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Cablegate: Germany Moving Quickly Forward On Biofuels

VZCZCXYZ0011
RR RUEHWEB

DE RUEHRL #1385/01 2841601
ZNR UUUUU ZZH
R 101601Z OCT 08
FM AMEMBASSY BERLIN
TO RUEHC/SECSTATE WASHDC 2346
INFO RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC 0081
RHMFIUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS BERLIN 001385

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: EAGR ENRG EU EUN SENV TPHY TRGY
SUBJECT: GERMANY MOVING QUICKLY FORWARD ON BIOFUELS

USDA for OSEC for Dorr, Faulkner, Keenum; FAS for Yost, CJackson,
RSschwartz, DYoung, DSalmon

1. (SBU) Summary: U.S. Department of Energy's (DOE) Principal
Deputy Assistant Secretary (PDAS) John Mizroch and U.S. Department
of Agriculture's (USDA) Deputy Under Secretary (DUS) Douglas
Faulkner represented the U.S. in July 2008 bilateral discussions on
biofuels with German officials representing the Ministry of
Environment (BMU), Ministry of Food, Agriculture, and Consumer
Protection (BMELV), Ministry of Transportation (BMVBS), and the
Research and Education Ministry (BMBF). GHG reduction is the
primary aim of German biofuels research, but they are constrained in
their stock of raw materials. NGOs pressure is one factor in their
effort to develop sustainability criteria, as is the concern about
the input competition between food and fuel production. The
discussions explored potential areas in which the two countries
could collaborate on biofuels. Germany expressed a strong interest
in continuing the dialogue and conducting a return visit to the U.S.
later in 2008. End Summary.

Reducing Greenhouse Gases the Object
of Biofuels German Work
------------------------------------

2. (U) PDAS Mizroch and DUS Faulkner presented the U.S. energy
strategy for transport fuels and vehicle efficiency and the
political framework conditions for promoting the use of biofuels in
the U.S. They also reviewed the U.S. priorities in the Energy
Independence and Security Act of 2007 (EISA). They emphasized the
Administration's commitment to furthering biofuel use as a means of
increasing energy security and independence, as well as fighting
climate change.

3. (SBU) In Germany, reducing greenhouse gas (GHG) emissions is the
primary motivation for advancing biofuels. Wolfgang Hahn, Director
General of Road Transport in BMVBS, acknowledged however, that
Germany does not have enough raw materials to produce enough
first-generation biofuels to meet its biofuel goals and will not
have significant quantities of second generation biofuels before
2020. (Comment: The German Government supports the production of
agricultural crops for biofuels and has a number of incentives in
place that support the industry. In December 2007, the German
Government adopted the EU goals for the production and use of
biofuels into its own national policy program for renewable fuels
and committed itself to achieving the goal of a 10 percent biofuels
blending rate by 2020. End Comment).

4. (SBU) In the discussion of the current German system, Thomas
Weber, Desk Officer in the Air Pollution Office of the BMU said that
Germany is looking at reforming its current quota system (mandate)
for biofuels. The mandate is currently measured in terms of energy
content, but after 2015, BMU wants to measure the mandate in terms
of GHG reduction potential.

Concerns about Biofuel Competition with Food
--------------------------------------------

5. (SBU) Clemens Neumann, Director General for Renewable Resources
in BMELV added that due to the lack of domestically-produced feed
stocks, "Germany must therefore import biofuels and give the public
the impression that they are produced in a sustainable way." The
German government is under pressure from non-governmental
organizations (NGOs) to ensure that biofuels use does not harm the
environment or compete with food production. German officials
conceded that Germany received criticism alleging that its biofuels
mandates were driving high commodity prices. To address this, they
expressed a strong interest in learning about the research done in
the U.S. that showed biofuels mandates were a small factor in
driving higher food and gasoline prices.

6. (SBU) Jan-Hendrik Stapp, Desk Officer at BMELV, stated that
German farmers also support the implementation of sustainability
criteria (SC) because it evens the playing field and subjects
competing countries to the same environmental standards they face,
thereby eliminating their production cost advantages.

Sustainability Criteria: Countering NGO Campaigns
--------------------------------------------- -----

7. (SBU) In December 2007, Germany proposed SC that must be met in
order for a biofuel to count against the German biofuels mandate or
to receive tax benefits. Germany also submitted this proposal to
the EU for approval. These criteria were proposed in an effort to
counter NGO campaigns. Under the proposal, production and import of
biofuels or feed stocks that do not meet the criteria will still be
possible, but they would not receive any tax benefits. The EU put
the German proposal on hold until the end of 2008 in order to
develop its own sustainability criteria. The major criteria for
both the German and the EU proposal include GHG savings and a
prohibition of feedstock production on "high value" land (e.g., rain
forests, nature conservation areas, or land with high carbon stock).
(Comment: While these criteria are aimed at reducing GHG
emissions, they could also pose a trade barrier, depending on the
formulation of the criteria. End Comment).

