Transcript: Morning Session - Biofuels For Transportation Conference

Second point: which technology will be of interest? Let’s look at China, which is in future the largest consumer of transport fuels worldwide. China is especially interested in the BTL technology – biomass to liquid – but the main interest in all countries in the medium term is clearly biodiesel and bioethanol. Biodiesel production largely is hyped up by the hope to find that biodiesel plant that can grow on marginal land.

My fourth point: what will be the market situation in future? The bioethanol production of Brazil in the year 2015 is estimated at 20 million tons equivalent to a 60 percent increase over current production. Eighty percent of production is anticipated to meet national demands. That leaves only 20 percent for exports. China and also India are planning to increase production substantially. At the same time, these countries invest in expanding their production and according to our studies China and India are likely to become important importers of biofuels.

My fifth point: what has to be done? First of all, a solid analysis and pilots together with investors are required. Many countries plan to start pilot value chains especially in remote areas. The German government has started various initiatives to support partner countries in a joint effort of public investment – of private investment and public support – a PPP approach. In India, for example, GTZ is facilitating cooperation between a German manufacturer of processing plants and an Indian investor in Jatropha. Representatives of the Indian investors are participating also in this conference.

Secondly, what is needed? International trade regulations need to be clarified. Everybody agrees that the main prerequisite for facilitating international trade is an agreement and enforcement of standards. The discussion on standards includes first of all the technical standards. However, it evolves beyond. It is necessary to address concerns with regard to environmental issues and food competition. In a number of other commodities, for instance, coffee, GTZ is involved in these negotiations on behalf of the German government to come to social and ecological standards that benefits both the producers and the consumers. Especially food competition is an issue which needs to be taken seriously. Countries like India have set up policies prohibiting the use of agricultural area for biofuel production and using only non-used marginal areas and byproducts instead. In any case, the food security issue, competition with food crops and the impact on the poor have to be carefully analyzed and if there is a negative impact, that needs to be addressed.

Finally, environmental issues also need to be carefully analyzed. These will be discussed in detail this afternoon by Uwe Fritsche. And the last point which needs to be tackled now coming to important issue: shaping the national policy framework. In developing an emerging economies, investors all over the world are pushing ahead. They are ready to invest in feasible biofuel projects. Obviously, the most crucial requirement for any investor is a clear-cut investment environment. Political level discussions and exchange is important in developing this sector. Here we need to bring people together from all levels into an intensive dialogue. A good example is the Renewables 21 Network. Ideas moved forward substantially with a big conference of several hundreds of experts and decision-makers in Bonn in 2004. A great number of activities followed and right now there’s a big follow-up conference in Mexico City.

Let me come to the end of my presentation. The regional studies in Brazil, China, India and Tanzania have brought out interesting issues for the global vision, which is required and there’s a special issue of merging the private sector interest, industries with poverty reduction especially in the developing countries. The discussions in Berlin two weeks ago upon invitation of the German Ministry of Agriculture have illustrated the serious efforts to merge the national interests of farmers, processors, consumers with our global responsibility.

Let me summarize and end with four points. First, it is necessary to see biofuels in the global context that will be a substantial portion of international trade. The incredible dynamics of the issue requires country-specific and regional analysis together with the relevant policymakers. The German government funded with government funding and private sector funds, GTZ is addressing this issue. Secondly, the newly created biofuel market is now being shaped. Political priorities in the different countries determine to which extent they will have an impact on poverty reduction. They also determine the environmental relevance of this sector and the economic viability and social implications especially for the poor.

The third point: international trade flows in biofuels are now being shaped. Investments, supplier contracts, political decisions need to be determined. Market access is an important for competitiveness and both issues determine – are determined by international standards.

And my fourth and last point: the required technology transfer far exceeds the technical content as far as developing countries are concerned. It is important to provide support along the value chain from farm to tank. This includes looking at land access issues, contracts, formation of producer organizations as well as processing technology and distribution networks.

Thank you very much. (Applause.)

