Transcript: Morning Session - Biofuels For Transportation Conference

As I said before, we founded this task force in the foreign ministry, working for comprehensive German energy strategy. We are looking very importantly at the question of security of supply but also – this is maybe one point where it is not discussed very strongly today, even by the colleagues of the kind from Germany – European cooperation. This, of course, for us – I mean, I know in the United States the EU is not always only positive address as far as, for example, trade is concerned. But it is, of course, it provides the framework for us, as far as our energy policy is concerned. I will say something about this later on.

In our work towards this comprehensive energy strategy, of course the question of this sphere of fuels will be an important issue. I think our common challenge – and this has been said, and said before very passionately – is to lessen our dependence on oil. President Bush has said this very clearly in his State of the Nation address. I think in German political circles, for the reasons I named before, nobody would dispute that we really need very fast alternatives to fossil fuels. We have a contrast in electricity generation in Germany. Renewable energies already account for a considerable share of the market, but as far as transport, as fuels are concerned, 97 percent are still produced from fossil sources, mainly oil, and to a much lesser degree, in difference to other countries in Europe, gas. So it’s very important for us, too, in Germany and Europe to find alternatives to fuel sources. We think that biofuels are an important alternative. It’s not the only one, but a very important one.

We have the chance to increase our security of supply through biofuels because we find them on our doorstep. We have them under our control. There is some discussion about whether we have enough conservation area in Germany, in Europe, to increase the production significantly of biofuels. But we think this is unfounded at present. We have seen an incredible progress in technology in the last years, in both, actually, production of food and of biomass. If people discuss, I mean, whether one should maybe switch to biofuels production to the detriment of food production, this is not the case. We think that in the future we will have more land available for bioenergy and biofuels. Biofuels, in our opinion, are the regenerative alternative with the greatest potential. We have, as we said before, biodiesel and bioethanol as first-generation biofuels in the short-term. And then – and this is, I think, very important as far as technology is concerned; this was named before already by Susan also – the biomass to liquids: a second-generation biofuels in the course of the next decade.

If we are able to come to market soon – in the next 10-15 years – with this new technology, with the production of biomass-to-liquid fuels, we are going to be able to use a number of raw materials which, until now, are really not at all in the perspective. We think that – this is also important, of course – in Europe, as in the USA, I think, you always have to think also about how well are your farmers off? They are maybe less interested in the security of supply than the foreign office is, but they are always interested in the question, what does happen to my income, to my production? And we think farmers will win from this situation.

Renewable sources promote value-added and also employment in rural areas. This is our German experience, at least. We have been able to create 50,000 jobs in Germany and a rising number of jobs in this area – in a situation in Germany with a lot, as you know, of jobless – nearly 5 million. This is very important for a rural area. The turnover, including investment in the field of bioenergy, amounted to almost €6 billion in 2005.

What have we done in Germany as far as the government is concerned to promote biofuels in the ‘90s? This is, I think, important also for the question market, global market, home market versus what can the state – what can a governments do? We have the feeling – we are quite convinced that we need very active action by the governments to give a boost to this sector which still is, as we said before, in infant stages, at least in Europe. In America it’s probably a little bit different.

As far as biodiesel is concerned, we had a high rise in consumption, a growth that reached nearly 2 million tons in 2005. That’s already around 5 percent of the total sales of diesel in Germany. We think this will rise to nearly 2.5 million tons of biodiesel in Germany this year. Interesting is that the demand is so great that it’s almost outstripping production. We have 15,000 filling stations for biodiesel in Germany working, which is, I think, an interesting number. We are not big as far as ethanol is concerned still, but we have quite important efforts going on. We have built, in addition to lots of small facilities, three large-scale plant producing the ethanol at the rate of around 500,000 tons per annum.

In short, I think it’s correct to say that Germany is among the most active, let’s say, partners in Europe when it comes to biofuels.

Why was this possible? As I said before, we needed government action for this. And this might be also part, maybe, of the discussion mainly this afternoon, but maybe also later on: What can we do to help this industry?

In fact, Germany in the past has exempted biofuels from mineral oil taxes. As was said before, we are now in a process of converting this whole tax exemption into a partial exemption – it’s being done by the government at the moment – and of replacing this with an obligation to blend biofuels and mineral fuels. We’re going a little bit on the basis of experiences we’ve seen in other countries of the world: in Brazil and also in the United States.

These measures – we are very convinced of this – even increase the use of biofuels, and we think that the obligation of mineral oil companies to bring biofuels onto the market will help achieve also the EU directives who, as it was said before this morning – I will again maybe stress this – who target a level of 5.75 percent of biofuels by 2010. We are very optimistic in Germany to be able to reach this target even before. In addition to this, the German government is working at EU level to increase the current limit of 5 percent, which is input of blending biofuel in European fuel legislation.

One project which I find very interesting, and which will be discussed this afternoon, is the CHOREN project. Michelle Deutmeyer here will be discussing in one of the panels this afternoon about these activities. Germany is funding the establishment of the pilot plant to produce biomass-to-liquid in the state of Saxony. This is, I think, one of the most important, most interesting actions of the German government. And then there are the activities like the German Energy Agency drawing up a feasibility study for large-scale biomass-to-liquid plants, not on a small pilot scale but larger biomass-to-liquid plants.