8. (SBU) DUS Faulkner presented the U.S. approach regarding
sustainable production of biofuels. He stated that the U.S. has a
much broader view of sustainability which does not reduce
sustainability to GHG savings but also encompasses economic
sustainability. He added that the U.S. believes in voluntary,
rather than mandatory sustainability standards. In response,
Neumann asked whether the United States could support the
establishment of an international certification system for biofuels.
He stated that BMELV already supports a pilot program to set up a
certification scheme, which upon completion, should be able to
certify compliance with the proposed standards as well as establish
a "meta" or umbrella system for harmonizing different certification
schemes. To ensure that eventually the proposed certification
scheme could and would be applied globally, Germany is seeking
participants from the U.S. DUS Faulkner stressed the U.S. opinion
that any international work on standards should be undertaken within
the framework of the Global Bioenergy Partnership (GBEP). (Comment:
The system developed in the pilot program does not set any
criteria, but functions as a tool to make sure the rules and
requirements of a given system are actually being observed. In
addition, the system would help to make different systems comparable
and compatible, thus reducing the need to seek additional audits.
End Comment).

Opportunities for Cooperative Research
--------------------------------------

9. (U) PDAS Mizroch and DUS Faulkner presented an overview of
research and development (R&D) activities in the field of biofuels
in the U.S. These focused on bio-chemical and thermo-chemical
conversion of biomass into biofuel and other biomass-based products.
They provided background on the funding lines and introduced the
Germans to the concept of the Biomass Research Board and the three
biomass research centers.

10. (SBU) On the German side, R&D activities on biofuels are
divided among various ministries and agencies. Although the BMU is
not the primary research sponsor for biofuels, it is responsible for
coordinating biofuels policies and research amongst the various
ministries because of the role it plays in combating climate change.
Germany supports biomass research for a range of uses that are not
always specific to biofuels, including for electricity production
and home heating. The BMU allocates some of its profits from the
Emissions Trading System to general climate protection research. In
2008, 2-3 million Euro were targeted to develop the German Biomass
Research Center in Leipzig (with the assistance of BMELV and
BMVBS).

11. (SBU) BMBF does not have any biofuels-specific research
projects, but instead focuses on bioenergy and plant research in
general. According to Christian Mueller, the Assistant Director for
Nutrition and Renewable Resources in BMBF, the ministry has
allocated 50 million Euro for bioenergy over a 4-5 year period.
Mueller is interested in doing joint workshops and sharing
information among scientists. He specifically mentioned an interest
in working on plant genotyping and phenotyping.

12. (SBU) BMELV is another major sponsor of biofuels research. The
Agency for Renewable Resources (FNR) within BMELV receives an
estimated 17.5 million Euro annually, specifically for biofuels
research. Ronny Winkelman, FNR Project Manager expressed interest
in a fact-finding trip the U.S and collaborating on research,
particularly on pyrolysis.

13. (SBU) Stefan Woehrl, Head of the Environmental Department of
the German Association of the Automotive Industry (VDA) said
Biomass-to-Liquid (BTL) has the largest GHG emissions reduction
potential, with 90 percent. In April, Chancellor Merkel visited the
CHOREN commercial-scale BTL plant in Freiberg to mark the completion
of the plant's building phase. Woehrl said that cellulosic ethanol
has a GHG emissions reduction potential of 89 percent.

German Interest in Information Exchange
------------------------------

14. (SBU) Uwe Lahl, Director General for Emissions Control at BMU
and Neumann both expressed interest in learning more about the
biofuels agreements the United States has with China, India, Brazil
and Sweden. In addition, Lahl sought information about the
compatibility of U.S. vehicles with the bioethanol fuel blend (E10).
In early 2008, the German Government tried to implement a similar
E10 blending policy. Foreign manufacturers, however, claimed that
the proposed E10 mandate could have damaged up to 3 million vehicles
due to the fuels' corrosive nature. Consequently, the government
abandoned its proposed policy and left it with a public relations
fiasco. The news surprised the U.S. Delegation given that similar
vehicles in the U.S. had been using E10 for some time. Lahl stated
that they could not share the auto manufacturers' data because of
proprietary reasons, but he welcomed any information the United
States could share on the matter.

B99: A Trade Query
------------------

15. (SBU) Although trade issues were not on the original agenda,
German officials did bring up the B99 (blend of 99 percent biodiesel
and 1 percent diesel) trade issue at the end of the meetings.
German officials contended that the U.S. exported 700,000 metric
tons of subsidized biodiesel to the EU in 2007. They claimed that
the subsidized imports were hurting German producers and maintained
that the policy was not in the interest of U.S. taxpayers because it
subsidized foreign companies that were exporting the biofuels. PDAS
Mizroch responded that the U.S. was aware of the issue and noted
that they were not the appropriate interlocutors to discuss the
matter, but rather an issue that needed to be addressed by the U.S.
Trade Representative's Office. Nonetheless, the U.S. delegation
indicated that not all the biodiesel being exported from the United
States consisted of imported fuels. DUS Faulkner stressed that the
U.S. Government was aware of the issue and it was cooperating with
the EU to address the complaint filed by the European Biodiesel
Board (EBB).

Next Steps
----------

16. (SBU) Both sides agreed on the following potential areas of
cooperation: 1) exchanges of scientists, and 2) discussions
addressing the issue of higher food prices. The German delegation
proposed to exchange lists of research programs that are currently
undertaken in both countries, with a view of facilitating an
increased person-to-person cooperation between German and U.S.
scientists. In addition, the German delegation expressed strong
interest in a follow-up meeting in the U.S. in the fall of 2008.

17. (SBU) COMMENT: The meetings served as a good start for
bilateral discussion on biofuels. A member of the BMELV delegation
commented after the meeting that he was pleased to see that there
was a common understanding about the importance of biofuels as well
as their accompanying problems.

KOENIG

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