Transcript: Morning Session - Biofuels For Transportation Conference

MR. FLAVIN: Thank you. Thank you very much, Mr. Ambassador, for a very inspiring speech. We really appreciate the leadership that the German government has taken on the whole host of energy issues, really going back over the last 15 years and it’s particularly rewarding to see that the change in leadership in Berlin has not meant any diminution of the kind of commitment to develop a new kind of energy system.

I remember back in the 1990s when we first began to notice that Germany was leading the world wind energy industry and then it was the solar electric industry and now it is, of course, beginning to happen in biofuels as well, and I think many Americans visiting Germany have found it a little bit surprising that our leadership had suddenly been taken by Germany because I remember early trips to Germany where people would say, well, if Bill Gates had been born in Frankfurt, you know, he would now be a mid-level engineer at Siemens. (Laughter.)

It’s not a country – it is a country that’s known for technological strength, but not for some of the entrepreneurialism that we’re used to seeing in Silicon Valley, but in this sector Germany has become a real entrepreneurial high technology leader and I think that it is the collaboration between strong governmental policy and the unleashing of private sector innovation that you have demonstrated, which really holds out a great example for the rest of the world, and I must say that I’m proud to indicate as an American that the U.S. for the first time and I think close to 15 years actually surpassed Germany in wind installations last year. The U.S. is very much back in the game now. Thanks, in part, to decisions taken in this Congress as well as decisions taken at the state level, but for me, this is the kind of healthy international competition that we very much need and it’s great to see the U.S. and Brazil struggling for leadership in biofuels, and Germany and the U.S. struggling for leadership in wind energy, and I think that kind of energy is going to take the world, as a whole, to a new level and to an ability to meet the huge energy challenge which you so aptly described for us.

It’s now my great pleasure to introduce the president of the World Bank, Paul Wolfowitz who has just joined us. President Wolfowitz needs no introduction in Washington with such a long and distinguished career of service in the U.S. government particularly in both the State and Defense Departments. A former U.S. Ambassador to Indonesia, a former Dean of our next door neighbor, the School of Advanced International Studies, Johns Hopkins University, and given I think the huge potential that all of us see in terms of developing countries and meeting development goals by developing this new set of industries, which of course are agricultural, rural-based industries, it is important and I think hopefully a very strong sign for the future that the president of the World Bank is joining us today.

Thank you very much, President Wolfowitz. (Applause.)

PAUL WOLFOWITZ: Thank you, Christopher Flavin. Mr. Ambassador, thank you. I was almost – (unintelligible) – which I guess is important in – – (chuckles) – the German system. And Peter Conze, good to see you this side of the Atlantic. If I seem a little spacey at some point in this talk, I have an excuse. I left last Friday, I believe it was – went to Kyoto, then Tokyo and Seoul, then Frankfurt where I met you and Hamburg where we had an excellent World Bank German forum, Rome and I’m here. I think this must the Washington if it’s Wednesday, and I’m only here in this meeting briefly, but I was eager to take advantage of the opportunity just to say a few words about how important the subject of this conference is to the developing world and the work we do at the World Bank.

My colleague, Eckhard Deutscher, the German member of our board of directors, was going to be here also, but in a special act of courage he was persuaded to go to Costa Rica to talk to some trade unions there about the importance of Costa Rica joining CAFTA, so I think that’s – I admire him.

I’d like to begin by congratulating all of you for organizing this important gathering to help raise awareness about the potential of biofuels as an alternative energy source to petroleum in the global transportation sector. I hope that the conclusions of the study carried out by the Worldwatch Institute can contribute to the debate on how to promote biofuels on a larger scale. For a development institution like the World Bank, one of the key challenges to support developing countries and meeting their energy demands and to helping poor people escape from poverty is a critical issue and how to do that with a small environmental footprint is increasingly urgent as well.

If you look at global energy statistics, it’s a daunting picture. Of the 6.3 billion people on the planet today, 1.6 billion don’t have access to basic energy services. Five hundred million of those live in sub-Saharan Africa. For those people it’s a matter in some cases literally of life and death to have access to clean energy. They’re using dirty fuels. They’re breathing in the smoke from them. They’re getting diseases and even dying from it. The International Energy Agency estimates that developing and transitioning countries will need to invest about $300 billion a year from now until the year 2030 to meet energy requirements, and the IEA has projected that world primary energy demand will increase by nearly 60 percent between now and the year 2030. That’s the equivalent of adding 16.5 billion tons of oil consumption per year and two-thirds of that increase is projected to come from developing countries.

We’re already seeing major effects of that, I think, on the world economy. It’s a major force in driving up energy prices and of course, it’s contributing substantially to the carbon in our atmosphere. The cost of adapting to projected climate change – a separate cost in developing countries alone is estimated to be somewhere – excuse me – between $10 billion and $40 billion a year and about a third of that cost is going to have to be publicly funded. Last year, at the G-8 Summit in Gleneagles in Scotland, the eight industrialized countries invited the five big middle-income countries – Brazil, China, India, Mexico and South Africa – to participate and specifically to exchange views on the issue of meeting the energy demand of developing countries. The G-8 Summit ended up with a Gleneagle Action Plan on climate change, clean energy and sustainable development, and the World Bank was asked from that to work with all the multilateral agencies and with our development partners to create what was called a new investment framework for clean energy and development.