And now it’s a special pleasure and privilege for me to introduce to you the ambassador of the Federal Republic of Germany to the United States, Dr. Klaus Scharioth. He’s new in town. He started his job here in March of this year. He is a lawyer. He has a Ph.D. from the Fletcher School of Law and Diplomacy and has served the German government in the foreign office for more than 30 years. With – in Bonn – in Berlin now at the permanent mission of the Federal Republic of Germany to the United States, he was a Chief de Cabinet – director of the private office – of the NATO secretary general. Before coming to the United States, he was the political director and for the last three years the state secretary in the Ministry of Foreign Affairs in Germany.

Mr. Ambassador, may I ask you to address the audience? (Applause.)

AMBASSADOR KLAUS SCHARIOTH: Ladies and gentleman, Peter.

First of all, it’s a great pleasure for me to be here and I very warmly welcome all of you to today’s Biofuels Conference. Not only is the topic of this conference extremely relevant, but I think we couldn’t also – we couldn’t have picked a better time. I think the timing is absolutely perfect because in the United States as well as in Germany this is I would say one of the great topics of the day, and I think the large number of participants and also I would say the prominence of the panelists and speakers show how great an interest there is for this issue in our two countries at least, but I think actually worldwide.

Energy drives the economy. Mobility is an important feature of any modern society. Nearly one-third of the energy consumed in the European Union is used in the transportation sector. Economic growth and also our Western lifestyle continue to be based on the unlimited availability of one – basically one limited resource, namely, petroleum. Now, the dramatic climb in crude oil prices over the past months – but let me add here immediately that fortunately, in real terms, the prices have not yet reached the same price level as we had in 1980, which sometimes is forgotten because we see the figures in nominal terms, but in real terms we have not yet reached the prices of 1980 –but still this dramatic climb in prices has delivered a blow to the economy and to consumers, and has confronted us with a hard reality.

The tremendous economic boom in some regions of the world, namely, Asia has led to a sharp rise in demand for primary energy, particularly crude oil. The real – or let me say more likely the perceived trend towards scarcity – I think it is more a perceived trend than a real trend – the perceived trend towards scarcity has driven up prices. Moreover, the large portion of the world’s oil reserves are located in politically instable regions. Thus, Western democracies’ dependence on crude oil imports also has geopolitical implications and I don’t need to mention the example, Iran, to make that point.

We’re also paying a price in environmental terms for our unchecked energy consumption. Climate protection is the greatest environmental challenge of our time. Climate researchers see numerous indications that climate change has already begun. The major factor in this phenomenon is the emission of greenhouse gases that arise particularly in combustion processes. Within the framework of the Kyoto Protocol, Germany pledged to reduce its carbon dioxide emissions by 21 percent of 1990 levels. By 2003 – that’s the latest year for which we have the statistics, the full statistics – we already reached a reduction of a solid 18.5 percent. So we have good reason to more closely examine how we can satisfy the future energy of our global economy and society.

The question basically is how can we secure a sustainable supply of affordable and environmentally safe energy? It was therefore only logical and consistent when in his most recent state of the union address, President Bush called for, and I quote, “the end of our addiction to oil,” end of quote, by, among other ways, increasingly turning to alternative energy sources. In Germany, Chancellor Merkel recently convened an energy summit, which dealt with the issues of supply security in a national and international context. It also dealt with the energy mix, with energy sufficiency and efficiency and also with new technologies. The German government has pledged to significantly increased both its investments in energy research and in energy innovation – actually, by no less than 30 percent over the next three years.

Renewable energies are an important element in securing our energies supply for the future. These include as you know, wind, water and not least, biomass. The German government aims to double the share of renewable energies in its primary energy consumption by the year 2010. In 2005 last year, we had already achieved 4.6 percent and we want to increase this share especially in electricity usage to 20 percent by the year 2020. Already now, biofuels contributes significantly to satisfying energy demand in the transportation sector. They help protect the climate and this is, I think, interesting and relevant because generally less carbon dioxide is emitted in their production, in their processing transferred and use than can be absorbed through the growth of raw materials such as trees and plant life. So that’s a very significant factor, I believe.

