUNT,
BIOFUELS PROJECT MANAGER, WORLDWATCH INSTITUTE
THOMAS DORR,
U.S. UNDER SECRETARY OF AGRICULTURE
VIKTOR ELBLING,
GERMAN FEDERAL FOREIGN OFFICE,
DEPUTY CHIEF OF TASK FORCE ON ENERGY,
HEAD OF THE DIVISION OF INTERNATIONAL ECONOMIC POLICY
Transcript by: Federal News Service, Washington, D.C.
For more on the report, read the complete press release, view selected trends and facts from the report, register (free) or log in to our site to download PDF files of the short and extended summaries, and view the conference schedule with PDF versions of the presentations. The full report will be available later in the year.
CHRISTOPHER FLAVIN: It is a real pleasure to welcome all of you to the Rayburn Building on Capitol Hill here today. My name is Chris Flavin. I’m president of the Worldwatch Institute, and it is our great honor and pleasure to be able to host this event on global biofuels and the potential to meet a variety of needs over the years to come. Let me say just a few words about the genesis of this project and the study that we’re releasing today.
About a year and half ago we began discussions with the German minister of agriculture and the secretary of state in the Agriculture Ministry, and at the time biofuels were really just beginning to come onto the international scene in a serious way. The discussions we had were really looking beyond the sort of narrow issues about what technologies are developing, what are the market prospects, how is the lobbying going for incentives in different countries, to really looking in a much bolder and longer-term way at the unfolding potential of biofuels and what it ultimately could mean not just for the energy system, but for agriculture, for rural economies, for environmental trends – everything from global warming to the future of biodiversity – and we found it encouraging that we were even having this discussion with a ministry of agriculture rather than a ministry of energy where these kinds of questions have traditionally been more lodged. And what we ended up agreeing to over a period of two or three months was to come up with a project that was aimed at really exploring all of these aspects in a very interdisciplinary way and also, I must say, in a very international way.
In the end, we brought together, under the able leadership of Suzanne Hunt, who has led this project for Worldwatch, a team of 15 researchers and writers, and they were then joined by – it must be something in the order of 100 reviewers and experts that helped us improve various drafts of the study. So this was, I think, fair to say, one of the most ambitious research projects ever undertaken on this set of issues particularly looking at it from an unusually broad interdisciplinary framework and looking at it on an international basis.
We, of course, had very strong support and cooperation from the ministry of agriculture in Germany throughout the project and we also worked very closely with the German Agency for Technical Cooperation, which has a long history of working closely in developing countries around the world and they played a leadership role, particularly on some individual case studies for some of the individual countries that were studied as a part of this project.
I must say that the entire project and the research for the report ended up being a real eye-opener for all of us who have worked on it and I expect all of you will find a lot of new material and a lot of fresh insights as you dig into the material that we’re going to be presenting today. And it was in a way sort of a strange experience in that the whole field was evolving so quickly in the course of actually conducting this project that you really felt that you were dealing with a moving target and whatever might have been true at the beginning of the project, you couldn’t necessarily assume was still true by the time we got to the end of the project. It made the project both particularly exciting, but as you can imagine from a research point of view, particularly challenging to make sure that we were keeping up with the pace of real world developments.
I’m going to summarize for you very briefly some of the insights that have begun to emerge from this study and then Suzanne will be joining us on the podium a little bit later in the morning to explain in a more detailed way, and using the appropriate PowerPoint graphics, some of the very specific conclusions of this study. The first overall conclusion that we reached is that biofuels are just about to transition from having been an issue primarily a focus in a national domestic context to becoming a truly international, indeed a global issue. We see that in the whole host of countries around the world that are now beginning to join the world’s biofuels leaders, which are Brazil, the United States, and Germany, with policies now being discussed and passed in many, many countries around the globe encompassing a very wide range of economic circumstances as well as agriculture and energy resource basis.
The emergence of this as a global issue I think is significant in a number of ways. It is going to move a lot of the policy discussions to the international level. There are a lot of questions that are beginning to emerge about harmonization of national policies, trade issues and so on, but I also think that there is a growth dynamic that is going to emerge as this becomes an international issue because countries are now not only sharing technologies, making investments in each other’s industries, but are sharing policy experiences as well, and the countries that begin now are going to be able to move much more quickly than the United States and Brazil were able to because those countries had to invent a lot of these things from scratch.
Second, we’re impressed by the kind of technology learning curves that are clearly in place in biofuels development and I think there’s been a tendency we found as we discussed with people who don’t follow these industries closely to think of biofuels the way many people thought of them back in the ‘80s – things that only existed because of heavy government subsidies that were fairly static, that were basically unreplicable on a large scale. We think that that is changing and it is changing largely because of technology learning curves both fundamental advances in science, but also just the kind of manufacturing learning experiences that you get when you’re doubling production every four or five years as we’re beginning to see in the biofuels industry as growth rates have begun to crank up in recent years.
