Transcript: Morning Session - Biofuels For Transportation Conference

Well, I think I talked too long already. Thank you very much for your attention and I look forward to the discussion.

(Applause.)

MR. FLAVIN: Okay, now it’s your chance. Questions, thoughts, discussion? We’ve got a microphone set up here in the center. If you have a question, why don’t you come and start a line behind that microphone? Unfortunately, I think that’s the only way that we’re going to be able to hear your thoughts and questions.

If you want to direct a thought to a particular speaker, you can do that. If not, you can just make a general comment. The only thing I would ask is that each of them be relatively short. And please identify yourself as you make your question, please.

Go ahead.

Q: There’s been mention of a common standard several times today. I’d be interested in an elaboration on that concept – any of the speakers – all of them?

MR. FLAVIN: Why don’t we take a few comments and questions, and then I would ask each of the panelists to take notes and you can sort of select which ones – assuming they weren’t directed at an individual – you want to take, and then hopefully we won’t have everybody answering every question.

Next individual?

Q: (Off mike.)

MR. FLAVIN: Could you identify yourself, please?

Q: Arthur Hunt

I travel around the Adirondacks and we’ve seen an awful lot of damage from acid rain from coal fire plants. I’m really excited about this biofuel conference and the implications of it. I’m really pleased to see that the USDA has been a long-term supporter of the biofuel efforts. And you’ve mentioned that the technology is in place to produce clean-burning coal plants. We have the carrot; I would like to urge you to – urge the administration to reinstitute the stick.

The environmental safeguards were relaxed for the benefit of a few coal plants and energy companies. I think it’s time it reinstitute them, and that will help also reduce the carbon emissions. Thank you. Thank you for your support of this conference.

MR. FLAVIN: Thank you.

Jodie?

Q: Jodie Roussell with the American Council on Renewable Energy. I have a question for Mr. Elbling.

You commented that there are now 15,000 biodiesel filling stations in Germany, and we’ve keenly watched the tax exemption of biofuels in your country. I’m wondering if you can comment more on the historical development of filling stations in terms of the numbers over the past 10 years and how the tax exemption spurred the development of additional filling stations? Thank you.

MR. FLAVIN: Let’s just take one more and then we’ll turn back to our panel.

Q: Yes. Harry Stokes, Stokes Consulting Group, working with Winrock and other partners in Africa and other places in the developing world.

Would the Worldwatch Institute be interested in expanding the scope of this study to look at the applications for alcohol in household energies, especially cooking?

MR. FLAVIN: Thanks for that leading question. Let me first ask the undersecretary if he’d like to respond to one or more of those questions. Why don’t you please come up here for the microphone?

MR. DORR: Well, on the issue of standards, it’s clear to me that all of the producers that we’re working with are very focused on the need to migrate to appropriate standards to make sure that all the products we’re producing are interchangeable, as any other hydrocarbon-based fuel is. And so we completely agree with the issue there.

On the situation relative to the standards on coal-fire plants, obviously there are reasons the administration has taken the position they have, and I think they’re very cognizant of trying to be a good steward of the environment, and I would expect they would continue to be.

MR. FLAVIN: Suzanne, do you want to –

MS. HUNT: Yeah, the standard question, I would say that this is an issue for the producers but largely for the car companies. They want to insure that the fuels meet certain standards so that they can assure that the cars are compatible, the emissions releases meet certain standards, et cetera. It’s actually more a concern with biodiesel than ethanol. The variation in feedstocks with biodiesel with different oil saturation levels lead to differing characteristics of the biodiesel. So it’s more an issue there. With ethanol, it’s a much more homogeneous fuel but water content can be an issue. There are already standards in place in the United States and in Europe, and other countries have adopted those standards, but for this to become a truly global market and a global industry, internationally accepted and aligned standards are going to be needed.

In terms of expanding the scope of the study, we actually felt like we had our hands a little bit tied with the study being limited to liquid biofuels for transportation because there are so many other types of bioenergy and applications of bioenergy. But we were also quite relieved because it was already such a broad study. But we would be very pleased to expand it in the future and look forward to working with many of you.

MR. FLAVIN: Viktor Elbling?

MR. ELBLING: Yes, thank you for the questions. As far as the common standards are concerned, I think there are two points to differentiate. On the one hand you have the question of what standards the fuels have to reach in order to be operable in different systems, different countries. At the moment you have different standards in the U.S. and in Europe, and you might not be able to really reach a global market if you don’t have common standards for the fuel itself.

Then on the other hand – and this is the second question, the second part of the problem – is, as we said before, especially tropical countries have the possibility to further the product on the markets to much more interesting prices than we do in our more temperate countries normally. And I think it’s important to ask the question, how are the labor conditions in these countries that export – how are they treating the environment? How are they treating the water supply? What happens with deforestation? Take Brazil, for example. I think we really need to have – this will be the ideal thing, if we could be able to agree on common standards when you are talking about the exportation of biofuels.

As far as the German filling stations are concerned, this of course concerns biodiesel in Germany only. As we said before, this is mainly produced from rapeseed, and interesting is it’s an oil. And the interesting thing is that you can use this fuel practically without any change to the engine, any diesel engine. This is the interesting thing. And that is why the markets have accepted it. So it’s pure – it’s pure rapeseed oil in this case, which is filled into a normal diesel engine at these filling stations.

