Cablegate: France Questions Biofuel Sustainability

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SUBJECT: FRANCE QUESTIONS BIOFUEL SUSTAINABILITY

1. In announcing the conclusions of the "Grenelle of the
Environment" on October 25, President Sarkozy said that in France,
the development of biofuels will be reassessed. He specifically
targeted first generation biofuels (produced from food and feed
crops) and suggested that a priority should be given instead to
second generation biofuels, i.e. plant-derived fuels such as
cellulosic ethanol.

2. On October 26, Minister for Ecology and Sustainable Development
Jean Louis Borloo reaffirmed Sarkozy's position. France will
maintain its goal of 7 percent use of biofuels in fossil fuels by
2010. However, with the recent hike in commodity prices, France will
reassess the feasibility of the 10% percent mandatory use of
biofuels by 2015. The French Energy and Environment Agency (ADEME)
will be tasked with assessing the ecological impact of biofuel
production from food and feed crops. In the meantime, public
research organizations will increase R&D on biomass biofuels,
including plant-derived fuels.

3. Unlike farmers' association, French environmental associations
and consumers organizations have been very critical of the French
biofuel program. They were disappointed by Borloo's announcement,
hoping that the GOF would lower its 2010 biofuel goals and reduce
its tax credit commitments for the production of 700,000 MT of
biodiesel and 250,000 MT of ethanol. At the same time, farm groups,
especially arable crop associations, have expressed concern that GOF
support for first generation biofuel production is diminishing.

4. Comment : This is the first time the GOF has officially
questioned the viability of its biofuel programs. While most
economists have not linked the hike in wheat prices to French
biofuel programs, media and the general public have blamed ethanol
production as one of the factors accounting for higher bread prices.
In any case, continuous high commodity prices could seriously hamper
the economic viability of French biofuel production in the future,
despite record oil prices. At least, one major ethanol project has
already been postponed, officially for technical reasons. However,
as the volume of wheat used in ethanol production is still limited,
a shift in the GOF position will have no direct impact on French
wheat availability for either domestic uses and exports. Embassy
will continue to stress to our GOF contacts the importance of
biofuel production and research in the fight against climate change
and the enhancement of energy security.

Stapleton

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