Transcript: Morning Session - Biofuels For Transportation Conference

So in terms of the cost of the subsidies, I think that is an issue that needs to be looked at much more carefully. And in terms of replicating that success, Brazil has shown leadership in terms of being very willing to share their experience, share their technologies. So there is a huge amount of interest both on the sides of countries in the Caribbean and Africa and other areas that have similar climates, but also on the side of Brazil in terms of being willing to share this experience directly with those countries. And we have already seen – there are delegations from all over the world going to Brazil on seemingly a daily basis to learn and see the plants and talk about technology trends.

One of the kinds of lessons that can be learned I think from Brazil’s success is that they did have leadership from the highest levels in their government, and that is certainly a critically factor. And they coordinated amongst their industries – this is a really unique energy source in that it crosses many of our government agencies and ministries. So the transportation ministry has to coordinate with the agricultural ministry and the energy and rural development, et cetera. And that is something that is notoriously difficult for governments to do. So strong leadership from the highest levels and the willingness to coordinate was certainly important there.

MR. FLAVIN: Go ahead.

MR. DORR: Those are a series of great questions and observations. I think the thing that I generally think about when I am involved in policy decisions is that, really, markets do work; they work very, very well. And I made a couple of observations.

Number one, one of the things that has also occurred relative to exchange of information is I think we tend to – particularly those of us who deal with it every day – tend to underestimate or at least have lower expectations of the value of the deployment of broadband technology and the ability to move information very, very quickly, even to very remote Internet cafes. We are moving information and money and ideas in a much more unique and rapid manner than we ever have in the past.

I also reflect back in 1974 when we passed the first check-off in Iowa for the purpose of promoting market development. And one of the things that I talked about was ethanol development. And at the time we were working to pass that check-off, we were literally standing on hayracks at seed corn field days in the fall telling our producer members that we needed to pass this check-off because some day we were going to have to sell a $10-billion bushel corn crop. And they all looked at me and those of us who were doing this as though we had been smoking something that we forgot to pull out in the fence line earlier in the summer because we were only producing 5 billion bushels of corn at that time. We have produced two 11-billion-bushel corn crops since then.

And when you tie that into the discussion about food and fuel, and some of these trade issues that in my view tend to take on a tone of, well, we have to be careful that we don’t infringe in everyone’s market, I hasten to point out that what happens in developing countries is the food component, the caloric intake, goes down. I don’t need 3,500 calories when I’m not – when I’m riding in a tractor versus walking behind a mule. On the other hand, demand for liquid and electric energy has almost been linear.

And so consequently, we are recalculating, we are reworking the direction of the caloric production that we are getting from the sun and from the earth and otherwise. So I think those things are important to keep in mind. And then other things – I mean, this is just from an old Iowa farmer’s perspective, but one of the ways that we establish standards for things like hydraulic couplers and three-point hitches and loader tractor adapters was through a series of ISO standards that ultimately came through the various international processes, and I’m assuming that that will occur again.

So I think when you look at the fact that these are literally brand-new infrastructures built around some either, depending on how you look at it, old or new technology but technology that has not historically been part of the energy structure, we’ll work through these systems, and there are going to be some very bright quick kids coming out of some colleges all over the world who are going to figure out ways to solve these problems and make a lot of money.

MR. FLAVIN: It’s hard to shake that enthusiasm. (Laughter.)

MR. ELBLING: Yes, thank you again for the questions. What will we be able to move as far as tariffs are concerned in the Doha round now – very difficult to answer. I think it’s correct to be careful with the predictions at the moment. One shouldn’t lose hope, but I think with some reason we are a little bit skeptical about the result of this round at the moment. But if we are able to lower tariffs in important industry and crop industries for the developing world, then we are very – we Germans at least are very much willing to go forward with that. As I said before, there are other partners who have some problems with this who have a stronger agricultural background maybe than we had.

One question was already answered with the question. It was the question of aid for trade. And the European Union is engaged very strongly already with, for example, especially countries of the Caribbean, about how to change their exports in sugar after reform of the sugar markets, especially countries who had a preferential entrance into the European Union after this. And we are using very much the aid-for-trade instruments of the Doha, of the WTO to do this. So I think this is going on quite well.

Market and states – well, I think you heard from what I said before that we have the feeling that the state has to play a very important role giving incentives in the beginning for these kinds of industry to make the competitive. The markets have to be created probably, have to be put in place in order to function. I think they are not always already there functioning perfectly. So I think it’s important through mandates, through other measures like the buying up by the government of a certain amount of biofuels, for example, for the car fleet of the government – things like this – all things that have happened in Brazil could be interesting ideas to follow. So I think the state has to play an active role if we have a – want to reach a target on this.

Why do we have trade on carbon emissions and not on biofuels? I think that is a good question. I think the Kyoto Protocol gives some possibilities to work with – to promote biofuel development through the instrument of the clean-development mechanism. And we have the chance to get emission-reduction credits, as you know, for investments in all kinds of emission-reducing projects. And if this emission-reducing project is in the biofuel area, this is a good possibility for developing countries. As far as transformation countries are concerned, for the countries especially Eastern Europe, well, you have the second-important instrument with this disjoint implementation, which more or less functions the same way.

So I think there is something in place if you have projects that go well with the idea of the clean-development mechanism and then of the biofuel emissions reductions. Thank you.

MR. FLAVIN: Well, thank you all for the wonderful questions. And thanks to the panel for the equally cogent answers, and for everybody for keeping the responses very tight because we now have lunch and I expect many of you are eager to get onto that, not only because I think we have a pretty good lunch plan, but our luncheon speaker, Jim Woolsey, I think is going to probably, if anything, take the energy level up a notch because he tends to do that.

There is a map in your packet indicating where the lunch is being held. It is at the Holiday Inn on New Jersey Avenue. It should be about a 10- to 15-minute walk. I look forward to seeing you all in just a few minutes.

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