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Cablegate: Unctad Seeks More Active Role with Biofuels: Conference On

VZCZCXRO9924
RR RUEHRG
DE RUEHBR #2263/01 3461439
ZNR UUUUU ZZH
R 121439Z DEC 07
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 0632
INFO RUEHGV/USMISSION GENEVA 1549
RUCNDT/USMISSION USUN NEW YORK 0237
RHEBAAA/DEPT OF ENERGY WASHDC
RUEHSO/AMCONSUL SAO PAULO 1304
RUEHRI/AMCONSUL RIO DE JANEIRO 5552
RUEHRG/AMCONSUL RECIFE 7478

UNCLAS SECTION 01 OF 04 BRASILIA 002263

SIPDIS

SENSITIVE

SIPDIS

DEPT FOR IO/EDA, OES/EGC, WHA/BSC, WHA/EPSC, EEB/ESC
DEPT FOR GREG MANUEL
GENEVA FOR ANN LOW AND CHUCK ASHLEY

E.O. 12958: N/A
TAGS: TRGY UN UNCTAD KGHG ECON SENV ENRG KSCA BR
SUBJECT: UNCTAD SEEKS MORE ACTIVE ROLE WITH BIOFUELS: CONFERENCE ON
BIOFUELS, DEC. 4-5, 2007, RIO DE JANEIRO

1. (U) THIS CABLE IS SENSITIVE BUT UNCLASSIFIED AND IS NOT FOR
INTERNET DISTRIBUTION.

2. (SBU) SUMMARY. UNCTAD, together with the Government of Brazil
(GoB), held a conference on biofuels in Rio de Janeiro, Brazil, on
December 4-5 as a pre-event to the twelfth session of the United
Nations Conference on Trade and Development (UNCTAD XII), which will
take place in Accra, Ghana, in April 2008. UNCTAD officials and the
representatives of nearly 30 countries expressed support for greater
use of biofuels "if done right", and they saw UNCTAD as playing a
constructive role in helping developing countries with biofuels.
The preliminary list of recommendations coming out of the conference
is provided below; when finalized these recommendations are supposed
to feed into UNCTAD XII. END SUMMARY.

BACKGROUND

3. (SBU) UNCTAD and the Energy Planning Agency of the Brazilian
Ministry of Mines and Energy (EPE) hosted a conference on biofuels
in Rio de Janeiro, Brazil, December 4-5, 2007, as a pre-event to
UNCTAD XII, which will take place in Accra, Ghana, in April 2008, as
well as to the International Conference on Biofuels which the GoB
will host in November 2008 in Sao Paulo. Officials from 28
countries attended (including China, Europe, India, Africa, Iran,
Cuba, Latin America and the United States), and UNCTAD, the Food and
Agriculture Organization (FAO), the United Nations Environment
Programme (UNEP) and the International Tropical Timber Organization
(ITTO) sent representatives. Also, representatives from various
universities, research centers, and the private sector participated.
The USG was represented by Embassy Brasilia's Counselor for
Environment, Science and Technology and by Consulate General Rio de
Janeiro's political/economic specialist.

UNCTAD'S VIEW

4. (SBU) Ms. Laksmi Puri, the Acting Deputy Secretary-General and
Director, Division on International Trade in Goods and Services and
Commodities, opened the conference describing the benefits of
biofuels in addressing three simultaneous challenges: increasing
energy security through energy diversification; reducing greenhouse
gas gases; and promoting economic development. She stressed that
handling biofuels had to be done "in the right way" in order to
avoid impairing food security and causing deforestation.

5. (SBU) Puri saw a greater role for UNCTAD in helping developing
countries to understand the implications of biofuels. She cautioned
that developing countries need to keep an eye out for possible
dumping and also technical barriers to trade (citing a case where UK
groups were calling for a ban on imports of soy from Africa). She
predicted that such technical barriers are likely to increase. With
regard to greenhouse gases emissions, she stated that 10 to 12
percent of those emissions were related to transportation and so
biofuels could make a significant contribution in reductions. Puri
noted the issue of agriculture subsidies and that the climate change
agreements can have significant trade implications. She commented
that the Clean Development Mechanism (CDM) could be helpful with
biofuels. However, she opined that biofuels were not a "panacea,"
though they can play an important role in a country's mix of energy.
Puri said UNCTAD could help developing countries with certification
schemes and could fill the knowledge gap with biofuels. UNCTAD
already is preparing case studies regarding biofuels with Guatemala,
Thailand and the Philippines.