One of the really interesting manifestations is the fact that this is going from being a sort of quiet, agriculturally-based industry to being a high tech industry where costs come down rapidly as the huge surge of investment capital and particularly venture capital is moving into this sector. So it’s not just the big companies; it is a whole array of small companies as well, most of them trying to compete with innovative new technologies.
Third, our research indicates that biofuels have the potential to meet a very significant share of global transportation fuel needs. We have not come up with a single number. We think it’s basically premature to come up with a single number because there are not enough of the major countries that have really done the kind of resource assessments that are needed, plus there are a lot of variables about how some of the new technologies were developed. But there are estimates that have been made and that one can make rough estimates of ranging from a third of total fuel supplies to, I’m convinced, as high as 100 percent in quite a number of countries that have relatively low levels of oil consumption, but very strong agricultural resource bases, particularly in the developing countries.
The potential is very, very substantial. It will obviously take time to fully develop and one of the things we think needs to be done is for countries to study their own potential in more detail. And that is the fourth point really because the nature of the potential and the appropriate strategy to be followed is going to vary widely between different countries. There is no one program, no one strategy that is going to make a sense around the world and so there is a real need for individual countries to assess in a very detailed way their own potential, looking at the agricultural resource that base they have and examining closely what kind of a policy structure is going to make sense to exploit whatever options they feel are appropriate to develop.
Fifth, we believe that biofuels do have the potential to substantially strengthen rural economies, as they have already begun to do both in Brazil and the United States, but we believe that in a host smaller and more agriculturally dependent economies the macroeconomic effect and the effect in terms of the lives of rural people has the potential to be even greater that it is in the United States and Brazil. This is something that I think has not been sufficiently explored or developed to date. We think in particular the development community – it needs to play a very active role and a more active role certainly than it has to date in assisting countries in exploring these options, which to be frank until recently have not been taken very seriously in most countries or indeed in most international development agencies.
Sixth, we do conclude that the development of biofuels is not without risk. Indeed there are very substantial risks – particularly ecological risks – if biofuels are not developed in the right way. The huge additional pressure that is likely to be put on the world’s agricultural resource base as we begin meeting our energy needs as well as our food needs from crop land is clearly very, very substantial and I think unless that potential is met through a significant restructuring, greater intensification, improvement of efficiency of agricultural systems around the world, there is a real danger that there’re going to be very sizable environmental costs to the development of biofuels, both in terms of what it can do to the agricultural resource base – depleting soils, stretching water supplies that are already stretched too thinly, but then of course also pushing the margins of agriculture more out into the few remaining centers of biodiversity in tropical forests and other remaining ecosystems around the world.
We do believe that biofuels can be developed sustainably. They can be developed in a way that you would actually build carbon in the soil. They can be developed in a way that will help to stabilize agricultural landscapes and to reduce soil erosion, but that will only happen if farmers make the kind of commitment that is needed and in fact if governments have the kind of policy incentives, land use controls and laws that will ensure that that is, in fact, the case.
Finally, we believe that the whole issue of international trade in biofuels is going to come upon us in the international community very, very quickly. As you’re probably aware, there has been only very limited trade in biofuels to date, but as the scale of the market grows and of course, in an age when many industries are, in fact, globalized; indeed, in an age when the energy sector and oil in particular trades quite freely around the world in massive quantities, there is inevitably going to be a pressure to open markets and to allow trade on a growing scale between countries.
We think that that has the potential to be an additional very strong engine of development and could push growth even faster, in part because it will encourage investment because investors will see that there is more than a unitary national market available for whatever plant that they might develop. We think in particular it is likely to encourage developing countries to invest more heavily and in general we do think that it is time for both governments and international organizations, particularly the World Trade Organization, to begin serious exploration of changing the current arrangements. That can begin to happen on a bilateral basis as it already is, but I think ultimately there are some key international trade issues that can and need to be addressed if we’re going to really develop the full potential of global biofuels.
This, I think, is a study that you will all find very useful and interesting to read. We have a very short summary of it that’s available in the blue folder that you picked up when you registered. There is a significantly longer summary of the report that is available on the Worldwatch website and I believe we have the coordinates to reach that noted in your materials. Unfortunately, the full report is not yet available, but it will be published in book form later this year, and we encourage all of you either through the internet or if you want to just leave your e-mail address with our staff here today, we will ensure that you are fully informed when the report becomes available. The publisher is not finally determined yet, but that will be known shortly and we do want to make sure that we give you the opportunity to get an access to the full report just as soon as it does indeed become available.
