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Cablegate: Environment Ministry Decision On Bioethanol Will

VZCZCXRO3774
RR RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD
DE RUEHRL #0428 0951523
ZNR UUUUU ZZH
R 041523Z APR 08
FM AMEMBASSY BERLIN
TO RUEHC/SECSTATE WASHDC 0841
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE

UNCLAS BERLIN 000428

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: SENV KGHG ENRG EUN GM
SUBJECT: ENVIRONMENT MINISTRY DECISION ON BIOETHANOL WILL
HAVE NEGLIGIBLE EFFECT ON BIOFUEL INDUSTRY

REF: A. BERLIN 316
B. 07 BERLIN 2177

1. On April 4, German media reported on Environment
Minister Sigmar Gabriel's decision to abandon a planned
increase in the unlabeled blending mandate for bioethanol in
gasoline from five percent to ten percent. However,
according to Embassy contacts in leading biofuel industry
groups, not a single journalist understood this issue clearly
and no article got the facts right. In contrast to media
claims, the adverse effect of this decision on the German
biofuel industry is negligible.

2. The proposed legislative amendment to the Fuel Quality
Ordinance would increase the unlabeled blending limit of
bioethanol in gasoline from 5 percent (E5) to 10 percent
(E10) and for biodiesel in diesel fuel from 5 percent (B5) to
7 percent (B7). Biofuels may be blended above those limits
only if they are labeled as such to make consumers aware of
the fact; since not all vehicles are compatible with higher
biofuel blending limits, their owners would be forced to buy
more expensive premium gasoline. The planned increase in the
blending mandate was based on a series of roundtable
discussions held between the German Environment Ministry
(BMU), Agriculture Ministry (BMELV) and representatives from
the automobile, mineral oils and biofuel industries (REF A).
However, in calculating the number of vehicles that would be
incompatible with an increase to E10, the BMU received input
only from domestic automobile manufacturers represented by
the German Association of the Automotive Industry (VDA). As
a result, BMU grossly underestimated the number of foreign
vehicles that would be impacted by a change to E10. Only
after the German Automobile Club (ADAC) and the German
Association of Foreign Auto Manufacturers (VDIK) weighed in
with new figures did BMU acknowledge that the number of
impacted car owners would be in excess of 3 million (as
opposed to their previous estimate of 375,000). Not wishing
to make so many individuals bear an increased financial
burden, BMU officially abandoned the planned unlabeled
blending limit increase for E10 on April 4.

3. Experts believe this action will have a negligible
adverse effect on the German domestic biofuel industry. The
industry consists primarily of biodiesel producers with only
a small number of bioethanol producers. In a conversation
with ECONOFF on April 4, Dr. Norbert Heim of biofuel lobby
group UFOP said almost no bioethanol is currently being
produced in Germany. This opinion was confirmed by Karin
Retzlaff of another lobby group, VDB, who noted that almost
all bioethanol in Germany comes from imports. The BMU's
decision on E10 will not affect in any way the parallel
planned increase from B5 to B7. Therefore Heim said that
biofuel producers have "no problem" with the BMU's decision
since it only applies to bioethanol in gasoline and not to
biodiesel. Retzlaff said on April 4 that she expects the
increase to B7 to become law shortly.

4. COMMENT: The BMU's decision places more pressure on the
German automobile industry. The current EU Energy and
Climate Package released on January 23 proposes stricter
emissions limits of about 120 grams of carbon dioxide per
kilometer for a fleet of vehicles. Originally, Gabriel had
denounced this proposal as discrimination against the German
auto industry. Gabriel was roundly criticized by the press
for his defense of automobile manufacturers, which damaged
his image and credibility as Environment Minister. Gabriel
subsequently received complaints from auto manufacturers
about the proposed increase to E10. Media and industry
insiders speculate that, because VDIK rejected BMU's
invitation to a biofuels road map discussion in 2006, Gabriel
likely felt unfairly burned by their criticism of the final
road map. As a result, Gabriel is reportedly no longer
willing to defend the industry. German automobile
manufacturers had been counting on the increased use of
biofuels to help them meet any lower EU emissions
requirements. In his remarks Gabriel said that automakers
will now have to bear the responsibility for finding other
means to reduce auto emissions themselves. END COMMENT.
TIMKEN JR

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