The initial report on that investment framework was presented at the spring meeting of the IMF and World Bank to the minister’s of finance and development and a final version of that report will be presented at our annual meeting in Singapore in September. The investment framework’s goal is to serve as a vehicle to accelerate investments so that developing countries can meet their energy demands for growth and poverty reduction in an environmentally sustainable way. That report focuses on three important considerations. First, it reveals the investments to meet long-term energy needs of developing countries while taking into account efficiency in the local environment. Second, it outlines additional steps required in the energy, transport and industrial sectors to address the effects of climate change by reducing greenhouse gases, and third it explores what developing countries need to do to adapt to the impact of climate change and extreme weather changes. That report, by the way, is available in the World Bank website and as I say the final version is due in September and I think comments from both individuals and institutions are welcomed on that.

Against that backdrop, biofuels presents an opportunity to build a strong partnership between rich countries and developing countries. I had the opportunity back in December to visit Brazil. I imagine actually that’s in addition to the report that I’ve just mentioned, that’s the other main reason I think I was invited here – certainly a major reason I wanted to come. I remember very vividly meeting with President Lula in his office and the enthusiasm with which he presented to me the display of various types of nuts and other potential sources of biofuel for this very remarkable president and he is a remarkable president. Biofuel is near the top of this agenda. And later during the course of my visit I got a chance to see in a number of dramatic ways exactly why.

I got to visit one of the large sugar cane manufacturing areas in Brazil where they’re producing ethanol on an enormous scale and with exceptional efficiency, and then got a very vivid presentation of how ethanol prices have been steadily coming down in the Brazilian industry at the same time that world energy prices have been coming up, and it certainly, from that point of view, presents a very promising picture. It’s an opportunity to add to the world supply of energy to meet this enormous growing demand and hopefully to mitigate some of the price effects. It’s an opportunity to do so in an environmentally friendly way and in a way that is carbon-neutral. It’s an opportunity to do so in a way that developing countries like Brazil can provide income and employment for their people, and it’s an opportunity also to – for developing countries to earn carbon credits for mitigating the environmental impacts.

There are still obstacles, of course, significant obstacles, and I suppose the most fundamental one is economics. What can be successful in Brazil may or may not be successful elsewhere. It may be difficult to duplicate the success of Brazilian production in other places, but it certainly seems like something that should be pursued. There may indeed be places in Africa with the right mixture of climate and water and land to make this kind of production effective. One of the barriers that I think is unnecessary and I hope something might be done in this go-around of negotiations to eliminate it are the barriers to trade in ethanol. I’m getting, to be honest, a little concerned about the outcome of the DOHA round, but it seems to me at a minimum one thing that ought to be aimed at is to move unnecessary trade obstacles that make biofuels less competitive. If anything, we ought to be doing everything we can to make them more so.

I guess to conclude, while in the short run ethanol from sugar cane may offer the best chance for commercial viability, in the long term the manufacture of ethanol-from-cellulose offers one of the greatest hopes. This technology, which is so far only developed on a pilot scale, uses new catalysts and enzymes to speed up natural processes. The advantage is that it does not rely on valuable crops. It can use waste products such as straw corn stalks or agriculture debris. Their widespread availability, low cost and potential to reduce greenhouse gas emissions make this technology attractive. Biofuels will certainly represent a growing share of the energy mix in developing countries. How big that share will be and what type of biofuels will be produced will depend on the circumstances of each country, their competitive advantages, the alternative uses of land, and the potential of environmental risks associated with conversion of forest into crop land.

The World Bank through its work in the Investment Framework for Clean Energy and Development will be looking at ways that we can strengthen cooperation between developing countries and between them and developed countries on biofuels. Our goal is to provide advice technical assistance and investment programs to help our partner countries meet the energy challenge while protecting the environment.

I appreciate what Worldwatch Institute is doing with its report. I appreciate very much what the German Government, GTZ is doing in this area. You have indeed been pioneers on renewable energy and we thank you for that, Mr. Ambassador. Thank you for keynoting this conference and I look forward to hearing the results.

Thank you very much.

(Applause.)

MR. FLAVIN: We’re going to take just a five-minute break. If you’d like to grab some coffee and bring it back to your seat, we’re going to get going again fairly quickly because we have a very busy program. Thank you.

(Break.)

MR. FLAVIN: Well, thank you all for returning to your seats. There’re so many interesting people here to talk with, I know it’s a little hard to settle down. There are cost even with having big successes and we’ve got a tremendous crowd today and thank all of you for your patience. I think other than that we’re basically on track, and I must say that the quality of the speeches so far has just been terrific and we promise to do our best to keep the interest level very strong as we move forward.