Second, they contribute to the security of supply because they’re currently the only available regenerative energy source in the transportation sector. They promote economic growth for development of innovative technology, and fourth, they strengthen the economy and employment particularly in rural areas. For instance, in Germany, the study predicts a rise in the number of people employed in the biofuel sector of more than 40 percent, and more than 100 percent – 130 percent even in the solid biofuels sector by the year 2020. Forty percent in general; 130 percent in the solid biofuel sector that they think is significant.

With its renewable fuel standard, the United States have mandated including 7.5 billion gallons of biofuel and its energy consumption by 2012 setting an ambitious goal, which has received global attention. That would correspond to about 4.7 percent of U.S. fuel consumption. Based on the current trend, it looks like the United States will not only reach, but also soon exceed even this goal. The European Union is striving for a share of 5.75 percent already by 2010, so that means two years earlier and the EU heads of state have recently even called for minimum share of 8 percent. So our goals are even a bit more ambitious.

Among the renewable fuels, biodiesel and bioethanol currently seem to show the greatest potential for blending with traditional fuels. While the U.S. has set its sights on ethanol, Europe is focusing on biodiesel. Biodiesel is produced primarily on the basis of vegetable oil, in particular rapeseed oil and can be blended with conventional diesel at a share of up to 5 percent in Germany. The German government recently agreed to commit the oil industry to a specific consumption goal for biofuels similar to the U.S. renewable fuel standard.

So the prospects look bright for the future of biofuel. In particular, biofuels offer the opportunity for countries like Germany that are poor in energy resources to reduce their dependence on imported fossil fuels. In a sense, you could say that we are building new drilling pumps on our domestic farmland. New opportunities are also opening up to developing countries. Peter Conze has mentioned that. They can produce part of their own energy supply even if they don’t have fossil fuels. They may even be able to establish themselves as biofuel exporters on the world market – of course, if there weren’t import duties. Despite these bright prospects, we cannot forget that there’re still some unanswered questions, but I’m sure all of you will tackle them in today’s presentations and discussions.

Ladies and gentlemen, let me sum up. Biofuels are in their infancy both in terms of their potential and in terms of the fossil fuels they’re designed to replace. In order for all players to be able to participate in a targeted international trade in liquid biofuels, it is imperative that we have a complete picture of their potential global use. And that means not only their technical potential, but also the potential for their economical and sustainable use. The project “Biofuels for Transportation: Materials: Global Potential and Implications for Sustainable Agriculture and Energy in the 21st Century,” which was funded by the German Federal Ministry of Food, Agriculture and Consumer Protection is intended to provide exactly such a picture.

The project examines not only how much crude oil can be replaced worldwide by biofuels, but also the following questions. First, which biofuels hold the promise on the current conditions? Second, what opportunities do biofuels hold for our economies for employment, for export and also for added value? Third, what environmental consequences can we expect? Fourth, what role can biofuels play in developing countries? Thus, it is important to have a clear picture of the opportunities and despite all optimism also the limitations of biofuel production and usage as they relate to energy, agriculture, the environment, development and the economy.

Finally, the results of this study are also intended to offer recommendations on what type of action our political and business leaders should take. For example, what international rules do we need on the use of biofuels, say, in trade? What needs to be done in regard to international technology transfer among industrial threshold and developing countries? How can we move innovations in power generation more quickly to the application phase, and how can we ensure that biofuels are sustainably produced and used? The results of this study were presented for the first time by Christopher Flavin at a Biofuel Congress on May 16th and May 17th in Berlin. At the two-day conference, politicians, government officials, business leaders and scientists discussed the role of biofuels and the opportunities for future social developments.

I invite all of you now to build on this, to build on this discussion here in our conference in Washington. My thanks go to the Gesellschaft fur Technische Zusammenarbeit – GTZ – represented so ably here by Peter Conze and to the Worldwatch Institute in Washington for their presentation of this study and their work. I also would like to wish to thank everyone who organized this conference.

And now, you see – Paul, you come exactly at the right moment. (Laughter.) You come – this is perfectly timed because I was just going to say I’m really grateful to the president of the World Bank, Paul Wolfowitz to now address this conference. (Laughter.)

Thank you very much. (Applause.)