Why is this attractive? Because the tax breaks made this in principle more expensive production of this fuel, competitive against the taxed fuels as gas, for example, where the difference to the United States, 50 percent of the price of gas at the filling station comes from taxation, from mineral oil tax. That is the reason why it was interesting. There is in Germany an interest for environmentally safe or safer fuel, and that is why it was a success I think to move to these fuels. Thank you.

MR. FLAVIN: The last time I was in Germany it was $6 a gallon. So that does provide a powerful incentive.

Let’s go ahead and take some additional questions and comments.

Q: Hi. Ian Monroe from Winrock International. It seems like, as has already been articulated, striking the appropriate balance between supporting domestic energy security and agriculture versus the economic efficiencies of global trade and supporting developing countries’ development of biofuels and increased revenue is going to be a major challenge. And I’m just curious to get the opinion specifically of Mr. Dorr and Mr. Elbling regarding how we strike that balance. And we have seen specifically, Ms. Hunt has put up, the tariffs that are in place as barriers to trade currently. When should we start seeing those tariffs going down and eliminated, if that is something eventually we want to do? Obviously this ties into the whole Doha negotiations that have been going on and the major challenge there.

MR. FLAVIN: Thanks. Sergio, I’m not sure if it’s fair for an author to be asking a question, but we will give you a special exemption here.

Q: No restriction was mentioned; that is why I stood up. (Laughter.)

First a comment on the technical specification. Our German colleague talked about much broader standards than technical. But I think there are two sources here. One is the world fuels chart. All of the fuels in the world are decided, defined by the world fuels chart. And the other thing is when you go into international trade, you have to specify the fuel in a futures and options contract. The New York Board of Trade has such a specification, and other future commodity traders will have that defined. So I think we are migrating into that.

But the question itself is although the United States has not signed Kyoto – as some would say in Texas, “Cyoto (sp)” – (laughter) – there is trade going on even in the United States in carbon. And of course those countries like Germany and others who have signed a device called the CDM, the clean development mechanism, that allows trade in carbon coming from developing countries to developed countries. And it is very, very well – there is no problem with that. But when it comes to biofuels, it seems to be an issue. Now, the question is, in summary, why can you trade emissions and not trade biofuels? Thank you.

MR. FLAVIN: Good question. Next please.

Q: Hi. I am Jahim Fandon (ph), of the International Food Policy Research Institute.

Congratulations to a great study, to GTZ and Worldwatch. It raises a number of very important science and technology questions. And my question relates to how can we move the science and technology agenda forward in a coherent way with sufficient exchange mechanisms? I fail to see a global clearinghouse mechanism which especially would facility fast exchange of knowledge to developing countries. We have talked a bit about competition between, say, Germany, U.S., Brazil, and so on, and who is at the frontiers with biofuel and so on, but maybe the panel, and especially you, Ms. Hunt, can comment on that. How can we establish a global mechanism to facilitate fast technology transfer in that field?

MR. FLAVIN: Thank you. And one final question.

Q: Thank you very much. Charlotte Hebebrand from the International Food and Agricultural Trade Policy Council. I would like you to address a little bit more the development dimension of biofuels. Clearly Brazil has done a tremendous job, and it’s a big powerhouse. But let’s not forget that Brazil also benefited from an enormous amount of government support. So how can we sort of replicate the success Brazil has had in other developing countries and least developed countries? And what is the role that the donor countries can play here? And I’m thinking with regard to perhaps the EU change in the sugar regime. What is the thinking in terms of helping some of the ACP countries switch from sugar to ethanol production? And also in the aid-for-trade debate taking place in the WTO, is there not something that could be looked at in this regard? Thank you.

MR. FLAVIN: Suzanne, do you want to lead off in this round?

MS. HUNT: You know, I meant to plant some questions and I just never got around to it. (Chuckles.) But the question about the exchange is actually one of the recommendations that we did make that I didn’t have time to talk about in my presentation, was that we actually did recommend in the full report that there be a clearinghouse mechanism.

And, you know, certainly we need to look at the best way to do that. One idea is that there is a – one of the things that came out of the Bonn 2004 conference, renewable energy conference, was the REN 21, renewable energy network for the 21st century. And that kind of model, which is a dispersed network of people; there isn’t an organization with people who have to continually raise their funds and whatnot. And actually, Chris has been quite involved in that and can talk more on that with individuals later. But that is one idea.

One idea that actually we were talking about this morning is farmer exchanges, actual direct exchanges. Certainly the World Bank and other development agencies, GTZ, can play a role in getting the lessons that have been learned and the experience that we already have out there. Certainly in the countries that have extension services like ours, that is an institution that can play a role.

But that is a very important point. One of the things that is needed is research development, and demonstration. I think any farmer - if they are going to change what they are growing, what equipment they are using - they are only going to take that risk if they know that there is going to be a market there, and if they can see how it is done and how it works, how it has grown in their region. So there is a significant need also for on-the-ground demonstration and pilot projects.

In terms of replicating Brazil’s success, this is a really good question, and thank you for raising it, Charlotte. One of the things that I would like to point out is often we – you know, we look at how much money Brazil spent in terms of subsidizing their industry, but they also saved a significant amount of money, actually more. The numbers that we have show that they actually saved a lot more money in terms of avoided petroleum imports than they spent on their subsidies. And that doesn’t even count the benefits that they gained in terms of environmental gains. Certainly early on there were environmental costs, but environmental gains, job creation – estimates range from a million jobs being created to more or less depending on how you count them.