We’re now going to have an opportunity to hear in substantially more depth about the conclusions of the study that we’ve been working on. And Suzanne Hunt who is already in effect been introduced, of course, has been the project manager for the Biofuels Project for Worldwatch. When Suzanne was hired by Worldwatch to direct this project we lured her away from a colleague environmental organization where she was working – the Environmental Defense organization. Many apologies to them, but we feel like it’s been one of the better moves we’ve made over the last year at Worldwatch.

Suzanne as is typically the case at Worldwatch comes to the Institute with an interdisciplinary background. She has studied at three institutions: Penn State University, American University and the United Nations University for Peace in Costa Rica, and has studied both in environmental science and in natural resource management, but I guess for me probably the thing that most sold me on the idea that she was the person to lead this project is that she has a personal background in agriculture. Her family has something called the Hunt Country Vineyard in Upstate New York. Suzanne has been actively involved in that operation, I guess, since she was able to steer a tractor and do the various other things you need to do on a vineyard and winery, and I think one of the proud things that she likes to include in her resume is that she helped in the early use biodiesel on the family farm there in Upstate New York.

So Suzanne, it’s all yours.

(Applause.)

SUZANNE HUNT: Well, thank you, Chris. The president of the World Bank makes a hard act to follow, but I’ll see what I can do. If I space out in the middle of this presentation, I have no excuse, so just bear with me. (Laughter.)

I’m tasked with going into depth in 15 minutes on a 400-page study that we spent a year working on with hundreds – (laughter) – of inputs from 100 people in different sectors and countries, so I’m not sure how much depth I can go into, but I will be very pleased to take questions at the end of this part of the discussion. I think after our next few speakers, we’ll take questions together. I actually think that a Swedish colleague of ours summarized our results in one sentence very well. This was actually at a meeting in Brazil that Andre Faaij organized. And after about three days of meeting after meeting after meeting, the Swedish expert raised his hand and he said, so I think what we’ve concluded here is that biofuels are the solution to every problem and that they are the cause of every problem. (laughter)

There is nothing that is black and white in this fuel for sure. It’s very complicated, but fortunately we were able to pull in an incredible – truly incredible team of people, with a very wide range of expertise and experience and I was hoping that – a number of them have actually made it here today from far ends of the earth and I’m hoping that they won’t mind standing right now, so that we can all congratulate them and so that you can find them throughout the day and hopefully spend some time with them. So would you all rise? Andre, Jim, Janet, Sergio, Lauren, everybody, and give them a round of applause. (Applause.)

I’ll just very briefly say a few words about the current status of the industry just so that we’re all on the same page. I’ll mention a little bit about our finding in terms of the potential for these fuels, and then I’ll talk about a few of the key issues and a few of the recommendations that we made. I’m sure that many of you know that the ethanol industry globally is growing extremely rapidly. You can see in this graph that just in the last five years the growth has just really taken off. As has been mentioned Brazil and U.S. are the two leaders. They make up about 90 percent of the world’s ethanol production between the two of them and are in the race right now to see if the U.S. can overtake Brazil’s production levels.

Biodiesel: the growth curve is similar. It has taken off more recently just about in the last decade-and-a-half, but the growth has actually happened even faster. We’ve seen biodiesel production quadruple in just the last five years, but most of us expect that we’ll see these current generation fuels, fuels made from food crops, predominate in the next 10 years, but in terms of the large scale long-term sustainable potential, that really lies in the cellulosic fuels and the next generation technologies.

Sugar cane is certainly an exception and I’ll talk a little bit more about that later and we’ll talk about the environmental impacts throughout the day as well. We looked at different conversion technologies. We’ve looked at the enzymatic hydrolysis of cellulose into ethanol. You’ll hear from the vice-president of Iogen later today who will talk about their technology for that. We also have a representative from CHOREN who’s going to talk later today about the gasification process paired with Fischer-Tropsch’s synthesis. We looked into a number of other technologies, but these are the two leading one.

It’s been very difficult, as Chris mentioned, very difficult to put a specific number on how much of these fuels we can produce and certainly there are an almost infinite number of factors that go into that equation, but it’s interesting to note that the projections globally for the next 20 to 50 years range all the way from biofuels being able to provide only a fraction of our fuel needs all the way up to more than our fuel needs. So it’s quite a range. We found that some of the country-specific assessments were the most instructive and the United States you might be familiar with the Billion Ton study that was done by the USDA and the USDOE that found that with their – what they felt were conservative estimates: about 37 percent of our fuels needs could be met with biofuels by the year 2025.

A similar study, led by Uwe Fritsche and the Oeko-Institut in Germany, looked at the potential for biofuels in Germany and that was then expanded to Europe and they also conservatively, assumed no trade and assumed that biomass is also used for other uses, and that sustainability criteria are applied. They also found that on the order of a quarter of their biofuels could be produced in Germany, and this is interesting especially because these are both two temperate countries and we all know that the developing world tends to be tropical countries that have longer growing seasons and inherently more productive crops.