It is now my honor and pleasure to introduce to you one of our very strong partners on this project. Peter Conze is a director at the German Agency for Technical Cooperation and, as I said earlier, they have played a very strong and important role on this report and indeed also hosted an event similar to this one that was held in Berlin two weeks ago to introduce the report to a German and the international audience. Peter has a very strong and deep background in the development field and I think particularly notable is the fact that he has extensive experience working in Africa, I believe heading GTZ’s operations in Africa during one period and I believe in that respect is in a very good position to give us a sense of the enormous untapped potential that lies in Africa and other poor parts of the developing world.
Peter, thanks for joining us. (Applause.)
PETER CONZE: Distinguished guests, dear colleagues, as Chris emphasized already, biofuels are a hot topic these days and therefore it’s an honor for me to be here as a representative of GTZ at this prestigious place on Capitol Hill to discuss this topic with you.
Biofuels need a global vision and this is why the German Ministry of Food, Agriculture and Consumer Protection – that’s the official name – contracted GTZ and the Worldwatch Institute for this global study. Suzanne Hunt will present the study later on and I want to thank the WWI for the fruitful cooperation and especially Suzanne Hunt and Chris Flavin for their strong commitment to bring biofuels on the international agenda.
The German ministry has contracted GTZ. GTZ stands for Agency for Technical Cooperation. It’s owned by the German government. We work worldwide in more than 100 countries promoting sustainable development mainly financed by the German government. The German Ministry of Agriculture is responsible for producers, upstream processors and consumers of biofuels in Germany. You might know that Germany is the biggest biodiesel producer worldwide at this moment. Thus, the Ministry of Agriculture can look back on a successful integration of German farmers into this new market. Looking ahead, the ministry aims to design policies in view of the future role of German farmers. Thus, the ministry has requested to capture the current global dynamics that will affect the production situation in the next, let’s say, 10 to 15 years.
As Suzanne Hunt will give you an overall global perspective, let me focus your attention on the situation of developing countries and emerging economies. The Ministry of Agriculture has contracted GTZ to organize policy-level consultations and conduct regional, national studies in addition to the global study on biofuels in selected countries. In Brazil, China, India and Tanzania, GTZ has contracted renowned institutions and researchers and worked out together in-depth studies and facilitated the political dialogue on biofuels. Many figures and details came out of these studies that you can access also online.
Let me just summarize five of the main conclusions in – from the perspective of emerging common economies and developing countries. First of all, why do we need to tackle biofuels in a global context? The competitive advantage of some of the emerging economies and developing countries is high. The production costs in these countries are low. Also, the efficiency of environmental benefits are higher. Many developing countries can produce more energy with less input in temperate than intemperate climates. There is a case for international cooperation. Developing countries, like Tanzania for instance, are asking for cooperation and assistance as they see new options from creating employment, reaching markets, and alleviating poverty. They’re not only interested in technology transfer, but instead require knowledge on shaping the political framework in setting up institutions.
Let me give an example of low production costs. Of course, we talk about Brazil first. We all know Brazil is the largest ethanol producer worldwide, followed, by the way, by the U.S. Their production prices are the lowest and they can compete with mineral oil from the level of $35 U.S. dollars per barrel on. Many other countries now want to learn from Brazil following their example. Do they have a chance? If we look at the learning curve in Brazil, we find that productivity in the sugar cane agribusiness has increased by 170 percent over the last 30 years. As in other industries, biofuels production would become more efficient over time. Please keep in mind that Brazil had political support for this sector from the ‘70s on.
My second point: what are the main forces supporting biofuels evolvement in developing and emerging countries? Increasing energy demand especially for transport is a major force. Furthermore, concerns for securing the energy supply has speeded up the search for alternatives. By far, the most important driving force are the budgetary constraints that force developing countries more than others to reduce foreign exchange spending for imports. Brazil is a good example for foreign currency savings. Between ’76 and 2004, Brazil has saved $61 billion U.S. dollars in foreign exchange by substituting mineral oil-based fuels by bioethanol.
Finally, when we look at the global goal to reduce poverty, the Millennium Development Goal number one, we have to seriously consider biofuels. Biofuels development can provide an option for generating employment and reducing poverty, especially in rural areas. China, for example, expects to create nine million jobs in rural areas from bioethanol and biodiesel production.
My third point: what are the future options and interests of countries really could look at? Let me highlight only two aspects. Do these countries have the space to grow biofuels? Brazil as the main global producer is planning to expand production. They are only using half of their sugar area for ethanol and that equals merely 1.2 percent of their agriculture area. Brazil also wants to expand in biodiesel. Currently, the area of oilseeds amounts to nearly 22 million hectares. Just for perspective the soybean area is 20 times larger than the oilseed area in Germany, which is the global diesel market leader, as I said already.