As I said before, it would not be correct to just look at what is happening in Germany, but we have also to see what is the framework Europe is giving to us? I think it’s safe to say that the European level too – not in all countries are the same scale. The use and further development of biogenic fuels is being strongly promoted. We have had, as I said before, directives which impose 2 percent – impose is wrong because actually it’s not binding. It’s a proposal, or a target, by the EU to fix 2 percent of total fuel sales by 2005 by biofuels. One has to say that this has been achieved in Germany but not in other countries, and in the EU as a whole, it has not been achieved either. And then there is the target I named before: 5.75 percent until 2010. As I said, these targets are not binding on member states. We Germans would like to have binding targets in the future – not easy with all partners, of course, as you can imagine. We are 25.

At the beginning of the year, the EU and commission presented a communication that maybe some of you are aware of, which is called “A EU Strategy for Biomass,” and this strategy contains some interesting objectives. On the one hand, it’s the creation of a framework for the comprehensive use of biofuels by enhancing competitiveness and stepping up research. On this I think we are very near also with our American friends. What is also interesting, I find – also picking up the discussion we had before – is the support is asking support for developing countries, in which biofuels can help foster sustainable economic growth. I think this is a very important target that the European Commission is putting to itself, which we really subscribe completely in Germany. To sum this up, I think one can say that biofuel is also moving up the European agenda.

I would like to finish by giving just a quick look at the international scene, where we also have the feeling that things are developing very positively. We’ve talked about U.S. – I don’t have to stress this again – but we also have other countries where biofuels are really having increasing importance. This is not only China, India, Thailand and other known examples – and of course, Brazil, the world champion, until now at least – is a pioneer in the production of ethanol since the ‘70s. I found it very interesting to hear that in Africa there’s a lot also quite a number – “a lot” may be exaggerating, but quite a number of countries having programs in biofuels. This is, I think, an interesting development and we will have, in Europe, to come to terms with the question: What is our interest as far as the exports of biofuels by this country is concerned? And I think we have not come to that point yet in Europe.

As I said before, we think we have to find and strike the right balance. This is an industry which is still in its infancy, on the one hand. On the other hand, this is a big chance. Like UNCTAS, the UN agency, said some months ago, to really do something against global poverty – biofuels are a chance against global poverty. So this is also our interest.

Now, we have to analyze the global potential of liquid biofuels, and we are very interested in highlighting the opportunities in biofuels. Questions remain, of course; questions going in the direction of what is sustainable production? What is sustainable use of biofuels? What can we do together and have concerted international efforts in this sphere of research, for example, as far as biofuels are concerned? There are big synergies I think we can find here. I think we have a big interest in a closer cooperation with the United States on this question. And we wondered whether it wouldn’t be a good idea to have a kind of a regular exchange of German and American experts dealing with this question. I think we could probably, in some way, say something about our experiences in biodiesel. We have very good scientists in this sector and I think we could learn a lot about your experiences with bioethanol. Why don’t we start an exchange on a regular basis on this?

I said before that one key international aspect which is not really resolved or answered at the moment, in my opinion, is the question of the trade with fuels. At the moment we’re looking very much into the domestic production of biofuels, but we think the discussion is going in the direction that says that imported biofuels, coming also from developing countries – and when I talk about developing countries, I don’t primarily speak about newly industrialized countries like Brazil or India, but I’m speaking more about real developing countries, countries which under the definition of the World Bank – we have Mr. Wolfowitz here today.

We think, in the end – and as I said, this discussion is not over yet in Germany and not over in Europe, of course. There are some partners who are very difficult as far as the tariffs situation is concerned. We think that fewer restrictions on imports can encourage the use of biofuels, and we should try to use this path also because we are going to insure falling prices, we’re going to be able to help development, at the same time insuring if we are able to able to strike an accord about common standards, I think, also to have a sustainable standard as far as production and processing of biofuels is concerned.

I would like to close by saying that we Germans have the luck – or maybe also the bad situation, I don’t know – to be president, the presidency of the European Union in the first six months of the next year, which is a very important task, and where I think the energy question in general will play an important role. What we can do as far as biofuels is concerned, this will be one part of our task. But I think we will have to look closely into what we can really move ahead during this time. As you know, the a question of who’s presidency in the European Union is always an important chance to move things forward.

And then – I don’t know if it’s more important, but at least it’s more global – we have the presidency in the G-8 process also during the whole year of 2007. This year we had the first presidency by the Russians, and they have stressed very much the energy question – not the biofuels, in this case, but other questions of security of supply. And what’s also interesting – and maybe we did not discuss today – the question of security of demand, which is one thing that some producer countries like to underline. The question is, how will they react if we are able to cut off strongly our dependency from their energy supplies? They are not – if you look at what the OPEC and to what Russia has been declaring in the last weeks and months, it was not very friendly when we said we would like to cut down on our dependency. I think this is an important question that has been looked into, and which has not been discussed very much until now, I would say.