6. (SBU) In closing the conference, Puri identified the need for
significantly more funding for UNCTAD in order to play a more active
role with biofuels. UNCTAD could be a clearinghouse for information
and an incubator of ideas. She underscored that biofuels must serve
the interest of economic development. On the margins of the
conference, Puri encouraged the USG to help with funding for
UNCTAD's biofuel activities.

7. (SBU) UNCTAD's Chairman of the International Advisory Expert
Group to the Biofuels Initiative, Prof. Ignacy Sachs, took a
different tact. He saw a need for governmental action, saying that
society needed safeguards from irresponsible "voluntariness" from
the private sector, apparently referring to such steps as
deforestation to produce biofuels. In fact, he viewed the question
of protecting the forests as a central one. He emphasized that the
world is facing a transition from an oil based economy to a post-oil
economy and biofuels should not be treated as a competitor to oil,

BRASILIA 00002263 002 OF 004


but rather as a new option for energy. Sachs, a self-described
"dinosaur," harked back to various ideas for raising revenues, from
a carbon tax, to a tax on oil royalties, to a tax on airline
tickets, and even to raising income tax rates (he spoke fondly of
the days when the income tax rates were up at 90 percent). He spoke
of the need for certification programs, such as for charcoal.
(Note. Participants and speakers at the conference differed on
whether certification programs should be voluntary or mandatory,
with the Sao Paulo Union of Sugar Cane Growers (UNICA) and the
Netherlands representative highlighting the benefits of a voluntary
regime and the risk of running afoul of WTO rules with a mandatory
one. End Note.) Sachs contended that UNCTAD should be active in
"organizing the world biofuels market." Puri did not comment on or
specifically endorse Sachs' statement, and the draft recommendations
(see below) hew closer to her point of view rather than to his.

BRAZILIAN GOVERNMENT'S VIEW

8. (SBU) Brazilian officials extolled the benefits of biofuels for
the world and especially for developing countries. The President of
EPE, Mauricio Tolmasquim, Brazil's clean energy matrix, with its
extensive use of hydroelectric power and biofuels/biomass, as well
as nuclear. He highlighted that Brazil will host the International
Biofuel Conference in Sao Paulo in November 2008.

9. (SBU) Ambassador Antonio Simoes, the Director of the Energy
Department of the Brazilian Ministry of Exterior Relations (MRE)
from the Foreign Ministry), described the Brazilian experience and
the GoB's interest in promoting greater use of biofuels in the
world. Speaking frankly, he pointed out that biofuels would
principally be a domestic matter. In Brazil's case, the country
consumes 80 percent of production and exports only 20 percent.
Biofuels can generate enormous benefits, such as in the case of
Brazil where over the last 25 years it has saved about US$ 75
billion by not importing oil and using domestic biofuels instead.
Simoes announced that Brazil will host an International Biofuels
Conference in Sao Paulo in November 2008.

10. (SBU) Simones laid out the GoB's goal of making biofuels an
international commodity. Today there are about 20 significant
producers in the world, and he hoped that in the future there would
be many more, but it has to be done in a sustainable manner with
respect for the environment. He noted that the lack of water (which
is critical for ethanol production) shouldn't preclude a country
from producing biofuels; biodiesel can be produced in dry
countries.

11. (SBU) Mr. Egon Krakhecke, the Head of the Brazilian Environment
Ministry's Secretary for Extractive Industries and Sustainable Rural
Development, stated that developed countries are primarily
responsible for CO2 levels and have the primary responsibility for
solving the problem. He stated that the United States is the
leading contributor to CO2 emission and should adhere to the Kyoto
Protocol following Australia's example. He said the GoB is working
on a "Social Environment" certificate for its biofuels ensuring that
it is produced in a sustainable manner. He concluded that trade
barriers on ethanol are "unjustifiable" and not fair to the poor.

USG COMMENT

12. (SBU) The USG representative (EST Counselor from Embassy
Brasilia), per information provided by Washington and Geneva,
advised Ms. Puri on the margins and also the conference publicly
that the USG was pleased to see UNCTAD being active in the area of
biofuels. In addition, the USG representative underscored the USG's
support for the increased use and production of biofuels, stressing
that biofuels need to be produced in a manner that does not
adversely impact the environment through deforestation or
biodiversity loss.

TECHNICAL INFORMATION

13. (U) Numerous technical experts, primarily from Brazil and the
United States, spoke at the conference about the state of play and
future for biofuels. (Note: Conference officials announced that
they would be posting these informative power point presentations on
the UNCTAD website. End Note.) The experts generally agreed that
ethanol from Brazilian sugar cane was inexpensive and produced
substantial greenhouse gas emissions reductions, especially after
factoring in the use of the bagasse (or remaining portions of the

BRASILIA 00002263 003 OF 004


cane after squeezing the sugar out) in generating electricity.
UNICA's Executive Director Eduardo Leao de Sousa highlighted
Brazil's Program of Biofuels Certification (PBCB) and the
International Round Table on Sustainable Biofuels. He noted that to
comply with the Brazilian law on reducing burning of sugar cane (Law
11.241/02) - which is necessary if using manual harvesting - the
sugar cane industry in Sao Paulo was moving to 100 percent
mechanized harvesting. This unfortunately will lead to reductions
in jobs.

