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