VZCZCXRO1243
RR RUEHRG
DE RUEHRI #0564/01 2711519
ZNR UUUUU ZZH
R 281519Z SEP 07
FM AMCONSUL RIO DE JANEIRO
TO RUEHC/SECSTATE WASHDC 4198
INFO RUEHBR/AMEMBASSY BRASILIA 0574
RUEHSO/AMCONSUL SAO PAULO 5081
RUEHRG/AMCONSUL RECIFE 3369

UNCLAS SECTION 01 OF 03 RIO DE JANEIRO 000564 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR WHA/BSC, WHA/EPSC AND GREG MANUEL 
EB/ESC JAMES EIGHMIE 
NSC FOR FEARS AND DAVID MCCORMICK 
DOE FOR GWARD, AKARSNER, BBARTON 
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D 
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/DRAMBO 
 
E.O. 12958: N/A 
TAGS: ENRG EPET PREL BR
SUBJECT: AMBASSADOR HOSTS BIOFUELS ROUNDTABLE 
 
 
¶1. (U) Summary. On July 13, U.S. Ambassador Clifford Sobel hosted a 
roundtable on biofuels with representatives from Brazil's public, 
private, and academic sectors.  The event marked the initiation of a 
dialogue to explore areas for strategic cooperation on research, 
development and commercialization for the next generation of 
biofuels.  The discussion centered around three areas: 1) creating 
stable sources for supply for a new global biofuels market, 2) 
overcoming opposition to biofuels, and 3) addressing national and 
regional differences by creating a framework to harmonize standards 
and build international cooperation.  Mission Brazil will explore 
additional opportunities to continue building a new partnership 
between Brazil and the United States on ethanol and biofuels.  End 
Summary. 
 
¶2. (U) Following up on the March 2007 US-Brazil Biofuels MOU signed 
by Secretary Rice and Brazilian Foreign Minister Celso Amorim, 
Ambassador Sobel launched on July 13 the first in a series of 
dialogues bringing together representatives from the public, private 
and academic sectors to discuss biofuels cooperation.  Specifically, 
discussion was focused on research and development (R&D) and 
commercialization. 
 
¶3. (U) Visiting U.S. Department of Energy (DOE) officials Brad 
Barton, Director of Commercialization and Deployment for Renewable 
Energy, and Dr. Dan Arvizu, Director of the National Renewable 
Energy Laboratory (NREL) participated and presented the U.S. 
Government's latest public initiatives for ethanol and biofuel 
development. 23 Brazilian participants attended, including 
executives from Petrobras and its subsidiaries BR and Transpetro; 
the Petrobras Research Center CENPES; US and non-US oil and biofuel 
companies Chevron, Shell, BRENCO, and Brasil Ecodiesel; the 
Brazilian National Oil, Gas, and Biofuel Regulatory Agency ANP; 
Brazilian Energy and Agricultural Research Institutions EPE and 
EMBRAPA, and several other key Rio-based biofuels players. 
 
Creating Stable Sources of Supply 
--------------------------------- 
 
¶4. (U) Ambassador Sobel emphasized the importance of increasing the 
use of ethanol and biofuels given that the world consumes 79 billion 
of the 81 billion barrels of oil produced per day.  Additionally 
with China's demand on the rise and projected to soon surpass that 
of the United States, secure sources of supply will be even more 
important.  Various roundtable participants highlighted their own 
biofuels programs and discussed ways to increase cooperation. 
 
¶5. (U) Petrobras representatives noted that about 10% of the 
company's annual budget (about US$ 1.5 billion/year) goes to 
renewable energy.  By the end of 2007, Petrobras expects to bring 
its three first biodiesel plants online.  It is also developing 
studies with the private sector to build new plants to allow the 
company to reach the B2 and B5 biodiesel mix to diesel by 2008.  In 
the last few years, Petrobras has increased the number of its BR gas 
stations offering biodiesel in Brazil from three to 5,000. 
 
¶6. (U) Brazil's National Petroleum, Gas and Biofuel Regulatory 
Agency (ANP) is the regulatory body that controls product quality. 
ANP currently certifies an ethanol/gasoline mix of 20-25% 
ethanol/75-80% gasoline.  The ANP participant highlighted that ANP 
has approved 30 biodiesel producers to date; another 50 are under 
review.  ANP has also recently approved eight new biodiesel 
projects.  For example, the state of Sco Paulo is testing a new 
biofuel blend for buses, referred to as bio-oil (produced by 
BR/Petrobras Distribuidora), which contains 32% biodiesel/8% 
ethanol/62% diesel.  ANP representatives also stated that Brazil has 
351 ethanol producers that generate 18 billion liters/year, of which 
15 billion liters are for internal Brazilian consumption and 3 
billion liters are for export. 
 