14. (U) Dr. Eric Larson of Princeton painted a bright picture for
the next generation of biofuels, especially those using
thermo-chemical processes. These processes could come on line
commercially in 5 to 10 years. Prof. Jose Moreira of the University
of Sao Paulo and member of the International Panel on Climate Change
(IPCC) stressed the known benefits of producing biofuels from sugar
cane. He viewed commercialization of the next generation or
cellulosic biofuels as being far off in the future.

15. (SBU) Prof. Robert Schaeffer of the Federal University of Rio
de Janeiro emphasized the need to build engines specifically for
biofuels, which would be more efficient burning biofuels than
current gasoline versions. He made the point that genetically
modified organisms could do much to improve crop productivity. He
recognized that the use of GMOs was a controversial point in various
parts of the world.

FINANCING

16. (SBU) A UNEP expert on CDMs, Glen Hodes, explained why there
had been practically no funding for biofuel projects. He could only
identify one small project in China and it involved using waste
cooking oil. He said trying to factor in direct environmental and
indirect costs associated with a biofuels project was daunting for
CDM analysts. (Comment. It appeared from the briefing that the
prospects for future CDM funding for biofuel projects seemed bleak,
even though Hodes said they were trying to address this problem.
End Comment.)

17. (SBU) The project manager for the West African Biofuels Energy
Fund (ECOWAS), Dr. Thierno Bocar Tall, described his organization's
interest in working with the United States and others on technology
transfer and financing. They are particularly interested in the
prospects for biodiesel from cassava.

CONFERENCE DRAFT RECOMMENDATIONS

18. (SBU) At the close of the conference, Lucas Assuncao, Chief of
the Biofuels Unit at UNCTAD, distributed a draft note regarding the
conference. He explained that the note would be reviewed further by
UNCTAD members back in Geneva. There was only a brief, cursory
discussion of the note at the conference.

19. (U) The draft note provides, in pertinent part, the following:

Paragraph 11. In the Sao Paulo Consensus, adopted at UNCTAD XI,
UNCTAD is mandated to address trade and development implications of
new and dynamic sectors, specifically in those sectors with
particular potential to offer development gains to developing
countries. It is therefore proposed that the following activities,
among others, are undertaken in the period 2008-2012:

(a) Prepare country assessment of the potential for the production,
domestic use and trade of biofuels in developing countries,
including (i) economic feasibility studies to determine biofuels
production costs and eventual subsidy levels, (ii) ways to prevent
non-tariff barriers related to trade in biofuels and (iii) consider
the use of certification/labelling/verification schemes that are
fair and non-discriminatory. Such assessments should be complemented
with capacity building activities for policy-makers and key
stakeholders and include the exchange of experiences with other
developing countries and the possibility of enhanced south-south
cooperation;

(b) Help create an enabling and appropriate domestic regulatory and
investment environment that enables developing countries to enhance
their supply capacity, secure market access and establish their
comparative advantages in the emerging biofuels sector, taking fully
into account national circumstances (population size, available
land, scarce natural resources, competing land uses, dependency on

BRASILIA 00002263 004 OF 004


foreign energy resources, climate and social conditions, etc...);

(c) Conduct economic analysis on trade and climate change interface,
for example by assessing trade and development impacts of specific
emission reduction proposals under discussion at the UNFCCC
negotiations for a new commitment period beyond 2012 under the Kyoto
Protocol;

(d) Serve as a clearing house for the exchange of policy relevant
information on biofuels and organize international policy fora to
discuss the interface and mutual supportiveness of trade and climate
change policy at the international, regional and national levels;
and

(e) Development of training material on the rules of the Clean
Development Mechanism (CDM), so that a considerable number of
developing nations can attract investment via CDM towards energy
development projects.

COMMENTS

20. (SBU) UNCTAD's December 4-5 conference on biofuels was a
low-key, technical discussion biofuels. The UNCTAD officials, GoB
officials and conference participants were in favor of increasing
the use of biofuels, though emphasizing it must be done in a
sustainable manner and respecting the environment. It appears that
UNCTAD is looking to obtain some form of mandate for additional work
in the area coming out of UNCTAD XII to be held in Accra, Ghana in
April 2008.

SOBEL

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