¶7. (U) A representative from the Brazilian Renewable Energy Company 
(BRENCO), a five-month old company that produces and distributes 
ethanol and biofuels, said that BRENCO plans to produce four billion 
liters of ethanol per year.  BRENCO is also on the cutting edge of 
that sector in Brazil, exploring production of the next generation 
of cellulose-based ethanol and it is signing confidentiality 
agreements with some U.S. companies to that end.  BRENCO is focused 
on creating a sustainable supply to inspire investor and market 
confidence that would then be the basis for creating a global market 
for ethanol and biofuels.  In BRENCO believes Brazil's supply 
capacity for ethanol will outpace demand, so a key Brazilian role is 
to create worldwide demand.  By 2015, Brazil could supply 12 percent 
of the global market.  In that context, a U.S.-Brazil partnership 
would be critical for creating a global market for ethanol and 
biofuels, and that it is essential to create a mechanism for ethanol 
 
RIO DE JAN 00000564  002 OF 003 
 
 
producers (i.e. U.S. and Brazilian farmers) to become reliable 
suppliers. 
 
¶8. (U) Another investment company, UBS Pactual Bank, is confident 
that investments will flow into stock in various projects, into the 
construction of new ethanol plants (estimated at 230), and into 
logistics expansion.  UBS Pactual also believes that a growing 
demand for flex-fuel cars will increase demand for ethanol, but 
cautioned that the world market must have credibility and stability 
to accommodate potential price spikes if supply is compromised by 
climate conditions.  UBS Pactual further commented that governments 
can help stabilize markets by controlling demand growth for ethanol 
and biofuels, but the international flow from producer to consumer 
is not obvious or guaranteed, especially with market-distorting 
mechanisms such as the U.S. tariff.  Department of Energy officials 
responded that the current ethanol price mechanism of US$0.51 per 
gallon aims to stimulate local oil companies to buy biofuels from 
domestic production.  The $0.54 tariff on imports is actually an 
offset to pay for domestic incentive. 
 
Overcoming Opposition to a Global Biofuels Market 
--------------------------------------------- ---- 
 
¶9. (U) A Brazilian delegate to the Interovernmental Panel on 
Climate Change (IPCC), whic is studying the potential impact of 
increased ethanol and biofuels production, also participated.  he 
identified specific concerns about the real ptential for biofuels 
and the need to address cerain issues in order to have a positive 
impact.  hese included the designation of land to ethanol an 
biofuel crops, and the impact of biofuels on clmate change (i.e., 
the speed of production willdetermine how quickly we can lessen 
harmful carbon emissions). 
 
¶10. (U) Sensitive to allegations that increased ethanol production 
would damage the Amazon rainforest and drive up food prices, a 
Petrobras participant indicated that Brazil needed to define 
agricultural zones and social ramifications. (Note.  Shortly after 
the event, the GOB released a map of zones where sugar cane 
plantations are prohibited because conditions in those areas are 
considered inadequate for sugar cane.  New sugar plantations and 
ethanol plants will require a social-environmental certification 
from the Brazilian standards institute INMETRO. End Note.) 
 
¶11. (U) Brasil Ecodiesel, Brazil's largest biodiesel producer 
pioneer in biodiesel production in the country, highlighted the 
social aspect of biodiesel production.  Its program has 57,000 
farmers planting castor for Brasil Ecodiesel plants in six Brazilian 
states.  DOE officials noted that biofuels became politically 
acceptable in the United States once the benefits to farmers became 
clear. 
 
Next Steps 
---------- 
 
¶12. (U) All participants acknowledged that better coordination among 
government agencies in both Brazil and the United States is 
necessary to develop markets with guaranteed sources of supply, 
environmental regulations, harmonized standards, and IPR protection 
- all in partnership with the private sector and the academic 
community. 
 
¶13. (U) Amb. Sobel asked Barton and Arvizu to take the lead on 
working with Brazil's biofuels community to explore areas of 
strategic cooperation and to develop concrete ideas for follow up. 
Barton suggested the best areas for next steps included developing 
partnerships between US and Brazilian universities and research 
institutions, beginning with NREL and CENPES (Petrobras' research 
center) launching a scientific exchange program in August 2007. 
Potential joint research programs could include exploration of 
second generation lignocelulose ethanol, and finding ways to reduce 
the corrosiveness and volatility of ethanol. 
 
¶14. (U) Commerce's NIST will work with Brazilian and international 
standards bodies (ANP, INMETRO and ABNT) and the parties to the 
International Biofuels Forum to create compatible standards by the 
end of 2007 as a basis for a new global biofuels market.  EMBRAPA 
plans to work with USDA to find ways to create a sustainable 
production system with increased crop yields.  Once global supply 
sources are secured, discussions will begin on supply contracts.  To 
that end, Barton suggested engaging the Pipeline Research Council 
(PRCI) to develop further U.S. infrastructure to accommodate 
increasing amounts of ethanol and biofuels in the U.S. fuel mix. 
 
¶15. (U) This message was cleared/coordinated with Embassy Brasilia. 
 
RIO DE JAN 00000564  003 OF 003 
 
 
 
MARTINEZ